Are there too many nonprofits in Austin?

This article first appeared in GivingCity Austin #3 magazine. To download the entire magazine, click here.
The data referred to in this article can be accessed via Greenlights here.

The data is in – the Austin community has more nonprofits per capita than any other city in Texas. Now what should we do about it?

We demand efficiency from nonprofits, requiring them to do more with less – and these days to do even more with even less. So when we see two or more nonprofits with the exact same mission, going after the same donations from the same people, we might wonder why they don’t join forces.  We might also wonder how they survive in this economy. Inevitably, the market will take care of it, right? Just as it does in the for-profit world?

Well, sometimes the market doesn’t  take care of it. That’s because nonprofits aren’t fueled by just donations, they’re also fueled by passion – which is sometimes all you need to keep your organization going. And thank goodness for that; we’d be in serious trouble if it weren’t for volunteers and underpaid nonprofit professionals. On the other hand, you have to ask yourself, as a donor or a volunteer, “Am I supporting a nonprofit that shouldn’t exist?”

Austin has more nonprofits per capita than any other city in the Texas. Which means we’re caring and entrepreneurial on the one hand, but probably frustrated and disillusioned on the other. When someone starts a nonprofit it means they feel there’s a need in the community that’s not being met And while one can appreciate their energy, it takes more than a 501c3 classification from the IRS to be an effective nonprofit in the long-term.

We asked five nonprofit advisors their views on the issue; these aren’t just nonprofiteers, rather they’re people in the position of changing the way Austin nonprofits work as a community. Here’s what they had to say.

Deborah Edward of RGK Center

Deborah Edward professor at the RGK Center, a nationally recognized philanthropy think-tank.

The idea that there are too many nonprofits in Austin is a refrain. But while we complain about it, a city like Boston boasts about it.

From our perspective that means we’re not thinking collaborations or efficiencies. We’re not taking advantage of opportunities. In business, these new ideas for a company come up, and you get investment bankers invested so they can see the idea, and in the end, everybody makes money and everybody’s happy.

But in the nonprofit world, we don’t have those investment bankers…except for these funders. They are in the wonderful position to respond to these new nonprofits and say, “Hey, why don’t you get together?” I bet you can find a number of funders that have experience asking two organizations to merge, but the lessons learned are kept within the family. They don’t have a forum to share those stories and encourage people to think differently about going from the initial idea of merging to creating a program that’s sustainable.

I think we need to map the different nonprofits visually in terms of access, value, and fees you can see distinct dimensions … but who’s going to make that happen? The funder’s in the position because he gets 20 groups that knock on his door, and he can do a better comparison than the groups on the ground. It’s not that he has the responsibility to do it, but he does have the opportunity.

Greenlights has done a great job of helps nonprofits discover opportunities for synergy. But otherwise there’s nobody driving the train. The Austin Community Foundation would be a great place, though traditionally it has been donor centered. The Community Action Network or the United Way have that macro view that could be enlisted to help with this. The zeitgeist is to say that there are too many nonprofits. The challenge is to flip that and say, “We are the best connected system of nonprofits in the United States.”

Matt Kouri of Greenlights

Matt Kouri, executive director of Greenlights, which helps Central Texas nonprofits by providing consulting, resources, and nonprofit training in areas from fundraising to how to start a nonprofit.

What’s most remarkable about this data we’ve put together is that it validates what I’ve been hearing from funders anecdotally – that we do have a disproportionate share of nonprofit organizations, especially compared to other cities of similar make-up. The data for Austin is not totally inconsistent with what we see in other communities. And we might have a disproportionately large share of nonprofits that don’t serve Central Texas solely or that serve all of Texas. But we share the belief with donors that having too many nonprofits is a problem.

That being said, there are some positive sides to having so many. It can mean that more is being done in our community and that there’s lots of innovative problem solving at work. But it can also mean there are some redundancies and inefficiencies in the sector.

The silver lining in this down economy is that it might force more nonprofits to realize that they can’t cut it on their own and maybe it’s time for them to make some hard decisions. That’s our hope. I can think of at least 10 different organizations now that really need to do it, and they’ve needed to do it for a long time, yet they continue to bang their head against the same wall every year.

As to who’s responsible for identifying and leading these mergers and collaboration, I think funders need to be careful. They aren’t at the street level. They can demand and expect results and impact but it’s the nonprofit’s job to make sure those dollars are spent accordingly. At the same time, funders can exhibit influence over their grantees, especially when they see logical opportunities for collaborations.

