Tag Archives: economics

“Creative destruction” and nonprofit consolidation

Posted on June 1, 2010 by melindaklewis| 4 Comments

photo credit, dhnieman, via flickr

Let’s start summer right, folks!

This week, I’m doing three posts related to concepts in Robert Egger’s book, Begging for Change. He has become one of my very favorite writers, speakers, and thinkers on topics related to nonprofit organizations and social change work, and I find myself continually challenged by his perspectives, going through an entire pack of sticky notes to mark pages I want to remember. If you haven’t read the book, you should, but, first, do me a favor and read the posts this week and share your thoughts about how I’ve connected his ideas (from 2004) to today’s not-for-profit landscape. And, you know, you can enjoy the sunshine, too.

Almost every semester, I am struck by the inclusion in at least several students’ career goals of something related to “start my own nonprofit organization”. This semester, I had students express interest in starting adoption agencies and drug treatment programs and mentoring projects for at-risk youth. I also receive relatively regular inquiries from former students exploring starting their own nonprofits. Myself, I honestly don’t have an entrepreneurial bone in my body; I’d never want to start my own organization, and I have even turned down a few promotions because I’d have to spend more time paying attention to payroll and less time generally agitating.

But it would certainly appear that the desire to be one’s own boss, combined with passion about the social problems we face, leads at least many within the social services sphere to dream of setting up their own shop. Now, you know that I don’t believe that duplication of effort is, necessarily, an evil. All things being equal, two excellent organizations working on the same social challenge should mean that, together (or apart, but headed towards the same goal), they reach victory more quickly than one would alone. And I like to win.

But Egger’s book, and my conversations with my students, and some discussion in the blogosphere (see, in particular, Lucy Bernholz’s awesome post on peer-reviewed nonprofits) and the traditional media have me thinking about what it would take to really change the game in terms of the ‘marketplace’ for nonprofit organizations. I mean, why does it often seem easier to start a nonprofit than a for-profit business, when, most of the time, our goals are much more ambitious (making success, therefore, seem more elusive)? Why are there nonprofit organizations still in business long after they ceased to really meet a compelling social need? Why do our current organizations often fail to capture the imagination of bright and talented graduates, pushing them to envision charting their own path instead (especially when we have a near-crisis in executive leadership in the sector)? Why is the recent uptick in nonprofit mergers seen as a sign of doom, when for-profit mergers are often hailed?

Egger calls for “creative destruction”, hence the title of this post–the consolidation or collapse of the most ineffective and wasteful organizations. He acknowledges that such a recommendation creates more questions than it answers: where would one draw this line? How do we define success? Without good benchmarks or a good roadmap to outcomes, how can we measure waste? How can we promote social enterprises that bring more social value to the for-profit sector, and are there places and ways in which such an approach is inappropriate? Questions that he doesn’t ask, but which must be addressed, include how to balance between consolidation and the sustenance of ‘niche’ organizations that effectively serve small, particular constituencies; and how long organizations should have to try innovative (but failing) approaches to entrenched problems. Should all nonprofit organizations be held to the same standards, once we can figure out what these standards should be? Or should they be more locally defined, taking into account differences in contexts and inputs? What are the responsibilities of donors, who give for all kinds of ‘illogical’ reasons, to stop supporting organizations that are failing in their missions?

I read Egger’s discussion of creative destruction with a different lens, I expect, than that through which it was written: that was 2004 and this is 2010, and some even excellent nonprofit organizations are collapsing because of the dramatic dropoff in foundation and corporate giving, in particular. But, also, perhaps because I just finished my class on macro systems, I thought back to a lecture early in the semester when we talked about the role of stress in social systems, and how stress can provide the impetus for real transformation, as systems struggle to adapt to new and harsher realities.

And that’s where I conclude this post, with questions, a little bit of despair, and some hope thrown in. I’d greatly appreciate others’ thoughts as I muddle through this–where do we go from here? Since we don’t have a ‘market’, per se, how do we make these decisions in a way that respects our shared values as a social service sector? How do we understand and communicate the stakes involved in perpetuating the status quo? And how do we use the current economic climate as the “crisis” that could best prod us in the right direction?

