Are there too many nonprofits?
WRITTEN BY MATT YELL
The frequent criticism from the nonprofit community that there are “too many nonprofits” has become so common in recent years that it’s become something of a cliché within our sector. And like many clichés, this one has a deceivingly simplistic appeal, combined with a degree of truth. But before we accept this as the truth, let’s dig a bit further to look at the standard basis for these claims and see how they hold up to even modest scrutiny.
One standard rationale I’ve read about is that the vast growth of 501(c)(3)s has resulted in inefficiencies. GuideStar’s database currently has information on more than 2.2 million nonprofits in the U.S.; more than 1.8 million are considered active organizations. In Texas, we boast of having almost 68,000 tax-exempt charities. Last year I ran across an article stating Texas has a nonprofit for every 406 people. Although it’s true that the nonprofit sector has grown by more than 40 percent since the mid-90’s, it is a logical myth to conclude that these larger numbers equates to decreased overall efficiency or effectiveness. I am not aware of any study that has been conducted to establish or even suggest that nonprofits are less efficient now – individually or collectively – than they were when there were fewer of them.
The next rationale I have heard for claiming there are too many nonprofits is that with so many nonprofits doing the same or similar work, the limited resources available are spread too thin. I believe there is some validity to this claim. Marla Felcher, founder of Cambridge-based Philanthropy Connection, has a similar view. “One thing I see over and over again is duplication of effort — so many small organizations that are doing the same work or very similar work,” Felcher said. “People say, ‘Oh, my nonprofit is different than that one,’ but if you’re on the outside, you don’t see the difference. “How can I say this so I don’t insult anybody?” she added. “I think some of our smaller organizations would be best served by working more closely with or becoming part of a larger, better-established organization.”
In the polite world of philanthropy, a reluctance to hurt feelings or offend funders often hinders discussion of the issue. I have heard several leaders throughout our state urge those with the funds, and therefore the power, be more courageous in their decision-making. Bringing more courage – and rigor – to the funding process would mean that only the most relevant, sustainable, well-led organizations would survive and thrive. On the other hand, some might argue that there is a place for some of these new and small nonprofits, serving extremely narrow or localized niche issues that no one else is dealing with. Many who argue for proactively shrinking the number of nonprofits fail to appreciate the societal benefits generated by the sector’s diversity. Audrey Alvarado, former executive director of the National Council of Nonprofit Organizations, put it this way: “I’m thinking here of all the things [nonprofits] do to build social capital and strengthen civil society – then I’m not sure that efficiency is the metric we should be focusing on. In fact, I’ve argued that, given the lack of civic engagement in this country, we don’t have enough nonprofits. I don’t doubt that there will be, and probably needs to be, some pruning in the sector, whether through mergers or groups simply shutting their doors. But if we’re willing to sacrifice some nonprofits for the overall good of the sector, we also must be willing to redouble our efforts to strengthen the capacity of the nonprofits that remain.”
The last rationale I want to discuss is with so many applications to evaluate, it’s difficult for funders to make well-informed decisions. I would dare to guess that most funders would prefer to see fewer nonprofits because it would make their lives easier. But there are many ways to address what is essentially a technical administrative issue other than advocating for a reduction in the number of nonprofits. Potential strategies include more collaboration and consolidations among funders, longer-term grants and grants to networks of nonprofits, to name just a few. I have always been an advocate of urging the nonprofit community to be more active in pursuing systematic collaborations.
As you can tell, there is not a clear or easy answer to the question. The reasoning behind the complaints of “too many nonprofits” becomes clear if one asks, “So if there are too many nonprofits, what’s the ‘right’ number and how do you know it’s right?” Could you answer that question? Could anyone?
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