Nonprofits Must Change as Old Funding Models Decline

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Nonprofits Must Change as Old Funding Models Decline

Particularly older organizations, such as Goodwill Industries, need to innovate to survive, nonprofit leaders told a Stanford GSB audience.

It's rare for an organization to be around 100 years or more. Some research says there's a 1 in 10,000 chance. A handful of the United States' well-known nonprofits have bucked the trend, however, and their CEOs shared lessons learned with an audience at Stanford GSB.

If there was a common theme among them, it was that finding funding is going to become more difficult in the years ahead as old models of charitable giving dwindle. The change means older nonprofits are finding they must work harder to be relevant to their clients.

Peter Goldberg, president and CEO of the Alliance for Children and Families, called upon business students to develop new ways of funding.

"We need new ways to finance delivery of human services - grants and contracts are in the past," he said. He noted that the quasi-governmental program known as Fannie Mae (Federal National Mortgage Association) successfully gave low-income earners access to home loans. "That was a fabulous public policy invention." Nonprofits need a similar breakthrough from people "with a finance degree and an interest in social services," he said.

The goal of Camp Fire USA (formerly Camp Fire Girls of America), which celebrated its 100th anniversary last year, is to create caring, confident citizens. That hasn't changed, but children have, said CEO Cathy Tisdale. "Teenagers are moving away from civic engagement. They don't want to be a Democrat or a Republican because they don't like what comes out of the mouths of Democrats and Republicans."

Her organization's challenge, she said, is to introduce tweens and teens to positive behaviors and outcomes to develop their leadership capabilities.

Both Goldberg and Tisdale said while having an iconic brand — the Alliance for Families and Children grew from Family Service America (established 1911) — builds trust, it can also be a hindrance.

Volunteers and employees who have grown up with the organization over the years may find "the experiences they had 10, 20, 30 years ago may not be as relevant to the needs and concerns of kids and parents today," Tisdale said. "The way I got it 20 years ago may not be the way they want it today."

"Too many organizations are holding on to 19th century culture in a 21st century environment," said Goldberg. Instead, they need to "build radar systems" to anticipate the fast-changing world. "The demand of change with the changing times is enormous."

Jim Gibbons, president and CEO of Goodwill Industries International Inc., founded in 1902, said the organization has made the leap from old-line charity to a modern social enterprise that puts people to work in careers in financial services and computer programming, not just repairing donated goods. "We have always been driven by the marketplace," he said. "We are a workhorse organization, not a show horse organization" where anyone can see the impact their donations can have on people's lives.

He added that he prefers the term social enterprise to charity. The difference, he said, is engagement. "We give everyone in the organization the ability to solve problems," he said, and the ability to move with the marketplace and clients. "The day we start existing for headquarters is the day we die. We have to exist for the community."

Leaders spoke about the challenges of the 21st century at the Jan. 24 event sponsored by the school's Center for Social Innovation, Public Management Program, and Center for Leadership Development and Research.

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