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Nonprofits In A Squeeze;
To stretch funding, many service groups are under pressure to consolidate - but their public missions could be shortchanged.
by Ann Marie Thigpen and Peter Chernack
Ann Marie Thigpen is director of the Long Island Center for Nonprofit Leadership at Adelphi University, where Peter Chernack is associate dean of the School of Social Work.
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Originally published July 1, 2007
Section: OPINION, Pg. A68 |
If nonprofit groups are to continue to meet the needs of thousands of Long Islanders, they face some tough choices here. Many nonprofit organizations - from human service agencies to environmental groups, from health care providers to art museums - are reeling under the weight of shrinking government dollars, intense fundraising competition and stepped up demands for accountability.
The stakes are high. Think what Long Island would be like without its nonprofit groups.
Where would you go to see the work of an exceptional local artist? Or to explore a nature preserve? Whom would you turn to if your teenage son or daughter had a drug problem? Where would an abused child be placed for protection? A homeless person for shelter? A battered woman for safety?
The local economy also needs thriving nonprofits. The Long Island Association's chief economist, Pearl Kamer, reports that nonprofits are responsible for 15.5 percent of all Long Island jobs. In a study last year, she concluded that this sector's "continued health is critical to the continued vitality of the LI economy."
Yet, the future is perilous. While finances always have been an issue for these organizations, the cost of doing business is continually on the rise and funding has remained flat at best. All the while, organizations must respond to new populations, address emerging needs and integrate new technologies - all of which cost money. Even the wealthiest and most established organizations struggle to keep pace.
And as a generation of long-term executives and founders retires, it is getting harder to attract new talent. Salaries remain low, and young professionals are leaving Long Island for cheaper places to live.
It is no wonder that a crisis mentality is brewing among some in the nonprofit community. In situations like this, however, it is best to avoid the seduction of simple solutions such as: "Merge!"
Some policy-makers have proposed the "merger mantra" as a way to save on costs and minimize duplication of services. Mergers can have merit, but they are not a panacea.
The issues are complex. Who decides who consolidates and with whom? Government, foundations, nonprofits? How does the merged organization sustain the trust, provide the access and continue to meet the needs of the merging groups?
These essential questions need to be front and center. There must be a balanced and thoughtful dialogue about the desired results in terms of serving the public. Focusing only on fiscal aspects can result in a "Pac-Man" approach, as larger nonprofits swallow up smaller organizations. If the motive is purely financial, those resulting mergers may be doomed to fail.
Mergers seek to bring together different organizational cultures, missions, clients and communities - a formidable task. This consolidation requires a commitment from multiple board members, staff, donors, clients and funders. Everyone has to be on board for a merger to succeed.
Mergers also are expensive to orchestrate. The cost of even considering a merger is hefty in terms of time and energy, let alone consultant fees. And all may be for naught, as is often the case, if the merger doesn't happen.
And say the merger does occur: Bringing two organizations together is costly, too. A recent Stanford University study of mergers found that not one had reduced the need for funding. "Although mergers decreased the number of organizations in the sector, they actually increased its total revenue requirements."
The expectation that with fewer nonprofits in the marketplace, the competition to raise funds will be reduced is short-sighted. With fewer nonprofits, there may be fewer charity golf tournaments, but the price of admission will be much higher.
Mergers can be an excellent solution if the motive is to improve the services that are the organization's reason for being. Sister Paulette LoMonaco, executive director of Good Shepherd Services in New York City and the winner of The New York Times 2007 Award for Nonprofit Excellence, noted that her organization has considered merger for only one reason - mission, not money. Good Shepherd has entered into two mergers but turned away others.
Besides pressure to merge, nonprofits hear the familiar cry to become more "businesslike." But this, too, may not hold all of the answers.
Nonprofits differ from businesses in key ways. Business has as its bottom line, profit. Nonprofits have as their bottom line, mission. Top business executives answer to their shareholders. Nonprofit executives must be responsive to a variety of disparate groups (boards of directors, government, foundations, donors, clients and their service community). As a result, nonprofit executives must lead by consensus and by influence. They have complex roles, in that they have to be marketers, fundraisers, managers and often have to be able to fix their own copy machine.
As David Chernow of Junior Achievement Worldwide, which educates K-12 students with programs about entrepreneurship, noted in the Stanford Social Innovation Review, "You can't just come in ... and wield a stick and make things happen."
Certainly business skills are critical to the success of any organization, particularly in financial management and accounting. But certain aspects of business are not appropriate for nonprofits.
For example, many businesses thrive on duplication of services - a Starbucks on every block and a Dunkin' Donuts in between. Nonprofits are constantly reminded about the importance of not duplicating services.
And, as noted business researcher and best-selling author Jim Collins has observed: Why would a nonprofit strive to be more like a business when most businesses fail?
Long Island's patchwork of nonprofits reflects the fragmentation of the Island with its 901 different entities, including two cities, two counties, 13 towns, 95 villages, water departments, police and fire departments, libraries, sewer districts and 127 school districts, each with its own taxing authority. Inefficiency abounds.
So why single out nonprofits? Then again, why not?
The nonprofit sector is indeed at a crossroads. It must face facts and seize the opportunity to respond to challenges by innovating. Organizations can do only so much with limited funding; the risk is that certain services could disappear.
There's no single answer. The challenge is to explore possibilities, discover alternatives and embrace change that will truly strengthen nonprofit organizations, enabling them to meet their missions and serve their communities efficiently and effectively. And to do all this without any community on Long Island losing any essential services. |
Contact
For additional information, please contact:
Ann Marie Thigpen
Director
The Long Island Center for Nonprofit Leadership
School of Social Work
Adelphi University
Garden City, NY 11530
p - 516.877.4429
f - 516.877.4352
e - linonprofit@adelphi.edu
This page last modified on June 19, 2008.
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