Are There Too Many Nonprofits? Or Too Few Bridges Between Them?

With few exceptions, the nonprofit sector has been on a growth trajectory since its inception. By some estimates, we have been steadily growing by about 5 percent each year since 2013. Even in periods of recession or crisis, when leaders predicted we’d see the sector shrink, we sometimes grew faster—resource constraints be damned! In 2020, during the height of the COVID pandemic we grew by a record 70,000 nonprofits. At our current growth rate, we’re likely to be a sector of over two million organizations within the next three years.

That’s significant when you consider that the nonprofit experiment is only about 100 years old. Our origins go back to the Tariff Act of 1894 and Revenue Acts of 1909, 1913, and 1917, in particular, which created a tax-exempt status for entities that serve the public good. In 1940, on a per capita basis, we had about one nonprofit per 2,590 people in the United States. By the 1970s, there was one nonprofit per 848 people. Today, according to the Chronicle of Philanthropy, there is one nonprofit per every 100 people in this country.

At our current growth rate, we’re likely to be a sector of over two million organizations within the next three years.

So why then, with more nonprofits than ever before, have we not been able to turn the tide on deeply entrenched, systemic social issues? It turns out that there’s no evidence to suggest that more nonprofits necessarily equate to more public good.

This is in part because our growth in number has not been accompanied by commensurate growth in resources and support. The resources that nonprofits rely on—philanthropy, government grants and contracts, fees for service, and volunteerism—have been largely static (especially when adjusted for inflation) or on the decline.

While it’s easy to point fingers at the lack of resources, there’s another issue at play, and it has everything to do with what happens between our nearly two million nonprofits, just as much as what happens within and to them. 

The “Too-Many Nonprofits” Myth

I’m part of a growing community of practice of consultants who facilitate mergers, dissolutions, shared services, and other types of organizational restructuring for nonprofits. When I talk about my work, leaders and philanthropists often nod and tell me that’s a great idea because we have too many nonprofits. And even though I facilitate nonprofit mergers for a living, I disagree. Multiple nonprofits serving a community is a good thing—if they know how to work together.

Years ago, I worked with a community center focused on food insecurity and youth development. When news spread that another organization from across town had inherited a building just one block away from my client and planned to offer similar services, it raised more than a few eyebrows among funders and community members. During interviews, as part of a strategic planning process, I heard varying degrees of concerns over the potential duplicity of efforts if two organizations in such proximity offered nearly the same services. Were we about to have a redundancy problem? If they competed, only one would survive, or so they believed. Some even went so far as to suggest they should merge. (Cue the collective gasp!)

Leaders and philanthropists often nod and tell me…we have too many nonprofits. And even though I facilitate nonprofit mergers for a living, I disagree.

What members of the community discounted was that the relationship between the leaders of both organizations went back decades and, instead of competing, they quietly and humbly collaborated.

By choosing cooperation over competition, food distribution in the neighborhood went from two days a month to three days a week. Instead of only programming for youth, there’s now space and staff to support programs for seniors, too. Both offer affordable space rentals providing the dignity of choice to neighbors for everything from weddings to community meetings. One has a strong religious affiliation; the other is more secular. And the attention that started as concern over duplication turned into positive attention from new major funders. Together, they better meet the needs of a diverse community, all while maintaining some element of uniqueness and differentiation.

The reality is that some communities cannot be overserved. And the secret to success in this case was not out-competing each other; it was finding ways to operate that complemented one another’s strengths.

The Case for Collaboration

One of the greatest myths of collaboration is that it’s only about redundancy reduction. Or about reduction at all. Collaboration occurs in every other aspect of society as a means of achieving more—from social moments and natural systems to corporations. It’s not through the creation of more silos but in the coordination of disparate pieces that we build power, visibility, and influence.

So, if having one nonprofit per 100 people isn’t too many, but we don’t have the resources to sustain a sector that refuses to stop growing in number, is there a way to make do with what we have?

At some point all growth becomes counterproductive. At nearly two million nonprofits, maybe we’ve hit a plateau. But what if we found a way to work together to build power, influence, and maybe even gain market share? What if we become many nations of islands instead of singular-island nations. Here are a few things we might try:

• Launch ships that travel between organizational islands sharing information and resources. Alliances, networks, and shared services are akin to establishing relationships of mutually beneficial exchange between organizations. They operate best when they have infrastructure to support them and agreements between parties.
• Connect islands with structures like bridges and byways to make the flow of services more visible, predictable, and accessible. Mergers and shared services can increase impact and visibility and, over time, reduce costs. And while they do often reduce administrative redundancy, they are more likely to expand the menu of programs and services, leading to growth, which in turn leads to larger and more specialized administrative support.
• Seek out new lands. Let’s be honest. Some of our islands are sinking. Instead of abandoning the people and programs in the organizations that have become unsustainable, invite them to settle on your shores. Asset and program transfers can breathe new life into the mission of both the acquirer and the acquired.

Do we have to link up the whole sector? No. Some organizations operate best on an island, such as those that need to make decisions quickly or that work on a very specific issue. But most of us are trying to address complex situations that are intrinsically linked. Spend one day in the shoes of a person trying to navigate all the systems we’ve created to support people at their lowest moment, and it’s no wonder some issues persist.

We don’t need modern day conquistadors to fund aggressive acquirers and forced partnerships. We need more resources and fluency around intentional alignment.

There are exceptions of course, and examples of people trying hard to collaborate in meaningful, sustainable ways, but they are often swimming upstream against a perception that merger equals failure or that being fiscally sponsored doesn’t make you a “real” nonprofit. They won’t get far without the proper resources, support, and cultural underpinning that makes collaboration stick.

Sea levels are rising in more ways than one and ushering in a focus on collaboration will take infrastructure, resources, and, perhaps most importantly, a radical shift in our mindset. We’ll have to loosen our grip on the illusion of control. Sure, it’s nice when you run your own island and get to make all the decisions, but it’s also very lonely and highly vulnerable in a storm. We’ll also have to get over the habit that every great idea deserves its own island, its own board, and its own 990 form. Linking some of our individual islands will build resiliency, and there’s a variety of organizational structures—from mergers, shared services, and asset transfers to alliances and fiscal sponsorship—that can make cooperation the optimal default.

Of course, I’m speaking metaphorically of linking organizational islands, not actual island nations. But while we’re on the subject, I would be remiss if I failed to take this metaphor one step further and caution us against the real dangers of colonization. We don’t need modern day conquistadors to fund aggressive acquirers and forced partnerships. We need more resources and fluency around intentional alignment between mission and organizational structure.

Instead of judging an organization’s structure as right or wrong, and perpetuating the stigma that these collaborative structures are signals of failure or weakness, we need to get curious. The best tool is the one suited for the task at hand, and collaborative structures are just another underutilized tool in the toolkit.

Unless your mission is anything but the narrowest of specializations, there should be something codified in your structure that fosters collaboration. But to accomplish that, we need to bring the conversation about collaborative structures out of the shadows and celebrate them as bold and strategic, not just a life raft for hard times.