How the Economic Crisis Will and Maybe Should Change the Nonprofit Sector

Originally posted at: http://www.managementconsultingservices.org/node/167

"Most prefer the security of known misery to the misery of unfamiliar security." Sheldon Kopp

There is no doubt that a great wave of fear has fallen over the nonprofit sector and indeed the nation. The constant barrage of bad news, while tempered by the jubilation surrounding the historic inauguration in Washington, affects our psyches as we approach each day a bit more unsure than the previous. Einstein said that problems can not be solved at the level of analysis that created them and yet we try. We are attempting to solve problems in which the allusive answers seem to create their own host of other problems. Downsizing may temporarily help our organization, but how then will we continue to provide essential services? We attempt to expand our individual donor base, but if all nonprofits make the same attempt how effective will we be? The conversation about the generational shift in leadership change has shifted to a fear that the sector will lose its young and
entrepreneurial talent to layoffs. In most cases there are no good answers, only better solutions.

In times of crisis, action is more important than getting things right 100% of the time. Indeed, while the New Deal now seems like a set of well formulated policies and institutions, FDR pursued no master plan for the economy, but rather engaged in a constant process of action, reflection, adjustment and more action. The worst economic crisis of our lifetimes warrants an all out effort of all nonprofits, foundations, government, and corporations to ensure that the gains to
social impact achieved do not slide backwards with the economy. We need action both at the individual organizational level and at the systems level. Individual organizations obviously should be cutting back on all kinds of expenses and look to take already lean operations and operate as absolutely efficiently as possible. Let's not mince words: this process in painful. Organizations in survival mode will also need to look now for partners for work that can no longer be done
and indeed for potential mergers of operations. Within the last two months, MCS has been action oriented moving quickly to develop a number of services to help organizations with this difficult work (see below).

Whether we realize it or not, the economic crisis will change the nonprofit sector and indeed the entire political economy of the inter-relationships of our corporate, government and nonprofit relationships. Once we've made the organization as efficient as possible, we must begin the process of re-thinking how we structure the mission work of the sector. Our known misery is that we face almost
insurmountable challenges at the organizational level, but unfamiliar solutions to systemic change taken collectively may just get us through the crisis.. Here's a short list of where the unfamiliar may lead to more security for our missions:
- The nonprofit organization may cease to be the center point of how we organize social mission work. Mission networks of organizations and funders will need to adjust conceptually to create a collective set of goals within a sub sector (rather than focus on individual program outcomes). Each network member (organization or individual) will focus on its core competency rather than trying to be everything to everyone. The technology infrastructure to support communications across formal and informal networks can bring the typical organizational boundaries and silos to the ground.

Many organizations will close. Necessary missions could be held temporarily by a holding nonprofit that maintains just the basics of the organization or the mission work until a time in which the organization or network can reformulate. Young leaders from these groups could continue to connect socially to maintain connections with each other and the sector.

Government's role in funding if not implementing social change work needs to be increased significantly. Government at all levels has devolved its responsibility, but we can no longer afford an abdication of the necessary role of government. The good news is that there is now a much richer web of nonprofit organizations and networks that government can support to do the mission work in market responsive ways. The federal government should fully fund the states and should
set up a bailout fund for the sector. Nonprofit organizations could submit existing or ready to go projects as part of the overall bailout.

Foundations (and nonprofits with endowments) should maintain investment levels (if not increase) despite the drop in assets. After years of being allowed to build tremendous asset bases, this Keynesian approach will support the sector and the economy when its most needed: right now. The marginal value of the dollar spent now is much higher than the dollar saved with all the downside risk in the marketplace over the foreseeable future.

Foundations should look at a significant portion of their assets (if not all) as part of the way that they achieve social impact. No longer should it be acceptable to hold investments with socially irresponsible enterprises or worse yet allow their money to be managed by the speculators that caused this crisis. I argued recently that we should be creating more investment vehicles so that foundations could responsibly invest in local economies.

These are just a few suggestions about how the would could and maybe should change. Perhaps you have others. Feel free to share them here.
Blessings to you as we enter this new world bravely.