Reality Time for Human Service Organizations

The recent demise of Hull House, the historic Chicago settlement established over a century ago by socialite, social entrepreneur, and activist Jane Addams may well be emblematic of tectonic shifts taking place in the human service sector. And the big problem with tectonic shifts is, you don’t know where the plates will land until they have.

To know about the history of social welfare in the United States is to know about Hull House as one of its most historic and significant icons. Addams imported the idea of a settlement house from England, and had the bold idea of empowering people and giving a hand up not a hand out. Central to the concept was that the settlement house was a part of the community, often an immigrant community, not somewhere downtown where one had to beg for help. The idea caught hold and settlement houses were established in communities across the country. Many still exist and are vital resources in their neighborhoods today.

Who knows if the board and staff leadership of Hull House could have made better decisions? They are certainly to be credited for spinning off some of their services to other service providers following the 123-year-old organization’s demise. The specifics of the Hull House situation notwithstanding, I think many of us see it as emblematic of the maelstrom of challenges even the most established and well run human service organizations is confronted with.

While often delivered by nonprofit charitable organizations, the lion’s share of funding for human services comes from government and it is squeezed at all levels. The economic downturn and recessionary pattern over the past few years created increased demand, notably by newly homeless and newly unemployed people, at a time when tax revenues and donations declined. Funding is particularly stressed in states hardest hit by the mortgage crisis, but it is the federal deficit that is driving and will continue to exacerbate the problem for service providers.

Nonprofit agencies are, for the most part, well run. Not all are as efficient as they might be, as many are more focused on mission than operations. Among the more sophisticated agencies, that has changed in recent years though. Groups of organizations are forming back-room cooperatives, agencies are combining their purchasing power, and several of the large “brands,” such as Girl Scouts of the USA, United Way Worldwide, and American Cancer Society, are combining sets of smaller local affiliates into larger and hopefully more efficient regional operations.

Being historic and having had success over the decades will not necessary spell success in this new era that seems to be upon us. Because of the financial pressures that are likely to affect the sector for the foreseeable future, every nonprofit organization has to consider its operations in new ways and perhaps consider organizational options it would rather not. From my vantage point, these are among the considerations:

Service offerings have to be evaluated: 1) to ensure that they reflect current needs (rather than providing a service because we always have); and 2) in light of current funding realities. Some service lines may have to be cast off. Some should be.

Every organization needs to understand and evaluate its financial model. This is not necessarily common nonprofit practice. Many of us have a funding mix that is historic and we work those sources from year to year. There are so many forces affecting the “tectonic plates” of the sector that we need to start from square one, evaluate not only the sources but also the alternative ways of financing the things we need to do. My organization, for example, found it was dependent on one source that was not growing and others that varied widely from year to year, and developed an earned revenue approach to round out our financial model.

Cost savings and efficiencies are imperative. It is amazing to me how many organizations—nonprofit and otherwise—overlook group-purchasing arrangements. To their credit, hospitals and other industries get this, and save billions collectively annually. But efficiency goes far beyond purchasing; nonprofit organizations grow bureaucratic just as government and for-profit companies do. Layers add processes and costs and we should assess the cost-benefit. And, as I noted, some organizations are consolidating smaller operations into larger operating units. In a sector where local engagement is crucial, that can and should be done in a way that maintains local “ownership.”

When times are really tough and survival is in question, organizational and brand ego should give way to what’s right for the mission, even if that means spinning off functions to another organization (as Hull House did with some of its services) or merging with a more viable entity. Boards are, in my opinion, as guilty of the failure to consider such options as paid staff. We love our organizations and we would, apparently, rather let them fail than take affirmative and bold steps to preserve important community services. 

The Hull House situation garnered national attention because of the agency’s rich history, a history that could not protect it in today’s volatile environment. Nonprofit human services providers, really all nonprofits that serve a community mission, must face the reality of today’s uncertain environment and consider all options with objectivity and vigor.

Read more stories by Irv Katz.