Nonprofit Organization Management: The Future Of Non-Profit
The Future of Non-Profits
Jose M. Peralta
Keller University
PA571 – Nonprofit Organization Management
Kevin Hume
February 18, 2011
The Future of Non-Profits
“The once-booming nonprofit sector is in the midst of a shakeout, leaving many Americans without services and culling weak groups from the strong. Hit by a drop in donations and government funding in the wake of a deep recession, nonprofits—from arts councils to food banks—are undergoing a painful restructuring, including mergers, acquisitions, collaborations, cutbacks and closings” (Banjo and Kalita, 2010). The article quotes Diana Aviv, chief executive of the Independent Sector, "Like in the animal kingdom, at some point, the weaker organizations will not be able to survive." …show more content…
What will the future of nonprofit look like ten, twenty years from now? With budget cuts from the state and federal government, lowered donations from private industries and citizens the outlook looks bleak unless some drastic changes are accomplished in the immediate future. Combined with the long hours, low salaries, long hours and burn out due to the never ending to do lists plaguing non-profits throughout the nation has caused people to leave non-profit jobs before the move up the non-profit ladder and taking executive positions (Kumar, 2008).
“The nonprofit sector has experienced rapid changes in its composition, size, values, nature and finances over the past few years. The transformation can be expected to accelerate in the two r three decades. Yet its practitioners and researchers have done little or nothing to anticipate and prepare for these development” (Eisenberg, 2005, p.81).
Eisenberg was correct in his assessment of nonprofit agencies and his words rang truer when the recession of 2007 struck and the financial sector of the United States collapsed. The free spending and loaning days of banks disappeared and a new age of saving and frugality became the anti-thesis of the nonprofit agency. Combine that with the falling United States’ and world economy, the stricter rules for loans and lowered donations by individuals and corporations has placed the nonprofit world in a bind to survive.
Today’s nonprofit world has to adapt to the new United States. Governmental cuts affecting many as corporate America is bailed out, corporate America recovering from their losses and cutting back on the excesses they lived by before the recession have affected nonprofits. Learning new ways to become effective community assets while thriving and advancing are difficult tasks for today’s nonprofit organizations.
As state and federal budgets scale back and look for new areas to cut, nonprofits took a brunt of the hits, directly or indirectly. Cuts in how much donations will be tax exempt, lowered donations due to the tax exemption offered to donors. Less donations by individual and corporate America has lessened the amount of money nonprofits were accustomed to in the past. The recession and other actions impacted nonprofits and have made new nonprofits harder to thrive and older, poorly ran nonprofits hard to survive.
Barriers
The biggest barrier affecting nonprofits is the economic barrier that was formed when the economy took a quick dip during the recession that encompassed the United States and the world in late 2007, early 2008. With the economy at a standstill and most times plummeting to unfathomable levels, nonprofits felt the brunt of it when it came time for corporate, federal and state governments were handing out donations. The economy at the time dictated that donations had to be scaled back, and for some organizations taken completely away in order to offset the losses and fight the downtrodden economy.
“The nonprofit sector has experienced rapid changes in its composition, size, values, nature and finances over the past few years. The transformation can be expected to accelerate in the two r three decades. Yet its practitioners and researchers have done little or nothing to anticipate and prepare for these development” (Eisenberg, 2005, p.81).
Eisenberg was correct in his assessment of nonprofit agencies and his words rang truer when the recession of 2007 struck and the financial sector of the United States collapsed. The free spending and loaning days of banks disappeared and a new age of saving and frugality became the anti-thesis of the nonprofit agency. Combine that with the falling United States’ and world economy, the stricter rules for loans and lowered donations by individuals and corporations has placed the nonprofit world in a bind to survive.
Today’s nonprofit world has to adapt to the new United States. Governmental cuts affecting many as corporate America is bailed out, corporate America recovering from their losses and cutting back on the excesses they lived by before the recession have affected nonprofits. Learning new ways to become effective community assets while thriving and advancing are difficult tasks for today’s nonprofit organizations.
As state and federal budgets scale back and look for new areas to cut, nonprofits took a brunt of the hits, directly or indirectly. Cuts in how much donations will be tax exempt, lowered donations due to the tax exemption offered to donors. Less donations by individual and corporate America has lessened the amount of money nonprofits were accustomed to in the past. The recession and other actions impacted nonprofits and have made new nonprofits harder to thrive and older, poorly ran nonprofits hard to survive.
