Assessing the State of the Nonprofit Sector: Too Big, Too Small, Just Right

Steven Windmueller, Ph. D.

Posted on July 28, 2017 / 5 Av 5777

Written by Steven Windmueller, Ph. D.

 

The State of the Nonprofit Sector

The nonprofit sector is one of the fastest growing components of the post-recession economy of this nation. But the larger issue is this field growing too quickly? Are there too many nonprofit organizations?

Setting the Background:

According to the National Center for Charitable Statistics’ most recent research, “the United States is home to more than 1.5 million registered nonprofit organizations – marking a nearly 20 percent increase over the last 10 years…” These figures are impressive as this sector now employs some 11 million individuals and adds some $887 billion to the nation’s economy.

Today, there is one nonprofit entity for every 175 Americans! Considering the total number of nonprofit organizations in the country, that list currently includes those groups with 501(C)3 tax exempt status, as noted above, and the nearly 500,000 additional entities that are operating without such legal designation. Nearly, 65 million Americans participate as board members, officers, donors, and/or volunteers on behalf of this sector. Based on average 2010 private wages, “volunteer labor” can be valued at $283.84 billion. In comparative terms, 2010 gifts from individuals, foundations, corporations, and bequests reached an estimated $290.89 billion.1

This rapid growth rate comes with its challenges as well. “The nonprofit sector is more crowded than ever before, making it very difficult for organizations to secure – and retain – their donor bases. The sector may be too large to ensure the ability of all of these organizations to be sustained.”

When applying the same questions to the Jewish communal scene, Guidestar can account for some 4,421 Jewish nonprofit entities registered on their site. Yet, other data would suggest that the actual size of the Jewish sector maybe considerably larger as a result of an infusion of “start ups,” the growth of Israeli-based nonprofits, and presence of global Jewish initiatives. Jewish funders and foundations are expanding their financial reach to seed and support new initiatives across the Jewish communal spectrum on an on-going basis.

Unpacking the New Realities:

But no matter what their magnitude, or the scope of their services, nonprofit groups share one major common concern – they all face the challenge of stretching their resources to cover their operational, financial and managerial needs without diluting their commitment to raise dollars for their primary cause.2

When competing for funding in this densely crowded space, nonprofits have a tendency to drift away from their core mission out of the need to attract resources. “If you can get your nonprofit to value resources over mission, you can put at least one foot in the grave.”

Marla Felcher, founder of Cambridge-based Philanthropy Connection, noted the following trend:

“One thing I see over and over again is duplication of effort – so many small organizations that are doing the same work or very similar work.” She added, “I think some of our smaller organizations would be best served by working more closely with or becoming part of a larger, better-established organization.”

“Potential strategies include more collaboration and consolidations among funders, longer-term grants and grants to networks of nonprofits…” Indeed, nonprofits face a series of structural challenges, in part created by their minimalist space within the American economy. According to most experts, the three major limitations within the sector involve fundraising, talent, and influence.

But there is a countervailing argument, in the view of some experts “given the lack of civic engagement within this country, we don’t have enough nonprofits.” These expansionists are suggesting a concerted effort to grow and strengthen the capacity of nonprofit organizations in order to increase American voluntarism and expand social activism. Their argument revolves around the premise “more is better!”

Peter Frumkin and Suzi Soza, writing in the Nonprofit Quarterly, offer the following commentary: “Preliminary market mapping allows the social impact leader to quickly assess the potential riskiness of entering a new market.” Organizational viability is directly tied to such issues as competition, effectiveness, and distinctiveness.

Inside the Jewish World:

What are the implications of this debate on the Jewish sector? It is quite evident that no one set of institutions or single leadership cohort can direct or control the ever-expanding Jewish marketplace. Some demographers are suggesting that we will simply run out of Jews to fund, join and benefit from an oversized communal infrastructure. Will we simply be consumed by this overreach of organizations and communal activities? With this viewpoint in mind, are we likely to see a stream of bankruptcies and mergers, in the aftermath of this excessive expansion? If history is any guide, during economic downturns, there has been a corollary decline of services and programs within the Jewish sector.

Others offer a different perspective, arguing that size matters. In the context of the changing character of the Jewish world, multiple choices and tastes demand a sea of organizational options, permitting Millennials and others the richness of selective engagement. But, when is enough, enough? Is there a saturation point?

Despite this appetite of continual expansion and possible overreach, one must acknowledge the richness, vitality and diversity of the contemporary Jewish marketplace. There have been few occasions where one community has produced and is also seemingly able to sustain such an extraordinary range of cultural, religious, and social institutional options.

Some critics of the current Jewish communal scene have argued that the major funders alone can regulate this run-on growth and the overbuild character of the community. By strategically directing dollars toward initiatives that promote and encourage merger and collaboration, the donor camp can influence future decision-making, and in the process, change the current passion for expansion. Major funders and organizational decision-makers may also be able to redirect the communal agenda by refocusing attention and resources to underserved constituencies and unmet needs.

In revisiting American Jewish history, we note an interesting case study involving the World War One story of the formation of the American Jewish Joint Distribution Committee (JDC) involving the 1914 merger of numerous aid organizations in response to the emerging crisis facing European Jewry. In that instance key philanthropists and community leaders brokered this historic arrangement that produced a unified response.

In the end the Jewish enterprise will follow the broader market trends, as expansion or retraction is subject to the contours of the economy, the passions of the donor community, strategic communal leadership, and the changing priorities and social behaviors of America’s Jews.

1 GivingUSA 2011

2 https://www.sobelcpa.com/sites/default/files/whitepaper.reservefunds.rm.sg.pdf


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