The Future of the Infrastructure

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Most of the infrastructure formed to support the functioning of nonprofits and philanthropy — and even the concept of “nonprofit sector” as a coherent field of study and analysis — was created in the last 25 years. As a result, the nonprofit sector, only now, can be said to be entering its middle stage of development. To be more specific, while nonprofit organizations have undergone substantial growth in finances and visibility, they have not, generally speaking, achieved their potential to influence their environment, their sources of support, or even a widely agreed upon understanding of their proper management or accountabilities.

Nonprofits have arrived at this stage of development many years behind their counterparts in the business and government sectors of the economy and therefore have a less mature configuration to advance the field. As with the development of other industries, there is an ongoing need for supporting services to strengthen and sustain the individual entities, and to support coordinating and external relations functions. For the nonprofit sector, there is a pressing need for the infrastructure to enter a second, more organized, focused, and coherent stage.

A variety of entities are active at the national, state, and local level to strengthen the functioning and coordination of nonprofits. There is no question that huge advances have been made and that the supporting network has transitioned from a hub-and-spoke structure to a distributed network, which is a potentially more dynamic and powerful entity. For this next stage, several important developments are needed, from reducing fragmentation and focusing effort, to increasing public-policy muscle. There is wide-ranging sentiment within the nonprofit sector that this middle stage of evolution needs to transition to one of greater consistency, clarity, and influence in order to address increasingly complex objectives and growing demands.

In this spirit, the following twelve proposals are put forward as a general set of goals for the nonprofit sector’s next stage of development.

1. Identify and focus on the primary constituency for infrastructure support — and be responsive and accountable to it. One of the most important changes needed, and already well afoot in the national infrastructure, is in the clarification of its primary constituency. For reasons described in greater detail below, the primary constituency for nonprofit infrastructure is the smaller to midsize organizations that make up a majority of the sector’s activity, though less than half of its financial activity.

2. Build up a strong national lobby. Nonprofits need a solid means to inform and influence decisions of government, with substantial clout and active participation at the state and local level. Federal and state policies have a massive impact on the people served by nonprofits, and on the ability of organizations to carry out their work, but nonprofits generally lack the ability to feedback effectively into this system. Nonprofits need a corollary to the National Federation of Independent Business (NFIB), the advocacy organization representing 600,000 small and independent businesses in Washington, D.C., as well as all 50 state capitals. NFIB was ranked the most influential business organization (and third overall), in “Washington’s Power 25” survey conducted by Fortune magazine. Whether it be some combination of existing groups or a new structure, this entity should be a democratic membership organization, with a critical mass of nonprofit organizations as members, and should provide an effective state/national connection that bridges distinctions between national and local organizations.

3. Define a public policy agenda. The sector needs a public policy agenda — broad-based, widely discussed, and agreed to — which encompasses the broad range of meta-level government decisions that affect the work of nonprofit organizations, from federal and state budgets to economic policy. Tax exemptions, IRS rules, and postal rates bear watching by nonprofits, but that’s not enough. In part to counterbalance their larger business counterparts, nonprofits are needed to voice their distinct perspective on national priorities. While business will always advocate for reliance on the marketplace and its own immediate economic needs, nonprofits and philanthropy should be an effective voice for the long-term interests of the country and for the opportunities not addressed by the marketplace.

4. Ensure effective learning and information sharing. Like most other industries involving comparable numbers of people, the nonprofit sector needs a major national convention and extensive state meetings. Engaging substantial numbers of organizations across activity areas builds connections, visibility, and legitimacy. This supports cross-fertilization in the sector and provides opportunities to involve mainstream media and national political leaders.

5. Support an informed public. Just as the public perception of small business was successfully enhanced 30 years ago (from an image of lacking the ability to grow to an image of entrepreneurial spirit and job creator), nonprofit organizations need to reposition the way they are perceived, both in the community and in relation to the economy. This task requires a changed message, both to the general public (including specific sets of business leaders and government officials), and to the employees, board members, and volunteers of nonprofits. The role and contributions of nonprofit organizations deserve to be in every high school social studies curriculum alongside the fundamentals of private enterprise and representative government.

6. Counter fragmentation. Nonprofits need the ability to pursue and increase their connections across activity areas, geographic areas and populations, enhancing the sector’s ability to operate and communicate between subsectors (for example, identifying and facilitating connections between child care and job training). The criticism that there are too many nonprofits, that some form of “Wal-Marting” the nonprofit sector into consolidated units would increase public benefit, is misplaced and counterproductive. However, despite an extensive history of collaboration, nonprofit organizations need to go much further in developing the skills and habits of mutual support and connection.

7. Bridge theory and practice. The nonprofit sector needs more visible and effective linkages between researchers and practitioners, prompting practical applications of the most useful research in the field. Specifically there must be greater awareness of major research questions; and research results need exposure in management programs, training, and publications. Real-time research is needed, with current economic-performance information about what has been happening in nonprofit finance, personnel and production — last quarter or last month — not three years ago. Basic data collection is a necessity, and should be financed by government.

8. Develop and nurture sector-appropriate theories of nonprofit management. Approaches borrowed from public and business administration should be supplanted by authentic nonprofit approaches to management, finance, government, and business relations; and individual participation. The growth of higher education programs, management-support organizations, specialty publishers, and research for the nonprofit market has prepared the way for native nonprofit theories and approaches, which pull together the democratic and social roles of organizations with their instrumental functions.

9. Support the development of a well-trained and highly motivated workforce. A clearer understanding of career options and tracks as well as a commitment to training and fair compensation are elements that can further cultivate the talented people now in the sector, as well as attract new entrants. Paul Light has documented the exemplary nature and advantages of the nonprofit workforce; in turn, management and human resource practices must take advantage and build on these attributes.1

10. Enhance access to appropriate information and professional services. The development of relevant, professional, and interstitial networks across disciplines that have expert knowledge of nonprofit organizations would help transform varied, individual efforts into more coherent fields of practice. The advance of allied professions such as specialist accountants, attorneys, consultants, and lenders can help develop the nonprofit sector in key areas.

