Nonprofits need faith in themselves

By Todd Cohen

Giving USA has released its annual estimates on charitable giving in the U.S., and the picture is bleak.

While overall giving grew to $290.89 billion in 2010, up 2.1 percent in inflation-adjusted dollars, that growth represents only a small step on the path to recovery from a combined loss of 13 percent in 2008 and 2009.

And if giving keeps growing at the same pace as in 2010, it could take five to six more years “just to return to the level of giving” before the economy collapsed in 2008, says Patrick Rooney, executive director of the Center on Philanthropy at Indiana University, research partner for the Giving USA Foundation.

An even grimmer picture emerges from an analysis of the Giving USA data by Ruth McCambridge and Rick Cohen of The Nonprofit Quarterly.

They see “not only a crisis of declining charitable giving reaching human services or social-safety-net groups, but a class divide where the groups that do well in charitable solicitations are those with connections, with the social-class interrelationships that give them automatic access.”

Charitable giving for human services, they say, “is very much the province of the less-moneyed donors, the payroll-deduction donors, the people who volunteer at the shelter or food pantry or clinic because they know the tangible importance of those institutions to their communities.”

Not counting giving to agencies in the U.S. to support relief efforts in Haiti, for example, overall giving to human services in 2010 took the biggest hit among all nonprofit subsectors, falling 5.6 percent in inflation-adjusted dollars, The Nonprofit Quarterly says.

In comparison, it says, inflation-adjusted giving to education and to arts, culture and humanities – subsectors with big institutions that have fundraising prowess and “personal connections to the affluent sectors of our economy” – grew 5.2 percent and 5.7 percent, respectively.

Further reflecting the class schism in giving, The Nonprofit Quarterly says, charitable bequests in 2010 grew 16.9 percent in inflation-adjusted dollars, and giving to foundations, fueled by giving to family foundations, grew 0.2 percent, compared to a 1.9 percent drop in giving by foundations.

There is “class divide in our society,” the Quarterly says, “and it is reflected in a class divide in charitable giving.”

What does this all mean for nonprofits, most of which are small, community-based organizations?

It means nonprofits need to get over it.

Nonprofits are the unsung heroes of our society, and they face huge challenges in building and sustaining their organizations and effectively serving their clients and communities.

So they need to stop blaming forces beyond their control for their problems, get their act together, and start taking charge of their business.

They need to move beyond their sense of helplessness and entitlement, think for themselves and take responsibility for their condition and their survival.

They need to push their board members to start fulfilling their role, setting a vision for the organization, making sure the staff gets the resources it needs, and providing their own support and connections to help raise money.

Nonprofits need to talk candidly with individual donors and foundations about their needs, not pretend all is well when it clearly is not, and push for operating support instead of taking on new programs – and costs – simply because they seem more likely to appeal to funders blind to nonprofits operating needs.

Nonprofits need to be more resourceful about strengthening their organizations and helping their staff and boards do a better job, while being a lot more skeptical before investing their scarce dollars in mediocre consultants and trade groups that make big promises but fail to deliver on them.

Nonprofits need to engage the kinds of donors, board members and volunteers who genuinely want to improve the organization so it can better serve its clients and community, and steer clear of dabblers and hangers-on who see their contribution to a nonprofit simply as a ticket to social prestige and connections.

Nonprofits need to be more forceful and effective advocates for public policies that recognize the indispensable role charity plays, and that provide incentives to encourage greater investment in a sector that takes on the symptoms and causes of urgent social and global problems beyond the mission or focus either of government or corporations.

The class divide in America and in the charitable marketplace is a fact of life, as is the deeply-wounded economy, and neither are likely to change any time soon, if ever.

Instead of bemoaning inequities in the way charitable resources are distributed, nonprofits need to have faith in themselves.

They represent, after all, a sector of society that characterizes itself as independent.

So nonprofits should embrace their independence, trust their own experience and judgment, tap into and build on their value as a community asset, and engage supporters and partners who truly want and are able to help them learn, lead and grow so they can more effectively serve people and places in need.

