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The Crisis of the Nonprofit Business Model

Friday, October 6th, 2017

My View ~ Published in Phoenix Business Journal ~ October 6, 2017

Thirty years ago, I was on the ground floor of the emerging field of corporate social responsibility (CSR), serving as senior consultant to what is now Boston College’s Center for Corporate Citizenship. Our aim was to position the business community as active agents of progressive social, economic, and cultural change.

Since then, the scope of corporate social responsibility has evolved from open checkbook philanthropy to decidedly strategic initiatives, emphasizing the convergence between the company’s business interests and the offerings of nonprofit beneficiaries.

These contributions are good, but they may not be good enough. While corporations have stepped up to the community-building plate, their nonprofit beneficiaries have lacked the infrastructure and capacity to move the needle on indicators of social and economic progress by more than incremental gains.

More critically, the nonprofit business model has remained essentially the same ~ anchored in practices of oversight, planning, administration, and financing that limit the nonprofits’ ability to adapt, innovate, and effectively address the changing demands and needs of a 21st Century technology-driven economy.

As a result, notwithstanding the good works of many nonprofits, we read with unsettling regularity articles about nonprofits at risk or on the verge of insolvency or in the midst of some internal dysfunction.

These instances are only the tip of an iceberg of nonprofit vulnerability that jeopardizes the relevance, impact and sustainability of the entire sector.

This vulnerability and the resulting dysfunctions are attributable directly to a fundamental flaw in the architecture of the nonprofit organization: a structure that positions volunteer boards of directors not only to perform tasks that are beyond their competence but also to do so free of accountability or incentives for prudence and due diligence.

In every instance when I’ve been called to turnaround and stabilize a nonprofit in freefall, one primary causal factor has prevailed: a blatant failure of governance. Boards that deny or fail to discern the red flags of financial stress, tolerate chronic deficits, and encumber the organization in indebtedness.

This is a problem that not even doubling the dollars of a budget will resolve. It is a condition that the scores of workshops, degree and certificate programs, and books and articles about board effectiveness have done little to alter. It is unlikely even that a system of state oversight and regulation of nonprofits would mitigate the problem.

What is required, however, is a fundamental redesign of the nonprofit business model that alters the balance of power and authority in nonprofit organizations, that establishes a system of checks and balances that ensures heightened accountability, and that liberates the professional staff to be as entrepreneurial as they can be.

It is to this endeavor that the corporate community can add tremendous value with a corresponding ROI that benefits us all. The time may be right for a third wave of CSR that is not limited to but transcends financial contribution and leverages the intellectual and technological capital of commerce to inform the redesign and repositioning of nonprofits from incremental to catalytic change agents.

Failures of Governance ~ Board Delinquency!

Sunday, September 20th, 2015

Members of Boards of Directors

They are recruited to provide organizational leadership and to champion the organizations on whose governing boards they sit. They ease into their seats with pride. They sign off on the list of expectations, one of the most important of which is to do what they can to generate revenue on behalf of that organization. Whether by contributing according to their means or cultivating donors or providing entrees to new sources of giving ~ they make promises.

And then they grow fat and happy, complacent and asleep at the wheel.

They aim low because aiming high would place more of a demand on their energy than they really want.

And then, when reminded of their duty of stewardship ~ when encouraged, supported, and finally pushed to fulfill their obligations and promises ~ they compensate for their failure of governance by firing the messenger.

All too often, in the course of my consulting with nonprofits, I have witnessed this sad dynamic. Again and again, responsible executives are the casualties of boards who have betrayed their oaths and doomed their organizations to mediocrity or worse.

There is an answer to this dilemma and it resides in the courage to fire the delinquents sooner rather than later before they wreak their damage! Yes, it is possible to fire the Board! Indeed, in the interests of organizational viability and on behalf of the cause for which it stands, it is an imperative.

Governance and New Directions in Behavioral Health

Tuesday, July 28th, 2015

(I was interviewed recently by Behavioral Health Care as one of the primary sources for an article on best practices in governance ~ with emphasis on behavioral health organizations.

Given the transformative move towards the integration of behavioral health and primary care, I stressed the need to strategically rethink the role of the board and the skill sets and perspectives required for effective governance.

The following article, researched and written by Joanne Sammer, a freelance writer based in Brielle, N.J., appears in the July 27th, 2015 issue of Behavioral Health.)

