Why Every Foundation Should Fund Infrastructure

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The purpose of this special issue of the Nonprofit Quarterly is to call on grantmakers to acknowledge the importance of providing funding for the nonprofit infrastructure — a wide and diverse network of intermediary organizations at the local, state, regional, and national levels — that helps the individual nonprofit organizations supported by funders become optimally effective. What is infrastructure and why should funders support it? The answer is below.

Each year, foundations give away millions of dollars to nonprofit organizations engaged in efforts to meet some of the toughest challenges our nation faces. These nonprofits feed the hungry, house the homeless, provide healthcare, educate young children, support the arts, and provide outlets for citizens to express their views or to volunteer.

In most cases, these nonprofits are undercapitalized, understaffed, and stretched to the bone as they continually struggle to find and secure the resources they need to carry out their missions. Since September 11, 2001, this situation has intensified, with nonprofits responding to rapidly increasing needs while facing diminished resources, not only from foundations, but from public and other private sources as well.

Foundations have played — and continue to play — an important role in providing needed financial resources to the nonprofits they support. And, in recent years, foundations have increasingly realized the importance of providing more funding to help their nonprofit grantees obtain services or assistance that will build their capacity to endure over the long term.

The upward trend in the number of foundations providing support for building the capacity of their individual grantees, however, has not been accompanied by a parallel level of interest in supporting the organizations providing this capacity-building assistance. These oganizations are the intermediaries working at the local, state, regional, or national levels that offer management support, advocacy, data, training, technical assistance, and other services to grantees and thousands of other nonprofits that benefit from them.

These intermediary organizations (see the map on pages 28 and 29) are the nonprofit sector’s infrastructure. Like a body without a backbone, a sector without a strong infrastructure will crumble; yet, the nonprofit sector’s infrastructure — its role, what it contributes to society, and what it offers to nonprofits — is still largely a mystery to many funders. This lack of awareness threatens the stability of our nation’s nonprofit sector, and in particular, whether it can and will continue to serve, along with the public and private sectors, as one leg of the three-legged stool of a healthy democracy.

In recent years, for example, two of the largest funders that supported infrastructure development ceased funding in this area, eliminating nearly one-third of the financial investment needed to meet the nonprofit sector’s rapidly growing capacity-building needs. And while a few other funders have stepped in to help fill the gap, their contributions are not nearly enough to meet these increasing needs, nor do they provide the consistency the sector needs to grow and flourish. Now, more than ever before, nonprofits need management support; technical assistance in marketing, governance, technology and financial systems; and tools to document their impact. They need to learn how to lobby just like their for-profit counterparts do, so that their programs, services and missions are protected and strengthened. They need help in communicating and evaluating what they do. And they need a strong academic base to train new professionals and generate rigorous research about the sector and its work.

Infrastructure organizations provide these crucial capacity-building services to nonprofits. That is why, as some of the funders who have supported the development and growth of the nonprofit sector’s infrastructure for many years, we are asking that all funders consider allocating at least some portion — whether it is one percent or one hundred percent — of their grant dollars to support for this infrastructure at whatever level they choose: local, state, regional or national. If only 1,000 funders contributed $100,000 apiece, it would not only make up the gap we currently face in ensuring the stability of this infrastructure, but it would also ensure the longevity of the nonprofit sector.

Before funders can contribute to the nonprofit infrastructure, however, they need to know more about what exactly the nonprofit sector infrastructure is, what it does, and what it contributes to their grantees as well as to society overall.

 

As with the private and public sectors, the nonprofit sector’s infrastructure comprises organizations at the local, state, regional, and national levels that help nonprofits become more effective, transparent, and accountable. Among these levels is a reciprocity that is vitally important. Local infrastructure groups need national infrastructure groups to help them monitor policy across states, obtain national-level data, conduct research, identify national trends, network for cross-learning and lobbying power, and engage in numerous other activities that benefit the sector broadly. National infrastructure groups depend on local or state intermediaries to provide them with information about the thousands of nonprofits “on the ground” with which they come into daily contact because this strengthens national advocacy efforts on behalf of all nonprofits.

No matter at what level one examines the nonprofit sector’s infrastructure — local, regional, state, or national — it has several common attributes. Specifically, this infrastructure does the following:

Advocates and represents the sector in public policy circles. Infrastructure organizations provide a “voice” for the sector in the conception, enactment, and revision of laws and regulations that affect either the nonprofit sector as a whole or the work of a subset of organizations. Such laws and regulations, for example, could restrict a nonprofit’s ability to lobby or advocate state laws or policies related to how government contracts are paid, in turn threatening the capital positions or financial management of thousands of nonprofits. At the national level, a number of groups exist to guard the advocacy rights of nonprofits and to promote advocacy as a tool; among them are Charity Lobbying in the Public Interest, OMB Watch, the Alliance for Justice, and the Advocacy Institute. These organizations teach nonprofits how to lobby, educate nonprofits about the legal parameters of such advocacy, and advocate for nonprofits’ right to engage in the public policy making process. At the local level, state associations may play this role; the Minnesota Council of Nonprofits, for example, has conducted major educational and media campaigns calling for a limit to state budget cuts to nonprofits serving poor and vulnerable constituencies in that state.

