What are the most important issues facing the nonprofit sector in your state?

• Lack of access to growth capital and general operating funds. Government procurement processes and programmatically-focused grants keep the nonprofit sector in the bargain basement — even though they are doing work we all say is important. Lack of growth capital means even the best-run organizations with proven impact grow very slowly. Lack of access to general operating funds means organizations are severely under-investing in business systems, technology, human resources and staff training and development.
• The nonprofit sector is lagging behind the business sector in its access to and use of technology. Although we are relying on nonprofits to do important work, many are working with unstable infrastructure, decades-old equipment, Excel spreadsheets as databases, and inadequate security and backups. Most do not utilize technology planning and are not using even the low-cost tools that can support communication, efficiency and program effectiveness.
• Nonprofit salary levels, particularly in urban areas, are driving highly skilled people out of the sector. There is a great supply of people who are drawn to work in our sector. As people get in their mid-thirties and start families, however, the nonprofit sector does not provide adequate pay for them. Nonprofit work requires a highly trained workforce if we are going to make steady improvements in addressing long-standing problems. What are the chances we can mitigate the impact of economic disparity, racism and social isolation, or turn the tide of climate change by relying on a constantly shifting workforce of people in their twenties and thirties?
• Turnover in senior leaders, particularly ED/CEOs and development directors, will stress organizations and disrupt the relationships between funders and donors. There are some great things about new leaders appearing in organizations, but few of them are internal candidates. This may result in a downturn in fundraising, particularly if organizations have not prepared for these transitions in terms of documentation and relationship management.

What are your core strategies for addressing these issues?

Regarding growth capital and general operating funding, we stand as advocates for general operating grants, which are the most effective form of capacity building. Using 501 Commons as an example, since we broadened our role in 2011, we have grown by a factor of 10 in both budget and in service volumes. We are able to serve many more organizations across the state because a significant amount of the philanthropic support we have received has been multi-year general operating support. This has allowed us to start new services, respond to the needs of our sector, and constantly reinvent ourselves so we can reach more organizations. We appreciate the trust our corporate and private foundation supporters have placed in us to make the best use of their funds.

In terms of technology, we have launched a “Zap the Gap” campaign to encourage foundations to fund technology-building efforts and businesses to provide new technology, subscription discounts and expertise to help us close the gap between nonprofits and businesses.  

Addressing nonprofit salary levels globally is outside of our purview, but through our Human Resources Services program, we encourage organizations to create an exemplary work environment, which includes fairly administered compensation models that encourage people to remain with the organization.

Our contributions toward leadership transition are varied. We provide a confidential small group session that helps leaders as they start preparing for their transition. We are also developing a program called "Encore Fellowship in Fundraising" that helps people with business experience transition into nonprofit development roles. Additionally, all of our action-learning programs (Springboard, Plan IT, HR Toolkit, VIP 360, Volunteer Manager Corps, and Catalyst) are done with cohorts of organizations using a model of "learning-while-doing" that offers a deep and practical form of leadership development and training. Participating teams generally include younger staff with their senior leader and offer powerful professional development, which these staff members rarely receive. They learn from each other and from the 501 Commons volunteer consultants who are providing facilitation, planning, and project management services.

How can philanthropy best support capacity building for the nonprofit sector in your state? What sorts of investments are most needed?

About 65% of most nonprofit budgets are personnel and related human resources costs. There are three ways philanthropy can make people more efficient:  

1. Provide skills training and leadership development.
2. Augment staff resources with volunteers.
3. Invest in technology, which allows staff to get more done.

To make skills training and leadership development available, we encourage funders to set up a mechanism to create Professional Development Accounts for nonprofit leaders. Organizations would be given a debit card to use for training and professional development. Since time is as big an issue as is cost, funders could give organizations that successfully use up their Professional Development Account a bonus payment to reimburse the organization for the time spent in learning. This puts the decision about the best form of learning in the hands of the nonprofit rather than having funders pick and choose which leadership development or training programs to support.

Funding volunteer programs and improving volunteer management are strategies that have a big return on investment. Organizations that use volunteers are more nimble, resilient and connected to their community. The investments United Way of King County has been making in this area by partnering with 501 Commons should be replicated across the state. Because these programs make extensive use of community volunteers they are not only cost-effective but they also build engagement with nonprofits in the community.