Follow best practices in board governance

Given the enormous changes going on throughout healthcare, behavioral health organizations will be relying on their boards of directors for leadership as well as a host of new and expanded responsibilities. Proper governance can help boards position the organization for success in this changing environment.

1. Choose your board members carefully

Behavioral healthcare is becoming more complex thanks to policy changes at the national and state level. Therefore, organizations must ensure that their board members have the skills and knowledge necessary to navigate the new healthcare landscape. Look for hard skills and expertise in areas such as technology, human resources, risk management and medical practice management.

“Not-for-profit boards need to move away from the ‘any willing director’ mentality,” says Ann Borders, president and CEO of Cummins Behavioral Healthcare in Avon, Ind. “Instead, they need to make a conscious decision about the expertise and skills needed on the board.”

To that end, the Cummins board has created a board profile matrix that shows the skills and knowledge the organization needs, such as legal, accounting and executive management, and which current board members provide that expertise. This way, when filling a board vacancy, the board has a visual tool to highlight knowledge gaps.

Potential board members might also be individuals who have access to potential donors, demonstrate political savvy, and have an understanding of mergers and acquisitions. As budget stress pressures smaller groups to merge, a board that can navigate the process will be invaluable.

“This represents not just a commitment to the organization’s mission but a different level of attitudes and aptitudes and skill sets and understandings,” says Herb Paine of Paine Consulting Services in Phoenix that advises not-for-profit organizations.

Paine says a board appointment should not be viewed as “a beauty contest” or an opportunity for someone to build up a resume. It takes commitment to the organization’s goals.

2. Increase board diversity

Along with diverse skills, boards also need diverse perspectives. Recruiting from the personal or professional networks of current board members is likely to create an echo chamber of similar types of people who all move in the same circles.

Lynn Shapiro Snyder, a member of law firm Epstein Becker & Green in Washington, D.C., suggests increasing gender diversity by ensuring at least three men or three women are present on any board.

“One person’s voice will not be heard, two cancel each other out, but three can be effective,” Shapiro Snyder says.

Reaching out to younger people as potential board members can also bring different perspectives. Most younger professionals are eager to contribute and will be ready to champion new ideas.

“Why make them wait until they are nearly retirement age to join?” she asks.

Yet, increasing diversity does not necessarily mean increasing board size. In fact, it is better not to. Keeping the board small with 10 to 12 individuals leads to more effective and strategic conversations, according to Paine.

“Nonprofits often want to populate the boards with as many members as they possibly can, but that is really not prudent,” he says.

To balance the need for both fresh perspectives and continuity, Paine suggests that boards either impose term limits on their members or create three-year terms that are renewable based on board member performance against expectations.

“This ensures that the board does not get stale or so entrenched and self-interested that it loses perspective on the big picture,” he says.

3. Evaluate your board’s performance

To maximize board performance, behavioral health organizations need to set expectations for board members, communicate those expectations and then monitor and evaluate over time.

The list might include:

  • In-person attendance at meetings;
  • Following through on commitments;
  • Continuing education; and
  • Committee participation.

“Given the board’s role as stewards of a public trust that the dollars from government or private donors are being used wisely, there needs to be a strong emphasis on accountability,” says Paine.

Members must be versed in big-picture expectations, too. For example, boards must be able to discuss issues such as organizational risk and compliance, as well as the organization’s financial position.

“This requires subject matter knowledge of the regulatory issues organizations face, whether that involves mental health parity, the Affordable Care Act or Medicaid or Medicare enforcement,” says Snyder. “They have to have a general awareness of these issues so that they can effectuate their fiduciary obligations in a more meaningful way from an enterprise standpoint.”

Operationally, boards should seek more incisive conversations with top management to shape board meeting agendas. The key is for board members to fulfill their role in defining policies that will guide the operation of the organization and the measures against which organizational performance will be evaluated. However, they must remember to stay out of day-to-day operations.

“Micromanagement is a real problem,” says Paine.

If a board member is not living up to his or her commitments, the board chair and other key members should have a predetermined method to transition that member off of the board.

“If someone is asked to resign, it needs to be handled carefully with documentation and using personal relationships to move people along,” says Snyder.

4. Prepare for the future…but not too far ahead

Healthcare is changing rapidly and boards cannot rely on doing the same thing the same way. New ideas should be embraced or at least examined in the context of today’s new paradigm.

“There is a lot at stake,” says Borders. “Boards need to recognize the threats and the opportunities.”

