If you work at a nonprofit, you really need to read this report by the Nonprofit Quarterly. The Nonprofit Quarterly’s Study on (U.S.) Nonprofit and Philanthropic Infrastructure maps and examines the strengths and weaknesses of the network that supports nonprofits and philanthropy in the U.S. 
The report is even more relevant now considering how the current recession is affecting nonprofits. In a time when nonprofits most need timely information, advice, training, convenings, and sector advocates, where do they turn?
This research is especially important for you to read and digest if you actually work at a nonprofit infrastructure organization. As a broad definition, nonprofit infrastructure refers to those organizations (that usually have a membership component) who provide capacity building, technical assistance, consulting, workshops, training, conferences, advocacy and research for the nonprofit and philanthropic sector. Most, if not all of them are nonprofit organizations themselves. A few examples: Independent Sector, Council of Nonprofits, Alliance for Nonprofit Management, Nonprofit Technology Network (NTEN), Guidestar, Council on Foundations, Fieldstone Alliance, Association of Fundraising Professionals, Hispanics in Philanthropy…as well as all of the state nonprofit associations like Minnesota Council of Nonprofits. Although the Chronicle of Philanthropy, “the newspaper of the nonprofit world” is not a nonprofit itself, they are yet another source for nonprofit capacity-building as they have recently begun providing webinar trainings for nonprofits.
The Nonprofit Quarterly’s research findings hold many implications for nonprofit infrastructure organizations and the future of nonprofit capacity building. For those of you that don’t have the time to read the entire 72-page study, here is the most important finding of the research that we all need to be thinking about:
The major finding of this study is that the current financing system for nonprofit infrastructure-including foundation funding-favors organizations that support and represent the larger nonprofits of the sector (which make up a small fraction of nonprofits overall) while networks and infrastructure organizations that serve tens of thousands of small to midsize nonprofits have been consistently under-funded.
Which raises the million dollar question: in an economic downturn where we are all struggling, who is supporting the small-midsized nonprofits? Are nonprofit infrastructure organizations really helping those who need it the most?
According to the Nonprofit Quarterly’s recent research, the answer is a resounding NO. Most nonprofit infrastructure organizations are set up (through their financial models) only to help those who can afford their services. Their revenue models determine what kinds of programs they can offer to nonprofits. As the report points out:
For research, policy development, and advocacy programs, foundation support is the most important source of funding; for training, conferences, communications, and member services, earned income is the primary source of financial support.
This means that if a nonprofit membership association or other infrastructure organization receives most of its income from conferences, etc. they must be sure to price the offerings such that they recoup their costs as well as cover overhead. For instance, if you’re the Maine Association of Nonprofits and you receive “more than 80 percent from earned income,” membership dues and conference/event registration fees become pretty important. Same goes for Independent Sector, which receives 70% of its revenue from earned income.
This revenue generation dilemma has always been a thorn in the side of most nonprofit membership organizations, including ones I have worked for or consulted with in the past seven years. If earned income is becoming increasingly more important as foundation grants decrease or dry up, how do organizations keep costs low for conferences and trainings? On the one hand, we need to make money, but on the other hand our mission is to help other nonprofits. In this economic environment, is it possible to do both?
Yesterday on Twitter and Facebook, I started what turned out to be a provocative discussion thread asking what folks thought about the price of the Chronicle of Philanthropy’s new webinars on mergers and fundraising. While the newspaper offers consistently useful, live discussions about nonprofit issues as well as their new podcasts for free, to participate in one of their webinars would set you back $95-$165. Regarding the webinars, web editor Peter Panepento responded with this:
“It’s not for everyone & we recognize that. We also have the weekly live discussions, which are free. We see our webinars as a low-cost alternative to attending a conference or off-site. We pull together some big-name experts who deliver some incredible information. We encourage participants to make these sessions into office-wide events.”
No, in this economy, expensive training is not for everyone. But many nonprofit infrastructure groups are now offering more services for free, as well as discounts or scholarships to their conferences. I’ve often also lamented the high cost of Boardsource tranings, which can cost up to $600, but they are beginning to offer lower-cost options. Same thing with Independent Sector’s annual conference, which is, in my opinion, a valuable experience. However, it could cost up to $1,000 (for non-members) to enjoy that experience, though their new scholarship program for next generation leaders offers some relief. I think that any disapproval of these high training costs are due to the fact that we are assuming those types of trainings are geared toward ALL nonprofits, even the itty bitty ones. We now know that to be an incorrect assumption. According to the Nonprofit Quarterly report:
There has been a relative lack of attention to building an appropriate overall financing system for the infrastructure. A skewed reliance on foundation funding and the lack of capacity (and resources) to pursue more diversified funding streams, including government money and capital funding, has not only led to dwindling resources for infrastructure groups but also, led them to create business models that pull them away from their missions and/or serve only those who “can pay the fee.”
