This is a crucial time for nonprofits. The sector is in flux, beset by increasing responsibilities and higher public expectations but limited resources. Its phenomenal growth over the past 30 years has been accompanied by the creation of thousands of new one-issue groups, narrower agendas, and greater fragmentation.
One can reasonably argue that, despite its enormous expansion, the nonprofit world has become less influential in shaping the direction, priorities, and policies of our society. It has been unable to address and resolve many of the major problems that undermine our democracy—persistent poverty; the increasing inequality of income and wealth; entrenched racism; a political system corrupted by big money; excesses and greed of corporate America; and philanthropic institutions that have failed to change their priorities and procedures to meet our most urgent public needs.
We may be larger and more effective deliverers of social services than we were 30 years ago, but we are more fragmented than ever before, often finding it difficult to collaborate with others to engage in the policy battles that threaten our collective well-being.
The sector is besieged by other problems as well. Facing increased competition for scarce dollars, severe cutbacks in public funds, and a shortage of foundation money, nonprofits have increasingly turned to fees for service, profit-making businesses, and other commercial ventures for income. Growing commercialization and corporatization of the sector is dangerously blurring the line between nonprofit and for-profit organizations, creating major ethical dilemmas, some erosion of nonprofit values and mission, and the question of nonprofits’ tax responsibilities.
The recent nonprofit scandals exposed by the media during the past two years have brought home the sad fact that much of the sector is unaccountable. Plagued by issues of excessive compensation, self-dealing, high trustee fees, corruption, inappropriate expenditures, and inadequate disclosure, nonprofits are in danger of losing the public trust that is so essential to the fiscal health of the sector. Yet much of our community clings to the illusion that self-reform is the key to public accountability, reluctant to support the only approach that can truly ensure nonprofit transparency and integrity—tougher regulations and enforcement by the IRS and State Attorneys General.
Happily, the sector can point to many new effective programs and initiatives. The spread of new community organizing and service groups across the country is an encouraging sign, as are the victories of local and regional advocacy organizations on environmental, health, and welfare reform issues.
Times of trouble, however, are also opportunities for nonprofit organizations to galvanize their communities, assert their leadership, and make the necessary social and policy changes happen. Following are three major challenges that confront our nonprofit institutions.
Historically, public policy, advocacy, and constituency organizing have been the dimensions of our civil society that have distinguished it from all others. Some foreign nonprofit sectors have had more nonprofits and more service providers than ours, but none has enjoyed our strong tradition of activism. It is this activism that has made our democracy vigorous and lasting. It has been responsible for almost all of the major social and institutional changes in our history. The irony, of course, is that our activism is much more appreciated overseas than it is here in our own country.
In fact, during the last 25 years, advocacy seems to have lost much of its cachet and importance among nonprofit organizations. This is due to a number of factors: the growing conservatism of the country; continual attacks by the right wing on nonprofit advocacy; the failures of nonprofit leadership; short-sighted boards of directors; the commercialization of the sector; and the unwillingness of mainstream foundations to fund activism.
But nonprofit leaders must share a major portion of the blame for this state of affairs. They have been reluctant to exercise the sector’s enormous potential for legal legislative activity. Of the 228,000 nonprofits that submitted their 990 form to the IRS in 1999, only 3,500 reported doing any lobbying at all levels of government. Their median effort was $8,000 per group, for a total lobbying effort of about $136 million, compared to over $2 billion spent by corporate America.
This lack of advocacy has taken a huge toll on both nonprofits and our society over the past eight years. The Gingrich Contract with America and the enormous federal budget cuts that accompanied this effort greatly reduced federal domestic programs, along with the budgets of thousands of nonprofits. Yet the nonprofit community did little or nothing to stop the onslaught. It was the silence of the nonprofit lambs.
Similarly, when the Bush administration—with nine Democratic senators in support—repealed the estate tax, the nonprofit sector was virtually silent…despite the fact that only the very wealthiest families in the country stood to gain from this measure and that the repeal would mean the loss of some $8 to $10 billion a year to charity, the undermining of our progressive tax system, and the loss of over $60 billion annually in federal taxes. Our largest umbrella organizations like Independent Sector and the Council on Foundations sat on the sidelines and provided no leadership. Ironically, it has been some 1,300 millionaires that have led the fight against the repeal, not the nonprofit sector.
And where was the sector when the corporate governance and corruption scandals broke out? Nowhere to be seen or heard. A few corporate executives, a few senators, and the SEC have led the fight for reform, although not with the vigor that is necessary.
Nonprofits should have learned from such experiences that they must devote a portion of their agendas to public policy, advocacy, organizing, and coalition building. They can no longer protect or meet the needs of their constituents by services alone. Only activism can win the big battles on issues important to nonprofits: poverty, lack of health protection, environmental hazards, and gun violence.
The shift to advocacy will be a challenge to many nonprofit leaders and boards of directors, but unless this change occurs, our society and democracy will be weakened further.
