Examining economic practices is a critical part of the reflection that is needed to improve nonprofits’ capacity to honor the spirit of September 11. The effective use of limited charitable resources remains critical if the nonprofit sector is to provide more than rhetoric or symbolic action.

Nonprofit organizations must absorb the lessons of September 11 without losing sight of their comparative advantages and limitations in the context of American society. Thoughtful Paul Light of the Brookings Institutions, in his recent book Pathways to Excellence, argues that nonprofits have to define and promote their own intrinsic identity, distinct from business or government: “Americans knew a great deal about individual nonprofit organizations long before September 11,” he argues, “...But they knew less about the sector as a sum of its parts.”

Lester Salamon of Johns Hopkins University, in his September 5 editorial in the Chronicle of Philanthropy, also recognizes the individualistic, fragmented character of the nonprofit sector, and the limitations that this appears to impose on the sector’s capacity for coordinated action: “...the fragile systems of charitable action were nearly overwhelmed by the enormity of the September 11 tragedy. Individual nonprofit groups, concerned about their autonomy, initially resisted efforts to coordinate their responses, either with one another or with governmental authorities... Charities, it turns out, though highly effective in mobilizing people to act, are far less equipped to structure and organize the resulting response...” Salamon argues for improved nonprofit-government partnerships as the basis for an effective social response and to take advantage of the relative strengths of both types of institutions.

Milano Graduate School of Management researchers Dennis Derryck and Rikki Abzug, who have written a very timely and insightful study of New York City nonprofits in the aftermath of September 11, found many of them, especially smaller ones near the site of the World Trade Center, to be seriously impacted by economic losses. They will discuss their findings at a special Fellows seminar on September 27 at NCNE headquarters. In an article in the Spring 2002 issue of The Nonprofit Quarterly, they observed: “A major implication of these observations is that nonprofit organizations need to consider the benefits of affiliation, federation, networking, and knowledge sharing so they do no have to face crises alone.”

Scholars and researchers raise a common theme: the nonprofit sector suffers from lack of coordination, unity, supporting infrastructure, and external ties, which undermines the effectiveness of the sector. September 11 highlighted these weaknesses because of the suddenness and scale of the tragedy. Yet, each of these analysts is to be commended for not proposing any radical restructuring or consolidation of the sector, or the imposition of a strong governing or regulatory superstructure. Light would like to see nonprofits develop a compelling common identity and a more effective message to the public. Salamon would like to see more effective efforts at nonprofit-government collaboration, and Derryck and Abzug suggest that nonprofit organizations need to develop stronger affiliations with one another and with umbrella groups. These recommendations are entirely consistent with the intrinsic, idiosyncratic, particularistic character and special strengths of nonprofit organizations, but they also raise important questions that individual nonprofits must address if they are to effectively make decisions about joining forces with other nonprofits and with government and business organizations.

In light of nonprofits’ experiences of September 11 and its aftermath, nonprofit leaders should consider the following questions and discussion points regarding their desire to improve their effectiveness:

What risks does my organization face if there are sudden changes in the economic and social environment and what are the resources on which we can rely for coping with these risks? The September 11 experience suggests that nonprofits need to think of themselves as parts of support networks through which they can work together and help each other out. They also need to think in terms of their “portfolios” of external relationships, and whether that portfolio is sufficiently diversified to help ensure that assistance or cooperation will be forthcoming in the event of sudden changes. Some organizations are more self-sufficient than others, face smaller risks, and perhaps can put less emphasis on external supports, although September 11th demonstrated that even the largest and most prestigious of our nonprofit institutions can be jeopardized. Other nonprofits have little internal slack and need to consider the risk-sharing benefits of joining federations, support networks, professional and trade associations, and so on. Of course, they also need to evaluate the costs of those affiliations in terms of direct outlays, the time needed to maintain the relationships therein, and the diversions from mission that might occur. Still, the experience of September 11 suggests that many nonprofit have under-invested in external affiliations.