Borders recognizes that real long-term planning is unlikely to be worthwhile in this environment. Therefore, she relies on her organization’s board to provide a three-year roadmap for the organization, instead of the seven-year projections used in the past because organizations simply can’t plan that far out, she says. Consider contingency plans.

Borders works with her board to develop situation analyses to project how the future might play out in various aspects of operations, including technology and legal and regulatory issues.

“What do we expect the landscape to look like in three years, and how can the organization prepare?” says Borders.

The Imperative of Investment in Children’s Services

Thursday, July 16th, 2015

(In a December essay in the Arizona Republic, I addressed the transformation under way in the field of behavioral health. If only such a transformation were the case in the field of children’s services. Unfortunately, we continue to see a disinvestment in children, particularly under the guise of  calls for privatization. That’s the focus of my opinion piece in the Republic’s July 16th issue:

The bottom line: A big job remains to educate the community and policymakers regarding the proper, fundamental, and value-laden roles of government and the nonprofit sector in addressing and investing in social issues.)

The Arizona Republic’s editorial board documented deficiencies in the current system and the adverse consequences of funding cuts to family services (“We’re not done fixing child-welfare system,” July 8).

Robert Robb reinforced the point (“More than money, child agency must reset priorities”) and critiqued the proposed solutions of social welfare advocates for larger funding increases. In this context, Robb referenced Arizona Senate President Biggs’ frustration over his unheeded call for “fresh thinking and new perspectives, rather than continuing to move organizational boxes and throw money at a problem that never seemed to improve.”

The Senator’s desire for originality in problem-solving appears less driven by a sincere interest in viable solutions than by an ingrained philosophy regarding the appropriate role of government and the nonprofit sector in mitigating social issues.

If Biggs had reflected first why improvement in children’s services has been elusive, he might have discovered that it is not for the lack of “fresh thinking and new perspectives” but for the reluctance of ideologically-driven policy makers to invest adequately in such initiatives.

The notion that money has been thrown at services to children is almost laughable, considering the paltry record and downward slide of this state’s allocations.

I am reminded of how many commissions and task forces I’ve sat on over five decades that have focused on children at risk and offered substantive and practical recommendations for systemic reform.

Recall, for example, the final report of the Governor’s special commission on child protective services in 2003 that asked why the horror stories of abused and neglected kids kept happening; that declared the system was neither well-designed nor operated; and that recommended comprehensive changes in structure and operation.

A dozen years later, it’s deja vu all over again, and the promises of change remain unfulfilled.

It may be instructive to contemplate the kind of solutions Mr. Biggs has in mind. One need look no further than the policy agenda of the American Legislative Exchange Council, whose seminars the Senator has attended, to understand why we’re not making progress. At the top of ALEC’s priorities are such “innovations” as privatizing foster care and adoption services and child support enforcement services. The former “allows a state to give for-profit or other corporations contracts to receive streams of tax dollars to manage foster care or adoption processing, including assessing prospective parents’ marital status, income, and religious beliefs.”

Abdicating responsibility and accountability for our children in favor of profiteers is neither acceptable nor ethical.

It is certainly well beyond the time that we challenge the core premises of this circular discussion regarding solutions to the state’s chronic child welfare crisis; that we provide more than band aids and tourniquets; and that we implement readily available and actionable alternatives to the current under-resourced and fragmented web of services:

  • Realignment of funding streams to require collaboration among the various entities that serve children. 
  • Subsidies, general obligation bonds, or public trusts that increase parental access to quality child care, early childhood education, pediatric care, and training in parenting skills. 
  • Incentives for employment development workshops and respite child care that reduce the stress of families at risk for child abuse or neglect.; 
  • An integrated behavioral health assessment and planning process that tracks children enrolled in multiple systems of care and detention and documents the outcomes and efficacy of treatment approaches.

If Biggs and his allies would give such real solutions a chance, we might someday look kids squarely in the eye and say that we practice what we sing in all those songs that say “the children are our future.”

Provisions of the Affordable Care Act

Friday, April 19th, 2013

On March 23rd, 2010, President Obama signed the Affordable Care Act (ACA) into law.

Thanks to friends in the financial services community, we’ve assembled the following reminder of the elements of health care reform that are included in the law.