Accountability is another barrier that needs to be taken into account. With the economic downturn, focus is going to be set on the financial management of nonprofit organizations. Financial managers will need to be able to account for all transactions of incoming and outgoing moneys. Scrutiny and oversight from board members, chief executive and financial officers, and outside audit agencies will be essential for future donations from interested donors, whether they are government, corporate or individual donors.
Scandals hit all of corporate America, for- or nonprofit. All organizations are susceptible of financial scandals and how the agency handles it shows potential donors how issues like this are handled. Scandals can affect how outside sources donate to an agency. These donations are a lifeline for most and how they deal with indiscretions can decide how much and if they receive outside funding.
Government crackdown on granting nonprofits tax-exempt status is another barrier that many nonprofits (new or old) will contend with in the upcoming future. The federal government will be looking for ways to increase revenue and cut overhead spending and one way to increase revenue is to deny tax-exempt status for nonprofits. More scrutiny by the Internal Revenue Service(IRS) will lower the number of exempt status of nonprofits.
Due to lack of manpower and lax enforcement of codes, the IRS has not been able to provide full attention. Under the current system, tax-exempt status was automatically approved and many questionable organizations were granted tax-exempt status. An example is an organization called Celebrations for Children established by Representative Tom Delay. The purpose was to throw parties and trips for legislators attending the 2004 Republican National Convention in New York. The money was supposed to be spent on needy children but the primary purpose was political (Eisenberg, 2005, p. 85-86).
Strong Leadership
“The organizational structures for nonprofits will be very different in 2020. Better use of technology, younger generations who desire challenging work and self-select into nonprofits because of the mission, workers’ desire for more autonomy will fundamentally change the hierarchal structure and reporting relationship of nonprofits. Leadership will be less directive and more participative” (Mesch, 2010, p.S173).
With the changes and challenges in the economic and nonprofit environment, leadership of nonprofits will have to be financially viable and well run in order to exist in today’s environment. Adapting to the new economic world while keeping to the core reasons for the existence of the nonprofit agency will be the challenge of future nonprofit leaders. Juggling the economy of the nonprofit, the societal needs, state and federal government criteria and laws, employee, stakeholder and clientele needs and many smaller agendas will affect the agency and a strong leader will be essential for its survival.
The new leaders of nonprofits will need to find new, innovative and creative employees with advanced skills. Competing with corporate America may be an issue, and finding ways to increase compensation and work environment will be essential to find the best person. Employees should be rewarded for innovation and creativity, providing flexibility and empowering employees to getting the job done. The leader guiding this new group should be dynamic in more than just the sense of the word. Executive officers have to be more than just the boss; they must become recruiters, mentors and challengers to their employees while being guiding lights to the cause of the agency while leading fundraisers and becoming advocates for newer ways of creating revenue.
Recommendations
Paul Light (2008) provided a reasonable future, four to be exact, that were possibilities for nonprofits in the future.
There is a clear understanding that immediate answers are not available and there is much growing pain for the future of nonprofits. But smaller nonprofits will be swallowed up by larger, more established ones. His reasoning, “in the midst of this struggle, larger “brand name” nonprofits may seek greater market share through muscular fundraising machinery and carve up territory that will in some cases undermine the self-direction and survival of smaller, community-based entities…In this institutional melee, citizens may be left out of the equation, even though they have a legitimate claim to involvement because they subsidize the sector’s tax status” (p. …show more content…
1).
The four futures are: 1. The rescue fantasy. This future is based on the kindness of strangers. It takes on the premise that American society is generous and willing to help out the little guy. But the likelihood of success is slim because of the amount money necessary to fill in the gaps made by cutbacks to donations by government agency and corporate America.
Nonprofit bailout? Some have been bailed out or their debt has been forgiven by the federal government. Larger, nonprofit organizations have received pardons for their debts, such as American Red Cross which received $100 million to cover the shortfall in their fundraising after hurricanes Gustav and Ivan. Other large nonprofits may benefit with these types of funding, but smaller ones will not be in the plans for such rescues. 2.
A withering winterland. According to Light, the more probable of the scenarios. This future has the entire nonprofit sector suffering, feeling the pinch of the economic recession and falling short of the past highs. This will be culminated with nonprofits not receiving the governmental support as in the past and donors not offering as much as before.
