Nonprofit agencies face a variety of challenges in today’s world. Lester M. Salamon, in the book The State of Nonprofit America, identifies six of them: fiscal challenge, effectiveness challenge, technology challenge, legitimacy challenge, human resource challenge and competition challenge. Quite the list—and I would pick the competition challenge as the one with the greatest potential impact, as it is so inter-related to the other challenges.
The increase in government funding and pay-for-service models has brought an increase to for-profit agencies in sectors traditionally dominated or shared by nonprofits and this increase threatens nonprofits in each of the other areas Salamon identifies.
- Fiscal competition from the for-profit organizations is great due in part to having more avenues for monetary gain in addition to the access to government funding (also used by nonprofits) and being able to be more nimble when making changes due to demand and market forces.
- Having to focus on their bottom line and perform for shareholders may give for-profits the more natural affinity to provide services more effectively and, more importantly, to report on and prove their effectiveness.
- For-profits are also more likely to utilize technology to market their services, manage their operations effectively and recruit employees. This is tied to the more nimble character of for-profit companies as the adoption and integration of technical tools is critical to being successful in the business sector.
- Legitimacy of nonprofits is also challenged by the competition of for-profit companies. If for-profits show themselves to be more effective than nonprofits, the public may question the legitimacy of having nonprofits provide services perceived as being provided more effectively than nonprofits. (I think that there must be an argument for the public feeling more strongly about the altruistic mission of nonprofits being more important than the bottom line focus of for-profits in this area of challenge.)
- The human resources challenge is strengthened by the fiscal ability of for-profits to offer greater compensation, a potentially less complex means of proving individual and organizational effectiveness (which can lead to less burn-out) and the potential for individual advancement within both the organization and industry.
Change in Percentage of Nonprofit Agencies by Sector 1982-97
I have experience with organizations that have had great intentions and mission but not the business acumen or infrastructure to build a sustainable charitable organization. Nonprofits must recognize that they are competing not just for government funds and service payments from those using services, but also even to maintain their legitimacy. In order to do this, nonprofits must address some of the challenges given so as to make these issues become strengths in their competition against for-profit companies and even other nonprofits.
My work and experiences at Handel have proven to me that technology can greatly assist the operations of a nonprofit, and lack of it can be a great hindrance. Technology must be embraced and used as a tool to enable everyone to do their jobs or roles better. For a nonprofit this also includes a tool that allows the agency to better fulfill the mission with the resources available. Used properly good technology will not only make daily operations more efficient but will also allow agencies to report on effectiveness and prove legitimacy to the public. We often talk about how RiteTrack turns data into information and this is precisely how our technology assists agencies in making their challenges the clearest part of their day.