Three Shifts Seen as Shaping Nonprofit Sector’s Future

March 6, 2012; Source: Northern California Grantmakers

At the recent annual meeting of Northern California Grantmakers, keynoters Lucy Bernholz of Philanthropy 2173 and Stanford University’s Rob Reich discussed three forces of change—what they call (and what Nonprofit Quarterly has previously referred to as) “tectonic shifts”—affecting the U.S. nonprofit sector. What’s particularly interesting is that two of the most dominant trends of the past decade, technological change and social networking, are apparently so embedded in our culture that they don’t bear special mention anymore. The three featured shifts all center on the redefinition of the fundamental role of nonprofits and philanthropy in our society.

One shift that was presented is the continued blurring of the boundaries between sectors, and there’s a new wrinkle. The blurring of boundaries shapes not only how organizations work together across sectors, but also how individuals see the best platform for their own aspirations to “do good.” In turn, this affects how the nonprofit sector can attract its next generation of leaders and donors.

A second shift, Bernholz and Reich say, is the role of private resources in reshaping the social contract that defines what we hold as key social benefits, rights and responsibilities. On the one hand, the “public” nature of the public sector is being eroded by such forces as sustained structural budget deficits at all levels of government, the expanded and increasingly opaque role of corporate influence (as enabled by the Citizens United court decision regarding campaign contributions) in politics, and the overall dysfunctional partisanship that has paralyzed policymaking. On the other hand, technology and tax reform are enabling a new “social economy” to mobilize private resources in new ways for social benefit.

Finally, the third shift presented is the pressure for tax policy reform that directly affects nonprofit operating costs and the incentive structure for charitable contributions. While potential elimination of personal federal tax deductions for charitable contributions is the most publicized example, other examples include localized challenges to nonprofit exemption from property taxes and fees, often in the form of payments in lieu of taxes. The last major change to related tax laws happened over a half-century ago with the Tax Reform Act of 1969, according to Bernholz, who believes new tax reforms offer an opportunity to align tax policy with financial tools and incentives that better fit today’s nonprofit sector.

Whether all these shifts create more opportunities or challenges, nonprofit leaders will need to be active in the political arena not only to address mission-specific issues, but also to shape our sector’s fundamental future role for society. Are you ready? –Kathi Jaworski

  • Bill Clayton

    “Potential elimination” of federal tax deduction is not “potential”, it is fact. Many of us, who do not itemize, cannot take a charitable deduction now. Additionally, I think the author should take into account the huge challenges to small nonprofits caused by new restrictions on nonprofits, and requirements for 990 filing, reinforced by harsh penalties.

  • Kathi Jaworski

    Good points- thank you! I’ve been thinking about another article imagining if all businesses with public money had to comply with the 990 reporting requirements. Maybe now is the time!

  • Holly Delany Cole

    Kathi, these observations are right in line with our own. Community Resource Exchange is a nonprofit management consulting group aimed at helping nonprofits fighting poverty and advancing social justice in NYC to become more effective in that work, and sustainable. We’ve been doing this work for more than 30 years, with 200 – 300 groups annually.

    This past week at our Board meeting, we lifted up several themes for our Board members to consider about the context in which our work is now happening. We too shared with them the blurring of the for-profit and nonprofit and public sectors, as evidenced by the emergence of Corporation B social enterprises (Catchafire is one example); the increasing number of social venture philanthropy projects (see Arbor Brothers); and the extraordinary growth of probono capacity-building activities by corporations and other institutions — just one example, here in NY, nine universities across the state, as well as business members of the Association for a Better New York, will partner with the Attorney General’s office to deliver volunteers for nonprofit Boards and training in core responsibilities to Board members of nonprofits. In our specific field, we see the big accounting firms vying to become technical assistance vendors to city agencies, and many former corporate execs joining the ranks of consultants to nonprofits. It’s like everyone got the same memo. Some of it is clearly powered by altruistic interests, and the other driver seem to be about new market development among nonprofits.

    An additional trend we see is that of private foundations mimicking more and more often, the social venture investing approach — narrowing their interests, using the language of ROI and investing in strategy (as opposed to investing in organizations or leaders). It is the way that they believe they can best get to results.

    These are very interesting times indeed.