Provides training, management and other capacity-building services and assistance that help make nonprofits more effective. Infrastructure organizations offer technical assistance or training in fundraising, communications, strategic planning, business plan development, financial planning, technology, board development, and other key areas in which nonprofits often need help. Hundreds of management support organizations and state associations often provide these services across sub-sectors (arts, human services, health, housing, and so forth) and/or at the local, state or regional levels, through such organizations as CompassPoint (CA) and the Community Resource Exchange (NY). Many of these local capacity-building organizations stay abreast of best practices and research on organizational management and development through their association with the Alliance for Nonprofit Management, which provides rigorously reviewed professional training and information. Also at the national level, the Nonprofit Finance Fund, Communications Resource Center, BoardSource, Center for Community Change, and Idealist.org are among several organizations offering research, information, and support in specific capacity-building areas. In many cases, these and other infrastructure organizations provide such services at little or no cost to nonprofits.

Promotes accountability and transparency among nonprofits and develops and promulgates better codes of conduct among nonprofits and the sector at large. Infrastructure groups monitor nonprofits to ensure that principles of good conduct are upheld and to establish processes for adherence to these codes. While this work is still developing, watchdog organizations such as the Better Business Bureau Wise Giving Alliance and Charity Navigator provide guidelines that can be used to identify nonprofits violating established codes of conduct. The National Committee for Responsive Philanthropy and the Council on Foundations are also involved in ethics and monitoring philanthropy to ensure that foundations adhere to ethical standards of practice.

Generates information for and about the nonprofit sector. Infrastructure organizations provide research and data about the dimensions, content, impact, and needs of the sector and encourage academic institutions to incorporate more rigorous scholarship and curricula in this area. GuideStar, an online database, provides easy public access to nonprofit organizations’ financial information.

The National Center for Charitable Statistics at the Urban Institute uses this and other data to provide researchers, journalists, policymakers, and others with analyses that help educate the public about the importance of the sector. The Foundation Center also collects and makes available vast amounts of useful information on foundations. The Aspen Institute’s Nonprofit Sector Research Fund provides grants to researchers to engage in more rigorous research about issues of concern to both nonprofit sector leaders and policymakers. Major national research about nonprofits has been conducted at Johns Hopkins University, the Brookings Institution, Indiana University, the University of Missouri, Georgetown University, New York University, Harvard University’s Hauser Center, and a host of other academic strongholds, many of which also offer degree or certificate programs in nonprofit management. Publications such as the Nonprofit Quarterly synthesize data and information, as well as offer new ideas in reader-friendly formats for practitioners at the local and national levels.

Offers opportunities for individual nonprofits to network and share information. Infrastructure organizations connect nonprofits to one another to help them learn from one another, build their management and program practices and develop policy positions and common action agendas. Even at an individual sub-sector level these groupings can be very large; for instance, the National Assembly of Health and Human Service Organizations represents 70 major national nonprofit health and human service organizations, which in turn represent collective budgets of some $32 billion annually; they employ 800,000 people and operate over 160,000 sites in nearly every community in America. At the state level, nonprofit state associations, which collectively represent tens of thousands of nonprofit groups, convene nonprofits across sub-sectors. All of these state associations are linked by the National Council of Nonprofit Associations, which provides opportunities for cross-learning among the state associations in such areas as the development of policy agendas at the state level, and the shaping of training programs. Also at the national level, Independent Sector convenes nonprofits across sub-sectors to consider and take action on issues of common concern.

Promotes philanthropy and voluntarism. Infrastructure organizations encourage and support charitable giving and voluntarism through public relations campaigns and organized initiatives. This happens at the national level through such organizations as the Association of Small Foundations, which provides support for foundations with smaller staffs and, at the geographic level, through groups such as the Forum of the Regional Association of Grantmakers, which convenes foundations around issues of common interest. The Council on Foundations’ has within it a varied affinity group structure, which gives grantmakers the opportunity to convene around common interest areas. To facilitate voluntarism among the public, VolunteerMatch, a national Web site, matches volunteers with nonprofits who need them, while the Points of Light Foundation offers people of all ages the opportunity to volunteer with community nonprofits.

