JULY 2003

Last month, 18 experts in the fields of federal, state, and municipal financing; regional and national foundation funding; charitable giving; high-net-worth donors; and public policy gathered for a day-long workshop hosted by Venture Philanthropy Partners and facilitated by McKinsey & Company. The purpose of the workshop was to understand what the leaders and supporters of community-based nonprofits might do to help their organizations survive and respond to the increased demand for their services in the face of an extremely challenging funding environment.

The discussion was sobering and confirmed how radically the playing field has changed between the time VPP was created in 1999-2000 and today. Participants noted that the stresses on low-income and working poor families and the nonprofit organizations that support them are deep and serious. The funding crisis is real and getting worse.

Yet, amid the participants’ gloomy confirmation of the harsh climate for low-income and working poor families and the deepening of the funding crisis, participants also discussed some proposed responses and strategies. After reflecting upon the issues and strategies raised during the day, we at VPP see some opportunities for the field to capitalize on these points of disruption and discontinuity so as to advance positive change for organizations and communities overall. Some of these opportunities are summarized below. The complete report will be available on VPP’s website the week of July 14, 2003.

Advocacy
Community-based organizations and their stakeholders certainly can and do have a role to play in improving the lives of children and families. However, the participants overwhelmingly agreed that without mobilization within the public sector, we ’re just “tinkering at the edges.” Getting to the root of the problem—the declining financial health of low-income and working poor families—requires far more dollars and commitment from the public sector. The group voiced strong support for improving and increasing advocacy on behalf of all children, especially children of low-income families. Although the impediments to progress here are formidable, efforts must be made to drive change and unlock public funding. In a sense, we need to advocate in support of advocacy.

Participants explored a number of ideas on advocacy, including:

• Persuade funders to support advocacy initiatives, be more present in the public policy arena themselves, and encourage nonprofits, their leaders, boards, and constituencies to be more directly engaged.
• Develop thoughtful communications with sharpened messages around the needs of all children, including children of low-income families, to shape public opinion and better inform legislators.
• Create initiatives to improve research that clearly identifies needs and demonstrates program results. And, more important, disseminate this research to the relevant audiences.
• Make linkages among research organizations, advocacy efforts, and the people “on the ground” who are most affected by public policy and funding.

Collaboration and Consolidation
Today's funding crisis could be the trigger that drives systemic change in the nonprofit sector. One of the more aggressive responses to this funding crisis is to strengthen the service delivery system for children through the consolidation of, and collaboration among, public agencies and nonprofits. Many states are looking at how they can promote systems integration, consider the consolidation of departments, and explore the blending of funding streams. This approach should be pushed further, beyond just internal public department consolidation. For example, there are opportunities for government agencies to outsource more service delivery to qualified nonprofit providers or provider coalitions with demonstrated performance and the potential to provide the same or better services at lower cost. Furthermore, innovative strategic alliances could be formed that blend and integrate public, private, and nonprofit entities to provide more comprehensive services.

Addressing Geographic Imbalances
Today in the National Capital Region there is an imbalance between the needs in particular areas of the region and the social, health and human, and educational services available. Public and private funders need to be more aware of demographic changes in the region and gaps in services. Strategies to achieve this awareness include:

• Through research, examine the existing services in light of the region's changing demographics.
• Help high-quality service providers expand their programs in other parts of the region and form strategic alliances with government agencies or emerging community-based organizations already present in underserved areas.

Talent Recruitment and Development
Both nonprofit organizations and grass-roots advocacy movements will need new leaders and programs that support the development and training of emerging leaders in their communities. Recruitment and retention tactics must be better developed at the community-based organization level, including incentives for working in the nonprofit sector. Special attention should be placed on the creation of a second line of management within community-based organizations, one that includes chief operating officers, chief financial officers, and fund development directors. Without building senior management breadth and depth, these organizations will continue to lack the ability to grow to scale.

While these opportunities and strategies may be a good start, the challenges we're facing are difficult and complex and require a more comprehensive response. We must not lose sight of the fact that, in the here and now, many high-quality nonprofits need our support simply to survive, let alone respond to the increased demand for their services. Yet this difficult funding environment is creating a disruption upon which broader, system-wide change may emerge. While we continue to support those in the trenches, let's also ask the larger questions of ourselves and of the field and be open and prepared to capitalize on the unanticipated opportunities that may emerge.