I was driving home from a trip to Pennsylvania to visit my in laws on the interstate this past summer. About 55 minutes outside of my city, I decided to get off the turnpike, since Waze alerted me to a traffic slowdown up ahead. I found myself driving through a smaller state route, which took me through a couple of small town downtowns. It was dusk, and I was pretty tired.

I wasn’t registering any of the unique features of any of these towns, such as their quaint courthouses or libraries.  I was just trying to get home as quickly as I could.

But then I saw it out of the corner of my eye.  A public service billboard. In the genre of “The More You Know,” the billboard featured an adorable smiling young man in a tie – he could not have been more than 12. The caption read, “He started a nonprofit at nine.” I swirled that one around in my mind for the next couple of miles. Starting a nonprofit is good. Yeah, starting a nonprofit is good. Cute kid. Smart kid. Ok. Sure. Yeah. Nonprofits good. Start them.

But, is that really true?

Is it always good to start a nonprofit organization?

When do you really need to start a new nonprofit organization?

Let me tell a story. There has been national coverage of the problem of human trafficking in Toledo. In the last few years, the city has ranked as the fourth busiest area in the country for human trafficking recruitment. This has been attributed to our high levels of concentrated poverty and the fact that the city is the crossing-point for two major interstates that bisect the country, I-75 and I-80.

The FBI has agents dedicated to human trafficking here. They work collaboratively with a group of nonprofits, local law enforcement officers, governmental social service agencies and university experts who meet regularly through the Lucas County Human Trafficking Coalition. This group was established to share information and better align the actions of the multiplicity of agencies that are involved with investigating and prosecuting these types of cases and then tending to the complex set of needs of victims, many of whom are minors.

Out of this coalition emerged a collective realization in around 2014 that our community lacked a basic category of service for vulnerable youth, one that may be contributing to Toledo’s shameful status as a recruitment site: we had no shelter for runaway youth.

The children and young adults picked out and groomed by traffickers are often the most vulnerable in our community. They are frequently children who are fleeing untenable home situations rife with abuse, neglect or rejection. They may be of an LGBTQ+ identity and experiencing rejection from the family. These youth are most vulnerable to the machinations of traffickers, who promise access to resources or safety. Without a formal safe haven for these youth, they make do informally by couch surfing and relying on connections they have made in the streets, which, in certain neighborhoods, are a haven for pimps and other traffickers.

Toledo had a runaway shelter nearly 10 years ago, but the organization folded due to a variety of issues. Since that time, there has been no safe place to turn. Over time, a group of people affiliated with the Lucas County Human Trafficking Coalition started talking about this issue. Other community members started talking about this issue. An awareness of an important service delivery gap started to build and to wend its way through the community. Then, a micro-burst of nonprofit activity followed.   Different folks in different parts of the community were motivated to act, both at the grassroots and the grasstops levels.

One grassroots organization was formed by a law student and a community member in late 2014. They did a lot of groundwork beforehand. The website explains:

“In November 2014, Angela and Kristen received a call from a friend asking where homeless youth or homeless LGBTQ+ individuals would go for assistance. After some extensive research and contacting a few local agencies, they determined that no such place existed. There were several adult shelters (a few that were LGBTQ+ accepting), a couple family shelters, but no shelter for youths or unaccompanied minors. Angela and Kristen reached out to a few places around the country, including the Ali Forney Center in New York City and the Ruth Ellis Center in Detroit, before deciding to launch Harvey House. No one was filling the need in Toledo, so they decided to step up to the plate and do the work.” In June 2015, Harvey House received a small grant from a community micro-grant dinner program called Toledo SOUP, which gave them momentum.

At around the same time, another community activist and LGBTQ+ advocate began to move forward with the creation of another nonprofit that would serve homeless youth, and offer targeted services to LGBTQ+ youth, who make up a disproportionately large segment of the homeless youth population. This  organization obtained its 501(c)(3) in July 2015, with the help of some local attorneys. In its early stages, this organization planned to launch a shelter for runaway LGBTQ+ youth. In December 2015, the Toledo Blade detailed this organization’s plan to run a shelter in a donated building.

The focus of both groups on the needs of LGBTQ+ individuals was laudable. These activists poured their heart and soul into these organizations. They did their research. They identified an unmet need, then created and implemented plans to address it. The creation of a new organization is often the first thought for emerging leaders eager to test new solutions to community problems. The local nonprofit sector in Toledo, Ohio is opaque, fragmented and change-averse, which can sometimes mean it is difficult to find existing nonprofit organizations willing to partner on the creation of a new program.

However, at the same time as all of this, a group of governmental social services agencies, the Juvenile Court, and a set of large community mental health nonprofits and Toledo Community Foundation had started meeting regularly to study the issue, secure local funds, and apply to the existing federal grant program that helps support runaway shelters. I call this group the grasstops group, because it had representation from so many leaders from different agencies and the judges from Juvenile Court.  This third group started the process for opening of opening up a runaway shelter at an existing behavioral health agency, the Zepf Center.

