While policy makers at the federal and state levels debate whether less business regulation, increased minimum wages, welfare reform or other big policy changes are the best tools to stimulate the economy and improve lives, local nonprofits are working every day to end the cycle of poverty one individual, one child, one family at a time.
My four years as executive director of Peninsula Family Service exposed me to the wonderful and difficult world of human service nonprofits. This experience changed how I think about the transformative potential of community-based nonprofits. I have seen firsthand:
• A carefully structured vehicle loan program for low-income parents result in better employment and the ability to build credit and get into the financial mainstream;
• The impact of child development and early learning programs to prepare children from low-income families to succeed in school; and
• The impact on the well-being of older adults of programs that foster social interaction.
So much more could be done and so many more families and individuals could lead better lives if we increased investment in our local nonprofits. Doing this will require a change in thinking about nonprofits by donors, foundations, corporations and government.
For too long, we have thought of nonprofits as shoestring operations that should run more on passion than on adequate funding and organizational capacity. Maximizing the value of nonprofits requires us to recognize these organizations as a true, equal third sector with the ability to perform the way we expect of well-run businesses and governments.
Like any effective enterprise, a robust nonprofit requires adequate organizational infrastructure in technology, management capacity, finance, human resources and training. Sadly, many donors express reluctance to support “overhead” wanting all of their funding to go directly to programs. Some organizations that track charities have, for a long, supported the myth that the organization with the lowest overhead is the most-well-run. In response, nonprofits gut their core infrastructure, losing the capacity to plan for the future, sustain long-term operations and scale up to serve more people. Would any successful business adopt a strategy that would hobble their growth?
Effective enterprises require qualified, adequately compensated and well-trained staff. The compensation of many nonprofit workers in our high-cost area often is on par with the compensation of those they are serving. This makes attracting and keeping qualified personnel very difficult. Training is often minimized to keep “overhead” low; this prevents program participants from receiving the most effective service and support, and stifles the careers of dedicated workers. How effective can anyone be in their job when they are worried about paying the rent or whether the car will keep running?
Like business investment, we need to recognize that nonprofits require sustained funding to have lasting impact. Grants of funds for one to two years are simply not adequate to allow for the impact of even the highest quality programs by the best-run organizations. Would we have many of today’s most successful companies if venture capital firms operated with this short-term mindset?
Nonprofits have the passion, knowledge and demonstrated success to transform lives and strengthen communities. It is up to us to ensure they have the capacity to maximize their positive impact on our communities.
As an individual, the best way to ensure this is to designate your contributions to local nonprofits as “unrestricted,” supporting the maintenance of the infrastructure necessary to deliver the quality programs you value. For foundations and institutional funders, make multi-year unrestricted grants and ensure that the organizations you support have the operational infrastructure for sustained, effective performance. The Ford Foundation recently established a 20 percent overhead rate for grantees. For governments, take into account the reduction in the long-term social costs for criminal justice and welfare programs. Partner with local nonprofits to develop innovative programs that are demonstrated to break the cycle of chronic poverty by giving program participants the tools and support to become self-sufficient and productive members of society.
A truly energized nonprofit sector can improve the lives of our most vulnerable neighbors and strengthen our communities.
Arne Croce is the former executive director of Peninsula Family Service and the former San Mateo city manager.