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Insights: Leading nonprofits in 2011
By Elizabeth Ytell Kang, EYK Associates, principal
Experienced nonprofit organization leaders are accustomed to navigating uncharted territory. To fill important social needs, vision, political savvy and innovation are necessary to fuel social change.
Nonprofit organizations struggle to meet fast-growing demand for services
When the economic meltdown occurred in 2008, many nonprofit organizations were already struggling to stay afloat.
Fortunately, many nonprofit organizations have survived, and their leaders have found ways to regroup and stabilize operations. Typically, these organizations already had a diversified resource base and/or were fortunate enough to have solid financial reserves. However, many smaller nonprofit organizations continue to struggle to regain their footing. Regardless of the situation, the impact of the unfavorable economic environment on the nonprofit sector has been both challenging and stressful. And it appears that there may be even more challenges ahead.
A Nonprofit Finance Fund (NFF) survey and report provides a context for the current state of nonprofit organizations nationwide.
The Bank of America Charitable Foundation supported the NFF survey, which was released in the spring. NFF contacted more than 1,900 nonprofit organization leaders in markets nationwide and found that while there are some signs of hope, many nonprofit organizations are straining under year-after-year increases in the demand for services. It looks like nationwide, 2011 will end as another tough year for nonprofit organizations and the people they serve.
A summary of the key points and findings of this survey are worth sharing:
- 87 percent of nonprofit organizations say, "… the recession has not ended."
- 85 percent of organizations expect an increase in service demand in 2011; and just 46 percent expect to be able to meet this demand.
- 60 percent of organizations have three months’ operating cash on hand; and 10 percent have none.
- Only 9 percent expect 2011 to be financially easier for the people they serve.
- 44 percent of nonprofit organizations ended 2010 with a surplus.
- 25 percent added to reserve funds in 2010.
- 35 percent of organizations raised more revenue than anticipated.
Many nonprofit organizations caught in vicious cycle
To further demonstrate the struggles nonprofit organizations have faced, this author interviewed several executives with diverse, extensive experience whose organizations have survived the current economy. Their responses are summarized as follows:
Nell Edgington, Social Velocity president
During her 15-year career, Edgington has watched many nonprofit organization leaders struggle to do more with fewer resources. They put out fires instead of planning for growth; and they chase competitive funding. Such actions have produced less social change and increased frustration. After observing this vicious cycle, Edgington challenged leaders and nonprofit boards to innovate.
“In order to survive and really contribute solutions to social problems, nonprofits must do things differently. Nonprofits need tools, skills and insight to grow their solutions and use their limited resources more effectively,” Edgington stressed. “Nonprofit leaders have to focus on financing social impact instead of fundraising, which means taking a step back and creating an integrated strategy for finding all of the different kinds of money necessary to deliver services and grow organizations.”
Peter Carey, Self-Help Enterprises (SHE) chief executive officer (CEO)
Since 1990, Carey has been the CEO of SHE, an organization dedicated to self-help housing, infrastructure development and home ownership in the San Joaquin Valley in California.
“The downturn in the real estate market combined with the problems with the federal budget has created some very tough challenges for self-help housing organizations. Even though many of the families we serve still have the drive for home ownership, the economic uncertainty has had a huge impact,” Carey commented. “We are clearly charting a course in unknown territory that has placed significant stress on SHE’s business model. There is a natural tendency for our staff to look for the positive and maintain their sense of idealism; however, even this has been put to the test.”
“Long range planning as we know it is out the window,” Carey added.
Stanley Keasling, Rural Community Assistance Corporation (RCAC) CEO
Keasling stressed that nationally, the single family housing program has experienced more than $50 million in losses. The self-help housing agencies RCAC works with have been hit especially hard because of the recession’s impact on new development and construction. Early on, the U. S. Department of Agriculture, the primary funder for the self-help housing program, worked with RCAC to shift its strategies and support self-help agencies to outlast the current economic downturn cycle. This meant RCAC had to work with these groups to scale back their development projects and refinance others.
“RCAC has been using the resources in its community development Loan Fund to offset the losses of the organizations and communities we serve,” Keasling said.
“Public agencies and water utilities have been especially hard hit in the economic downturn.”
~Rita Sudman
Julia Helmreich, RCAC communications and development director
“The impact on nonprofit organizations with diversified resources wasn’t as drastic before 2011,” Helmreich said. “RCAC was positioned to receive funding under the 2009 American Recovery and Reinvestment Act,” she added. “This enabled RCAC to continue its work with communities on environmental infrastructure in 2009 and well into 2010. All in all, our funding was fairly stable.”
She noted however, that in 2011, RCAC has experienced reductions in funding as a result of federal budget cuts that have negatively affected both operational resources and staffing levels.
Public agencies and water utilities hit hard
Rita Sudman, Water Education Foundation (WEF) executive director
WEF is a nonprofit organization that exists to create a better understanding of water resources and foster public understanding and resolution of water resource issues through facilitation, education and outreach.
“Public agencies and water utilities have been especially hard hit in the economic downturn,” said Sudman. “WEF has made it a priority to retain the expertise and the staff we have in place. It is incumbent upon us to maintain the caliber of the education and information we offer,” she added.
She stressed that WEF cannot afford to lose individuals with the type of special expertise needed in this field. At the same time, the complexities and challenges with California water issues remain at the forefront.
Karen Koller, RCAP Solutions president and CEO
RCAP Solutions has nearly 100 people working in nine states, Puerto Rico and the U. S. Virgin Islands providing capacity building and solutions for affordable housing and infrastructure in rural, low-income communities.
“Over the last two years, RCAP Solutions has seen about a 10 percent reduction in our federal and state funding,” Koller said.
When Koller joined RCAP Solutions in 2001, several changes were necessary to stabilize and strengthen the organization. She said these changes meant staff, stakeholders and board adjustments.
“These changes have had a positive impact on the clients we serve and enabled RCAP Solutions to position itself for future opportunities,” Koller said.
Neil McCabe, WSOS Community Action Commission CEO and president
Community action agencies that provide direct services for children, seniors and families struggling to make ends meet are experiencing an increase in clients and a decrease in funding as well. For example, a nonprofit community action agency headquartered in Fremont, Ohio, serves families in four counties in the northwest corner of the state.
“WSOS is actually seeing individuals and families that have never used any of our services before. They are not familiar with our programs and at times they are embarrassed. We are also serving the generation of grandparents of children in our Head Start program,” McCabe said.
The current climate has tested the resolve and resilience of many nonprofit organizations and their constituents. It is clear that the last three years have not been easy and the future will continue to be challenging. Some organizations will survive and thrive through innovation and knowing how to best navigate change.
For a more in-depth look at how nonprofit organizations are moving forward, read “Organizational and political savvy: What it takes to run a nonprofit,” by Elizabeth Ytell Kang in RCAC’s Rural Review Volume 29, Number 2.