Instead of launching a new organization, this grasstops group felt that it would be better to rely upon the existing capacity, infrastructure and systems within a large, established community mental health provider, rather than launch the lengthy process of building all of this capacity within a new organization.

They understood that governmental grant dollars, whether from federal, state or local sources, typically cannot be granted to organizations that do not have a financial track record. These funders require documentation of sound financial management, proven through audited financial statements.

And they also understood that it is a more efficient usage of funds to launch a program in an existing agency. The organization already has systems in place for HR, accounting, legal, insurance, training, administration, fundraising, security, etc. There are economies of scale being achieved through these existing administrative systems that make it cheaper for the new program to operate.  An existing large organization can more easily absorb the costs of unexpected challenges that come up with the establishment of a new program.

Zepf Center was chosen because it had space at a centrally-located facility that could be easily adapted to meet the stringent regulatory requirements for a youth shelter. The organization had a 24 hour facility and sufficient security in place. With nearly 10 other facilities, the Zepf Center also had strong operational systems for building maintenance and management.

So, this group went about the process of securing local government and foundation grant resources for a build-out of the runaway shelter wing in the Zepf Center’s new Ashland Avenue facility. Because there were representatives from various County funders and the community foundation at the table, it was simple to secure resources needed for start-up.  The new shelter would be known as Safety Net.

When some of the grasstops group members started to hear about the existence of two other, similar organizations, it immediately acted to welcome them to the conversation.  Both grassroots groups were invited to participate in the monthly planning meetings.  But there is no magic to the discovery.  I would describe the process in this case, and in most cases, as being “analog” as opposed to digital. There is no database that easily flags new organizations in a community.  The way in which the discovery of each other occurred was simply that the Toledo Community Foundation was e-mailed by one group, and became aware of the other through that groups own activities and publicity.

One of the groups decided to join the grasstops table and become an active participant. This impressive leader found a way to pivot the organization’s planned activities in order to compliment the work of the Safety Net Shelter. They decided to offer training around LGBTQ+ issues. They also decided that they would operate a drop-in resource center, engage in advocacy and find other ways to add value in the community.

In May 2016, the Safety Net Shelter at the Zepf Center had its soft launch. The demand was clearly there. They reported having served 40 youth before the grand opening.  

The other grassroots group decided not to participate as actively. It continued to solicit donations. It told donors it was planning to build its own shelter into early 2017.[1] Many generously gave to support the important mission of this agency.

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I share this case to illustrate some challenges our America system presents.

More than anything, we value freedom in the United States. Instead of managing our social service delivery systems from a hierarchical authority that manages everything, anyone can start a nonprofit. As long as a start-up nonprofit organization can find backers (donors, funders, volunteers and anyone offering in-kind resources) and complete required filings, it can operate freely. Like I described here, many great innovations are a result of this system.

Many view the nonprofit system as having entrepreneurial qualities. Anyone can start a business. As long as there is access to sufficient start-up capital and it’s not illegal, he or she has the freedom to launch.  The free market dictates that the businesses that offer value succeed, and the ones that don’t, fail.

But there are a number of reasons why this analogy doesn’t really work for the nonprofit sector.  Venture capitalists and banks do a lot of research before they decide to invest. In the nonprofit sector, the dynamics are more complex. Often, those who give money really don’t analyze much.

For example, what kind of research do you do before you give charitable contributions?  How often are you motivated by your heart and not your head?  We’ve all done it. It’s extremely common, even among the very wealthy. According to a November 2017 article in the Chronicle of Philanthropy, “Many wealthy donors rely on family and peers when making decisions about giving, not necessarily on professional staff or evaluations, according to a new survey of 219 people, most of whom donated at least $100,000 in 2015.”[2]

Based on my experience in philanthropy, working with donors giving anything from $500 to $100,000, few donors really analyze the organizations they support at all.

There are some problems with this approach.

• Donors often don’t know if there is evidence to support the programming, so they might give to something that doesn’t work.
• Donors don’t often analyze the “competitive landscape” – so they don’t know if the services are already being provided elsewhere, and just need to be expanded.
• Donors also don’t often understand the funding landscape (public and private) – so they have no idea of how to realistically assess whether an organization can raise the dollars it needs to be sustainable – or if there are other dollars already paying for the program under consideration, or others like it.

Also, the concept of “value” is unclear in the nonprofit sector. Because so many give without analysis, but in response to an effective marketing campaign, ineffective, inefficient, duplicative organizations can sustain themselves for a very long time. We very often end up with a duplication of services in a given metro area, which isn’t very efficient. Because there isn’t any real accountability mechanism in the sector, a nonprofit can deliver programming  without any basis in research or evidence, without clear productive outcomes, which really doesn’t offer much value at all. Many argue that the sector provides a moral safety valve. People give oftentimes because of how it makes them feel about themselves.

And, more importantly, because we break up our providers of public goods and social solutions (the nonprofits and governmental agencies) into so many little, tiny pieces, communities are ill-equipped to solve big, challenging problems. 

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This story also illustrates another challenge for communities.

There is a public information problem within this story that nobody has figured out how to solve.

