Excerpt: Strategic Fund Development, Part 2

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Simone P. Joyaux, ACFRE is recognized internationally as an expert in fund development, board and organizational development, strategic planning, and management. She is the founder and director of Joyaux Associates. Visit her website here.

For the past eight months or so, Simone Joyaux has been writing the third edition of her first book, Strategic Fund Development. The book will be released in spring 2011 by John Wiley & Sons, Inc. Her next two columns will feature modified excerpts from the book’s first chapter.

Building Profitable Relationships That Last

Naming the sector and its organizations

Rather strange to define the sector by what it isn’t, e.g., “not-for-profit” or “nonprofit” or “non-governmental.” Other terms include “independent sector” or “third sector,” with the for-profit and government sectors being the other two. But these terms never seem to stick broadly.

Over the years, many have questioned the sector name, defined by what it is not. But I suspect it may be here to stay. And it isn’t a battle I want to fight right now; I have too many others.

I use the term nonprofit / NGO, hoping to move beyond North America centric only. NGO means non-governmental organization. That’s the term typically used outside of North America.

How about those terms “earned” and “unearned” income? “Unearned” references charitable gifts. Hey, nonprofits “earn” those gifts through very hard work! I say “income” with two subsets: revenue (referencing fees and tuition and box office, etc.) and public support / charitable contributions. Both equally earned, thank you!

By the way, it’s okay that organizations generate excess income over expense. In fact, healthy organizations do just that. I wonder how well those outside the sector understand that.

Actually, I wonder how many outside the sector understand how the nonprofit / NGO sector is financed. I wonder how well those outside (and inside) the sector understand the financing conflicts, the lack of capitalization, the inadequacy of resources, and the inappropriate expectations forced upon the sector.

Do you think your board members actually fully understand the sector’s financing? Surely they should. Read Clara Miller’s articles in the Nonprofit Quarterly.Read “The Nonprofit Starvation Cycle,” in the Stanford Social Innovation Review.

Why does this sector matter?

Waldemar A. Nielsen calls this sector the “keystone of a caring society,” as contrasted with the for-profit and government sectors, which might not be so caring.

The nonprofit / NGO sector is essential for the “spirit and character of our society and for the freedom and fulfillment of each of us…” So says Waldemar A. Nielsen in his marvelous paean to the sector, “The Third Sector: Keystone of a Caring Society,” an Occasional Paper published in 1990 by the Independent Sector.

The third sector is comprised of a myriad of organizations large and small, focused on education and human services, arts and culture, public society/benefit and health, and more. The third sector is essential to a healthy community.

Nielsen describes the sector as doing three key things:

·      Delivering a wide range of services to people – often bridging the gap between government investment and actual community needs

·      Strengthening the other two sectors, for-profit marketplace and government – often producing corrective and compensatory effects

·      Serving as a humanizing force – offering people an opportunity to give (Nielsen uses the phrase “an outlet for the nearly universal impulse to altruism.”)

More than two decades ago, Nielsen ended his paper with the following: “The Third Sector is now in serious difficulty – under simultaneous assault by inflation, government regulation and competition and the negative effects of some misbegotten tax policies. [The Third Sector’s] own mismanagement of its affairs is another worrisome problem. To preserve its freedom and vitality will require a long determined and persevering struggle by all of us who are committed to the preservation of a humane, compassionate, and free society in this country. That cause is eminently worth fighting for.”

What might you say today? Something very similar. The third sector is in serious difficulty. As the saying goes, plus ça change, plus c’est la meme chose. The more things change, the more they stay the same.

I really like Nielsen’s statement that the nonprofit / NGO sector provides corrective and compensatory benefits to the marketplace and government. And, the nonprofit sector is the counterbalance to government and the for-profit sector.

For me, a critical role of the nonprofit / NGO sector must be questioning the status quo. A major role for the sector must be advocating appropriate public policy.

Nonprofits and democracy

Without a doubt, the nonprofit / NGO sector plays a critical role in creating and sustaining democracy. Through voluntary association, citizens gather together and question, rally, and act. Search the NPQ website for many marvelous articles about this sector and democracy.

Read, too, the writings of Alexis de Tocqueville and his 19th century examination of life in the United States. He wrote extensively about voluntary associations and their role in democratic societies.

Through the right of associating, people push back against issues as diverse as laws and elected officials, corporations and their acts. By associating voluntarily, people exercise their right to question and critique, advocate and lobby. As associations – not just individuals – people can hold accountable their government as well as the marketplace.

Look at the movements that forced government to change and forced the for-profit sector to change somewhat. Think about the anti-smoking and environmental movements. Think about the Civil Rights movement. Look at the marriage equality movement and the anti-war movement. Remember the fall of the Berlin Wall. Look at the freedom movements around the world.

Citizens voluntarily engage in nonprofit organizations. NGOs fight and fight hard, including protests and litigation. And change happens. With change sometimes comes – hopefully – stronger democracies and more justice.

Thanks to the third sector.

But still more must be done. The third sector must fight harder. More nonprofits must join in.

What stops NGOs from embracing their role in democracy? Why doesn’t the sector step up and fight harder?

·      Lots of reasons. Insufficient time. Not enough resources – after all, big funders (especially foundations) don’t always support advocacy and public policy work.

·      Why else? Fear of donor reaction. Lots of donors give to direct service and don’t want to make systemic change. Systemic change means questioning the status quo and lots of donors arethe status quo.

·      Why else? Regulatory threats. For example, the U.S. government invents laws and regulations to reduce the advocacy power of nonprofits. And nonprofits often don’t find the wherewithal and motivation to fight this.

·      On and on it goes. The nonprofit / NGO sector does not live up to its potential to fight government.

But let’s not just blame the sector. The people – our donors and volunteers and voters – must stand up and speak out on behalf of the sector and on behalf of democracy, which is reinforced by this unique sector.

The time is always now.