It is important to note that many infrastructure organizations offer a combination of the functions listed above. Independent Sector, for instance, performs research, does policy advocacy, and convenes organizations across a number of sub-sectors to identify common concerns. The state nonprofit associations provide a combination of advocacy, technical assistance, and benefit programs for their members and the sector overall in their states. GuideStar not only offers data about nonprofits, but in so doing provides the sector with a level of transparency and accountability that has been difficult to achieve previously without this data.

In many cases these and other infrastructure organizations carry out these efforts — and work to meet the needs of 1.2 million nonprofits — on budgets that can barely sustain them from year to year. It is for that reason — and those listed below — that more funders need to support these organizations.

 

Foundations are an integral part of the nonprofit sector infrastructure, which, in turn, contributes to a healthy democracy. As Alexis de Tocqueville recognized nearly 150 years ago, a vibrant and healthy nonprofit sector plays a critical role in U.S. democracy. In addition to giving millions of citizens opportunities to volunteer or become civically engaged, nonprofit organizations provide assistance and voice to disadvantaged populations and serve as incubators for solving problems that the for-profit private sector and public sector are either unwilling or unable to address in a timely fashion. On September 11, 2001, Americans were reminded of the critical services and assistance nonprofit groups provide when this vast network of organizations, within minutes, became the nation’s “first responders” to an unprecedented crisis.

Today, the assortment of organizations that make up the nonprofit sector includes most of the nation’s hospitals and universities, almost all of its orchestras, the bulk of its environmental advocacy and civil rights organizations, and enormous numbers of community organizations, children’s service organizations and community health facilities. Conservatively measured, the U.S. nonprofit sector comprises nearly

1.2 million organizations. Although it does not focus on the production of profit, it annually generates more than $670 billion, or nine percent of the gross domestic product. It also employs nearly 11 million people. Always reflecting the diverse and developing interests of the population, the sector continually revitalizes itself; nearly half of all nonprofit organizations were founded after 1984.

The nonprofit sector is currently facing increasingly serious challenges and complexity that demand a stronger infrastructure. Although the nonprofit sector in the United States is seen as a model in emerging democracies for keeping citizens engaged and civic life alive, philanthropy’s support of the infrastructure for the sector has not only not failed to keep pace, but it has also decreased

significantly in recent years. Today, with government cutbacks escalating, nonprofits are more often being called on to provide many of the services that the public sector has traditionally provided, including healthcare, social services, and job training. Concurrently, the market in which nonprofits function is progressively more complex and, in some cases, populated by for-profit competitors. In addition, public and private funding priorities and levels have changed — and continue to change — very quickly, along with shifting regulatory and policy environments. The communities in which nonprofits operate have also changed and become more diverse, while constituents expect more accountability, and technology continues to suggest new ways of working. All of these changes require that nonprofits learn and adapt quickly. This necessitates a vibrant, robust infrastructure that gathers, aggregates, and circulates information in real time.

A healthy sector cannot be successful without an adequate infrastructure behind it. One only has to turn to the private sector to see what this investment looks like. The private sector has an extensive and established infrastructure that comprises scores of professional associations, a solid academic base and degree program (M.B.A.), management and research firms, and lobbying arms with considerable power and influence. In contrast, the nonprofit sector has relatively few institutions dedicated to building the capacity of nonprofit organizations; an academic base that is still emerging, fragmented or multidisciplinary; a dearth of rigorous research and/or timely data; and few resources for lobbying or advocacy. As Christine Letts, the Rita S. Hauser Lecturer in the Practice of Philanthropy and Nonprofit Leadership and Associate Director of the Hauser Center for Nonprofit Organizations, has written: “While for-profit managers are awash in training, research, and education, and boards and investors encourage them to take organizational capacity seriously, nonprofit managers are expected to get heroic results out of their organizations with few of these supports.”1

It is important to emphasize that support for infrastructure is not necessarily the same as support for capacity building. While there has been a laudable increase in the amount of foundation support for nonprofit capacity building in recent years, most of this funding has focused on helping individual nonprofit organizations address their specific needs, rather than on building a stronger infrastructure that helps nonprofits become stronger and more effective.

Support for infrastructure leverages foundations’ investments. When a foundation makes a grant to an infrastructure organization, it helps all those nonprofits that use that organization’s services and, thus, leverages funders’ investments. Using survey response data from 27,000 nonprofits that use VolunteerMatch, for example, a social return on investment (SROI) analysis found that for every dollar invested in the service, $59 is returned to participating nonprofits in the form of volunteer recruitment savings and the value of volunteer hours delivered. In short, supporting infrastructure organizations helps strengthen funders’ individual grantees, the grantees of other foundations, and, by extension, the nonprofit sector overall.

