The Nonprofit Institutional Dilemma and More on the Future of Infrastructure Organizations

Earlier this week on Twitter, Idealist.org Founder Ami Dar posted this ominous tweet:

My first thought was: oh no, not another one. Not another nonprofit infrastructure group (those that provide capacity building, technical assistance, consulting, workshops, training, conferences, advocacy and research for the nonprofit sector) on the verge of shutting down. Like many of you, I have a personal connection to Idealist.org because I found my very first full-time nonprofit job on their website. My second thought was: the nonprofit sector needs Idealist. We can’t let it go down like this.

I expect Idealist.org to launch a “Save Idealist” fundraising campaign like so many other nonprofits have done in the past year. A local campaign here in DC that recently achieved major success was “Save WEAVE,” a call to the community to keep WEAVE open so they could continue to provide services to domestic violence victims in the city. But while some of the campaigns to save direct-service programs have been successful, Idealist.org will be the first nonprofit infrastructure organization to launch a public fundraising effort of this sort. (That I know of.)  For a non-direct service nonprofit, it’s hard to know what the response will be. As those of us who work in nonprofit associations or capacity building organizations know, it’s much harder to sell a nonprofit that helps other nonprofits than it is to raise money for a nonprofit that helps the poor. Believe me. I did it for over five years. It was tough. The pool of funding sources for non-direct service programs has always been slim, and is only getting slimmer.

Unfortunately, Idealist.org is not the only nonprofit infrastructure organization in financial trouble.

• Last September, the Chronicle of Philanthropy reported that the Council on Foundations had laid off 16% of its staff amidst decreasing attendance at its meetings.
• The Nonprofit Times reported in April 2009 that the Association of Fundraising Professionals had plans to lay off 14% of its staff, despite record conference attendance that year.
• The Council of Nonprofits has also made a round of layoffs, and now seems to have less senior staff than in previous years. Last year, the Council also made the difficult decision to cancel its 2009 Nonprofit Congress.
• The Alliance for Nonprofit Management began making shifts in their operations in late 2008, with an ongoing series of candid and transparent messages from the Board to their members. Like this one: After difficult and thoughtful deliberation, the Board feels that the most responsible action we can take at this time in order to preserve the mission of the Alliance and insure that members continue to have a voice and place to go for support, is to make major reductions in our budget. These reductions have included restructuring the Alliance with a significant reduction in our staff and engaging a management company (Raffa & Associates) on a pro-bono basis, and one part-time interim program manager to manage the day-to-day functioning of the Alliance.

It makes me wonder, once again, what the future holds for nonprofit infrastructure groups. How are they planning to weather a financial storm that doesn’t seem to be letting up? How will organizations change their revenue models, management structures, and program offerings to be sustainable for the nonprofits they are tasked with helping? I’m thinking particularly of nonprofit associations as they gear up for the 2010 conference season. Are groups still moving forward with the traditional conference program model that costs attendees hundreds of dollars in registration fees and travel? Or are more folks getting hip to the idea of hosting “unconferences” like the amazing one I attended in DC called Social Justice Camp? It was free and it was awesome. And better than many of the nonprofit conferences that I paid big money for.

The ongoing financial and programmatic challenges for nonprofit infrastructure groups is what Clay Shirky meant by the “institutional dilemma.” I’m almost through reading his fantastic book, Here Comes Everybody: The Power of Organizing Without Organizations. You should read it, too. In the book, Clay talks about how technology has allowed for global collaboration to happen without the assistance of corporations to manage their work. How groups of individuals can effectively organize themselves for social change in lieu of operating under the umbrella of an established organization. To be sure, Clay’s book isn’t an indictment of traditional organizational models. He’s not saying that self-organizing groups of individuals will completely take over the role of “the institution.” But what he does do is point out the precarious nature of institutions:

In a way, every institution lives in a kind of contradiction: it exists to take advantage of group effort, but some of its resources are drained away by directing that effort. Call this the institutional dillemma – because an institution expends resources to manage resources, there is a gap between what those organizations are capable of in theory and in practice, and the larger the institution, the greater those costs.

What this means is that no matter how much we want Idealist.org or Council on Foundations or Council of Nonprofits or Alliance for Nonprofit Management to stick around, there will always be inherent challenges to what they are able to do for the nonprofit sector in the long-term. As Clay points out:
Running an organization is difficult in and of itself, no matter what its goals. Every transaction it undertakes – every contract, every agreement, every meeting – requires it to expend some limited resource: time, attention, or money. Because of these transaction costs, some sources of value are too costly to take advantage of. As a result, no institution can put all its energies into pursuing its mission; it must expend considerable effort on maintaining discipline and structure, just to keep itself viable. Self preservation of the institution becomes job number one, while its stated goal is relegated to number two or lower, no matter what the mission statement says. The problems inherent in managing these transaction costs are one of the basic constraints shaping institutions of all kinds.

The approach that several infrastructure groups have taken so far – layoffs, program cuts, management changes – seem to have had a positive impact to their financial bottom line, but I’m not sure that it translates into success for their respective missions. Do I want Idealist.org to stick around? Yes, of course. But I’m more concerned with preserving their mission versus their organization.

What do you think? Will new and better models begin to emerge that will be a win-win-win for nonprofit infrastructure organizations, their members and the nonprofit sector overall? Do you know of any that are bubbling up?

Read more stories by Rosetta Thurman.