For donors who are interested in supporting runaway youth, whose job should it be to inform them that their tax dollars and significant philanthropic resources are already being used to support a much stronger, more sustainable, well-managed youth runaway shelter?

Similarly, whose job was it to discover and inform the grassroots founders that a significant conversation was taking place among local government agencies, and public and private funders about how to tackle this issue – or vice versa?

These are difficult questions with no easy answers.

There were many different stages for the local folks who help nonprofits form to stop and consider how and if the formation would be a wise venture for the broader community.

The “midwives” to new nonprofits are often well-meaning attorneys and CPAs who consider that they are doing important work by offering pro bono services to help in the establishment of new organizations.  Their involvement is often interpreted as a vote of confidence by the founders.

Too often, the ultimate sustainability of the nonprofit organization is neither their area of expertise, nor their concern. One attorney I spoke to, who often generously gives of his time to support the formation of new nonprofits said to me, “Come on, there’s lots of money in Toledo. Look at all of these other organizations.” This is an oversimplification of the issue. Raising money is hard. It requires skills, marketing and capital. New organizations are competing for resources in an environment flooded with experienced, professional fundraisers.

And unfortunately, there is no comprehensive, workable nonprofit database or resource that makes it easy to understand who is currently doing what – much less who is engaged in the planning and incubation of new endeavors. Discovery of each other is often a product of chance.

How and where should information like this be managed?

Plus, there are no widely-known institutions within the local civic context that really provide any comment on the value of a proposed nonprofit organization to the community it intends to serve.  This can lead to wasted donations, ineffective organizations, missed opportunities to leverage funding and build the electorate’s understanding of its local public and private resources.

And who should play this role in a community?

Both the state and the federal government are agnostic on the value of proposed services within a particular community and reasonableness of the proposed revenue model when new nonprofit corporations are formed. This is both at the Ohio Secretary of State’s office or when 501(c)(3) status is  granted by the IRS. These agencies simply verify that the fledgling nonprofit is within bounds of the charitable provisions of the state code and the Internal Revenue Code. That’s it.  And there are many reasons why this is a good thing. Would we want the state and local government weighing in the value of a new nonprofit to a local community? Probably not. It could kill innovation. It might not be managed well. It just doesn’t go along with our American way of doing things.  All this and host of other reasons.

Private philanthropy is not always well-positioned to play this “traffic control” role in a particular metro area.  Private foundations are often governed by their own philosophy, idiosyncratic geographic scope and set of priorities.

Community foundations are one of the few organizations that can and do provide guidance here.  The staff of a community foundation, particularly the program department, is constantly immersed in the nonprofit sector of a local area.  They study the local funding landscape, evidence-based programming and evaluate the work of nonprofits they help to fund. Because of this, community foundation program officers often have a field-wide view, and knowledge that can help folks discern the need for a proposed service or new initiative. But in the grand scheme of things, relatively few consult with the Toledo Community Foundation or the Center for Nonprofit Resources, its technical assistance arm, prior to launching new organizations – or funding them. I plan to explain the role of foundation program officers and explore the potential for community foundations more in a later article.

Even without any well-developed programs to speak of, many nonprofits continue for quite some time, sustained on fumes: an existing, yet relatively uninformed donor base, relationships, enthusiasm, and solicitation from unwitting members of the community (i.e. other donors and funders who don’t do their homework).

No easy system exists to put a stop to the proliferation of often very well-meaning, yet duplicative organizations.  There is no civic infrastructure in place to address this situation.  Private individuals, donors, foundations and corporations are investing time, money, and resources, often in ways that are inefficient and ineffective.

How can we transform the way we manage information, and make decisions in our communities so that we can more effectively use public and private resources to address community challenges?

That is a question I aim to explore throughout my writing. I encourage you to share your ideas in the comments section.

Epilogue:

Since the time I originally wrote this piece, the organization that was committed to launching its own shelter no longer appears to be on that path. Instead, it operating a drop-in resource center and conducing advocacy work. The other leader is focusing on advocacy and offering supportive, complimentary services to the LGBTQ+ target population.  Both groups are to be commended for taking the steps that they have. Our community and our youth are undoubtedly better off because of their actions.

 

 

 

 

 

[1] Their website, checked on February 1, 2017, stated: “Harvey House is an up-and-coming LGBT youth homeless and runaway resource center and shelter in Toledo, Ohio. We are in the early stages of raising money and seeking a building. (From http://www.harveyhousenwo.org.)

 

[2] “For Big Philanthropists, Advice From Family and Peers Is Still Key to Giving, Study Finds” by Timothy Sandoval, The Chronicle of Philanthropy (November 14, 2017) , available at https://www.philanthropy.com/article/For-Big-Philanthropists/241758/?key=0mdOBfPXzVTrDoSIc1iezEY9kCYvONyai7EXjE9zYIvQT9b3pTbNeAKHKSD_z5v6aU40dUwzWkg1ZWFPTkl5TGR3SmFEaVlZZFRvd0VrTWlUZGJkQXplN3JySQ