As part of a recent discussion around the state of human services, this blog post is written by Nancy Long, Executive Director of 501 Commons

In March 2012 501 Commons conducted (1) interviews with 21 funders, capacity builders, and interim executive directors throughout Washington State and (2) a survey of 150 nonprofits. A summary of the survey results shows:

• One-third of respondents (53 or 33%) indicated that they expect to have a change in leadership in the next three years. Of those expecting a change in leadership, 39% (36) are somewhat likely or very likely to bring in an interim executive before hiring a new leader.

• Nonprofits are relying more on volunteers to help them deliver services and to bring professional skills the organization needs. Seventy-seven percent (122) of respondents have increased their use of volunteers in the last three years. Of those organizations that do not use volunteers, 40% (12) plan to start a volunteer program in the next two years.

• Almost all nonprofits collaborate in some way with other nonprofits but more than a third of respondents are considering developing a new collaboration, combining operations in some way, or merging with another nonprofit in the next three years. Of those who are considering developing a new collaboration or merging, 69% (46) say the primary reason is to better serve clients. Only 19% (13) and 12% (8) say it is because of cost savings or improved access to funding, respectively.

• In the next two years, respondents think that technology will help them be more effective or efficient. However, they need assistance with: using social media; updating their websites; using databases for tracking and reporting; managing customer/client/donor relationships; doing volunteer scheduling, recruitment, and management; and using cloud systems.

Nonprofits are making use of social media for fundraising, outreach, volunteer recruitment and other core activities, but may not have an overall communications strategy or the technical skills to make social media really work for them.  And the tools are changing rapidly. NPower Northwest and Groundwire have been offering some free social media trainings that have been hugely popular.

The potential to use mobile applications to reach low-income clients, who may not have access to a computer but do have a phone, is largely untapped.

In the interviews we conducted, we found some increase in the willingness of funders to provide limited support for capacity building activities like building stronger boards, using technology, or improving financial systems. A couple of funders also report that they were providing more general operating support. Most funding is still tied to specific programs costs.  This finding is in line with national funder practices.

In the Spring of 2012, the consulting firm TCC released a study of funding trends and best practices done for Grantmakers for Effective Organizations (GEO) every three years.  Is Grant making Getting Smarter?: A National Study of Philanthropic Practice, summarized the results on the GEO website:

“On the whole, general operating support remained static. While it’s encouraging that grant makers preserved their levels of general operating support at a time when it might have seemed more logical to provide restricted dollars to serve immediate client needs, it is also disappointing that grant makers are still only devoting a median proportion of 20 percent of their annual grantmaking dollars to general operating support. According to the Foundation Center, that number hasn’t changed much in almost a decade.”

As the study noted many funders targeted their funding towards support of program outcomes. While this helps focus on results, it also means that nonprofits struggle to be able to be able to make the investments they need in order to efficiently and effectively deliver services and measure results.

Research by Grantmakers for Effective Organizations demonstrates that the types of financial support that are most associated with long-term nonprofit success are:

• General operating support (also known as unrestricted support)
• Multiyear support
• Capacity-building support

The recession has exacerbated the impact of chronic and systemic underfunding of administrative personnel and systems, a trend explored in two important recent studies:

• Daring to Lead shows that chronic underfunding of nonprofit infrastructures results in most executive directors serving short tenures and refusing to accept future executive director positions. The majority of executive directors burn out in four years or less and cite high stress, long hours, and concerns over organizational finances as major factors.

• The Nonprofit Starvation Cycle is described in this way:  funders’ have unrealistic expectations about how much it costs to run a nonprofit which puts pressure on nonprofits spend too little on overhead and underreport expenditures on tax forms and in fundraising materials. This in turn perpetuates funders’ unrealistic expectations and over time, funders expect grantees to do much more with less —a cycle that slowly starves nonprofits.

Times of economic crisis reinforce the need to amplify the impact of nonprofits by increasing the core organizational capacity that allows programs to be well managed and successfully delivered.