Several major provisions of the Act will not take effect until 2014, and these are summarized below. However, many of the Act’s requirements already have been implemented, including:

  • Insurance policies must allow young adults up to age 26 to remain covered on their parent’s health insurance.
  • Insurers cannot deny coverage to children due to their health status, nor can companies exclude children’s coverage for pre-existing conditions.
  • Lifetime coverage limits have been eliminated from private insurance policies.
  • State-based health insurance exchanges, intended to provide a marketplace for individuals and small businesses to compare and shop for affordable health insurance, are scheduled to be implemented by October 1st, 2013.
  • Insurance policies must provide an easy-to-read description of plan benefits, including what is covered, policy limits, coverage exclusions, and cost-sharing provisions.
  • Medical loss ratio and rate review requirements mandate that insurers spend 80% to 85% of premiums on direct medical care instead of on profits, marketing, or administrative costs. Insurers failing to meet the loss ratio requirements must pay a rebate to consumers.
  • The ACA provides federal funds for states to implement plans that expand Medicaid long-term care services to include home and community-based settings, instead of just institutions.
  • The ACA provides funding to the National Health Service Corps, which provides loan repayments to medical students and others in exchange for service in low-income underserved communities.
  • Medicare and private insurance plans that haven’t been grandfathered must provide certain preventive benefits with no patient cost-sharing, including immunizations and preventive tests.
  • Through rebates, subsidies, and mandated manufacturers’ discounts, the ACA reduces the amount that Part D Medicare drug benefit enrollees are required to pay for prescriptions that fall in the donut hole.

Provisions of the ACA that are due to take effect in 2014, include:

  • U.S.citizens and legal residents must have qualifying health coverage, subject to certain exemptions, or face a penalty.
  • Employers with more than 50 full-time equivalent employees are required to offer affordable coverage or pay a fee.
  • Premium and cost-sharing subsidies that reduce the cost of insurance are available to individuals and families based on income.
  • Policies (other than grandfathered individual plans) are prohibited from imposing pre-existing condition exclusions, and must guarantee issue of coverage to anyone who applies regardless of their health status. Also, health insurance can’t be rescinded due to a change in health status, but only for fraud or intentional misrepresentation.
  • Policies (except grandfathered individual plans) cannot impose annual dollar limits on the value of coverage.
  • Individual and small group plans (except grandfathered individual plans), including those offered inside and outside of insurance exchanges, must offer a comprehensive package of items and services known as essential health benefits. Also, non-grandfathered plans in the individual and small business market must be categorized based on the percentage of the total average cost of benefits the insurance plan covers, so consumers can determine how much the plan covers and how much of the medical expense is the consumer’s responsibility. Bronze plans cover 60% of the covered expenses; Silver plans cover 70%; Gold plans cover 80; and Platinum plans cover 90% of covered expenses.

Breaking Up is Hard to Do – the Painful Necessity of Reorganisation

Monday, December 17th, 2012

(Published in HR InSights, December 17, 2012)

The cold truth of turnaround management is that jobs are either being lost or reconfigured. There is no getting around this reality. The challenge then, is to execute staff restructuring. Whether one refers to it as reduction in force (RIF), downsizing or rightsizing, the process needs to be handled in a prudent and practical way, with minimal disruptions to the operations of the organisation.

In this transitional period, management, perhaps understandably, is often inclined to soft-pedal the possibility of staff restructuring lest morale plunges, employees take flight or productivity decreases. Furthermore, the possibility that a merger may be the restructuring option of choice can further heighten paranoia regarding staff pushback.

Whether the turnaround process comes as a result of a business’s employees, systems or processes, it’s important to remember that the process is only underway due to a failure in organisational effectiveness. The business may be on the verge of insolvency, losing its competitive edge or encountering a serious downturn in revenue generation. Therefore, the turnaround, by definition, must mean an end to business as usual.

The duty of a turnaround manager is to ensure the organisation remains solvent and effective during transitional periods, as well as making sure it is populated with the skill sets, competencies and perspectives to help enable the organisation to fulfill its goals and meet the needs and expectations of its customers. The challenge is to expedite and negotiate this process of change so that any decisions made, weather the tests of dissension or charges of wrongful termination.

The first order of business is to make the workforce aware of the challenges facing the organisation, along with the intended processes and the messages of the intervention. In every intervention I’ve conducted, I’ve found that employees respect candor and transparency. They may not like what they hear, but they respect it. My approach has been to acknowledge the anxiety that accompanies my presence as a turnaround manager and recognise that, although I can’t eliminate it, I will do all I can to mitigate it by means of open and constant communication.

