The nonprofit world has been abuzz lately with talk of the sheer number of nonprofit organizations. How many should we have? How many is too many? How do we get rid of some of them?

85,000 More Nonprofits?  Surely Not! 

In March, Jack Siegel on his Charity Governance blog threw down the gauntlet when the IRS released their annual data book. In his post Do We Need 85,000 New Charities? Somebody Thinks So, Siegel reacted in shock to the news that the IRS received 85,771 applications for new 501(c)(3) nonprofit organizations in 2007, and over 68,000 of them were approved. He proposed a campaign to dissuade people from forming nonprofits, including a fee hike for processing the application forms.

Jeff Brooks of the Donor Power blog responded with Too many nonprofits? Let 85,000 flowers bloom! He identified some downsides of having many nonprofits, but decided that the benefits outweighed the costs:

On the other hand some of these new nonprofits are tiny, serving extremely narrow or localized niche issues that no one else is dealing with.

Others are smart, fast innovation factories that are unfettered by bureaucracy and limited thinking. These are the organization that will quickly be competing for donor dollars with established nonprofits -- the organizations that will force us all to be smarter.

Albert Ruesga on the blog White Courtesy Telephone gave some thought to the question Are There Too Many Charities?, but he found that the issue was a lot more complex than a Yes and No situation. He reminded us that many nonprofit organizations are incorporated, but never proceed further than that, so there are far more organizations on paper than there are in practice. Also, if a charity manages to convince enough donors that there's a need for its services, then who's to say they're wrong? "How far should we go," he asks, "to stifle an exuberant desire to address a clearly articulated social need?"

Foundation to Nonprofits: Get Together or Get Gone!

Now a report issued by the Boston Foundation, Passion & Purpose: Raising the Fiscal Fitness Bar for Massachusetts Nonprofits (PDF), has urged charities in Massachusetts to restructure for efficiency and financial health, including possibly merging with other organizations that share similar missions. Part of what motivated their concern was the fact that nonprofit organizations have doubled in the state in the past few years even though the state's population has not. (For a summary of the report, see Massachusetts Nonprofits Overstretched, Underfunded, Report Finds.)

Tom Belford on The Agitator pointed to yet another article, Aid Groups: Aid Can Also Harm by Sheri Fink on the website ProPublica. Apparently, international health and development organizations are calling for voluntary reforms in how aid organizations operate. Part of the problem? "The existence of tens of thousands of unregulated non-governmental aid agencies, each with a unique approach to providing assistance..."

So what's the optimum number of nonprofits? How do we decide which ones to keep and which ones to toss?

You Say Tomato, I Say Waste Of Money - Or Vice Versa

I definitely believe that there are nonprofits out there which should not exist. They duplicate the efforts of existing organizations. They only exist to make the Executive Director and Board Members look good. They are inefficient, incompetent, or wasteful of resources. But I don't think is is a problem that can be measured by counting the number of nonprofits and deciding that we should have 1/3 fewer of them. It can only be addressed by requiring that nonprofits measure and demonstrate their successes so they can be judged on an individual basis.

When doing the judging, though, who am I or anyone else to say that the donors, volunteers, and employees of those organizations don't have as much right as I do to try to solve a problem in their own way? There are certainly some objective criteria that can be used to judge whether a nonprofit is a complete disaster. If they're spending 90% of the money they raise to raise more money, with only 10% going to programs, few people would argue that they need to change or stop operating. Hopefully the donors think so too, once they are informed. Outside of such extremes, though, who decides what's good enough? If the donors think their money is being used effectively, according to their expectations, they'll continue to donate. If not, they'll stop. Theoretically. If the nonprofit isn't so large and well known that people give to it without bothering to check on it.

Tom Belford says in his blog post on The Agitator that this market mechanism is too inefficient, and a "perform or die" mechanism is needed to force the issue. Perhaps, but the test he proposes is whether a charity raises more money over each five year period. I worry that this would negatively impact nonprofits who serve groups that fall out of the public eye once the "fad" of being interested in them has passed, despite real needs that persist. It might also harm groups that are true grassroots organizations of low-income or disadvantaged people, unless those organizations decide to seek large donors and the strings that come with that type of support. To be fair, Belford is just throwing this out as a draft idea and not a serious proposal.

Reliance on the "market," though, also ignores the public responsibility that nonprofits have. They don't just answer to their donors, they answer to taxpayers and the public at large.

Bring It On! 

I'm with Jeff Brooks of the Donor Power blog when he says that new nonprofits should be welcomed, since they may contribute energy and ideas that are currently lacking. Part of what's great about nonprofits is that they attract such passion and enthusiasm. I have no doubt that when a new nonprofit is formed, it's an opportunity to attract people and dollars that may not have been applied to that problem without that group having been formed. Sometimes, too, only time will tell whether an organization will emerge as a leader. I do roll my eyes every time a celebrity starts a nonprofit or a foundation to deal with an issue, when there are already a billion nonprofits that work on that issue, but can anyone deny that the Lance Armstrong Foundation has become one of the all stars of cancer nonprofits?

What do you think? Are there nonprofits in your community that could merge or be eliminated?

[Image by scol22.]