We encourage all funders to support technology costs — especially computers. When you give someone an up-to-date computer that can run current software you immediately provide additional capacity. Moreover, technology also plays an important role in how organizations communicate with constituents, raise money, and advocate for policy changes.

What’s been a recent big success for your organization and what excites you about it?

Our biggest success has been growth in services. It has been five years since we became 501 Commons (after 20+ years as the Executive Service Corps of Washington) and we have steadily added services, grown our staff and expanded our service corps volunteers to 500 people. We provided 600+ contracted services last year — nearly 200 of these for ongoing finance, IT and HR services — and completed 444 Information and Referral cases. We welcomed 95,000 visitors to our website and have nearly 100 consultants and specialists listed in the Statewide Nonprofit Resource Directory. More than 600 people participated in training and peer learning sessions, with an additional 325 people representing 73 organizations participating in various cohort learning sessions.  

We are ever-mindful that there are thousands more organizations that need services and we are excited about several new initiatives this year to expand services that strengthen nonprofits so they can better serve the individuals, families and communities of our state.

What are the most important public policy issues for you this year, and what are you doing about them?

If the Department of Labor’s Fair Labor Standards Act changes (to be announced in July) happen as expected, it will more than double the minimum salary for exemption from the overtime rules from $23,660 to over $50,000 for employees in administrative, executive or professional roles. Suddenly, most of the program management staff in nonprofits who are paid $35,000-45,000, and even some executive directors, will no longer be exempt and will have to be paid overtime for work above 40 hours. This will increase pay for  workers but the increased labor costs will likely result in some erosion of programs, especially those that would have a large overtime burden like camp programs, back-to-school initiatives and holiday services.

We provided information to the sector when the draft rule was announced and will provide a King County session and a webinar with Washington Nonprofits to educate the sector and give them some strategies for managing the impact.    

What are the one or two best opportunities you see for nonprofits and philanthropy to “go beyond the grant” to work together to create sustainable change in communities?

Advocating for public policy changes, particularly in ways that cross single-issue boundaries and build stable coalitions. The economic power that exist within philanthropy can change the course of public policy if people are willing to recognize that public policy is a “contact sport” and it is a very long game. Policy does not change because of lobby days and emails. It changes because of diligent long term relationship building and attention to the tedious details of legislation and rule-making. Your engagement will also influence more board members to stand for their mission.

Communicate success to the public. I always look forward to the annual letter from Bill and Melinda Gates because it so well describes progress and shares a sense of hope. Nonprofits tell their individual stories, but the more powerful stories are how systems of nonprofits are changing lives. Philanthropy can tell those stories with authority. Think of the impact of the domestic violence system that has been put in place over the last 30 years — or the education of the public on how the 140,000 low-income housing units in Washington state are stabilizing lives.

What’s one more question we should ask you, and how would you answer it?

Q. How can we make corporate and private philanthropy more effective? 
A. First, for companies, make sure you’re not polishing your CSR story at the expense of your nonprofit partners. If you expect them to make a video salute to the company or provide your employees with volunteer opportunities, pay them for it. Otherwise, you are transferring resources from the nonprofit to your company.

As someone who works on the boundary between our philanthropic partners and the nonprofits we serve, I see how counterproductive well-intended grants can be. Those that are one-time, tied to line-item uses, and requiring significant reporting are sapping nonprofits’ organizational strength. We have too many small nonprofits chasing too many small grants.  

This is a key problem for social equity. At 501 Commons, we find it very easy to encourage organizations that serve communities of color and refugee and immigrant communities to come into our programs. They want to grow and improve their infrastructure. But asking them to navigate the world of grants, where their return on their investment can be so low, is unrealistic for most. We encourage grantmakers to recognize this equity challenge and change the way you approach funding in these communities.

If the program is a good program to fund once, it is a good program to fund for three years. If you trust the leadership of the organization enough to give them a grant, do not tie it to a line-item budget. If you are giving less than $10,000, require a lot less reporting than for a $100,000 grant. If the community you want to impact is using the organization’s services and supporting them, trust the community and just write the check.

We have a saying at 501 Commons: “We earn the right to exist tomorrow every day.” This is the mindset of nonprofits, and it is so different from philanthropy where most organizations will exist in perpetuity. Recognize the extreme stress and pressure nonprofit staff are under and act in ways that lighten that load for people. After all, you want them working on their mission.  

Nancy Long is executive director of 501 Commons, joining us this month for our virtual roundtable with state nonprofit association leaders.