With the knowledge of the possibilities that lie before them and the understanding that there are no guarantees of continued employment, they have choices – to stick with it through the process of change, to demonstrate that they are indispensable, to resist and face the consequences, or to abandon ship. The one choice that is unacceptable and subject to immediate termination is subversion; there can be zero tolerance for the toxic personality. Any personnel actions during this period require a credible and reasoned rationale.

Below are three essential steps which demonstrate the painful necessity of restructuring:

  • Organisational assessment – During this process of discovery, intelligence is gathered to help inform future decision making. This period focuses on interviews with staff and surveys of employees to offer insights into the organisation’s culture, the efficiency of current structural arrangements and the quality of staff relationships and internal collaboration. This is a key opportunity to assess the organisation’s human capital.
  • Strategy – The immediate focus of a turnaround is stabilisation – restoring financial stability, focusing on core lines of business and shedding those lines and associated personnel that are not core to organisational mission. With stabilisation, a conversation can ensue regarding future strategic direction and priorities. It is in this context that the transition team will define the skill sets, competencies and perspectives required to advance the organisation and determine to what extent the current staff complement and configuration is compatible with future strategic goals.
  • Implementation – All the theory in the world will not conceal that as well organised as the restructuring process is intended to be, it is ultimately a messy and painful process. Leading up to the final staffing decisions, the turnaround manager will likely contend with a good share of minefields – not the least of which are the organisation’s ‘sacred cows’ and the subversives. In the end, having navigated these stormy seas, the turnaround manager’s challenge is to communicate the necessity of the restructuring decisions in an objective and dispassionate way, while demonstrating authentic empathy.

Turnaround and stabilisation require solvency, continuity and effectiveness to have primacy over the interests of the work force. If the mission is to be achieved and the expectations of the customer met, the right people in the right positions with the right standards of performance need to be involved. Were that the case in the first place, the necessity of the turnaround may have been obviated.

Rethinking Corporate Social Responsibility

Wednesday, December 12th, 2012

(Published in Nonprofit News, ASU Lodestar Center for Philanthropy & Nonprofit Innovation, December 12th, 2012)

Twenty years ago, I was privileged to serve as a senior consultant and trainer with the newly created Center for Corporate Community Relations at Boston College (now the Center for Corporate Citizenship).

In the two decades that have elapsed, the scope and texture of corporate social responsibility (CSR) have evolved dramatically. Then, the focus of my consultation was on community needs assessments, priority-setting, and allocations processes; today, the focus is on impact and return on investment. In the coming years, given dramatic changes in the marketplace, the context and scope of CSR may need to take a giant paradigmatic leap.

What was once a matter of checkbook philanthropy is now decidedly strategic, and the driving forces of CSR revolve around the convergence or fit between the company’s business interests (its customers, product line, and brand) and the offerings of potential nonprofit beneficiaries.

Corporate support is today an indispensable component of the nonprofit organization’s diversified fundraising strategy. Corporate presence and visibility in the community have been most effectively accomplished through relatively low cost/high yield investments, including short-term project grants, event sponsorships, cause-related marketing, voluntarism and hands-on projects, in-kind giving (e.g., printing, marketing, human resources, information technology services), and board membership.

This is all good and deeply appreciated. However, it may not be enough.

The nonprofit business model is increasingly vulnerable to the volatility of the nonprofit marketplace and broad social, political, economic, and technological trends.

For example, health, behavioral health, and social service organizations, already limited in capacity and infrastructure, will have a devil of a time adjusting to new models for care delivery, requirements for electronic documentation of metrics and outcomes, and changes in the financing of services.

Likewise, for nonprofit arts and cultural organizations, similar challenges exist because of the impact of new technologies and alternative forms of entertainment on audience tastes and behavior.

Among the most severe impediments to nonprofit sustainability are fundamental deficiencies in funding, capacity and infrastructure. Notwithstanding countless initiatives and grants to address this dilemma, the business model problem remains.

It is because of this altering landscape and the inherent threats to nonprofit viability that I believe that there is an urgent need to rethink the nonprofit business model and our structural arrangements for philanthropy and governance. In this context, I believe that corporations have a unique and vital role to play in the reinvention of the nonprofit sector – because nonprofits can’t do it alone and because corporations have the infrastructure and intellectual capital to help nonprofits transform their business models.

