It has been almost two years since I first put fingers to keyboard to write about the rising tide of nonprofit reform. Hardly a day went by without hearing some new idea for improvement, whether embedded in new management standards, bounties for mergers and strategic alliances, or calls for greater transparency. The problem facing individual nonprofits was not too little reform, but too much.
Two years later, the deluge continues, driven in part by the sector’s own sense that it must get better, faster, and leaner to manage its growing workload. There is a reform for every philosophy, not to mention a likely funder, consultant, and best-seller. Nonprofit executives are expected to be conversant in a pastiche of reform languages, from customer-speak to outcomes-ese, lest they jeopardize their funding, frustrate their volunteers, or anger their boards.
Through it all, the sector is pressed hard to become something other than nonprofit-like. Sometimes, the pressure is explicit, as in calls to be more businesslike, revenue-centered, customer-focused. Other times, the pressure is more subtle, as in the rise of the Harvard Business Review as a destination of choice for scholarship on nonprofit management, or in suggestions to import best practices wherever they can be found, usually meaning over the fence in the corporate sector.
This is not to argue that nonprofits should never downsize, generate revenue, join alliances, or be strategic. Indeed, one can rightly argue that the nonprofit sector gave first meaning to familiar terms such as entrepreneurial and innovative. Most nonprofits exist in a turbulent, competitive world, and increasingly compete with other nonprofits, government and private organizations alike for funding. Name an area of nonprofit endeavor and there is likely to be some for-profit, governmental, or hybrid organization bleeding away resources.
Nevertheless, there is something deeply troubling about the lack of meaning and aspiration embedded in the term “nonprofit-like.” The question is not whether nonprofits need to become more effective and efficient, but how far nonprofits can go down the path toward being businesslike without becoming something other than nonprofits. Those who believe, as I do, that nonprofits should generate at least some revenue of their own do not know, for example, whether there is some tipping point at which making money transforms a nonprofit organization into more of a business than a nonprofit. Nor do we know just how entrepreneurial a nonprofit can become without somehow losing its connection to the community it serves.
Nor do advocates of competition know at what point the pressure to win so alters an individual agency’s operating culture that it can no longer tolerate the collaboration that makes it part of the community in which it resides, or when the pressure to be lean and mean becomes more compelling than the pressure to represent stakeholders. Much as competition can sharpen the organizational senses, it can also create a kind of “tread-milling” in which nonprofits spend more time searching for the next dollar, innovation, or bright new thing than fine-tuning what they already know works for enhancing their impact.
Just because the nonprofit sector needs to improve its performance does not necessarily mean it has to become more businesslike. Unfortunately, absent a compelling vision of what being nonprofit-like means, it is hard to imagine that individual organizations will be able to resist the pressure to become less like nonprofits.
Consider for a moment the words one associates with the terms “businesslike” and “nonprofit-like.” The former conjures up images of competitive, entrepreneurial, strategic, agile, innovative, and profitable, while the latter all-too-often sparks conversations about sluggish, under-funded, stressful, professionalized, duplicative, and inefficient.
Therefore, it is hardly surprising that boards and funders would rarely urge the nonprofit sector to be more nonprofit-like. Whereas being businesslike has come to mean fast, lean, efficient, and strategic, being nonprofit-like is merely a condition of existence. Nor is it surprising that being businesslike would be viewed so favorably, if only because the private sector is so effective at burying its failures and celebrating its successes.
Asked by the Pew Research Center for The People & The Press to explain their nation’s success at the end of the 20th century, for example, Americans gave almost as much credit to the free enterprise system (81 percent said it was a major reason for success) as they did to the Constitution (84 percent) and free elections (84 percent). Respondents also placed being businesslike well ahead of cultural diversity (71 percent), freedom of the press or the character of the American people (tied at 69 percent), and God’s will (65 percent). The nonprofit sector is found nowhere on the list.