11. Concentrate on small “l” leadership development. The next generation of the nonprofit and philanthropic sector will require a widespread encouragement and nurturing of emerging leaders, providing venues and open networks to increase their access to information and resources.

12. Devise a “business plan” for further development and maintenance of the infrastructure. Lastly, there is a need to look carefully at which infrastructure activities can realistically be supported through fees, and which will need to be underwritten by foundations or by government. Where is capital needed and where can activities complement one another? This subject — discussed in greater detail below — will need a much higher degree of commitment on the part of leading institutions and funders.

Plans for meeting the future requirements of nonprofits would benefit from greater precision in identifying the nonprofit sector’s audience. Too often statements about the nonprofit sector engage in puffery, citing the largest possible numbers of organizations, employees, and financial activity as proof of significance, and thus, conflating organizations of such different magnitudes that they operate in completely different orbits. Successfully developing the next stage of the nonprofit infrastructure requires realistic distinctions between primary and secondary constituencies.

The largest portion of the sector — and the constituency with the greatest need for the most to gain from the national infrastructure — is the hundreds of thousands of small to midsize groups. The vast majority of individual nonprofits in this group have fewer than 100 employees, and are the groups that most people think of as charitable organizations: human services, arts and culture, employment and job training, economic development, environmental and animal-related organizations. They include health education and health promotion, alternative schools, community clinics, neighborhood groups, youth sports, etc.

A secondary constituency comprises larger organizations, such as universities and hospitals, health maintenance organizations (HMOs), trade associations, unions, and others. While these larger organizations are a valuable part of the sector, they are generally capable of sustaining many of their own infrastructure activities and shouldn’t be viewed as the primary participants in the nonprofit infrastructure support activities discussed here.

Therefore, a key challenge in supporting the nonprofit sector lies in covering the costs of supporting the effective operation of small and medium-size organizations, the primary constituency. Supporting these organizations presents particular challenges since their diversity is both a unique asset and a barrier to more effective programs. The proliferation of organizations creates choices and allows for creativity, local control, and adaptability to local conditions. It also promotes mobilization of non-financial community resources including volunteers, board members, and individual donors. However, these groups are challenged by fragmentation, which can result in overly narrow approaches to complex social issues, a lack of political clout, and redundant or less-than-optimal administrative systems. Infrastructure support is essential in addressing the fragmentation, isolation, and fragility that characterize these organizations, while leaving their very local and individual identities intact.

Until recently, because of the difficulties involved in communicating in a reciprocal style with such a large and diverse field, most of these smaller nonprofits have not been directly connected to the national infrastructure. This isolation presents obstacles to diffusion of knowledge, planning strategy, and taking joint action.

A vital role for infrastructure is to provide the information and connecting channels needed to overcome the problems of fragmentation and isolation, and to be a force of synthesis and aggregation. Infrastructure organizations can support network development and can also provide information and organizational support. Some infrastructure organizations have developed the capacity to reach out broadly, sometimes through local members and sometimes directly (online in many cases) to hundreds of thousands of nonprofits, as well as to individual donors and volunteers and other participants developing ways of conversing with, gleaning, and meeting the interests of this diverse and dynamic field.

To understand the potential for planned development and intentional support for key functions as part of a larger strategy, it is necessary to segment which parts of the nonprofit sector should appropriately be supported by government, which are supportable largely or in part by user fees, and which will need the continuing subsidy of philanthropy. Of course in some cases, it will be a mix of two or all three of these categories.

While this article will not go into detail about it, there are very basic data-gathering and aggregation functions that should be paid for by government, since government provides these same functions for business in general, as well as for a number of specific industries.

Some aspects of nonprofit infrastructure support are easier to finance by fees than others. If nonprofit organizations value infrastructure services they should be willing to pay for them. There is a natural continuum in the potential for earned income in this area.

The nonprofit sector’s lack of access to capital is at the core of the difference between business and nonprofit infrastructure systems. There’s no financial “return on investment” in the nonprofit sector, so the incentive for private funders or government to invest in infrastructure is less clear-cut than for venture capitalists, for example, who understand that such support is necessary for long-term success. User fees can pay for some or all of the cost of a number of infrastructure functions, but quite a few activities will always have a need for subsidy.

The table above sets out a continuum illustrating the willingness and ability of the primary nonprofit market to sustain its infrastructure activities, from high to low. Nonprofit organizations can be expected to pay the full cost of fundraising information, audit services, accounting, and executive searches. Nonprofits, as a group, are unlikely to ever aggregate sufficient participation to fully cover the cost of sector research, public policy analysis, or curriculum development.

The existing constellation of infrastructure organizations has evolved on its own, and certainly has a remarkable set of achievements to date. The second stage, focused on what is required to move the nonprofit sector ahead, may not look the same or be financed in the same way. Resources are a key constraint, but so are the time and attention of organizations and individuals.

To focus and redesign the existing set of institutions would be a formidable task. A comprehensive process of intentional planning and strategic priority setting for the sector as a whole would be ideal, but seems alien and unlikely to succeed. However, an open and honest exchange about priorities and sustainability is essential. The conversation already begun by many of the leading infrastructure organizations could provide the grounds for a frank assessment by the larger nonprofit community about what is needed, what the larger goals are, and what should be subsidized. Somehow, the tough decisions will follow.
Jon Pratt is contributing editor to the Nonprofit Quarterly and is executive director of the Minnesota Council of Nonprofits.