Investments in infrastructure can help improve nonprofit effectiveness. A recent study by Paul Light, professor of public service at New York University, found that nearly two-thirds of nonprofit organizations that had used services provided by management support or other intermediary infrastructure organizations said that these services had been “completely” or “mostly successful” in improving their organization’s management. Nearly 65 percent said it had been “completely” or “mostly successful” in improving their organization’s program impact, and 74 percent said it had been “completely” or “mostly successful” in improving their organization’s overall performance. Additionally, 55 percent of the respondents strongly agreed that intermediaries had helped them introduce changes in their organizations that “led to long-lasting improvements in the organization.” Moreover, half said the intermediaries “gave us a clearer sense of direction and priorities than we had before,” and 47 percent strongly agreed that the work “showed us the areas we needed to improve and the areas where we’re doing well.”

Funding infrastructure organizations can help generate and test new ideas and thinking, which can, in turn, help improve nonprofit performance. When funders support research or organizations working with groups of nonprofits, they help generate and test new ideas and practices. More rigorously tested knowledge about the options available to nonprofits in addressing their capacity-building needs is then distributed through publications, train-the-trainer efforts and management tools, thus providing the broadest possible access to the most helpful sources of advice. In short, support for infrastructure lowers the cost of learning and, thus, raises the odds that individual capacity-building efforts will succeed. This, in turn, lowers the aggregate cost of capacity building throughout the sector.

Support for infrastructure sends a message that foundations care about and are willing to contribute toward creating a positive legal, regulatory, and political climate for nonprofits — including their grantees. This message has become even more important at a time when foundations and nonprofit organizations are under increasing scrutiny about their practices and policies.

 

• Join nonprofit sector associations or organizations that advocate for and deliver services for groups of nonprofits. Also, provide memberships for funders’ nonprofit grantees in these organizations.

• Provide funding for local, regional or national organizations that deliver management, fundraising, technology, communications or other capacity-building services and training to funders’ grantees and other nonprofits that use and need these services.

• Provide funding for research about the nonprofit sector so that their nonprofit grantees are better able to demonstrate their effectiveness, impact and influence in and on society and, in turn, advocate more effectively for their own interests as well as the interests of their constituents and the sector overall.

• Provide funding for publications, educational materials and other information that nonprofits, including their grantees, can use to strengthen their organizations and their work. This includes supporting academic institutions and other nonprofit organizations attempting to strengthen the academic base of the field and sector, including nonprofit management curricula and courses, degree programs, and standards.

• Provide funding for local, state, or regional efforts to build the capacity of individual nonprofits.

• Support efforts by nonprofits to lobby and advocate at local, state and federal levels on issues that concern them, their constituents, and the sector at large — issues such as tax policy, IRS rules, postal rates and others.

• Offer opportunities for grantees and others to network across activity areas, geographic regions, and populations so that they can learn from one another, establish stronger connections and work collaboratively to achieve common goals.

• Encourage and provide support for organizations that train and help to develop emerging leaders in the sector, particularly young people.

• Set aside a percentage of all annual grant funding specifically for infrastructure awards.

These are only a few of the many ways that funders can — and should — support nonprofit infrastructure development. There are many more. While this publication has a particular emphasis on the need to support the national level infrastructure, what is important is that all funders support infrastructure at some level, because no single funder — or group of funders — can do this alone, nor should they. Every funder that supports nonprofits has a responsibility and an obligation to provide some resources for the infrastructure that strengthens and enhances this work. Anything less risks the health and well being of a strong nonprofit sector capable of meeting the challenges of the future and, ultimately, the strong democracy of which it is a critical part.

Cynthia Gibson is the program officer for the Strengthening U.S. Democracy Program at Carnegie Corporation of New York. Ruth McCambridge is editor in chief of the Nonprofit Quarterly.

 

1Letts, Christine. 1998. High Performance Nonprofit Organizations: Managing Upstream for Greater Impact. New York: John Wiley & Sons. pp. 169-190.

 

Does your foundation:

•           Understand the difference between nonprofit infrastructure development and capacity building for individual nonprofit organizations?

•           Survey your grantees to determine to what extent they use or obtain assistance from infrastructure organizations?

•           Know the names of the infrastructure organizations in your community, state, region or nationally — and which ones are used by your grantees?

•           Support field-specific intermediaries that assist your grantees in their work?

•           Support management-assistance organizations, consulting firms, trainers, researchers and other institutions and individuals that are providing important capacity-building services to nonprofits in your city, state or region?

•           Support the national organizations that build the skills of local, regional or statewide groups such as those listed above?

•           Hold memberships in key infrastructure organizations at the national and state levels?

•           Support research that culls and analyzes data about nonprofits in their states or regions — or the sector nationally — so that nonprofits, including the ones that you support, can show concrete results and the impact of their work to the public, policymakers and the media?

•           Support organizations that monitor and hold the nonprofit sector accountable?

•           Support data centers that are broadly accessible and useful to all nonprofits?