Nonprofits grow, struggle, serve

By Todd Cohen

Twenty years ago this week, as business editor of The News & Observer, the daily newspaper in Raleigh, N.C., I launched a weekly column on philanthropy that two years later gave birth to the Philanthropy Journal.

Since then, the nonprofit marketplace has undergone sweeping changes.

Today, the U.S. is home to nearly 1.5 million nonprofits, most of them small community-based groups.

Having grown more rapidly than business or government for decades, the nonprofit sector now accounts for 5 percent of gross domestic product and 10 percent of the workforce.

Annual charitable giving totals nearly $300 billion, most of it from individuals, and at least $6 trillion is expected to go to charity over the next 50 years from wealth that is transferred between generations.

Nonprofits are stronger and more diverse than ever, but they face unprecedented challenges and still are run, generally, by people who are older, white and often male.

Despite limited resources, they take on our toughest social and global problems, and always are looking for new ways to learn, lead and grow.

They address the symptoms as well as the causes of deeply rooted problems, and serve as civic society’s research-and-development arm.

But nonprofits also are more at risk than ever of going out of business, both because of the stricken economy and because they often are poorly governed and poorly prepared to operate in a fiercely competitive marketplace.

The nonprofit sector is vast and fragmented but virtually unregulated.

In that sprawling free-for-all, big foundations, along with the trade groups, consultants and vendors that feed at their trough, have become powerful players.

And they are not shy about throwing their weight around, whether in trying to shape the agendas of nonprofits that depend on their funding, or in fighting any effort by lawmakers and policymakers to tighten regulation of the nonprofit sector.

The charitable marketplace now includes more trade groups, consultants, vendors, financial institutions and other providers that offer support and services for nonprofits.

Many of those groups are smart and effective, but many are not.

Still, providers that are mediocre or just plain bad still make a lot of money by peddling their services, and promising more than they can deliver, to nonprofits that need savvy and strategic advice but get little in return they actually can use to improve their organizations and programs.

The need for better training for nonprofit professionals has spawned a host of academic and continuing-education programs that focus on nonprofit management, fundraising and philanthropy.

Like the for-profit industry that serves nonprofits, these training programs range from those that are excellent to those that have no business being in business.

So, short of more effective regulation, the rule for the nonprofit marketplace is, “Buyer, beware.”

Today, as it was 20 years ago, operating “capacity” represents the biggest organizational challenge facing nonprofits.

Many nonprofits, for example, are governed by boards that have no clue what their role is and consist of members who are invited and agree to serve for all the wrong reasons, typically because they gave money to the organization or are community leaders or friends of the CEO.

Boards often hire CEOs who seduce them with big talk, big ideas and big personalities but have no concept of how to lead or manage an organization.

Nonprofits also struggle, continually, to raise money, sometimes understanding the tools and techniques of fundraising, but rarely recognizing that truly effective fundraising must be part of a larger vision of creating a culture of philanthropy within the organization and connecting donors to larger needs in the community.

Communication is another huge challenge for nonprofits.

They want the media to tell their story but they themselves do not know how to tell it.

They are caught up in the buzz about social media and want to plug in, but they have no inkling how to use it strategically or how much work it will take.

And they talk about transparency but stonewall when they run into trouble.

In a society and culture ripped apart over class, race, ethnicity and ideology, to name only a few of our schisms, many foundations and nonprofit advocacy groups have fallen prey to the same intolerance that has metastasized in our politics.

Despite all its problems, however, the nonprofit sector remains one of the treasures of our society and culture.

Unlike business, which has the mission of enriching shareholders, and government, which at its best serves as a firm and even-handed cop, referee and broker, nonprofits exist to serve people and places in need.

Many nonprofits are getting better at building effective business models, understanding and engaging donors, and working in partnership with their supporters to take on community problems and enlist additional partners.

Charitable giving, whether in the form of money, know-how or time, is fundamental to our society, and many nonprofits are doing a better job of nurturing donors for the greater good.

