We’re wasting all your donations. (Thesis Part III, Nonprofits in a Modern Society)

Hey - did you know there are over a million nonprofits in the United States? Heck, I can think of at least two right now. .....

Shameless plugs aside, there are a lot of nonprofits, and the count is on the rise. The number of nonprofits increased 30% between 1998 and 2008 - to about 1.5 million.

It must be contagious.

In the states, nonprofits employ 11 million people and engage 5.7  million volunteers annually. No small beans.

But how do nonprofit organizations work, essentially? A couple of folks get together and resolve issues for the greater good, right? Nonprofit businesses are permeated with warm fuzzy feelings where there is no workplace drama, everybody has a voice, and women are paid equal wages for equal work, right?

No, not really.

Nonprofits have a lot of the same problems for-profit businesses have, and a few extra ones too.

“Nonprofit organizations are working in an era of heightened scrutiny, greater demands, fewer resources, and increased competition.” - Adams and Perlmutter.

Women are also often paid less for similar work - and not by a little, either.

I'm kidding, right? Nope.

“Among those with annual budgets of more than $50-million in 2000, the median salary for male chief executive officers was 46 percent higher than that for women.” - guidestar.org

Even scarier? According to some recent studies, it's getting worse - not better.

Point being: the nonprofit industry is by no means perfect, nor is the business structure of nonprofits, either.

So - what is the structure of nonprofits, anyway? Here's a quick review.

Traditional nonprofit structures are innately hierarchical. In nonprofits with a paid staff the nonprofit governing board, led by a board chair, hires and supervises an executive director.

Let’s start with the board. A federally recognized nonprofit board is required to have a minimum of three officers - a chair, a secretary, and a treasurer. Most boards have more. Some small orgs have just three.

The rule of thumb for nonprofits with paid staff is this: the board sets the mission, the executive director fulfills it. However, in a hierarchical working board with no staff, or in an organization with a paid staff, this situation can leave something to be desired. Nonprofit board members are often constrained by traditional roles: they are skilled and willing to help the organization, but due to the nature of their roles (or lack of them), situationally unable.

Moving to the organization: the executive director, hired by the board, supervises and hires the remaining staff. But even in institutions with an active board, both board and staff still receive most information filtered through an executive director.

So while the purpose of the board is intended to be one of governance as a checks-and-balances to the system, all too many nonprofits really operate as a hierarchy with the ED guiding both the organization AND the board.

So - what questions am I asking here? Ohhhhh so many. A few key ones:

  • Do traditional executive directors have too much power?
  • Is the current board/org structure of nonprofits as effective as it could be?
  • Could we be doing more to engage board members?
  • Why are nonprofits -committed to various aspects of the greater good- not setting better industry standards for employee, board, and volunteer engagement as well as fair pay?
  • How are nonprofits going to survive this “era of heightened scrutiny, greater demands, fewer resources, and increased competition?”

Stay tuned. I’ll answer all those questions and more! Thanks for reading.

In other news:

I've been asked to present at this year's Nonprofit State Fair. Woo! Here's the skinny on what I'll be presenting:

Innovative Governance Models: Staying Flat, Staying Thin, Staying Effective

Over the past years, nonprofits, including volunteer-led grassroots organizations, have faced a growing number of challenges. In the context of a changing environment, where nonprofit leaders are expected to do more with less and nonprofit volunteers are often expected to do more than before , is the traditional hierarchical form of nonprofit governance still relevant? In this session, we’ll explore a governance structure for volunteer-led, grassroots organizations that offers shared power and decision making, greater flexibility and ability to innovate, and potential for greater organizational sustainability. Attend this session to discover an alternative for volunteer-driven organizational governance models, learn how you can effectively engage volunteers, board, and staff utilizing the model and see if it’s a fit for your grassroots organization. Jamie Schumacher, Executive Director, Northeast Community Development Corporation

In short: it's going to be neat, and you should totally come. :)


More super fun resources for you:

Nonprofit statistics: http://nccsdataweb.urban.org/PubApps/profile1.php

Salaries: http://philanthropy.com/article/Gap-Between-MensWomens/52648/

Cameron, H. (2004). The nonprofit phenomenon. Searcher,12(2), 33-41.

Cornforth, C. (2001). What makes boards effective? An examination of the relationships between board inputs, structures, processes and effectiveness in nonprofit organisations. Corporate Governance: An International Review, 9(3), 217.

Gangl, W. (1998). Creating and maintaining effective governance for nonprofits and foundations-I. Directorship, 24(8), 10.

Hackler, D., & Saxton, G. D. (2007). The strategic use of information technology by nonprofit organizations: Increasing capacity and untapped potential. Public Administration Review, 67(3), 474-487.

Anonymous. (2004). Invigorating bored boards. Credit Union Directors Newsletter, 28(9), 3-4.

Light, P. C. (1998). Sustaining innovation: Creating nonprofit and government organizations that innovate naturally. San Francisco: Jossey-Bass. _____