Locally, the news is out: thanks to Chris Hepp, a The Philadelphia Inquirer reporter, news of our recent economic impact survey of Delaware Valley nonprofits hit the streets this week. From Philadelphia Mayor Nutter’s office to an astute board president to folks just wanting to know more, it’s getting attention. I just hope it isn’t too late!
Why would I say such a thing? Because I am worried. One of the most troublesome outcomes of our survey is the revelation that the older, more established organizations (based on age of organization, number of employees, operating budget) are not weathering the current economy as well as the younger, smaller (measured by both number of employees and operating budget) organizations. They are more likely to be facing deficits at the end of the current fiscal year than younger organizations, more likely to have already seen a loss in individual, government and corporate dollars, already had to freeze salaries, lay off staff and/or dip into a reserve fund. Look at these figures:
38% of those organizations less than 5 yrs old are in worse financial shape than they were a year ago
50% of those 5-20 years old are in worse shape
65% of orgs 21-50 years old are in worse shape
67% of those older than 50 years are in worse shape
These data are not only quite scary but also quite provocative: there is a direct relationship between age of an organization and its current fiscal shape (not statistically speaking).
Surprise? To some, not at all. Those folks are of the mind that younger organizations are used to living on the edge, doing with even less than a normal bare bones nonprofit culture and enduring the vagaries of cash flow while simultaneously being more flexible and adaptive. But to others, the direction of this influence of age is a surprise, because these folks assume that with longevity comes better and more experienced management practices, a solid financial base on which to rest during tough times, an experienced and sagacious board, all of which should provide insulation at times like the present.
So, I am wondering what is going on and what our data might suggest about nonprofits and their overall practices, regardless of the economic times in which they are operating. After all, that is what researchers do: they gather and analyze data and then offer up possible explanations to explain what they found. My possible explanations aren’t pleasing me. For example, are more established organizations under-performing younger ones because older ones have gotten complacent in their practices? Have they fallen into ruts that served them well in the past and, absent the best practice of engaging in on-going impact evaluation, assume those ruts are still serving them well? Whereas the younger organizations, keenly aware of the need to establish themselves as important and valuable players, do not take anything for granted, regularly assess, feed the results of the assessments back into the organization, learning from and adapting with the new information? In other words, is it in fact the younger organizations—by which I mean both the boards and staff of these organizations—which are abiding by sound business practices?
Have the established organizations gotten arrogant due to their longevity, the recognition that comes with age, and the resulting dollars that flow toward the magnet of that recognition? Are they resting on the presumption of laurels that no longer exist, lulled by past glories? Do they assume that since they have survived this long, whatever they have done in the past must be right, even for the present, and thus do not bother to challenge themselves?
Arrogance or complacency? One often masquerades as the other and neither is a helpful trait.
There are other possible explanations, don’t get me wrong. But I keep coming back to the same place: established versus needing to establish. The latter brings with it an edge that in any economic climate may be hard to overcome. And oddly enough, herein might lie the most important message of our survey, a message that goes well beyond the economic downturn, and should be ringing especially loudly in the ears of older organizations–and the funders who automatically support them. The strength of an organization lies in the vision and drive of the people who serve it, not merely in its ability to survive.