So, the time is ripe, I believe, for the next shift in CSR: from strategic branding-driven philanthropy to pragmatic collaborative philanthropy, whereby corporate leadership is actively invested as partners with government and nonprofits in business redesign, technology transfer, community problem-solving, and capacity-building.

The challenge for progressive CSR leaders is to delineate their company’s role in these endeavors and accessible processes for deploying their resources. Because corporations are deep reservoirs of human and intellectual capital that extend beyond their corporate contributions and foundation programs, they have much to offer in cultivating environments where individuals and families can thrive – where they want to work, live, play, and stay. After all, if corporations wish to be defined as people, then they need to act like people and share more proactively in building the common wealth.

Likewise, leaders in the nonprofit sector, individually and collectively, should develop a unified strategy for leveraging corporate resources for broad-based and integrated organizational development, capacity-building, and community development. The advocacy strategies of nonprofits may need now to shift from a focus on government to a focus on the private sector, encouraging if not urging active public/private partnership for community development.

The Centrality of Professional Development in HR Strategy

Friday, November 9th, 2012

(Published in HR Insights - November 9th, 2012)

Human resources development: More honoured in the breach than the observance. The commitment to invest in one’s human capital too often takes a back seat to other organisational priorities, particularly and ironically during hard times when it is needed the most.

Regardless of one’s primary book of business, the core reality of contemporary organisational life is that all enterprises are in the people and the information business and that these two intrinsic lines of business connect and lubricate corporate performance. Inattention to human and information detail ultimately diminishes performance and productivity. Organisational effectiveness derives from having the right intelligence about your market and deploying people – your human capital – in ways that address and exploit market realities and leverage great talent.

If this is so, what impedes a high-level and sustained commitment to human resources development?

The answer lies in part in the need for a model that:

a.) Establishes clearly the link between investment in human capital, resource allocations, and corporate financial performance, i.e., profitability

b.) Compellingly reinforces the principle that management has a vested interest in employee loyalty and productivity, to the extent that the evaluation and remuneration of the manager will be largely a function of the performance of his/her employees.


To address this need, I propose such a model (Figure 1), comprised of the following elements:

  • Organisational culture at the core of the model, defining the values and principles that guide the conduct of the organisation’s business and behaviours – values and  principles which ideally will emphasise and encourage empowerment, innovation, and flexibility.
  • The four quadrants that reflect the logic and flow of management’s investment in human capital development are:

1. Metrics – Whereby the manager clearly defines the results against which
the individual’s performance will be evaluated and relates performance to
intended outcomes for the team and the corporation.

2. Controls – Whereby the manager balances the commitment to empowerment
with a delineation of those practices that are unacceptable in achieving the

3. Verification – Whereby, in the spirit of trust but verify,
the manager defines the process, format and frequency for tracking performance
against the metrics and uses the verification process as a platform for
coaching, interventions and/or corrections.

4. Professional development – Whereby, based on the employee’s
performance, the manager identifies not only areas of strength but also
opportunities for investing in building the employees’ skill sets.

  • The cycle of review, improvement and resource allocations feeds continuous improvement in organisational performance. The premise of the cycle is that a conscious investment in human capital will breed higher levels of performance that  ultimately will inure to the benefit of the corporation and its stakeholders and that will in turn determine future investments for continuous improvement.

The bottom line is that this model will work when the CEO is fully and unequivocally committed to a sustained investment in human capital. The engagement of an HR manager does not relieve the CEO of responsibility for personnel management and development. Indeed, the CEO must ever and always be the chief HR officer, even if the title is conferred on a subordinate. The HR manager exists to help the CEO achieve corporate objectives by ensuring that all  employees have an environment in which they can do their jobs and excel.

Philanthropic innovation requires business leadership

Monday, October 29th, 2012

(Phoenix Business Journal – October 26, 2012)

As the season of appeals for charitable contributions commences, it’s worth noting what a rough year it’s been for nonprofits. It’s going to get rougher still. And that has broad implications for the business community.

A number of long-standing organizations have fallen by the wayside — organizations that have sustained, healed, educated and inspired us. For example, the WellCare Foundation, Arizona Jewish Theatre, The Arts & Business Council of Greater Phoenix, and Community Food Connections.

Some are gone because of failures of governance, others because of funding cutbacks they could not withstand, others for their inability to adapt to a highly competitive marketplace.