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An Advocacy Agenda for the End of the Recession

Posted on January 28, 2010 by melindaklewis| Leave a comment

Recession Lane by ZenTraveler, via Flickr Creative Commons

I’m no investment guru. OK, that’s a major understatement. I’m not even responsible for balancing my own checkbook.

But, I read. And, so, I know that the smartest investors and business leaders are planning NOW for the end of the recession, positioning themselves now to take advantage of the opportunities that will arise when the economic conditions improve. The advice, essentially, is that waiting until things get better to make your move will be too late, that we have to step out of our retrenchment, reactive mode and start thinking about what it is that we want and need to get out of the immediate post-recession period, and, much more importantly, how we’re going to get there.

So that has me thinking: what would a post-recession policy agenda look like for the social services? And what should we be doing today to position ourselves to make it a reality?

Becuase we get it. The economy is really bad now. State budgets are horrible. We have a terrible federal deficit and stimulus funds that will run out soon, and our local governments are absolutely in dire need of funds. Not-for-profit organizations are, in many cases, even worse off, because private donations have dropped as well. It’s all bad.

Until it’s not, anymore.

And, then, what are we going to do about it?

Unfortunately, history suggests that the answer may be, “not that much.” Too often, we have failed to demand what it is we know we deserve during the good times, and then we almost completely go away, or at least just fade to defense, during the bad times. I mean, think about it, when was the last time that a state legislature or U.S. Congress ever approached the social work profession and asked, “You know, we have some extra funds right now. What can we do for you?”

They don’t. Which is why we’ve got to be ready. Here, in no particular order, are my 5 things we should demand when this recession ends, and the 5 things we should be doing now to position ourselves to win them. No, 5 is not a magic number here; it was going to be 10, but, you know, I have 3 kids to raise!

Our advocacy agenda for the end of the recession:</strong>

  • Full restoration of cuts in social service and community development programs, and an index for inflation: In the past few months, several people have asked me what I view as the chances that programs will be restored to their full, pre-slash levels. My answer? Almost none, unless we demand it. Yet we cannot let ourselves forget that, even before this most recent round of assaults, services were woefully, and sometimes even dangerously, inadequate. We can’t allow that to happen again. Means-tested benefit levels should be automatically indexed for inflation, both at the individual level and for overall program growth, which will require:
  • Progressive tax policy: We will make a huge mistake if we head into a post-recession period ONLY talking about spending. The truth is that this recession would not have been nearly so painful if not for the widespread and often deep tax cuts at the state and federal levels in the late 1990s and early part of this decade. We need to restore vigor and progressivity to the tax structure, close tax loopholes, and build a strong foundation for the future, in times of feast and famine. And, yes, this means that nonprofits need to get on board with the Obama Administration’s proposed changes to deductible contributions for very high earners.
  • Full restoration of outreach and optional items within entitlement programs: States and localities, in particular, have been quite creative in how they have cut costs in this recession, and we must be vigilant in our post-crisis advocacy. One of the main ways that programs have been cut without being “cut” has been through reductions in outreach and some optional items, because, after all, if no one is applying for a given program, then we don’t have to spend any money on it, right? Only close connection to those most affected by these programs and their reductions can inform our advocacy priorities along these lines.
  • Increases in state institutional aid and federal financial aid for higher education: Of course we social workers are primarily concerned with social services funding–it’s what we do, what pays our bills, and what our clients need, every day. But we also need to be concerned about the future of our profession, and that requires attention to the dramatic rise in college tuition around the country. We can’t build the kind of social work profession we and our clients need if we don’t increase access to higher education.
  • A shift towards instititutional social welfare, starting with universal preschool programs: Enough of the safety net. Why are so many people falling in the first place? We need a transformation in favor of universal supports, and a good place to start is with universal preschool, especially given the increasing recognition of the importance of early childhood education. It’s only a small start–we need universal health care (STILL WAITING, folks), greater investments in housing, maternity and paternity policies, etc…but preschool kids are a good place to start.