So despite the lack of resources, shortage of leadership, disproportionate clout of big players, lameness of many consultants, and ideological rigidity of many foundations and advocacy groups, the nonprofit sector offers the best hope for addressing our most urgent social and global problems and making our communities better places to live and work.

Become a PJ member

Twenty years after that first newspaper column, the Philanthropy Journal continues to have the privilege of providing news and tools for nonprofits, and to serve as a voice and champion for this overworked, underpaid, under-appreciated and unsung sector that represents what is best about America and the best hope for our future.

While PJ is a program of the Institute for Nonprofits at N.C. State University, we receive no state funds and depend on earned and contributed revenue to cover our costs.

To help us do that, we count on our readers to become members so we can continue to provide the news and resources you count on.

To become a member, please click here.

Nonprofit boards need to step up

By Todd Cohen

In theory, nonprofit boards are supposed to be responsible for their organizations.

In practice, many boards simply are coasting.

Boards are charged, among other things, with hiring the CEO and monitoring his or her performance, setting the vision and direction for the organization, overseeing its finances and investments, and making sure it is running smoothly and serving clients effectively.

Boards also need to create an organizational culture in which the nonprofit can thrive and fulfill its mission, and make sure it has the resources it needs.

And when times get tough, boards must be prepared to be open and candid with donors, volunteers, customers and partners about the problems their organizations face, and about their plans for fixing those problems.

Today, with the economy in turmoil, with technology and competition transforming the marketplace, and with demand for their services rising and resources becoming more difficult to secure, nonprofits face unprecedented challenges, with many organizations struggling to survive.

Boards should be leading the effort to retool their nonprofits and equip them to cope with the complex organizational and financial problems that confront them.

Yet many boards are failing to fulfill their duties.

Boards often consist of or include people who do not understand their board role, who treat board meetings as an opportunity for networking and socializing, and who believe they have done their job at board meetings if they ask a few questions about, and then rubber stamp, reports from the staff.

Many board members do not want or know how to raise money, and seem to have little if any curiosity about how their organizations actually work, or the practical challenges their staffs face on a daily basis, particularly the personnel issues, sometimes serious, that can damage the workplace environment.

So when a crisis arises, boards often are surprised, unprepared and unsure how to proceed.

That would not be the case if boards were doing their job.

Serving on a board is not simply an opportunity to pad a resume or schmooze with colleagues. And it should not be merely a reward for a big donation or other type of support.

Board service demands true commitment and rigorous attention to the organization.

It requires curiosity, scrutiny and constructive skepticism about how the organization is operating.

It requires an active role in setting the organization’s vision and direction, in making sure it secures the resources it needs, and in creating a philanthropic culture connected to the needs of the community the organization serves.

Boards also have an obligation to ensure the organization is acting in a legal and ethical manner.

When nonprofits get in trouble, the CEO often takes the fall, a good call if the CEO in fact messed up.

But the board ultimately is responsible for keeping track of what is happening inside the organization and making sure mistakes do not happen, and that includes careful oversight of the CEO’s performance.

In today’s economic crisis and fierce marketplace, nonprofit executive directors are getting burned out and overwhelmed.

And while it is the job of executive directors to run day-to-day operations, it is the board’s responsibility to provide the tools and support executive directors need to navigate what is the most difficult time nonprofits have faced in decades.

Yet many nonprofit boards are leaving their executive directors to twist in the wind

By law, nonprofit boards have fiduciary and other responsibilities for their organizations, yet many board members do not seem to understand those obligations.

Instead, board members see their board service as a perk, acknowledgement of a gift, or recognition of their role in the community.

And when problems at their nonprofits arise, board members often do not want any part of it, and ask the executive director to deal with it.

Nonprofits no longer can afford boards that abdicate their responsibilities.

What nonprofits need are boards that lead by being smart, engaged, aware and responsible.

Until boards get their act together and take their role seriously, they are putting their nonprofits at risk.

Stonewalling in crisis a risky bet

By Todd Cohen

In the worst of times, some nonprofit and philanthropic organizations seem to fall short of the standards of openness they set for themselves.

