Thursday, January 29, 2015

Nonprofits: Filling in important gaps

The nonprofit sector has a unique and significant role to play in our society—a role which has changed over time.  Renz (2010) offers a basic definition of a nonprofit: an organization who serves the public, is privately operated, has no profit motive, and is formed to serve the public in some capacity.  Rentz follows their development from voluntary associations to tools of the wealthy to the creation of foundations to the diverse body of modern nonprofits.  Currently, nonprofits work on issues and provide services for many diverse needs, including health services, education, social and legal services, civic and environmental advocacy, international relations and development, arts and culture, and I will add in, research and data. 

The nonprofit sector has a large impact on the economy: the Urban Institute reports that in 2010, nonprofits added $779 billion to the United States economy or 5.4 percent of GDP, accounts for over 10 percent of jobs in 2009, and is growing faster than both business and government sectors, adding 25 percent more organizations between 2001 and 2011, reaching over 1.5 million organizations.

All three sectors share some commonalities.  Similarities between the three sectors include:
  • The United States is a complex, growing society with important and changing roles for each of the three sectors. 
  • All three sectors reinvent or change themselves over time to serve changing societal needs. 
  • All three sectors face limits in resources and challenges in how to remain sustainable.

Similar to the for-profit sector and unlike the government sector, nonprofits have to complete with both other nonprofits for funding and in the case of social enterprises, private industry (Berman 2002) for providing services.  Nonprofits have access to unique funding streams, including donations, volunteer time, and grants from other non-operating nonprofits. 

While the government sector does not rely on donations or generating earning with its taxing power, it faces changing perceptions of its actions: government spending is now out of favor since the post-WWII years but its role is increasing in protecting the environment and individual health and welfare.  As government provides less with less resources available, the non-profit sector fills in to cover the still-existing needs (Berman 2002).

Nonprofits have a unique relationship with the for-profit sector.  Nonprofits rely on individuals working in the private sector to donate to important causes.  In the era of corporate social responsibility, the for-profit sector also is increasingly recognizing their responsibility to the community.  In fact, business relies on stable communities to effectively operate and generate profit, creating economic justification for their investment in the community and the nonprofit sector.   The for-profit sector relies on nonprofits to tackle challenges that they and the government sector do not or cannot tackle and to work toward a stable society.

Our society today depends on all three sectors to work together, compete, and fill the gaps that the others leave, creating a synergy between the three (Berman, 2002).  Overall with government’s changing role (and lessening role in some areas) and for-profit recognition of the need for a stable society, nonprofits’ unique fit has become even more important.

Renz, David O, ed. 2010. The Jossey-Bass Handbook of Nonprofit Leadership and Management. Jossey-Bass. San Francisco, CA. 

Berman, Howard J. 2002. Doing "Good" vs. Doing "Well": The Role of Nonprofits in Society. Inquiry 39: 5-11.