What is surprising is how reluctant the nonprofit sector has been to rise to its own defense. Humbled by the United Way scandal, the sector was intimidated by congressional bluster following the 1994 elections; the more recent faith-based initiative has only added to the anxiety. Frightened by the steep decline in government funding, the sector is hoping for its share of the new dot.com philanthropy. But in an era where being businesslike is the great American ideal, the nonprofit sector has been unable or unwilling to mount a stirring call to nonprofit-ness-let alone develop a rigorous model of what being nonprofit-like might mean.
The nonprofit sector cannot mount such a defense until it starts defining itself by what it wants to be. That means converting the word “nonprofit-like” from a condition to an aspiration. Like being businesslike, being nonprofit-like should speak to the best in the sector, not merely the sector as a whole. Properly defined, being nonprofit-like will not apply to all nonprofits, nor should it. The term should refer to the best in the sector, whatever that benchmark (to use a shop-worn businesslike term) might be, and should be inspirational in tone. Some nonprofits simply will not measure up as nonprofit-like.
As a starting point for further debate, let me define nonprofit-like as high performing in the pursuit of the collective, or public, good. As such, my definition covers both the performance and purpose of the sector.
First, being nonprofit-like means aiming for high performance in the delivery of whatever goods and services a nonprofit organization provides. Being mediocre or hanging on for survival’s sake cannot constitute being nonprofit-like, lest the term be stripped of usefulness as a lift to the sector. To the extent that being nonprofit-like becomes an aspiration instead of a condition, the nonprofit sector as a whole must take responsibility for the poor performance that resides within its borders. That requires the kind of self-policing implied in the standards of excellence coming from Minnesota and Maryland, and the willingness to take action when individual organizations fail.
Second, being nonprofit-like means producing public, not private, goods. This part of my definition speaks directly to the pressure to become more competitive, entrepreneurial, and strategic. It is one thing to generate revenue that can be used to subsidize public goods, and quite another to allow the pursuit of revenue to crowd out the core commitment to an organization’s mission. The precise amount of self-generated revenue that changes a nonprofit into more of a for-profit may be squishy, but this definition would most certainly require a careful accounting of just where the self-generated profits are spent.
Drawn together, the definition of nonprofit-like allows nonprofits to reclaim their ownership of terms such as innovative, strategic, and entrepreneurial. The nonprofit sector has long been a source of innovation in America, whether in pioneering new medical technologies, developing new policy ideas, or building communities in which the American economic system could grow and prosper. Nonprofit organizations hardly need look across the corporate fence at the 3M Corporation or Intel for guidance on becoming innovative, when they can just as easily visit their local puppet and mask theaters, research laboratories and teaching hospitals. Take, for example, the Consumer’s Union, which has pioneered a host of creative techniques for testing everything from shoes to blenders. Which organization is more innovative: the one that invented Post-It Notes or the one that invented a sneeze machine to measure the strength of facial tissues?
Some will argue that being nonprofit-like should contain elements of advocacy on behalf of stakeholders, efforts to build community, and collaboration in pursuit of economic, social, political, or artistic renewal. Others will argue that being nonprofit-like should include operational goals such as cost efficiency, outcome measurement, total quality management, even customer satisfaction. Still others will put their emphasis on words such as responsive, trustworthy, or faithful to describe high performing nonprofits.
But whatever the final list of strategies, operational goals, and core values, the debate over being nonprofit-like is long overdue. Until the sector creates its own language of higher performance, it is likely to be buffeted by whatever new idea flows over the transom from government and business. As such, it can only become less nonprofit-like over time. Absent such a debate, the path toward becoming more nonprofit-like will remain very badly lit, poorly mapped, and rarely taken, leaving nonprofits that want to improve with only the hackneyed option of being businesslike.
1. Public Perspectives on the American Century: Technology Triumphs, Morality Falters. 1999. The Pew Research Center for the People & the Press. July 3.
Paul Light is vice president and director of governmental studies at the Brookings Institution, author of Making Nonprofits Work, and lead investigator on the Nonprofit Effectiveness Study, which is asking how nonprofits sustain excellence in performance.