Accustomed in good times to positive media coverage, charities in a crisis sometimes seem to believe that avoiding questions about their problems is prudent and acceptable.

But stonewalling can deeply hurt a charity with its donors, supporters and partners, eroding the trust it counts on for the community investment it depends on.

That is the big risk the Triangle Community Foundation in North Carolina’s Raleigh-Durham region currently is taking.

Founded in 1983, the foundation has become a philanthropic pillar of the community, building its assets to over 750 funds totaling over $135 million in the fiscal year ended June 30, 2010, and awarding grants totaling roughly $12 million, down from $15 million in fiscal 2009.

But the foundation now faces a crisis in confidence stemming from a sabbatical deal the executive committee of its board cut with Andrea Bazán, its president for the past six years and one of the leading Hispanic advocates in the state and U.S.

Under the deal, announced two weeks ago in a short email message from Kelly Harrell, the foundation’s communications director, Bazán gets an immediate paid sabbatical for an indefinite period.

Board chair Phail Wynn, an official at Duke University, has stepped in as part-time interim CEO and president, while Lori O’Keefe, who had resigned as director of philanthropic services, agreed to serve as interim chief operating officer, running the foundation’s day-to-day business.

After Harrell distributed her email – which did not mention the sabbatical was paid, or that O’Keefe recently had resigned — foundation leaders have refused to respond to repeated requests from the Philanthropy Journal for interviews.

The only exceptions were a brief phone interview granted by Harrell, who told Ret Boney, PJ’s deputy editor, that Bazán had been “running pretty hard” in her six years as president and had “requested a sabbatical for some well-deserved time off.”

And Wynn, vice president for Durham and regional affairs at Duke University, sent an email to Boney that said the details of the sabbatical “are confidential, and have not been and will not be shared with the news media.”

That email also said there would be “no further comment from the foundation at this time.”

Thanks to Boney’s reporting, however, we now know the foundation’s executive committee hammered out the sabbatical deal at least in part because of board concerns about staff unrest and turnover, and in part because of Bazán’s frequent distraction from foundation business and her regular involvement in advocacy work and service on other corporate boards.

A crisis can test the character of a nonprofit, and the Triangle Community Foundation is not headed for a good grade.

Accustomed to positive media coverage, leaders at the foundation are dodging reality in the face of its current turmoil, apparently believing they owe no accounting to the foundation’s supporters, donors and partners, or to the community.

Like community foundations throughout the U.S., the Triangle Community Foundation connects donors and nonprofits.

It serves as a home for funds donors create, and it makes grants to nonprofits, often with the advice of donors who created the funds.

It also provides common ground for local groups to talk to one another, and works as a catalyst to address local problems and issues.

Silence, especially on the heels of the disclosure of skeletal details that only raise questions that beg for answers, is easy to misinterpret and can feed the rumor mill, which tends to work overtime in the low-key and often cloistered world of philanthropy and nonprofits.

Wynn’s email about the “confidential” details of the sabbatical suggests a legal fight might be brewing over what led to Bazán’s “indefinite” paid leave.

If it is, the foundation would indeed be smart not to talk about those details.

But hiding in the dark is not a smart move for a public charity that depends on public trust and support.

Most nonprofits do a good job serving people and places in need, and they continually strive to do better. The Triangle Community Foundation, in the past, has been among those.

But nonprofits can and do make human mistakes.

So when problems escalate to dramatic actions like the indefinite departure of a CEO, the leaders of a nonprofit should be prepared to talk openly – to the extent they believe they can — about what is wrong and their plan for fixing it, and about the general health and operations of the organization.

And if, for legal reasons, they believe they cannot talk openly about some details, nonprofit leaders must be prepared, quickly, to address questions that are bound to arise on the part of concerned donors, grant recipients, and organizational partners, as well as the news media.

As a long line of politicians who have been embroiled in scandals and been less than forthcoming have learned, painfully, the cover-up often ends up doing more damage than the problem kept under cover.