Though the current financial models seem to be “working” for some nonprofit infrastructure organizations, they are certainly not working to address the overall capacity building needs for the majority of the nonprofit sector. To be true to the core mission of capacity building, which is essentially to help nonprofits operate better (including in this new economy), membership organizations, technical assistance groups and others must recommit to examining the way they do business. As the report states:
To respond to this challenging environment in a rapid and well informed way, nonprofits of all sizes and shapes, but especially, the majority which are small or mid-sized, need the connective tissue of infrastructure to, among other things:
- restructure their practices, services, and organizations to fit a resource-scarce environment;
- identify and pursue available resources;
- track important trends in government and communities;
- identify potentially useful innovations in practice, financing, and organizational structure occurring elsewhere;
- engage in collective policy development and advocacy.
So what does the future hold for nonprofit capacity building? Will we start catering more to the larger organizations who can pay expensive training fees or will we begin to think creatively about how to meet the need of smaller groups? What do you think nonprofit infrastructure groups should be doing right now?
UPDATE: While the Chronicle of Philanthropy does provide services and resources to nonprofits, they are not a nonprofit organization and would not have been considered part of the group that was examined by the NPQ report. Thanks to Stacy Palmer (Editor of the Chronicle) for the clarification.
Photo credit: shoothead
I recently read the report as well.
About eight months ago my group did a survey of the nonprofit organizations we collaborate with across the country and we found that in facing this economic crisis that large nonprofit organizations (budgets of $15 million and up) saw their role during this period as “creators of solutions” that will aid their communities.
As Nonprofit Management Service Organizations look to ways to continue to serve small to mid-size organizations, consideration should be given to partnering with large organizations like the United Way, Catholic Charities, Red Cross, YWCA or YMCA, and Habitat for Humanity (both local and national chapters of these organizations) to build capacity-building cooperatives for small to mid-size organizations. These large organizations are vastly dependent on the smaller ones in order to further their impact in the communities they work, so the incentive is there.
Finally, there is so much capacity-building knowledge between organizations that is not being passed on. We need to find better ways to leverage and share expertise across organizations and sectors.
Thanks for your comment Carlo! These are great thoughts. I think we all recognize the value in forming strategic partnerships like the ones you’ve described, but the report also points out the reasons why they are not happening widely. Fierce competition and the fight to be “the leader” in the nonprofit infrastructure space. We suffer from the same turf wars as the nonprofits we are trying to help. But in the end, it helps no one. Seems to me there’s a good chance that many capacity building groups will end up shutting down/downsizing anyway as earned income continues to drop. So, we could be fighting for our “turf” in vain. At least collaboration would allow infrastructure organizations to continue to contribute in this space, versus disappearing altogether.
I would include Universities in this group as well. Centers and Institutes are struggling to find a business model that allows them to keep providing this type of service and information while Universities are taking more and more off the top, starving their units. We all need a new business model that will enable the flow of information and support. Google figured it out. It’s time the Nonprofit sector did too. Perhaps we need to focus more on the value added and partner with businesses and government in order to become a vehicle for communication. If nonprofit infrastructure organizations are about communication, then we need to figure out who will value that as a vehicle – government to be in greater communication with constituents, business to reach a different audience. This is a fundamentally different way of doing business, but the old model of charging fees is not working and is pretty much done. The internet, technology applications and other forms of viral communication (which is how I came across this article) are free. Thanks for a thought provoking article.
Thanks so much for the really great summary Rosetta. It was a dense read and I hadn’t had the chance to write it up yet myself. You saved me! I want to echo the need for collaboration at this time. The support organizations themselves need to work more closely together, and we need to help the organizations we work with to collaborate more as well. Collaboration is tough. But we owe it to the sector to figure out how to make it work!
I work for a nonprofit that does capacity-building for very small to small organizations and found your summary very useful as we begin to think about moving into some form of fee for service model. To date, we have been very lucky to have stable foundation support to offer all of our technical assistance, workshops and consultation for free in addition to small grants to support capacity-building.
Unfortunately, that funder has restructured their giving programs, and we are operating on our final grant. We struggle with these same questions about access and who will benefit. We have chosen to make small grants and focus our TA on small, rural, community-based groups for a reason, and moving away from that would not fulfill our mission.
In addition, with a real technology & infrastructure gap between urban and rural communities, we are still wed to older ways of communication: email, phone and in-person (when possible). For me, the lack of access by small and mid-sized organizations is compounded by the rural/urban divide.
I agree that collaboration is the key. Ironically, it is what we support and fund other to do, and need to do better ourselves!
Thanks Rosetta. I want to quickly (okay not so quickly) comment on the idea that charging a fee excludes small nonprofits. I’ve been with CompassPoint for over 15 years and in its total existence of over 30 years (we were formeley the Support Center for Nonprofit Management part of a network of Support Centers), the model has been to charge for services (in general, there are numerous “free” things we do too). What we charge and how we do it is a constant balancing act of what it takes to be a sustainable organization, providing consistent high quality services, and staying on top and contributing to the thought leadership in the sector.
On Sustainability: As the last poster demonstrated, relying on primarily on private funding (especially if it’s relies just a few) to provide your program services is risky. In my years with CP I’ve witnessed organizations either close their doors or drastically change or reduce what it offers. We haven’t been immune to loss of major funding, but having a diversified revenue structure ensured that we not only maintain our current services, but invest and advance our work in the sector.