With the lowered donations by government and corporations, employment will suffer as nonprofits, no matter the size, will have to reconsider the numbers of employees they will have on their books. Dwindling finances will cut the fat from nonprofits adding more unemployed to unemployment. 3. An arbitrary winnowing. In this scenario, a rebalancing toward larger, richer, and fewer organizations is the likely scenario. Some nonprofits will fold and others will prosper as donations make their way to the more established nonprofits. Organizations that cannot do not have strong community ties, are not relying on donations and support from the local community and cannot make up the lost funds may merge with larger organizations, be acquired or simply just
disappear.
In a nutshell, this scenario will essentially get rid of the midsize organizations through assimilation or annihilation leaving the landscape with large nonprofit agencies and a large number of small, community nonprofit agencies scattered throughout. The numbers overall will be down, bringing a larger unemployed persons to unemployment. 4. Transformation. In this scenario, nonprofits have to reinvent themselves. Understanding of financial and community needs is essential for nonprofit leaders to take into consideration. (Light, 2008, p. 1-3)
In an interview with Paul Light (2008), he was asked ‘if you were to say something which was a kind of a call to arms for nonprofits during this period including the nonprofits that are really experiencing that danger of imminent demise, what would you be calling them to? What would you say to them?” His response, “…I think we’ve got to get quite real and quite serious about what’s going on and try to figure out a way to be deliberate about our response as a sector…right now we’re letting the recession happen to the sector rather than the sector trying to manage it carefully with good deep information” (Light, 2008).
Reference
Banto, Shelly and Mitra Kalita. Once-robust charity sector hit with mergers and closing. 2 February 2010. 1 February 2011 .
Cornelius, Marla, Patrick Corvington and Albert Ruesga. Ready to lead? The next generation leaders speak out. San Francisco: Compass Point Nonprofit Services, 2008.
Eisenberg, Pablo. "Forum - Looking ahead: What is the future for the nonprofit world?" November 2005. International Journal for Not-for-profit law. 7 February 2011 .
Hopkins, Bruce R. Starting and managing a nonprofit organization. Hoboken, NY: John Wiley & Sons, 2009.
Kumar, Niketa. Study: nonprofit workers burn out. 3 April 2008. 2 February 2011 .
Light, Paul. "Four Futures." 2009. Nonprofit Quarterly. 5 February 2011 .
Mesch, Debra J. "Management of human resources in 2020: The outlook for nonprofit organizations." Public Administration Review (2010): S173-S174.
Jose M. Peralta
Keller University
PA571 – Nonprofit Organization Management
Kevin Hume
February 18, 2011
The Future of Non-Profits
“The once-booming nonprofit sector is in the midst of a shakeout, leaving many Americans without services and culling weak groups from the strong. Hit by a drop in donations and government funding in the wake of a deep recession, nonprofits—from arts councils to food banks—are undergoing a painful restructuring, including mergers, acquisitions, collaborations, cutbacks and closings” (Banjo and Kalita, 2010). The article quotes Diana Aviv, chief executive of the Independent Sector, "Like in the animal kingdom, at some point, the weaker organizations will not be able to survive." …show more content…
What will the future of nonprofit look like ten, twenty years from now? With budget cuts from the state and federal government, lowered donations from private industries and citizens the outlook looks bleak unless some drastic changes are accomplished in the immediate future. Combined with the long hours, low salaries, long hours and burn out due to the never ending to do lists plaguing non-profits throughout the nation has caused people to leave non-profit jobs before the move up the non-profit ladder and taking executive positions (Kumar, 2008).
“The nonprofit sector has experienced rapid changes in its composition, size, values, nature and finances over the past few years. The transformation can be expected to accelerate in the two r three decades. Yet its practitioners and researchers have done little or nothing to anticipate and prepare for these development” (Eisenberg, 2005, p.81).
Eisenberg was correct in his assessment of nonprofit agencies and his words rang truer when the recession of 2007 struck and the financial sector of the United States collapsed. The free spending and loaning days of banks disappeared and a new age of saving and frugality became the anti-thesis of the nonprofit agency. Combine that with the falling United States’ and world economy, the stricter rules for loans and lowered donations by individuals and corporations has placed the nonprofit world in a bind to survive.
Today’s nonprofit world has to adapt to the new United States. Governmental cuts affecting many as corporate America is bailed out, corporate America recovering from their losses and cutting back on the excesses they lived by before the recession have affected nonprofits. Learning new ways to become effective community assets while thriving and advancing are difficult tasks for today’s nonprofit organizations.
