Part 2 of 3: An Intentional Ecosystem 

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, as the nonprofit sector has grown into an industry, it has developed systems and practices that don’t support some of its most cherished aims.  For example, as we noted in our first post on the topic, the tortured flow of resources between funders, nonprofits, and communities can lead to misaligned priorities that can make it difficult to ensure that capital is producing sustainable organizations and addressing community needs.

Second, we must recognize that the nonprofit organization, as traditionally conceived, isn’t the only vehicle for addressing social problems.  Recently, B-Corporations, L3Cs and others 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 effort is offered through the principles of the “solidarity economy” which seek to build economic structures focused on mutual benefit and cooperation.  This language may ring a little “pie in the sky” to some readers, but solidarity economic principles are not simply lofty Utopian ideals.  Indeed, for the nonprofits we work with everyday, they present several practical models for boosting mission achievement and financial health.  And, fortunately, we can see them at work in the real world.  

Cleveland’s Evergreen Cooperatives are a growing suite of employee-owned companies in--and serving--downtown Cleveland.  They provide environmentally friendly laundry, weatherization services, solar power, and, starting this year, vegetables.  Structured as for-profit businesses, these novel institutions are worker-owned and, while initially supported by seed-funding from government and philanthropy, they will be sustained by service contracts with nonprofit “anchor institutions” like universities and hospitals.

To learn more about Evergreen’s approach to economic development, we spoke with Ted Howard of The Democracy Collaborative.  As a Senior Fellow at the Cleveland Foundation, he has been one of the architects of the Evergreen project.  What’s so different about the Evergreen model, according to Howard, is the way it departs from the traditional social service model in the nonprofit sector by “mov[ing] out of project and initiative thinking and mov[ing] into institution-building.”  For example, a nonprofit devoted to workforce development might do a great job providing job training programs, but these programs will have little impact if there are simply no jobs to be had in the community.  Alternatively, Evergreen offers a systematic approach rooted in the alignment of all stakeholders’ interests.

Of course, local residents, existing nonprofits, philanthropic funders and local government all share the broad goal of economic revitalization.  But on a practical level, Evergreen’s purpose-built structure goes deeper in pursuing mutual benefit for all players in the community. Within the cooperatives, collective ownership ensures all employees have a personal investment in the success of the business.  Current worker-owners provide job training to their prospective co-owners, creating a built-in motivation to keep that training top-notch.  Externally, the cooperatives generate revenue by providing needed services to anchor nonprofits.  Both gain a direct benefit from the exchange in addition to promoting economic vibrancy in the surrounding community through local hiring and supporting a fund to seed the development of additional start-up businesses.  Finally, for philanthropic investors, the for-profit structure of the cooperatives allows a mission-focused investment while avoiding ongoing reliance on contributed subsidy.

It’s worth noting that Evergreen is early in its development.  The cooperatives have created about 50 jobs so far, with plans for 25 to 50 more by the end of the year as a third enterprise comes online.  As Howard explains, it’s just far too soon to look for the kind of systematic economic changes in the neighborhood that are Evergreen’s ultimate aim. (A more mature example of these principles at work, Mondragon Corporation in the Basque Region of Spain, proves that worker-owned cooperatives can achieve significant scale and long-term sustainability.)

Of course, while Evergreen may be an innovative solution that works for its particular communities, a network of worker-owned cooperatives isn’t going to be an appropriate vehicle for every nonprofit or funder.  However, there are a wide range of more gradual steps that existing nonprofits can take to pursue these principles of increased alignment of mission priorities and economic self-sustainability.  SolidarityNYC provides the following diagram outlining the broad spectrum of economic activities that can build solidarity within communities.  


(Click to see a larger version)

Many of these categories (with modest re-framing in some cases) can be directly applicable to nonprofit management.  Some examples include:

Banking: Locally-focused nonprofit organizations can choose to bank with credit unions in order to keep wealth within the communities they serve.

Facilities and Administration: Space-sharing and back office collaboration can help ensure that existing resources are fully utilized.  

Purchasing: Much like the anchor institutions going to Evergreen for their laundry service as a way of supporting their local economy, nonprofit leaders can examine whether there are opportunities to leverage their buying power in support of their communities.  Additionally, ethical buying clubs can lower administrative costs through bulk purchasing while supporting vendors that maintain high standards for environmental impact, local economic investment, and fair labor practices.

Human Resources: There is the well-known cultural expectation that nonprofit workers contribute their “sweat equity” toward the organization’s mission (as our sector survey showed again this year, demand for services rose and hiring of new staff remained stagnant).  Not only do unsustainable working conditions reproduce some of the very social problems the nonprofit sector is bent on fixing, burnout and turnover can drive up costs associated with search and training, which can negatively impact financial health.  While Evergreen’s worker-ownership model may not be viable for many organizations, adjustments in employee policies could create greater alignment between workers and the organization overall, decreasing turnover in the process.

In all cases, the viability of particular strategies will be highly dependent on local resources and networks.  A good starting place for any organization could be to examine the extent to which its business practices (both programmatic and administrative) are truly consistent with its mission, and with the sort of world the organization wants to help create.  

But organizations and local communities need not go it alone. We spoke with Margot Brandenburg of The Rockefeller Foundation, a philanthropic supporter of Evergreen, who emphasized that national funders with “an active desire to experiment” can enable new forms of cooperation between local funders and nonprofit service providers. In the case of Evergreen, The Cleveland Foundation had extensive knowledge about local networks and community need, while Rockefeller had the resources (and the risk tolerance) to invest capital for innovative organizational structures.  As Evergreen’s model takes hold, the pool of national funders willing to participate in comparable efforts is likely to expand.  Of course, funders can also play a key role in projects of a more modest size.  For example, access to change capital will be essential for nonprofits to manage the financial risk of implementing new systems or partnerships, even 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:

• 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.  As we move into our third and final installment in this series, we want to synthesize an approach to increasing the alignment of priorities for all those working within the ecosystem of funders, service providers, and community members.  Mapping this new ‘intentional ecosystem’ will increase our chances of bringing about the change we want to see in the world.
----------------
Nonprofits and Solidarity Economies: A blog series
I. Re-examining Nonprofit Economies
II. An Intentional Ecosystem
III. Coming soon: An Approach to Systematic Change