By Sevetri Wilson
The nonprofit sector has always been a vital pillar of support for communities around the country, and its role continues to deepen as we emerge from COVID-19. In many cases, nonprofits are responsible for the provision of basic services — healthcare, education, and the delivery of essentials like food, clothing, and shelter. Meanwhile, nonprofits are at the forefront of the renewed push for equality in the United States.
These responsibilities, coupled with the pandemic and recent economic contraction, have put unprecedented pressure on nonprofits. Many organizations were pushed to the brink as their revenue fell off but the demand for their services only increased. Across the country, there are philanthropy deserts: areas where nonprofits are doing critical work, but without meaningful assistance from philanthropists, grant makers, or government support. These nonprofits lack sophisticated fundraisers, well-connected boards, or savvy communications professionals — and just like any business, they can’t scale their work without the resources.
Lost in the philanthropy desert, these nonprofits are unable to connect millions of Americans with the help they need during a once-in-a-generation economic and public health emergency.
No matter how nonprofits improve their operations and attempt to scale impact, it’s clear that the infrastructure of support they provide is only becoming more important to communities across the country.
How philanthropy deserts threaten communities
The role of the nonprofit sector in the United States is much more significant than many people assume. According to the 2020 Nonprofit Employment Report published by Johns Hopkins, the sector is the third-largest employer in the country, accounting for almost 12.5 million jobs (for reference, that’s more than the entire manufacturing industry). Even more critically, nonprofits comprise a vast proportion of private employment in several key fields: education (71 percent), social assistance (41 percent), and health services (43 percent).
As the first wave of COVID-19 infections crashed down on the country, 55 percent of nonprofits said they saw an increase in demand for their services, 16 percent reported that demand stayed the same, and just 29 percent reported a decrease. Even before the pandemic, 57 percent of nonprofits said they were unable to meet demand for their services. Meanwhile, many nonprofits saw substantial reductions in revenue, which required them to cut staff, reduce programs, and even take out lines of credit. And the nonprofits that are undercapitalized and already understaffed are far more likely to serve people of color.
Although the sector proved to be more resilient than the grimmest projections anticipated, there’s no doubt that many organizations suffered last year. This means the communities these organizations serve had nowhere else to turn in the middle of one of the worst crises we’ve faced in decades.
Eliminating philanthropy deserts
For many years the nonprofit sector had to contend with what has become known as the “overhead myth” — the idea that high-performing nonprofits invest only in programs, avoiding expenditures in salaries, infrastructure, or the basic operational systems that many in the corporate world take for granted.
The “overhead myth” is part of an overarching narrative that funders will only invest in direct support for programs. If we ever needed conclusive evidence that this myth is, in fact, a myth, we wouldn’t need to look any further than 2020. Nonprofits were in such a difficult position last year because they lacked the ability to absorb a significant drop in revenue, maintain (let alone increase) the services they provide, and position themselves to get through the crisis with minimal disruption.
These are all areas where capacity-building — which refers to the process of strengthening internal operations, improving financial management, up-skilling nonprofit staff, etc. — can make a significant difference. Take financial planning, for instance: 92 percent of nonprofits have budgets of less than $1 million, while 50 percent have less than one month of cash reserves. This is an extremely untenable position for organizations, especially during a crisis.
Grantors are increasingly investing in capacity-building for a reason: if a nonprofit shuts its doors, it won’t matter what the ratio between its spending on programs and operations was. Over the past year, we’ve seen what happens when under-funded and under-equipped nonprofits experience a financial shock — communities have to go without vital services. This is why a nonprofit’s top priority should always be the health and sustainability of its operations — the best services in the world can’t function without a robust organization to support them.
The role of technology in delivering essential services
Although investments in capacity-building are increasing, nonprofits still want to keep costs low, especially during this economic rebuilding period. This is where technology can play a major role — many of nonprofits’ most resource-intensive operations (such as fundraising, tracking and reporting outcomes, capturing data, and compliance) have become more efficient and affordable thanks to digital platforms. However, survey after survey has found that nonprofits aren’t able to take full advantage of the technology at their disposal. Nonprofits are limited by time, resources, knowledge, access, and a lack of digital savvy in a sector that has historically lacked access to newer tools and technology.
The organizations that prioritize technology have many advantages over their peers. For example, Accenture reports that, “More than 90 percent of nonprofit workers believe that digital collaboration platforms have improved their efficiency.” Tech-powered nonprofits are also better able to collect and share data on their effectiveness, which allows them to attract more support from grantors and increase their revenue. These are all forms of capacity-building that ensure organizations will be capable of strengthening their commitments to communities over the long term — the key to shrinking and eliminating philanthropy deserts.
Sevetri Wilson is the Founder and CEO of technology startup Resilia, founded in 2016. She is a 2010 recipient of the Nobel Prize for Public Service, the Jefferson Award; and her work was featured in the U.S. Senate report to the White House on Volunteerism in the U.S., under President Obama.
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