Winter Is Coming

Frederic Jameson famously observed that it is easier to imagine the end of the world than the end of capitalism. Could the same be said for nonprofits? Can we imagine a New York without them? Would it be a Scandinavian-style paradise, where an efficient and effective government provides all social services? Or a bleak dystopia, where the social, human and cultural services once provided by nonprofits have simply vanished? Or perhaps a Milton Friedman fever dream, where profit-seeking corporations — guided by the “invisible hand” of the market — meet our every need?

None of these scenarios seem plausible to me — and a good thing, too, because the current system, where citizens voluntarily come together through nonprofit organizations to deliver essential services, remains the most effective and distinctly American option.

Given this, I am confident that the nonprofit sector as a whole will survive the Trump administration largely intact. However, this is cold comfort given the enormous challenges many individual nonprofits will face in the days to come.

Any New Yorkers who are sanguine about Trump’s potential impact on nonprofits in our vital city should keep a few things in mind: $100 billion of federal funding supports New York City in everything from income support, social services, homelessness, housing, childcare, education, infrastructure, health care and the arts; 20% of the city’s human services agency budgets come from the federal coffers, of which about 50% is discretionary; major social service funding programs have been specifically targeted by Trump or members of his entourage; the administration has a wide variety of tools at its disposal to wreak havoc with existing funding streams including legislative action, executive orders and the impoundment of appropriated funds. In addition to potential financial pressure, nonprofits operating in certain program areas (e.g., immigration, advocacy, LGBTQ rights and diversity, equity and inclusion) may see increasing needs while facing greater legal and political jeopardy under proposed new rules like H.R. 9495 which could redline nonprofits disfavored by the administration. Finally, a more aggressive “tone at the top” may increase the use of “lawfare” — the filing of lawsuits for political purposes — by local actors who are hostile to particular nonprofits or their funders.

Given this, even those of us who are less concerned about the long-term prospects for the sector as a whole need to be fully engaged with practical and mission-critical issues that will make or break the individual organizations we care about in the short term. We need to double down on improving governance, risk management, cash flow monitoring and strategic collaborations. We may even need to help some nonprofits accept that in a tougher environment, the best thing they can do is wind down in a dignified way rather than squander resources in an attempt to survive at all costs. As a result, we have no time to waste on the abstract, intractable discussions and debates that have too often distracted us — particularly in the nonprofit chattering class.

To that end, I hereby pledge to spend zero time — zero — thinking, discussing, reading or writing about any of the following questions over the next four years:

1. The structure of the nonprofit sector. Why are there so many nonprofits? Why don’t they consolidate in the interest of efficiency and economies of scale? Why don’t funders grow the more effective ones and let the ineffective ones disappear?

The structure of the nonprofit sector is shaped by numerous factors: Nonprofits are relatively easy to establish, often led by founders with a specific vision and frequently supported by localized funders (e.g., friends, family, boards or government entities that prioritize small, community-based organizations). It’s silly to spend time thinking about the “structure” of a sector that itself is almost meaningless in that it encompasses everything from Harvard University to a volunteer-run soup kitchen, where 80% of revenue is concentrated in 2% of organizations, and where more than 50% of organizations have more board members than staff! Yes, individual nonprofits should strive to take their missions forward in the best way they can, but the structure of the sector in which they operate is largely irrelevant, unlikely to change and beyond the control of any single individual, organization or funder.

2. The balance between program effectiveness, financial viability and internal values. Which is the most important of these? If they are in conflict, which should take precedence?

This is a false choice. Success in the nonprofit world requires addressing all three simultaneously: (i) ensuring financial viability (revenues exceed expenses), (ii) delivering meaningful impact through programs, and (iii) upholding core organizational values. These are interdependent, like solving simultaneous equations in algebra. Sometimes there is no solution (or there was a solution, but circumstances changed.) Great leaders recognize that success is a team sport, so they recruit employees who specialize in one of those three areas. They do this knowing that these people come from different camps, speak different languages, favor different equations and can sometimes get into squabbles. It’s a necessary part of the messy process by which nonprofits make progress.