    And the 5 things we need to be doing today to get there:

  • Relationships, relationships, relationships: I’m sure that my students are tired of hearing me say this, but it’s really true: relationships are pretty much everything when it comes to lobbying. We can’t afford to sit out this legislative session, or 2011, just because there may not be money to accomplish our ‘wish lists’. We need to be there, making our case, presenting data, organizing constituents, demonstrating that we will never, ever, ever go away.
  • Messaging of economic investment arguments: I firmly believe that we shouldn’t go overboard on the money-saving arguments–some of the things that we need to do are important despite their costs, quite honestly, and we also potentially weaken the moral strength of our arguments–but where we can make the claim, as I believe we often can, that investing in our nation’s human capital will make us better positioned for the next economic downturn, we need to be ready to make that claim, effectively.
  • Voter registration, naturalization, youth voter engagement: Numbers don’t equal power. Anyway you calculate them. BUT, organized numbers are the best way to guarantee a seat at the table and, many times, the substantive policy changes we want and deserve. Check out this map and tell me how happy you are. And now let’s go out and do something to shape the nature of the electorate not only in 2010, but in 2012 and 2014 and 2016, too.
  • Coalition building–we need a ‘big tent’: We need coordinated campaigns that make the case for broad investments in our social infrastructure, not ad hoc and sometimes oppositional appeals for special dispensation here and there. This will take a lot of organizing and may result in some uncomfortable alliances, but we know that it works. I mean, the Joint Chiefs of Staff go in with one united voice, right, and they get what they want. Well maybe we need a Joint Chiefs of the Social Economy, or something, and we need to speak with a big, powerful voice.
  • Organizational capacity for social change, even if that means nonprofit consolidation: I don’t believe that the growth in the number of nonprofits is necessarily a cause for any concern–where there are unmet needs and people with great capacity to meet them, we absolutely need an organizational response to facilitate that. But a post I read recently about the idea of requiring nonprofit peer review before charter got me thinking about the role that mergers and acquisitions play in the corporate world during economic hardship, and the generally-held belief that such processes play a role in the emergence of stronger, healthier corporations post-recession. And that got me thinking about the fact that, while we may not have too many nonprofits in the abstract, we all know of some that just aren’t really doing much, or not doing all that they should, or not doing things as well as they should, or not doing what they could if they were complemented by another organization, or…you get the idea. And, so, I’ll be so bold as to suggest that, in our pursuit of organizational strength and capacity for advocacy, which absolutely has to be a priority as we gear up for the end, we need to be willing to consider consolidation of organizations as a tool in that process.

    All of this said, I recognize that the recession is far from over. The human cost is real and huge. And social workers will absolutely play a key role in stopping the bleeding during the months to come.

    But, to really do justice for those whose lives have been ripped apart by the economic turmoil of the past few years, we have to be ready to act decisively and victoriously when the tide turns. There must be some honor from their suffering.

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    The Sunflower State Needs Reseeding!

    Posted on January 26, 2010 by melindaklewis| 6 Comments

    Kansans, we’ve got problems. And it’s not just that the budget is tough. We’ve known that for a long time.

    Our biggest problems are the failure of many Kansans, including many of those elected officials charged with representing us, to recognize precisely how bad it is, and what that means about the options that are and are not really viable at this point; and a lack of political will and strategic vision to make the hard choices that must be made.

    This certainly isn’t unique to this year or to our state. Moral courage, is, in general, in short supply throughout public life–NOT just among members of the state legislature. We’d all like to get as much as we can with as little pain as possible and, writ large, that can lead to some pretty appalling public policy decisions.

    But, still, as I head to Topeka this week to work with a few dozen bright, aspiring student journalists as they challenge our elected officials to think of the future, I’m hopeful.

    Because history shows that sometimes the most amazing things happen when our backs are against the wall, when everyone knows that the only avenues left are pretty bad, and when there’s a collective sense that we’re in this together, as much as we wish that we were somewhere (anywhere!) else.