Developing Nonprofit Leadership
There is a growing consensus that many of the nonprofit sector’s problems come from a failure of leadership. We’ve lost many fine leaders during the past 15 years; many, if not most of them, have not been replaced by others of commensurate quality. The tradeoff has meant a loss of passion, vision, zeal, and commitment to the public interest. For too many people, nonprofit work has become just another job. We need to start rebuilding dynamic leadership cadres now.
How do we go about this task? One way to begin is for nonprofits to place a greater priority on recruiting and hiring young people. It is surprising how many organizations don’t think much about how to develop their future leaders. Ask 100 groups whether they have succession plans for their executive directors. Probably no more than five will say they do.
Foundations have sponsored quite a few leadership development programs. Most of these have been recognition awards for mid- to senior-level practitioners and “foot-in-the-grave” tributes to those of us who are at the twilight of our careers. Instead, foundations, with encouragement from nonprofits, should make significant investments in young people in their 20s and early 30s by creating productive opening-level jobs for them and providing incentives for nonprofits to hire and promote young people.
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Good opening-level jobs with decent pay and benefits in nurturing nonprofit organizations are at a premium. Many college graduates and other young people interested in public service careers either can’t find jobs or can’t afford nonprofit salaries because of their outstanding tuition loans. As a beginning, national, regional, and local foundations could collectively sponsor at least 1,000 such jobs throughout the country for two to three years, paying $30 to $40,000 a year, depending on location.
Compared to the billions of dollars foundations fritter away every year on conventional, lackluster programs, investing $100 million a year on developing young leaders seems a bargain. The cost of not developing new leaders for the sector is too large to calculate.
Promoting Civic Engagement
There is some truth in the adage that people often get what they deserve. Many of the problems Americans face are in large part the result of their failure to become involved in civic life. Low voter turnouts in federal, state, and local elections; declining participation in nonprofit organizational activities; passivity in the face of corruption and scandals; high schools that don’t provide civic education and citizenship training; and young people who may be volunteering more but are less interested in politics, social change, and civic engagement—all are indicators that we are not creating a sufficient number of responsible, active citizens.
Nonprofit organizations are an important part of the social capital that binds us together—the glue that binds our democracy. As such, nonprofits have the responsibility not only to provide services and be advocates for sound social policies, but also to promote citizen participation in all aspects of American life. A part of every nonprofit’s agenda should be an effort to encourage its members, clients, and supporters to register and vote in elections, to work as volunteers at the polls, and to become part of the political process.
That agenda should include active support for ensuring that every high school in its community and state has a strong civic education program, including well taught history courses, required reading of newspapers, a thorough study of government and political institutions, and some familiarity with nonprofit organizations.
Many associations and other nonprofits have lost touch with their base, becoming publicly unaccountable in the process. They have been transformed from grassroots, membership-led organizations to professionally run groups, the participation of whose members is often limited to paying dues.
This is not good enough for a vibrant democracy. Nonprofits have an obligation to involve their members in every phase of their operations. Professionals are important, but a leader’s role as community organizer is to get members and boards involved and to develop the skills of the lay leadership. Re-energizing the capacity and power of citizens within the nonprofit community would be a concrete step toward greater citizen engagement.
There are other major challenges that will confront the nonprofit sector in the coming decade. These include ensuring public accountability, tempering growing commercialism, radically reducing poverty, taming the excessive power of corporate America, and implementing philanthropic reforms.
Not the least of these is the need for the sector to regain a sense of humor. Many of us have been so caught up in a somewhat puritanical zeal of doing good in the public interest that we have forgotten how to laugh—both at the world and at ourselves. We need to work hard but enjoy our jobs. Little wonder that some look at us as self-righteous prigs. In short, we need to lighten up.
It will take all of the nonprofit community’s resources and determination to meet the challenges we face. The sector surely has the capacity to do so, but does it have the will and courage to do so?
Several obstacles could block our progress in meeting these challenges. The first is our sector’s growing fragmentation. Is our leadership willing to transcend individual and institutional egos to join in common causes? The second is the sector’s lack of introspection and critical analysis. Most people are afraid to look hard at what really is going on and to be critical where necessary. Collegiality has become a highly developed and prized art form. No wonder there is so little vision and intellectual vigor among our colleagues in the field.
The third obstacle is, quite simply, our lack of courage. This is reflected in the unwillingness of practitioners to speak out on controversial issues and to go on the record with their comments; in the reluctance of grantees to critique and challenge foundations; in the fear of nonprofits to engage in legal lobbying; and in the reluctance of foundations to support activism and risk-taking programs.
What we urgently need is a growing cadre of nonprofit leaders and board members with integrity, vision, and, especially, courage. Where will we find these people? The answer is not clear, but until our educational, philanthropic, and civic institutions collectively initiate measures to develop new leadership, our nonprofit sector and country will continue to be in jeopardy.
This article is adapted from a speech presented by Pablo Eisenberg to the Minnesota Council of Nonprofit Organizations in St. Paul, Minnesota, on October 14, 2004.
Pablo Eisenberg is senior fellow at the Georgetown University Public Policy Institute and author of Challenges for Nonprofits and Philanthropy: The Courage to Change, published by Tufts University Press.