3. The appropriate relationship between funders and nonprofits. What can we do about the funder-nonprofit power imbalance? Why don’t funders make general operating grants or adopt participatory grantmaking approaches? Why is reporting so onerous?

In the corporate sector, things are clear: Shareholders own the company, the board oversees management on behalf of the shareholders, management runs the company for the benefit of the shareholders. For nonprofits, there is no basis in law or tradition to serve as a guide to the “appropriate” nonprofit-funder relationship. (Where is venture philanthropy on Maimonides’ eight levels of charity?) As nonstock corporations, nonprofits have no shareholders. Their boards are supposed to oversee the nonprofits on behalf of the mission, but where does this leave funders? The answer is: It all depends. Every funder is different. Every nonprofit is different. The best funder-nonprofit relationships are built on shared principles — honesty, transparency, respect and mission alignment — and then negotiated case by case on a contractualist basis.

4. Distinguishing outputs from outcomes. Why do so many nonprofits focus on outputs (e.g., the number of students attending math classes) rather than outcomes (e.g., improved math scores)? Don’t they see that outputs don’t matter?

This distinction is largely in the eye of the beholder. Improved math scores might be considered by some to be an output leading to college enrollment, which could be seen as an output toward graduation, which is an output toward a living-wage job and so on until you reach the rock-bottom outcomes-in-themselves like happiness or virtue or freedom. There’s nothing interesting going on here other than the division of labor within nonprofits and the practical challenges of measurement.

5. Measurement. Why don’t nonprofits more rigorously measure impact?

This discussion devolves into a half-understood quagmire of the sociology of objectivity and quantification (e.g., measures of what, used by whom and for what purposes?), econometrics, and the evidence hierarchy from medicine. Measurement zealots generally focus on the simpler cases — single-program, direct-service organizations with clear short-term outcomes that are binary (like living or dying) or are inherently monetary terms (like salary or debt levels). In many of the harder real-world cases — medical research, advocacy, multiprogram direct service organizations, the arts — it is seldom clear what the outcome measures should be or how incommensurate outcomes might be aggregated. Of course, nonprofits should work harder on counting, tracking and evaluation, and many would if given the necessary resources. They should be familiar with concepts like correlation, causation, selection bias, fidelity, fade, dosage and reversion to the mean, etc. But the measurement discussion seldom adds much to this work and is often little more than Kelvin and Einstein rehashed in long-winded, pseudoscientific jargon.

6. Governance: Why are nonprofit boards so often bad? Why do even “smart successful business types” fail to deliver in the boardroom? 

In “The Board Book,” Bill Bowen highlights the core issue: “By far the most important attributes of a trustee are the courage and will to act.” Add to that insufficient time, the interpersonal dynamics of any small group, the strong emotional connection board members often have with the organization and the brute reality that analytical thinking often suppresses empathy and the “warm glow” that nonprofits and board members want and need from one another. Worse yet, even a high-functioning board can quickly fall apart since changing even one member can alter the dynamic. A board that has been effective in some situations (or with a particular CEO) may not be if conditions change. In my experience, governing is a continuous, unending, dynamic, learn-by-doing process. Like Sisyphus, great board leaders accept the inevitable setbacks and just keep pushing.

This is my personal “no-fly list” of topics to avoid during a four-year period when nonprofits and their supporters must essentially be on a war footing. It’s hard to admit, but this thin gruel is all I have to offer on these topics despite the countless hours I’ve wasted reading, thinking, talking and writing about these issues over the last 15 years. Maybe that’s because I’m not clever enough to see what is really going on, but I’d prefer to believe that it’s simply difficult to have interesting ideas about uninteresting questions or to make progress on intractable problems.

By putting my thoughts down on paper, I hope setting them aside will be easier. Instead of engaging in intellectual debates of dubious value, the time has come to confront our daunting, scary, concrete reality. I encourage everyone who cares about nonprofits to develop their own no-fly list and pledge to do the same. Winter is coming.