This is a guest post from Andrew Schwalm and Philip Rosenbloom of the Nonprofit Finance Fund
The pursuit of a just and equitable society can invite a measure of paralysis when you’re faced with the simple challenge of where to start. Even if you narrow your focus to the nonprofit sector in particular, there are countless ways to approach the question of how to effectively promote positive change.
At the Nonprofit Finance Fund (NFF), our approach has been to help nonprofit organizations develop the financial capacity to keep providing the programming their missions demand. We know that nonprofit organizations exist, first and foremost, to achieve social missions. The continued increase in demand for nonprofit services indicated in our most recent sector survey suggests that nonprofits are, now more than ever, fulfilling social and cultural needs not addressed by government or the market economy. But our experience trying to impact the problematic economic system of our sector also forces us to confront some realities:
First, the nonprofit sector has developed underlying financial systems and operating practices that often don’t support some of its most cherished aims. Nonprofits usually must navigate a dual relationship between funders and clients, which can lead to misaligned priorities – asserting current program impact over organizational health, for example–that set mission and money at odds with one another.
Second, the nonprofit organization, as traditionally conceived, isn’t the only vehicle for addressing social problems. B-Corporations, L3Cs and other structures have arisen to allow investors to support social aims, cooperatives are a time-tested organizational structure, and for-profit small businesses can help produce more economically vibrant communities.
With these considerations in mind, we want to explore some ways the sector might reach beyond the familiar financial and organizational structures and seek meaningful social change by pursuing a greater alignment of community and sector priorities in tandem with economic sustainability.
One approach to this issue — the “solidarity economy” – foregrounds mutual benefit and cooperation. This language may ring a little “pie in the sky” to some readers, but the framework presents several practical models for boosting mission achievement and financial health. And, fortunately, we can see them at work in the real world.
A prominent example can be found in Cleveland’s Evergreen Cooperatives – a growing suite of worker-owned companies in downtown Cleveland. Structured as for-profit businesses, these novel institutions were initially supported by seed-funding from government and philanthropy, but will be sustained by service contracts with nonprofit “anchor institutions” like universities and hospitals.
From an impact standpoint, local residents, existing nonprofits, philanthropic funders and local government all share the broad goal of economic revitalization, but Evergreen’s purpose-built structure goes deeper in pursuing mutual benefit for all players in the community. Collective ownership and local hiring generate wealth for community members and guarantee incentives for quality job-training programs. Service contracts provide revenue for the cooperatives and needed services for anchor nonprofits, while both benefit from promoting economic vibrancy in the surrounding community. For philanthropic investors, the for-profit structure of the cooperatives allows a mission-focused investment while alleviating their ongoing reliance on contributed subsidy.
However, you do not have to re-design your organizational structure (or mission) to contribute to the solidarity economy of your local community. There are a wide range of options that existing nonprofits can take to pursue these principles of increased alignment of mission priorities and economic self-sustainability. SolidarityNYC – a collective which seeks to foster grassroots economic development and social justice through organizations such as cooperatives, collectives, and credit unions – provides the following diagram outlining the broad spectrum of economic activities that can build solidarity within communities.
Many of these categories (with modest re-framing in some cases) can be directly applicable to nonprofit management. Nonprofits can keep wealth in local communities by banking with credit unions, share space and offices to maximize resources, and make local purchases to support the communities in which they work. Additionally, nonprofits don’t have to conform to the ethic of “sweat equity” for which the sector is known – providing livable wages and working conditions may increase short term expenses, but can cut down on burnout and transition, increasing impact and decreasing transition costs in the longer term. Strategies like these can help contribute to both organizational stability and to the overall goal of a more just society.
Philanthropy also has a role in facilitating the implementation of these strategies. This can mean being open to conversations with grantees about shifting operating models or providing support to allow nonprofits to make these steps. Access to change capital (financial support specifically structured to help implement new systems or models) will be essential for nonprofits to manage the financial risk of implementing new systems or partnerships, especially when those changes are intended to increase financial health over time.
In order for those of us working in the nonprofit sector to enable the kind of just and vibrant society we envision, we must both recognize and respond to the structural challenges that create financial instability and limit our ability to bring about systematic change. Often, these challenges arise from various types of fragmentation, including:
- Competition for funds between nonprofits
- Indirect communication between those who fund services and those who receive them
- The divide between for-profits and non-profits
- A disconnect between our programmatic priorities and our internal administrative practices
Solidarity economic principles grapple directly with these structural challenges and encourage stakeholders to undertake intentional efforts to repair this fragmentation. Join us on the NFF blog as we continuing thinking about these issues. Mapping this new ‘intentional ecosystem’ will increase our chances of bringing about the change we want to see in the world.
Photo credit: katerha