Last week, the Urban Institute hosted a fascinating panel discussion, "Are There Too Many Nonprofits?". You can watch the archived video here. Moderated by Elizabeth Boris of the Urban Institute, panelists included David La Piana (consultant), Mark Pacella (Pennsylvania Office of the Attorney General, but speaking for himself), Pat Read (consulant), and Washington DC's own Glen O'Gilvie (CEO, Center for Nonprofit Advancement). See more bios at the links and see the handout that went along with the program here (pdf). Here were my top takeaways from the discussion- with a few thoughts of my own added.
Are there too many nonprofits? It depends on who is asking, and why.
Funders think there are too many nonprofits asking them for money. Nonprofits think there are too many other nonprofits competing with them for money. Politicians (particularly the local ones) think there are too many nonprofits depriving them of needed tax revenue. Regulators, often focused on the "problem" nonprofits, see too many nonprofits accomplishing too little good.
Then again, as David La Piana pointedly noted, there are many underperforming, scandal-ridden and ineffective for-profit businesses, and no one's asking if we have too many of those. Ultimately, we may have too many nonprofits, but we don't have too many services. We need more resources in the nonprofit sector to solve the challenges facing our society today- regardless of the actual number of nonprofit organizations.
Any discussion of too many nonprofits, of course, leads to talk of mergers (or, in corporate speak, M & A- Mergers and Acquisitions).
"Merger" is a loaded word. Instead, say "conserve, collaborate, and consolidate". Still, it is an extremely difficult discussion- for three basic reasons.
1. Every nonprofit believes it has unique approach and/or serves a unique need; therefore, if they go out of business the needs of their audience will not be addressed effectively, or a unique need will not be addressed at all.
I would add this is not simply the result of inflated egos. In seeking funding, nonprofits are almost always encouraged to think of themselves as unique, continually asked questions such as: How is your approach different? How will you solve the problem where others have failed? Why should we fund you, rather than a similar organization? What is your "unique value proposition"?
Additionally, there are always more needs than resources, so every nonprofit can be addressing a need, even if most of us would agree that there is a more pressing need elsewhere.
In this environment, it is no wonder nonprofits have a hard time imagining a merger that doesn't hurt their organization/clients/constituency. And uniqueness is closely tied to the next issue...
2. Control. This issue comes up more at the start-up stage, both for traditional nonprofits and interestingly, foundations. Very small foundations may in fact be better served by a donor-advised fund or community foundation, but everyone wants control of the assets- in perpetuity.
Individuals looking to start nonprofits see their ideas as so unique, they can't imagine taking it to an existing nonprofit or giving up an iota of control over the idea's implementation. It is their idea, and they will be the ones to see it through (we see this every day with customers in the Foundation Center library).
3. No nonprofit leader in their right mind wants to merge/collaborate/consolidate their financially healthy organization with another nonprofit that is soon to go out of business. Yet this is nearly always the point when the ED/board of a struggling nonprofit starts thinking about a merger. And in many cases, a severely struggling nonprofit has a demoralized workforce or dysfunctional culture that no other organization wants to take on. Therefore, merger discussions must happen before there is a dire financial need, and- critically- funders must realize that mergers cost money and an enormous amount of time.
Ultimately, it is asking a great deal for nonprofit leaders to enthusiastically embrace mergers when it often means a loss of control, a loss of services, and a loss of jobs. There may have to be a stronger force to persuade nonprofits to collaborate/merge- i.e. funders, both private and public. Or we'll just have to tolerate the many nonprofits limping along on reduced funding.
Q and A- But what about diversity of ideas and the grassroots?
The question and answer session included several questions that boiled down to this:
Small and grassroots nonprofits allow for a diversity of ideas and approaches that create real solutions. If everything is consolidated into larger structures, we'll be a less effective sector as a whole. What do you say to that?
The panelists hastened to state that they were all in favor of small, grassroots organizations doing meaningful work (though I have to say the audience can't be faulted for thinking otherwise, given the tenor of the conversation to that point). What many panelists seemed to agree about was that we don't necessarily have too many nonprofits, but we do have too many of the wrong kind of nonprofits.
And this led- as these conversations often do- to the third rail of nonprofit discussion: the tax exemption. Should all nonprofits receive the same tax exemption? Should certain types of nonprofits (human services, for example) receive a greater tax exemption than others (arts, for example). It is a tough call and a tough discussion.
What do you think? Should nonprofits be "persuaded" to collaborate and consolidate more often? Who would do the persuading? Would having fewer nonprofits increase impact and provide better outcomes?