Association for Public Policy Analysis & Management

Panel: Collaboration and Survival Strategies in the Nonprofit Sector

(Public and Non-Profit Management and Finance)

After years of steady, and in some cases explosive, growth, the U.S. nonprofit sector may have finally reached a saturation point. A short time ago, the IRS approved applications for tax-exempt status at a record pace, which immediately inflated the size of the sector. However, the tide has turned just as swiftly, and now, organizational closures may be starting to outnumber new startups. One potential reason for the contracting of the sector is that money from individual donors is harder to acquire than in recent years. The landscape for organizations is daunting, as social service providers face competition from within the sector as well as external competition, while total contributions to charity have remained fairly constant at 2-3% of gross domestic product since World War II.

While many large patrons are willing to support nonprofit service providers, some are willing to fund these services only under certain restrictive conditions. Some funders require local organizations to collaborate with one another to streamline service delivery. Others require charities to participate in financial arrangements such as “pay for success” that place more of the risk on the service providing organizations. Meanwhile, many other funders require their grantees to adopt sophisticated financial management and performance management systems that were originally developed for the for-profit sector, and which challenge the capacity of many organizations.

To survive, organizations either need to compete with one another, as well as with organizations from other sectors – or they can choose to collaborate with one another to ensure that they all remain viable. The papers on this panel all discuss strategies that individual nonprofits can adopt to survive, and hopefully thrive, in this new funding environment. Although the authors take different points of view and employ different methodological approaches, together they ask a number of important questions, including:

• Empirical questions: What types of organizations enter into mergers? How responsive do donors appear to be to financial characteristics like efficiency (the resources expended to attract donations), solvency (positive, or at least nonnegative net assets) and intra-sectoral competition? How do power asymmetries help to determine how the collective impact framework actually works in practice? How can nonprofit organizations adapt to the status quo, and the prospects for change, in the communities where they, their donors, and the people they serve are all located?
• Normative questions: How should collaboration occur when organizations serve different groups of stakeholders, but aren’t working together from positions of equal footing? Is the nonprofit sector actually overcrowded, and are asymmetric mergers (which may look more like takeovers) part of the solution or part of the problem? When donors are trying to find organizations to support with their contributions, what should they be paying attention to?