On Quality: Charging a fee keeps us “close to the market” and demands high quality that will keep the market coming back. We have to stay relevant. The market will not tolerate anything less.
On investing in the future and other products: Our revenue model (including foundation, govt, corporate, and consumer fees) is made so we can invest in other areas – for example, the study (Leadership Lost) that was a major contributor to all the dollars we are now and have been seeing invested by funders in nonprofit leadership was done without any outside funding. We are also able to invest in other free products like Board Cafe, etc.
On the definition of “small”: Really it’s not small vs. big. It’s poor vs. rich. We have large nonprofits with large budgets and staff and that basically have little unrestricted money to spend on outside assistance and small staffed nonprofits that seem to have endless cash to spend on consulting and training. Regardless, even organizations in major need – if you offer services that have value and impact to their cause, see the fee a small investment.
On barriers: In order to stay in biz for as long as we have, we are obsessed with what are the barriers for folks to access our services. Fees are definitely in the mix and need to be constantly attended to, but there are so many other factors of which one of the the biggest we see is time (having the time to take a workshop or work with a consultant) and timing. Time seems to be the most preciousn of all commodities in many of our “small” community based organizations. Geography for in-person services is also a major influence.
Okay, that’s it – I need to get back to work. Good discussion.
@Robyne – Thanks for sharing your thoughts! Yes, university centers & institutes must suffer from the same challenges regarding fundraising, etc. In developing new business models, it seems like a mixed strategy to include government & business will have to be explored. And for those that have not reached out to those sectors before, it’s a learning curve we need to get over sooner than later.
@Hollly – Thank you for commenting here! I am the queen of dense reads
That’s the one benefit of being a PhD student. I am beginning to hear your thoughts about collaboration being echoed out loud, at least here in DC, instead of just “in the hallways” at association events. The nonprofits we are supporting are wondering when we (the infrastructure groups) are going to walk our talk. They are the ones making the choices about where to spend their membership dues based on where they are really getting value. In the case of collaboration, I don’t think we have all the answers by far, but I agree that we have to start testing it out so others can follow our lead.
Thanks for a great summary of the report, Rosetta.
I agree that the fee for service model can be problematic, particularly for smaller, resource-constrained organizations. I agree that more collaboration would help, as well as more understanding from the funding community about the benefits MSOs are delivering to the sector and to communitities. I work at an MSO now and have in the past. I believe in our work strongly, and echo much of what Nelson and others have said above. Speaking of collaboration – the Alliance for Nonprofit Management Conference (www.allianceonline.org) is next week. And http://www.ideaencore.com is a new vehicle for sharing information in greater ways than the sector has done to date.
That said, I think we are ignoring one part of this equation – and that’s the importance of building the skills of people working in the sector. Professional development is not a “nice to have”, in my mind, but a must. And organizations – big or small, should prioritize building the skills of their people that will result in stronger organizations having greater impact on our communities. Small organizations with incredibly tight resources may never change that self-description until they prioritize developing themselves to rise above through better fundraising, marketing, program delivery and organizational management.
Free is a tough argument for me. People don’t show up for free (seriously – tell me you aren’t more likely to skip an event you didn’t pay for). And people don’t necessarily value free. And developing the skills of our workers is worth much much more than that to me.
@Chelsea – Thanks for reading! Your thoughts about access and implementing a new fee-for-service model makes me wonder if we need to rethink our assumptions about nonprofit training. Where are our costs coming from that make it hard for small nonprofits to pay the fees? If it’s paying for speakers or consultants, maybe we need to do away with them and pull expertise from the nonprofit community itself, i.e. a panel of local nonprofit leaders at a conference vs. an expensive big name speaker. I think we sometimes forget that we can learn from each other and provide peer-to-peer support as a lower-cost option.
@Nelson – You presented so many great thoughts here, I had to turn it into it’s own blog post. Thank you for sharing them.
@Virginia – Thanks for your comments! I agree with you about free, maybe low-cost vs. free is better so the nonprofits receiving the training or information do value it more. On developing the skills of workers, I come back to my comment to Chelsea above…what are our assumptions about who is “qualified” to train nonprofit workers? What if we designed a model by which the more experienced nonprofit folks could train those who needed development? Much lower costs than putting on seminars/conferences/workshops, and could be more relevant to the day to day work.
Rosetta –
You are spot on about peer learning–in fact this is the model we have used from the beginning. We have been able to offer our services free of charge in part because we value and promote the knowledge within our community of grantees and partners. This has been a very powerful and successful model for us – and rewarding to see the benefits participants gain from being in the same room (or same phone call) together and learning from each other. The annual capacity-building workshop we put on has had great impact in part because we focus on peer learning and solution development, and are very strategic about when and how we use “experts”.
However, I do think that Virginia makes a very good point about how people value or don’t value things that are free. And while our programs may be ‘cheaper’ to administer than others, we may still need to figure out how to incorporate a fee for service strategy to make it sustainable.
@Chelsea – Maybe there is nothing wrong, then, with creating programming that only “rich” nonprofits can afford, if we use the revenues to provide assistance to the groups that are “poor”….