Part 1 of 3: Re-examining Nonprofit Economies

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 NFF, our approach has been to help nonprofit organizations develop the financial capacity to keep providing the programming their missions demand.  The end goal of this work is the facilitation of social change, but the approach demands an initial focus on the welfare of individual organizations.   But what if we approached the question from another angle?  What if we started by focusing on the needs of whole communities and then asked what resources individuals and organizations - including nonprofits - could provide to fulfill those needs? 

We recently spoke with Cheyenna Weber of SolidarityNYC, a collective which seeks greater visibility and networking opportunities for organizations such as cooperatives, collectives, and credit unions - participants in New York City’s “Solidarity Economy” - in order to foster grassroots economic development and social justice.  Drawing on that conversation, we plan to present a series of three posts, where we  look at how the solidarity economy reframes the problem of the economics that undergird an institution-focused nonprofit sector, then we’ll flesh out the solution a solidarity economy framework proposes, and, finally, we’ll look at real-world examples that suggest practical steps funders, nonprofits and their communities can take to bring about more comprehensive strategies for change in particular communities. 

We know that nonprofit organizations exist, first and foremost, to achieve social missions.  However, the current economic crisis has also made it quite clear that regardless of tax status, nonprofits navigate the same economy as their private and public sector counterparts. Because nonprofit programs are designed primarily around criteria of mission achievement rather than stand-alone economic sustainability, and because these programs are often intended to serve clients who are unable to pay market rate for services, they rarely earn enough direct revenue to cover the organization’s costs.  Instead, nonprofits must rely on economic subsidy from other sources - often government or private sector wealth.

So, it’s not just that nonprofits are in the same macro-economic boat as everybody else – nonprofits rely on these other sectors to survive.  For nonprofits, this often means navigating a dual relationship, trying to meet the priorities of those paying for services on one side and the needs of those receiving services on the other.  In this relationship, each party comes to the table with a set of priorities which can sometimes vie for attention.

For example, if a nonprofit relies on grant funds in order to maintain operations, leadership may feel forced to adjust the program structure in order to pursue a particular piece of programmatic funding (and the overhead coverage it provides) even if it does not quite fit with the mission or client .  Furthermore, two nonprofits with similar missions can find themselves in competition for funding from the same sources, and may therefore be less likely to undertake collaborative efforts with one another, even if those collaborations might best serve their constituents. 

In other words, the power of money - even the most well-intentioned money - can decrease the power held by clients and the organizations that serve them to shape the programs intended to bring about change in their communities.  In this way, the economic model of the nonprofit sector can ironically replicate some of the very inequities the sector seeks to address.

Much of our work at NFF is concerned with the tactical work of supporting individual nonprofit organizations (or groups of organizations) by helping them navigate the economics of the current system.  But, if our broader goal is to build a more just, vibrant and equitable society, does that demand an approach that seeks engagement with that broader community and subsumes its interests to the persistence of particular institutions?

This question is in no way intended to diminish the importance of the work that nonprofits do or the support that they receive through government and philanthropic funders.  Rather, we want to ask whether a system that emphasizes institutional boundaries and, in many cases, preserves a firm distinction between funders and clients is really the best way to achieve the social missions that drive the sector.

In upcoming posts, we want to explore the alternative economics presented by the solidarity economy in order to imagine how a focus on deeper interdependence, horizontalism, and community engagement might encourage a more sustainable and effective approach to social change.