Greenlights is investing a lot of time into this issue this year. We worked with RGK to develop a continuum of steps nonprofits can take in terms of strategic consolidation. A lot of nonprofits are already engaged in some form of collaboration, which donors may not realize. But there needs to be a lot more, and it needs to move further down the continuum toward merger.

People who follow the nonprofit sector know that in 2010 it’s going to see some radical changes. We want to help make that change intentional as opposed to just happening to us.

Barry Silverberg of TANO

Barry Silverberg , president and CEO of Texas Association of Nonprofit Organizations, a statewide organization that offers training and support to Texas nonprofits and individuals who want to start a nonprofit.

Personally, I don’t believe in the numbers games because they’re always a function of who’s asking the question. I’m also not concerned with donors who believe they are getting too many requests. I encourage them to make their requirements more clear.

I don’t believe it’s our responsibility to eliminate those choices. Obviously funders can openly decide the fate of the industry by not giving funds, but I don’t believe they’re in the position to say what a nonprofit should do to be more effective. I think the question should be, “How do we get nonprofits to be more effective?”

TANO believe individuals have the right and the means to create better possibilities to serve the community. We help people understand the issue and determine if the best response is to create a nonprofit. From there, we emphasize what it means to run an effective nonprofit.

I think the nonprofit sector has a significant advantage in that people engaged in that sector are able to “do good,” and I don’t think we do enough to leverage that. There are probably too many nonprofits that are ineffective… because they ignore the stuff that could help them be more effective. I also think that funders need to strike a balance between the information they can gather quantitatively on the various forms they use, with the information they gather qualitatively. The fact is, some folks aren’t as good as completing a grant application – but they have a passion that’s unbelievable. That passion, if it’s combined with skill sets and competencies, will result in something effective if it’s guided and focused.

Janet Harman of KDK-Harman Foundation Austin

Janet Harman , founder, and Jenifer Esterline, program officer, KDK-Harman Foundation, a family foundation that focuses on education for economically disadvantaged Central Texans.

Harman : It’s a complex issue because at first glance one would say there are so many that we should consolidate and reduce. However, there’s a lot of room for creativity, so squashing that innovation would be a mistake.

We have actually brought several national nonprofits to Austin, so I couldn’t very well argue that there are too many nonprofits here.

I really think it’s the job of a lot of area foundations and organizations like the Austin Community Foundation and Greenlights, to point out where there is some opportunity to optimize by merger.

We reach out to other funders on a regular basis. In fact, we co-founded an education funders group, Central Texas Education Funders, a little over a year ago. We meet every other month and there are 30 members. One of the projects we’re working on is to put together a matrix of our fundraising efforts to identify the gaps.

Esterline: The model for Central Texas Education Funders is based on the Ready by 21 Coalition, which put together this matrix identifying common indicators, and we’re trying to create a similar one for the funding community. It would help us, but it would also help the nonprofits; they create about 15 different reports to different foundations, so we’re doing this to learn what they’re doing and how they can do it better. Then the other part of that is communicating this information.

As far as whether there are too many nonprofits in Austin, I would say that we are not overwhelmed with requests, but we are pretty focused on what we fund. In conversations among the education funders, we see that everyone’s funding the same nonprofits. They’ve been identified as effective and able to show their impact, so they rise to the top every time.

Everyone has the responsibility to collaborate and communicate. The new face of philanthropy is more transparent, more cooperative. A lot of our colleagues are embracing this because of people like Janet Harman who are young, entrepreneurial, and have a new way of thinking about philanthropy.

To see a list of existing nonprofit collaborations in Austin, click here.

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2 Comments on Are there too many nonprofits in Austin?

  1. Great article. Very thoughtfully done. I would just share a comment made by my friend, Susan Berliner, who has been involved in several mergers within the Central Texas nonprofit sector over time. When I asked Susan about the idea of too many non-profits in Austin as mentioned to me by donors, she responded that we are not asking the right question. And the right question is, “As a community, are we providing nonprofit services to those who need them in the most efficient and effective way?” I have to agree with Susan!

  2. I started a group on Linked in called Lean Austin.

    It is a group of efficiency experts and out of the box thinkers.

    There are about 60 people and this is the type of question I envision the group assisting with.

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