Mike Brennan: Nonprofits must collaborate, consolidate

Source: Crain's Detroit Business
Published On: March 18, 2007
By: Michael J. Brennan, United Way

The writing is on the wall, researchers who study nonprofits will tell you. Today’s economic climate nationally is such that nonprofits across the board need to do some deep thinking about what it will take to survive in a sector that will look vastly different in 2017.

There are 31,343 501(c)(3) organizations in Michigan, including nearly 12,000 in Wayne, Oakland and Macomb counties, according to the Urban Institute’s Center on Nonprofits and Philanthropy.

While competition drives innovation and promotes efficiency, an overcrowded field perpetuates waste. We have too many players chasing after the same ball. Something has to give, because the vitality of our nonprofit network is essential to the health of our region. In response, funders are encouraging more organizations to examine collaborations and consolidation as a means of more efficiently tapping into the resources needed to serve their communities.

Obviously, no one wants to feel forced into a sandbox with a competitor and made to play nice. However, consider the reality. Between 1977 and 1997 the number of 501(c)(3) and 501(c)(4) organizations grew 115 percent, according to the book The State of Nonprofit America. The private sector grew 76 percent.

Ten years later, we are seeing 30,000 nonprofits created annually, while the private sector is contracting. Charitable giving has increased from $103.7 billion in 1975 to $260.3 billion in 2005, but has not kept pace with nonprofit expansion.

The sector is also facing a serious dearth of leadership. In fact, a recent Stanford Social Innovation Review article estimates that over the next decade, nonprofits will need to find about 640,000 new executives to fill key positions — nearly 2½ times the number currently employed.

Today’s young professionals look more favorably at private-sector jobs or entrepreneurial opportunities than nonprofit work. Add to that the challenge regional companies have in recruiting workers, and the cause for concern is clear.

Although imposing, these are problems are not insurmountable, but the grant-making community must own a significant piece of solution. This will mean funding more collaboratives (rather than competing agencies) and providing access to flexible capital — not just money, but resources and expertise. Helping nonprofits improve leadership, expand operational capacity and improve facility-management skills must be key elements.

Nonprofits can help themselves by exploring ways to work together. For instance, Gleaners Community Food Bank and the Food Bank of Oakland County merged, and 1.5 million more pounds of food were distributed in Oakland County as a result. The recently formed Cultural Alliance for Southeastern Michigan brought together 70 arts organizations, and they now have a voice in regional planning discussions.

What nonprofits cannot do, however, is continue clinging to history or to turf. Instead, they must value cooperation and creativity. The future of the sector depends on our ability to let go of the past so that we may realize true progress.

For more information about what the United Way is doing, read about our Agenda for Change process at www.uwsem.org.Michael Brennan is president and CEO of the United Way for Southeastern Michigan.