Too many? I don’t think so.

Does the United States have too many non-profit organizations?  On April 3, 2012, the Urban Institute will take up this question in a public event being webcast for those of us outside of the Beltway.  According to the Urban Institute’s “Charity Challenge,” the total number of 501(c)3s jumped 19-percent over the time period of 1999 to 2009.  (The National Center for Charitable Statistics suggest even higher numbers.)  Whichever way you count them, the number of nonprofit organizations is on the rise.

This growth is a part of a disturbing trend, according to Therena Bailey of SISGI group, because it causes the resources dedicated to social change to be diluted by all of the organizations needing support.  She and others suggest remedies to this “problem” in order to maximize impact on a world needing change.

All of this outcry about whether there are too many nonprofits distracts us from a far more interesting question: Why are these new groups forming?  Perhaps we might yield more creative remedies to this challenge if we contemplated some of the  reasons why people who care about an issue might not look to some other organization to solve it but instead put some legal structure to their idea and call it a nonprofit.

Setting aside those individuals who create new organizations for non-altruistic reasons, I see three fundamental reasons why people start new nonprofits:

Values.  I believe that we don’t talk about values nearly enough in the public sector.  Values are the signposts that guide organizations forward, the unit of unity around which a group of individuals gather.  Our values guide our organizational culture, and that culture sets the tone for how we do our work.  We want to work for solutions that reflect our values.

Relationships.  Particularly in projects that cross borders— social change projects taking place in one country and resource raising in another—relationships matter.  The trust the builds between people does not necessarily transfer to another organization with similar interests.  The people who believe in me don’t necessarily transfer to believing in someone I tell them to trust.

Engagement.  We learn by doing, and within international partnerships, we learn by doing together across culture and language.  One of the most exciting trends in recent times is the growing level of engagement that people want to take in the projects that they support.  Increasingly, it is less about writing a check and more about joining a community.

I hope that someone on the panel on Tuesday acknowledges that the growing number of nonprofits might also indicate a higher level of activism among Americans that makes stronger our democracy and engagement with the rest of the world.  What kind of remedies could our nonprofit leaders devise if they recognized that people want to contribute within communities that share their values, build on relationships that inspire them, and roll up their sleeves alongside others?

I have some ideas on how foundations and others concerned about this issue can keep people focused on what they are good at:

1.   Increase funding for organizations with broad enough “umbrella missions” that they can serve as fiscal agents for smaller grassroots projects.  Many of these groups would gladly offload the legal and financial burden in order to focus on impact.  Several new nonprofits that I have worked with would have welcomed the chance to form their own identity without their own IRS filing.

2.  Fund open work spaces that eliminate the infrastructure costs that it takes to run a grassroots organization, thereby removing redundancies in the system.  In larger urban areas in particular, small organizations would welcome the chance to co-locate, share a copier, and exchange theories of social change over a shared office coffee pot.

3.  Create the “Common File”— including a common application, budget form, and financial and impact reporting tools used by most foundations under a certain size.  Too much time is spent recrafting the same materials to satisfy different funders, often by staff members who are paid as a part of overhead.  This may be the first step towards an excellent idea offered by Paul Shoemaker of Social Venture Partners: consolidated funding.

As I see it, we want grassroots communities here and around the world addressing their most pressing needs.  In the case of international partnerships, we want strong partnerships that cross borders, fostering deeper understanding about how the world works.  We want to keep alive the diversity of solutions that come out of communities with different sets of operational values because only a diversity of solutions will solve our world’s complex problems.  The increasing number of nonprofits is a manifestation of exactly what we want to happen.

Of course growth comes with challenges.  These challenges will be solved when we look at the system as a whole— nonprofits, foundations, and our communities at large— and find new ways to connect social change organizations with the resources they need.

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