A Crisis in Nonprofit Management

Nonprofits are stressed and need help; they want new ideas, and they must develop new skills. The need for high-quality training and consulting, and for investment in ongoing innovation in management practices, is at its most acute. But these needs have risen just when our capacity-building resources for the sector are at their weakest.

Travel back in time with me for a moment to the late 1990s — what one might call the heyday of nonprofit capacity building. Foundation endowments, fueled by a huge tech stock bubble, were riding high, experimentation was the order of the day, and big investments in capacity building were regularly launched. Grantmakers for Effective Organizations (GEO) was formed in 1997. In 1998, both the Bridgespan Group and our consulting firm were launched with support from groups of foundations. Commitments were being made to building strong and effective nonprofit organizations.

Then, just as we skirted safely past the bugaboo of Y2K (remember, the world was going to end on New Year’s Day 2000?) the dot-com bubble burst with a sickening pop. Seemingly overnight, the David and Lucile Packard Foundation, the largest source of innovation capital in the space, lost 70% of its $13 billion endowment. In response, it reconfigured its Organizational Effectiveness program to focus on support for its current grantees and ended its field-building activities. Other foundations also pulled back; if they couldn’t fund safety net services, the argument went, they certainly couldn’t keep funding something as nice (but not necessary) as capacity building.

Throughout the past decade, in good times and bad, we have seen a consistent pullback from major sector investment in services delivered by nonprofits. Capacity building has been a major, if often unacknowledged, casualty of this new era. Given the stubbornly slow economic recovery from the 2008 crash (except on Wall Street) and the resulting severe and persistent deficits across our state and local governments, the only thing that could turn this tide would be a massive new commitment from the federal government — a social stimulus. Wall Street got its bailout. Detroit too. But not the cities and counties, and not the nonprofit sector they depend on to provide essential services to the most vulnerable among us. 

Mimicking the nation’s economic divide, we are seeing a sector of capacity building haves and have-nots. Larger nonprofits and those with committed funders still have access to any number of national experts and services, while smaller, more fragile groups often depend on an equally fragile array of nonprofit management support organizations (MSOs) that deliver workshops and consulting in their local communities. Today, many of these capacity-building organizations are undercapitalized, understaffed, and underpowered to answer the nonprofit management challenge as the sector struggles to make sense of the “new normal” (or, as I see it, the new abnormal.

Funders have not been completely insensitive to this problem. Some have undertaken efforts to strengthen their local MSOs or to identify and improve access to the best local independent consultants. But we are in a nonprofit management crisis, make no mistake. Ongoing government funding reductions push us to be more creative, risk-taking, and bold; to think outside the box; to continually innovate and to fail faster; to follow, in short, the latest dictum from the business management gurus. But we can only do it with a robust support system — and the MSOs are the backbone of that system.