As state and federal budgets scale back and look for new areas to cut, nonprofits took a brunt of the hits, directly or indirectly. Cuts in how much donations will be tax exempt, lowered donations due to the tax exemption offered to donors. Less donations by individual and corporate America has lessened the amount of money nonprofits were accustomed to in the past. The recession and other actions impacted nonprofits and have made new nonprofits harder to thrive and older, poorly ran nonprofits hard to survive.
Barriers
The biggest barrier affecting nonprofits is the economic barrier that was formed when the economy took a quick dip during the recession that encompassed the United States and the world in late 2007, early 2008. With the economy at a standstill and most times plummeting to unfathomable levels, nonprofits felt the brunt of it when it came time for corporate, federal and state governments were handing out donations. The economy at the time dictated that donations had to be scaled back, and for some organizations taken completely away in order to offset the losses and fight the downtrodden economy.
“The nonprofit sector has experienced rapid changes in its composition, size, values, nature and finances over the past few years. The transformation can be expected to accelerate in the two r three decades. Yet its practitioners and researchers have done little or nothing to anticipate and prepare for these development” (Eisenberg, 2005, p.81).
Eisenberg was correct in his assessment of nonprofit agencies and his words rang truer when the recession of 2007 struck and the financial sector of the United States collapsed. The free spending and loaning days of banks disappeared and a new age of saving and frugality became the anti-thesis of the nonprofit agency. Combine that with the falling United States’ and world economy, the stricter rules for loans and lowered donations by individuals and corporations has placed the nonprofit world in a bind to survive.
Today’s nonprofit world has to adapt to the new United States. Governmental cuts affecting many as corporate America is bailed out, corporate America recovering from their losses and cutting back on the excesses they lived by before the recession have affected nonprofits. Learning new ways to become effective community assets while thriving and advancing are difficult tasks for today’s nonprofit organizations.
As state and federal budgets scale back and look for new areas to cut, nonprofits took a brunt of the hits, directly or indirectly. Cuts in how much donations will be tax exempt, lowered donations due to the tax exemption offered to donors. Less donations by individual and corporate America has lessened the amount of money nonprofits were accustomed to in the past. The recession and other actions impacted nonprofits and have made new nonprofits harder to thrive and older, poorly ran nonprofits hard to survive.
Accountability is another barrier that needs to be taken into account. With the economic downturn, focus is going to be set on the financial management of nonprofit organizations. Financial managers will need to be able to account for all transactions of incoming and outgoing moneys. Scrutiny and oversight from board members, chief executive and financial officers, and outside audit agencies will be essential for future donations from interested donors, whether they are government, corporate or individual donors.
Scandals hit all of corporate America, for- or nonprofit. All organizations are susceptible of financial scandals and how the agency handles it shows potential donors how issues like this are handled. Scandals can affect how outside sources donate to an agency. These donations are a lifeline for most and how they deal with indiscretions can decide how much and if they receive outside funding.
Government crackdown on granting nonprofits tax-exempt status is another barrier that many nonprofits (new or old) will contend with in the upcoming future. The federal government will be looking for ways to increase revenue and cut overhead spending and one way to increase revenue is to deny tax-exempt status for nonprofits. More scrutiny by the Internal Revenue Service(IRS) will lower the number of exempt status of nonprofits.
Due to lack of manpower and lax enforcement of codes, the IRS has not been able to provide full attention. Under the current system, tax-exempt status was automatically approved and many questionable organizations were granted tax-exempt status. An example is an organization called Celebrations for Children established by Representative Tom Delay. The purpose was to throw parties and trips for legislators attending the 2004 Republican National Convention in New York. The money was supposed to be spent on needy children but the primary purpose was political (Eisenberg, 2005, p. 85-86).
Strong Leadership
“The organizational structures for nonprofits will be very different in 2020. Better use of technology, younger generations who desire challenging work and self-select into nonprofits because of the mission, workers’ desire for more autonomy will fundamentally change the hierarchal structure and reporting relationship of nonprofits. Leadership will be less directive and more participative” (Mesch, 2010, p.S173).
With the changes and challenges in the economic and nonprofit environment, leadership of nonprofits will have to be financially viable and well run in order to exist in today’s environment. Adapting to the new economic world while keeping to the core reasons for the existence of the nonprofit agency will be the challenge of future nonprofit leaders. Juggling the economy of the nonprofit, the societal needs, state and federal government criteria and laws, employee, stakeholder and clientele needs and many smaller agendas will affect the agency and a strong leader will be essential for its survival.
