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Nonprofits face internal, external shifts

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Tom Lambeth

Tom Lambeth

[Editor’s Note: The following is the second of three excerpts from the keynote address given at the 2010 statewide conference of the N.C. Center for Nonprofits Sept. 30 by Tom Lambeth, senior fellow and former executive director of the Z. Smith Reynolds Foundation in Winston-Salem.]

Tom Lambeth

Nonprofits and their private funders have been challenged by the greatest economic depression of 80 years.

That is no news for any of you. But I think it is important to note that the landscape would be changing even if we had not had the economic reversals of recent years.

For example, nonprofits are becoming much more entrepreneurial. They are becoming much more strategic. And funders are doing the same.

Some of it is driven by the economy, but much of it driven by the changing generations of philanthropy and the changing demographics of foundation boards.

And much is driven by nonprofits realizing that being concerned about the bottom line does not mean being less committed to the mission.

We should remember that for-profit folks have not-for-profit values, too.

Some years ago, when we were beginning the Teaching Fellows program in North Carolina, we were loaned the services of two marketing people from a major corporation.

They did a great job in our efforts to recruit for that program. It turned out that the youthful ambitions of both had been to be teachers.

In the environment and the economy of 2010, there are new paradigms for nonprofits, including strategies and priorities that are not uncommon in the for-profit world — board development, in which skills in fundraising and management are valued even more highly; communications and marketing, which may not have been strengths in the past, are necessities for the future.

These are not frills or unnatural acts for nonprofits. They can be employed without damaging the commitment to the mission that drives our nonprofit organizations and institutions.

The impact of the Sarbanes-Oxley legislation on the for-profit sector is clearly an influence now on the nonprofit sector: The revised federal Form 990 is having an effect on how we operate as nonprofits; questions of independence for boards and the processes by which nonprofits determine compensation for executives are examples of this.

And everyone is learning the importance of audit committees.

Funders, driven by reduced resources, are more strategic, more demanding of outcomes and more demanding about proof of impact.

This is both because they sense a need to be wiser about the spending of their money, and because they find that much more often these days they must say “no,” they are very interested in being certain when they say “yes.”

This is not bad. And it is true that funders and their nonprofit beneficiaries should be innovative and imaginative if any institutions in our society should be.

Yet we would not want these organizations, which we proudly describe as risk-takers, to become so careful they lose their role as risk-takers, as cutting-edge folks who can afford to go into the unknown and unexplored when others cannot.

It is true that, as scholar Peter Frumkin says, many foundations are more about expressing values than about outcomes.

That is just as true, I believe, about nonprofits. They are about expressing values. Also, and like funders – foundation and individual funders – they are about change.

When either of these communities of institutions abandons their commitment to change, they abandon one of the justifications for their existence.

Funders – individuals, foundations and corporations – have a commitment to being more knowledgeable and they are increasingly using such tools as convening grantees, offering technical advice and the like.

The authors of the recent report “What’s Next for Philanthropy: Acting Bigger and Adapting Better,” suggest that while in the last decade philanthropic innovation has mostly been about improving organizational effectiveness, efficiency and responsiveness, over the next 10 years they will have to add to those efforts others designed to focus on coordination and adaptation.

Let me suggest here a time-proven strategy: Build into your organization some process through which, from time to time, you actually listen to those whom you serve.

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