Why We Don’t Need Another Nonprofit

Those of you who have been following me for the past couple of months know that I recently lost my job as the Executive Director of the Hawaii Women’s Business Center. It was nothing personal. Federal funds were cut to such a point that they could no longer pay my salary, or that of our office manager. I was sad to leave the Center, because I am still passionate about their mission, but the board and I were in agreement. In a dwindling economy, you can’t squeeze blood from a turnip.

Since then, a surprising number of friends and colleagues have suggested that I should start a competing non-profit. Bless their hearts, I know that they mean well. But I consider this to be a mistake of astonishing proportions on a number of levels.

First of all, frankly there are just too many non-profits already out there in the marketplace. They often have similar goals and even though the work that they are doing is altruistic and necessary, the administrative costs involved in overlapping services ultimately hurts those who need them the most. As an example, I googled “drug treatment youth Hawaii” and quickly found 124 separate rehabilitation facilities and programs – and I didn’t even try very hard.

Let me be clear about this: I am not suggesting that we need fewer addiction programs in the state. I haven’t studied this situation enough to make a judgment such as that. But I do strongly suspect that we don’t need any more programs. I believe that we would get better ROI by putting additional funding into the programs already in place rather than by starting yet another.

Funds are dwindling – everywhere. There’s just not enough money to go around. The pie is smaller; the need is greater. In the past, it has been difficult for moderate and small-sized nonprofits to recruit suitable leadership, simply because nonprofits traditionally pay substantially less than their counterparts in the for-profit marketplace for positions of equal responsibility. Often the best candidates don’t even bother to apply. Of course, there will always be those of us (particularly baby boomers) who feel a calling for working in the nonprofit industry, despite the monetary downside. But the hard fact is that resources are diminishing, even for those of us committed to the altruistic goals.

In April of 2009, a survey of over 1,100 nonprofit leaders in markets nationwide was released by Nonprofit Finance Fund (NFF). The key findings were pretty bleak:

• Only 12% of nonprofits expect to operate above break-even this year.

• Just 16% anticipate being able to cover their operating expenses in both 2009 and 2010.

• 31% don't have enough operating cash in hand to cover more than one month of expenses, and another 31% have less than three months' worth.

• 52% of respondents expect the recession to have a long-term (2+ years) or permanent negative financial effect on their organizations.

• 93% of lifeline organizations that provide essential services anticipate an increase in demand in 2009.

According to the Washington Post, a recent survey of member nonprofits by the D.C.-based Center for Nonprofit Advancement revealed that:

• one-third have no operating reserves or endowment

• 41 % are suspending or closing down programs

• and 44% are laying off staff.

So where will the nonprofits that do survive get their funding?
Oh, oh….more bad news:

It probably won’t be from foundations. On November 4th, The Foundation Center located in New York City reported that their latest survey shows foundation giving will likely decline in 2009 by 10%, slightly worse than their 8% estimated earlier this year. And as if that isn’t bad enough, the Center predicts further declines in 2010.

The extra money needed probably won’t be coming from the public either. According to a November 16, 2009 Associated Press report, only 38 % of Americans say they are likely to give at least one charitable gift as a holiday present this year, compared to 49 percent last year.

Looks like Santa is going to be skipping a lot of 501(c)(3) chimneys this year.

So will nonprofits fold up their tents and close their doors? Some will. But the smart ones will quickly discover that there is safety in numbers. Savvy nonprofits will band together with like-minded organizations and share costs. They will disclose strategic planning information so as not to cannibalize each other’s programming and educational bases. I predict that the ones who will succeed are the ones who understand their clients’ needs and allocate their budgets to doing one thing really well rather than trying to be all things to all people.

Those who sit tight and pray for a white knight to gallop in and save them won’t stand a chance in this economy.

So, to all of my dear friends who have encouraged me to start a women’s business center, bless your hearts but don’t hold your breath. I may be neurotic but I’m not stupid. The world doesn’t need another nonprofit right now. Let’s just support the ones we already have, OK?

P.S. This holiday season, the world probably doesn’t need another $16 scented candle, either. But there are families around the globe whose lives would be changed by the gift of a goat or a chicken. May I suggest that you check out Heifer.org or Oxfam.org, two nonprofits that help families in third world countries become self sufficient while providing nutrients for their children. Or give the gift of a smile – The Smile Train performs free cleft palate surgery on children around the world, changing their lives in societies who shun those born with deformities. With nonprofit organizations like Doctors Without Borders, Project Hope, Mercy Ships or your local Shriners Hospital for Children, there is very little excuse to spend money on candy (it rots your teeth and makes your butt fat), knickknacks (they collect dust) or jewelry. Do something good this holiday season. Please. Thus endeth the lesson