Local Do-Good Economy Snapshot
Nonprofits and Associations
By David Liss
Special to washingtonpost.com
Friday, June 25, 2004; 11:54 AM
The definition of the nonprofit sector is "the collective name used to describe institutions and organizations in American society that are neither government nor business," according to the Independent Sector, a Washington, D.C. based coalition of national nonprofits, foundations and corporations.
Nonprofits face the same challenges as for-profit businesses -- declining revenues, more competition, technology, and an ever-increasing awareness that what has worked in the past may not work in the future.
Nonprofits and associations have a huge impact on our nation's economy and employment. Nearly 6 percent of all organizations in this country are nonprofits. One in 12 Americans works for a nonprofit. About 8.6 million people work for associations and nonprofits nationwide, according to the Greater Washington Society of Association Executives (GWSAE), compared to government, which employs 6.8 million.
GWSAE estimates there are over 3500 associations in the Washington area, employing more than 75,000 people locally. The D.C. metropolitan area has the biggest community of nonprofit organizations in the nation. So the Washington region is THE place to work in nonprofits and associations, which are recognized as tax-exempt, 501(c)(3) organizations.
The Differences Between Nonprofits and Associations
There are two basic types of nonprofits, philanthropic organizations involved in social service activities and professional or trade associations. The latter are distinct from the aims of their philanthropic brethren by their emphasis on representing the business interests of professional and trade groups. Additionally, there are professional societies, whose memberships range from psychologists and morticians to duckpin bowlers.
Nonprofits and associations serve different customers and have different masters. For nonprofits, the customer is the board of directors and those individuals, companies and government agencies that fund them. For associations, each and every member of their respective organizations is their customer. Challenges that nonprofits face are not the same as those confronting associations.
The biggest challenge facing associations today is that for-profits are offering services that were formerly offered solely by associations. And for-profits have the money to do it better.
An association is mistaken to think they have no competition because they are the sole representative of a particular industry or profession, says Val
Marmillion, CEO of Pacific Visions, a Washington, D.C. based association-consulting company. "I can go out and set up a Web site tomorrow, and provide information that can tear apart the existing brand of an association," he says.
Associations must engage in a more competitive posture and be more understanding of the marketplace. Each must redefine or establish their value proposition for their members. "Most importantly," says Mike Olson, president of the Washington, D.C. based, American Society of Association Executives (ASAE), "associations must see their members as customers and as a result, move to the posture of constantly reaffirming the value proposition of the association to its members." This is a big change in the mindset of many associations.
Associations with a revenue model based on membership dues will lose to new competition in the for-profit sector. To survive, organizations must become increasingly entrepreneurial to maintain funding levels supported largely by membership dues.
Another challenge for associations is the transient nature of staff.
Because the association community is so big, people frequently job hop to accelerate their career paths. Associations have a hard time retaining core staff, because existing groups have to compete with new tax-exempt organizations that pop-up in the District each year.
Associations also face the trickle-down effect of recession, which shrink donations and hinder budget projections. For example, in a tight economy, association members don't travel as much to conventions. Convention exhibitors may have to reduce their paid participation or budget demands may cause association members to cut their memberships altogether.
Challenges to Nonprofit Organizations
All nonprofits operate in an environment where the boundary between the for-profit and nonprofit world is increasingly blurring. More government and donor funding sources for these groups are based on performance contracts. All funders are now demanding better results for their money.
"There is no such a thing as a rich nonprofit that doesn't have to worry about cash," says Jeff Bradach, co-founder and managing partner with Bridgespan, a Massachusetts based consulting firm devoted to nonprofit management. "The average nonprofit has less than $1 million in revenue," he says. "Nonprofit management is where business was in the 1950s. They are more like mom and pop organizations. The amount they accomplish with what they have is astonishing. Everyone who is hired is making a lot of compromises to do their jobs. Business people underestimate this degree of difficulty," he says.
Nonprofits also struggle with the lingering effects of recession and terrorism. After 9-11, some direct service outreach nonprofits lost funding because attention was focused on helping the victims of the World Trade Center and Pentagon attacks. Although poor families still needed help to get food, clothes, and shelter, they became "second-wave" victims of this national tragedy, since there was less money available.
Competing for the Same Resources
Local organizations compete with national organizations for the same donations, staff members, and executive level leadership. In some cases local groups rely on donors outside the region. Sandra Renner, vice president of the Alford Group, a Bethesda based consulting firm for nonprofits, says, "[This trend] puts pressure on a local nonprofit to perform at the level of a national nonprofit."
"For staff and executives, local organizations compete with national organizations with greater resources and better benefits." says Renner, "Jobseekers have to think what culture they will feel more comfortable with and identify where they will be able to grow and profit professionally."
She adds, the differences in the size and resources of these groups can make a huge difference in the quality of professional life.
Editor's note: This article by David Liss, was first acquired by washingtonpost.com on April 30, 2003.
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