    Here’s how bad it is. At a legislative forum I attended two weeks ago (so, yes, this is tardy–ear infections in young children are evil!), I had this exchange with a senior senator closely involved in budget negotiations:

  • Kansas, as currently laid out, has a $5.3 billion budget in state general funds (which excludes those special-use funds, as my advanced policy students remember) for this year. That’s AFTER a cut of approximately $1 billion last year. With a “b”.
  • Despite those cuts from last year, to just keep everything going this year (with absolutely no program growth), we’ll still run $250-350 million short this fiscal year.
  • Okay, so that sounds like, “we need to make some cuts, but not as much as the year before, so…you know, we knew it was going to be a tough year, but everyone needs to tighten our belts and…”
  • Wait. That ~$300 million needs to get cut out of the ~15% of the budget that’s really in play. Here’s the deal. We can’t cut K-12 education anymore without having to give back the stimulus dollars that are tied to our commitment to keep school funding at at least the 2006 levels, which is where we are now. We can’t afford to give that stimulus money back, so we can’t cut K-12 education any more. And Medicaid costs are essentially out of our hands; Kansas is doing very little optional with Medicaid right now anyway, and the federal government determines eligibility and the level of state responsibility.
  • So, then, we’re left with a reality of needing to cut that $250-350 million out of approximately $800 million. And WE CANNOT. We’d have to close courts, release violent offenders, dismantle remaining safety net programs, leave dangerous roads unrepaired, lay off thousands of state workers…you can’t pretend to still have a state if you eliminate almost 40% of what the state does, especially when that’s on top of 17% cuts just the year before.

    And all of this brings us back to this question of vision and will and courage.

    Because we desperately need a restoration of our tax base. No one wants a tax increase. I know.

    But I don’t see another way out, that doesn’t include the decimation of the public infrastructure that, really, makes us a civilized society. Taxes are the price we pay for that, and we forgot that all too easily, and too often, in the boom years of the late 1990s…it’s time to rebuild.

    And you know what? My hopefulness is warranted, I really think. In the last two weeks, I’ve had conversations with 7 members of the legislature, from both political parties, who have admitted that many of the past tax cuts were mistakes, called for a revision of exemptions, and offered some specific ideas for possible tax increases. Several have even referenced that this session feels a bit different, because of the desperation, and that, by April, we could start to see a deal emerge.

    But, as that senior senator pointed out, those of us whose work depends on a strong tax base need to get working. Not one of the nonprofit legislative agendas I’ve seen has included a call for increased revenues, even though that’s undoubtedly the most important policy position the legislature could take this session.

    We need to talk with our grassroots base about the need for more revenues, and the need for tax justice. We have to build pressure to undo the excesses of the past decade. And we have to be in the process, stressing that all tax increases are NOT created equal, and articulating a vision of what tax fairness looks like.

    Things will get better (first, they’ll get worse, because we won’t have that stimulus money in FY2012!). But they won’t get as much better as they should if we don’t take advantage of this political opportunity to get the impossible done.

    Ad astra per aspera, right?

    Let’s go.

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    Big, gaping hole in the safety net

    Posted on August 21, 2009 by melindaklewis| Leave a comment

    I appreciate it when people have the courage to say what needs to be said, even if it’s not at all cheery or ‘new economy’ or feel good or anything like that.

    I’m tired of hearing people talk about how the nonprofit sector is going to take up the slack created by declining government support for social services, how private is better because it’s more nimble, how nonprofits are learning to do more with less. I’m tired of it because it’s not only not true; it’s really dangerous, because it paints over the true hardship that many nonprofit organizations are experiencing and the devastation that the resulting gaps create in the lives of those that these organizations seek to serve.

    The fact that, in the last year, more than ONE THIRD of organizations surveyed in various studies discussed in this report have had to cut operations due to declining revenues and/or escalating operating costs, in the face of increased demand for services, is bad, bad news. And it suggests what we should never forget about bad economic times: the demand for social services, like unemployment insurance or Medicaid, is counter-cyclical–it rises at precisely the time at which we are least able to afford it.

    This report confirms: individual, corporate, and foundation giving to charitable causes is down (giving lie to the idea that ‘the generosity of the American people’ will somehow make up for slashed public investments). That’s why we need high levels of investment from the only entity with the collective fiscal might to meet the need: the federal government. I don’t like the way that they qualify the report with the phrase ‘not asking for a handout’ from the public sector, in light of budget difficulties at all levels of government; to me, this weakening of the position is unnecessary. What we’re asking for/demanding is an investment in people in need and in our communities, to, together, build a stronger society. And no amount of ‘collaboration’ or ‘new thinking’ is going to get that done alone: we need money.

    Special Report on the Safety Net

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