Dennis Young believes the 2012 closure of the nation’s most renowned social service agency should have been a clarion call.
If Chicago’s Hull House, founded in 1889 by Nobel Prize winner Jane Addams, couldn’t survive economic headwinds, every nonprofit could be at risk.
And, as the pandemic painfully showed, the Case Western Reserve University emeritus professor observed, catastrophic events can undermine hundreds of these organizations.
A year after COVID-19’s arrival in the U.S., more than a third of nonprofit organizations reported their finances put them in danger of closing within two years—and in Minnesota alone, nearly 200 nonprofit organizations had filed for closure.
“The prevailing thought has been that it was imprudent to have substantial reserves on hand. Money that comes in, should go out; that nonprofits shouldn’t act like for-profit enterprises,” said Young, an expert in nonprofit management at the Jack, Joseph and Morton Mandel School of Applied Social Sciences. “We need a new way of thinking about nonprofit management—without a narrow focus on efficiency and frugality and with greater emphasis on viability and sustainability so they can get through times of unanticipated and potentially catastrophic challenges.”
In the text, they examine and outline “a new management paradigm” to build healthier and more effective nonprofit organizations for the future.
To weather unexpected events and economic challenges, Young recommends that nonprofits develop multifaceted strategies involving their balance sheets, cost-and-income structures, human resources policies, engagement in networks, deployment of technologies, entrepreneurial leadership and information systems.
“Do we have prudent levels of redundancy or diversification in sources of income, programs and technologies?” he suggested nonprofit managers ask themselves. “When one stream of revenue is diminished, what are our alternatives?”
Other advice includes:
Building critical information systems that warn of looming threats and help to prepare for and navigate crises;
Implementing flexible cost structures that can accommodate new resource constraints;
Keeping prudent levels of “slack and reserves” in financial, staffing and other resources that can be redeployed in challenging times; and
Embracing an “entrepreneurial culture,” focused on solving problems and exploiting new opportunities.