The new leaders of nonprofits will need to find new, innovative and creative employees with advanced skills. Competing with corporate America may be an issue, and finding ways to increase compensation and work environment will be essential to find the best person. Employees should be rewarded for innovation and creativity, providing flexibility and empowering employees to getting the job done. The leader guiding this new group should be dynamic in more than just the sense of the word. Executive officers have to be more than just the boss; they must become recruiters, mentors and challengers to their employees while being guiding lights to the cause of the agency while leading fundraisers and becoming advocates for newer ways of creating revenue.
Recommendations
Paul Light (2008) provided a reasonable future, four to be exact, that were possibilities for nonprofits in the future.
There is a clear understanding that immediate answers are not available and there is much growing pain for the future of nonprofits. But smaller nonprofits will be swallowed up by larger, more established ones. His reasoning, “in the midst of this struggle, larger “brand name” nonprofits may seek greater market share through muscular fundraising machinery and carve up territory that will in some cases undermine the self-direction and survival of smaller, community-based entities…In this institutional melee, citizens may be left out of the equation, even though they have a legitimate claim to involvement because they subsidize the sector’s tax status” (p. …show more content…
1).
The four futures are: 1. The rescue fantasy. This future is based on the kindness of strangers. It takes on the premise that American society is generous and willing to help out the little guy. But the likelihood of success is slim because of the amount money necessary to fill in the gaps made by cutbacks to donations by government agency and corporate America.
Nonprofit bailout? Some have been bailed out or their debt has been forgiven by the federal government. Larger, nonprofit organizations have received pardons for their debts, such as American Red Cross which received $100 million to cover the shortfall in their fundraising after hurricanes Gustav and Ivan. Other large nonprofits may benefit with these types of funding, but smaller ones will not be in the plans for such rescues. 2.
A withering winterland. According to Light, the more probable of the scenarios. This future has the entire nonprofit sector suffering, feeling the pinch of the economic recession and falling short of the past highs. This will be culminated with nonprofits not receiving the governmental support as in the past and donors not offering as much as before.
With the lowered donations by government and corporations, employment will suffer as nonprofits, no matter the size, will have to reconsider the numbers of employees they will have on their books. Dwindling finances will cut the fat from nonprofits adding more unemployed to unemployment. 3. An arbitrary winnowing. In this scenario, a rebalancing toward larger, richer, and fewer organizations is the likely scenario. Some nonprofits will fold and others will prosper as donations make their way to the more established nonprofits. Organizations that cannot do not have strong community ties, are not relying on donations and support from the local community and cannot make up the lost funds may merge with larger organizations, be acquired or simply just
disappear.
In a nutshell, this scenario will essentially get rid of the midsize organizations through assimilation or annihilation leaving the landscape with large nonprofit agencies and a large number of small, community nonprofit agencies scattered throughout. The numbers overall will be down, bringing a larger unemployed persons to unemployment. 4. Transformation. In this scenario, nonprofits have to reinvent themselves. Understanding of financial and community needs is essential for nonprofit leaders to take into consideration. (Light, 2008, p. 1-3)
In an interview with Paul Light (2008), he was asked ‘if you were to say something which was a kind of a call to arms for nonprofits during this period including the nonprofits that are really experiencing that danger of imminent demise, what would you be calling them to? What would you say to them?” His response, “…I think we’ve got to get quite real and quite serious about what’s going on and try to figure out a way to be deliberate about our response as a sector…right now we’re letting the recession happen to the sector rather than the sector trying to manage it carefully with good deep information” (Light, 2008).
Reference
Banto, Shelly and Mitra Kalita. Once-robust charity sector hit with mergers and closing. 2 February 2010. 1 February 2011 .
Cornelius, Marla, Patrick Corvington and Albert Ruesga. Ready to lead? The next generation leaders speak out. San Francisco: Compass Point Nonprofit Services, 2008.
Eisenberg, Pablo. "Forum - Looking ahead: What is the future for the nonprofit world?" November 2005. International Journal for Not-for-profit law. 7 February 2011 .
Hopkins, Bruce R. Starting and managing a nonprofit organization. Hoboken, NY: John Wiley & Sons, 2009.
Kumar, Niketa. Study: nonprofit workers burn out. 3 April 2008. 2 February 2011 .
Light, Paul. "Four Futures." 2009. Nonprofit Quarterly. 5 February 2011 .
Mesch, Debra J. "Management of human resources in 2020: The outlook for nonprofit organizations." Public Administration Review (2010): S173-S174.