Still others remain at risk, with zero margin for error and limited internal capacity, drawing on their reserves (if they have any), making last-minute appeals to live another day, or doing far more with far less.

With the full implementation of the Patient Protection and Affordable Care Act looming in 2014, a shakeout among behavioral health and social service organizations is coming. Single program-focused agencies no longer will be viable; some will dissolve, while others will merge into larger
integrated organizations.

Caretakers no longer will be office-based, but will be mobile with remote connections to servers. The emphasis will be on innovation and service integration. Organizations that are equipped with strong infrastructure, metrics and technology, along with the will to integrate services, will be the survivors.

Arts and culture are similarly challenged by the impact of new technologies on audience behavior and alternative forms of entertainment.

The bottom line is that the nonprofit landscape is altering as we speak, and the implications for the business community are profound. For it is businesses and their employees whose lives are enriched by these groups; whose presence makes for a hospitable place to live, work, and stay; whose absence impoverishes us.

It is an alteration that demands a long-term strategy to rethink our structural arrangements not only for philanthropy, but for governance and the configuration and delivery of services. And I contend that, to be successful and impactful, the strategy will require the substantive involvement and investment of this Valley’s business leadership.

Corporate social responsibility is an accepted value and is certainly alive and well in the Valley of the Sun. But it can do better. How it gets exercised, and to what ends, is crucial to the future well-being of our region. As always, business will need to deal with the painful necessity of
choice, responding to requests that far exceed their available funds.

But it behooves us to acknowledge that technological and political trends compel us to seek smarter more economical ways to allocate and leverage our limited reservoir of philanthropic resources.

In a region that excels in innovation, we ought to be able to reframe philanthropy.  Let’s begin that process now. The question is, who will take the lead?

Public/Private Leadership Required for Innovation in Philanthropy

Tuesday, October 2nd, 2012

It has been a rough year for Valley nonprofits and ultimately for the communities and individuals they serve. Mary Reinhart’s coverage of the crisis in health care (“Amid state cuts, non-profits strain to treat uninsured,” September 22, 2012) leaves no doubt about the long-term price we’ll pay for short-sighted public policy and severe funding cutbacks. The narrative about health care, however, is one part of a larger story regarding not just the continuous erosion of our social safety net but also the increasing vulnerability of the nonprofit sector and the need for bold community responses.

Consider the parallel crises in child protection services and in education, each of which have received in-depth analysis by the Republic.

Consider the demise this year of several long-standing community-based organizations (e.g., the WellCare Foundation, Arizona Jewish Theatre, the Arts & Business Council of GreaterPhoenix, Community Food Connections) that have sustained, healed, educated and inspired our community.

Some are gone because of failures of governance, some because of funding cutbacks they could not withstand, or others because of their inability to adapt to a highly competitive marketplace.

They signify another looming reality – that numerous nonprofits  remain at risk for the same reasons, with zero margin for error and limited internal capacity, drawing on their reserves (if they have any), making last minute appeals to live another day, or doing far more with far less.

Consider the additional likelihood of a major shakeout among behavioral health and social service organizations, in large part because of the reforms envisioned in the Affordable Care Act. Many single program-focused agencies will no longer be viable; some will dissolve, and others will consolidate into larger more competitive multi-service organizations.

With at least 12,000 nonprofits already operating in Maricopa County and, given the nearly 40% increase in the number of nonprofits over the last fifteen years, the likelihood of more entries in the marketplace, the competition for financial support will intensify and an already limited reservoir of philanthropy will be strained to meet the demands. 

These developments certainly amount to a compelling case for charitable largesse, particularly as the season of appeals for charitable contributions commences. However, the fact is that that a convergence of social, economic, technological, and political trends are transforming the terrain on which the business of caring is conducted. The community can ill-afford redundancy of effort, deficiencies in governance, and adherence to outdated business models. The nonprofit sector is ill-equipped to handle the challenges of these changes on its own. As is the case in other industries, business-as-usual in the world of philanthropy just won’t cut it anymore, and an each-agency-for-itself attitude does not serve the common good.

Therefore, let me suggest that the scenario I’ve painted calls for a fundamental rethinking of the way we organize, govern, prioritize, and deliver philanthropy in the Valley of the Sun and that, if ever there was a time for a public-private partnership of corporate, philanthropic, governmental, and academic leadership to address this opportunity, that time is now.