At what scale is the mission of my organization likely to be effective? September 11 demonstrated that the scale of operations of even some of the largest U.S. nonprofits fell short of their ability to fulfill their missions. The Salvation Army, for example, made promises to victims’ families that it could not keep until it upgraded its technological infrastructure. Preparing for a rare, large-scale situation such as posed by September 11 is not sufficient reason for an organization to expand internally; indeed that could be economically unwise. However, it is sensible to consider two issues: One, at current levels of demand, could the services that the organization offers be more economically provided through collaboration or consolidation with other nonprofits producing essentially the same services? And second, could contingency plans be made to coordinate with other providers, in the event of sudden surges of demand? The analogy is with energy companies and power grids, which share energy supplies in order to handle emergency situations. The nonprofit sector, known for its networking propensities and talents, perhaps needs to exploit them further.

What trade-offs exist between consolidating and coordinating to achieve economies of scale and insure against risk and possible losses of mission focus? Virtually every nonprofit organization thinks of itself as unique, which reflects both a strength and weakness of the sector. If two organizations integrate or coordinate their operations, much may be gained in efficiency and effectiveness, but something may also be lost in terms of style and approach, internal culture, responsiveness to particular groups, or motivations of volunteers, donors, and staff derived from loyalties to the separate partner organizations. These factors matter if they reflect real losses in service or mission achievement, and they need to be weighed against the net gains of consolidation and coordination. What should not, but often does determine the outcome are the sources of resistance that develop out of desires of particular groups to maintain control in the context of organizational politics and proprietary feelings. External funding sources, such as federated fund raising organizations, foundations, and government funders often pressure nonprofits to consolidate their operations to achieve efficiencies without sufficient sensitivity to real losses that can be incurred by straying from the particular missions of the nonprofit partners. Nonprofit leaders have a responsibility to address their missions as effectively as possible. Sometimes this favors coordination and consolidation; sometimes it does not.

What does the greater good require? Nonprofits are “particularistic” organizations responsible for their specific social missions and service to particular groups within their purview, not for the welfare of society as a whole. This is their strength, as Salamon points out, as well as the reason why the nonprofit sector cannot be expected to carry the entire burden of social welfare without government support and a coordinating infrastructure. Yet, nonprofits are also united by a set of charitable values and a unique organizational form that engenders public confidence and trust in difficult times. They are somehow expected to behave better than other organizations and to be cognizant of overall societal priorities. This puts a special burden on nonprofit leaders to do two things: First, leaders need constantly to ask how they can work together, consistent with both individual organizational missions and the greater good of the community. Second, they need to take the greater good into their calculus for running their own organizations. The latter may be the most difficult part. Specifically, every nonprofit needs to revisit its mission periodically to ask if it is still as relevant as it could be in today’s society. Bringing existing resources effectively to bear on missions that are outdated may be internally efficient and even financially supportable but not effective from a societal point of view. Historically, many nonprofits have had to ask themselves about their relevance at critical periods in their history. For example, ethnic and religious-based social service agencies in urban communities faced this issue in recent decades during periods of immigration and suburbanization, in many cases remaking themselves to become more responsive to the varied needs of new populations. Many educational, health, and cultural institutions have had similar experiences as well. What is most important in these situations is that individual nonprofit organizations rise above their parochial roots to see the interests of the wider community and how their organization’s mission is best juxtaposed with those interests. A recent example illustrates this point: In order to diversify its assets, The Hershey Trust has proposed to sell its controlling shares in the Hershey company to Nestle. The Trust had to decide whether the benefits to the Milton Hershey School superseded any harm that might be done to the Hershey community. Diversifying assets is a wise economic move for the Trust, viewed solely in terms of its mission to support the school. But trustees are also expected to consider how that mission aligns with the interests of the community and whether other solutions could be as effective in serving both the school and the community.

In aftermath of September 11, every nonprofit organization needs to widen the frame from which to make its economic decisions. Is the network of supporting organizations and affiliations sufficiently diversified? Is the scale of operations efficient? Could it be enhanced by collaboration? Should the mission be revisited in the context of the greater good of the community? And, are there trade-offs to be addressed between choices that narrowly serve organizational interests and choices that better serve the wider community? If nonprofits can continue to address and refine their responses to these questions, they will become more effective and more valuable to our society.