For those in the know, Charlotte’s nonprofit community is tight knit and easy to navigate. But for many, the sector as a whole is murky and unclear – what are nonprofits, what do they do and how do we engage with them?
Illuminate is a twice-monthly series facilitated by Josh Jacobson of Next Stage Consulting and hosted at Hygge, a coworking community near uptown, where participants gain a better understanding of how nonprofits in the Charlotte region are working on their behalf.
The first session was held on Tuesday, October 20, 2015 with a group of 20-some participants including thought leaders, nonprofit managers and people eager to plug in. The goal of the first session was to provide an overview of a few trends that are impacting Charlotte’s nonprofit sector and encourage a conversation about how to use the series as a platform for discussion and problem-solving.
The following outlines Josh’s initial presentation:
“For too many, the basic nonprofit structure is not well understood. Having worked with many nonprofits, I’ve seen staff and volunteer leadership both misunderstand the underpinnings of their enterprises.
“In some form or another, the concept of charity has existed in America since colonial times. Dan Pallotta talks about the impact of guilt felt by Puritans in his game-changing TED Talk, with the success of capitalism also giving rise to penitence in the form of charitable contributions. But until the late 1800’s, the IRS did not recognize such generosity in the tax code.
“According author Peter Dobkin Hall, the modern 501c3 public charity classification traces its roots to westward expansion during the late 1800s, when the ambition to settle uncharted territory got ahead of governments ability to meet the needs of its citizenry. But even more influential was the desire by tycoons of the era – Rockefeller, Carnegie and Morgan – to unburden themselves of a small portion of their massive fortunes.
“For a long time, Americans were suspicious of charities because they were private enterprises with no accountability. Its citizens had fought two grueling wars (The Revolutionary War & The Civil War) to fight for democracy, and the notion of charities (popularized first in Europe) were viewed with suspicion. The creation of the tax-exempt charity tax status came with it the opportunity to regulate these entities for the first time. That included appropriating them as “owned by taxpayers,” with a governing board of directors drawn from that tax base to serve as ombudsman for “the people.”
“I find this fact is too often misunderstood by Executive Directors and Board Members alike, who confuse their charge. The Governing Board is empowered with providing oversight in the entire community’s best interest first and foremost, ahead of the more narrowly defined audience served by the charity, its staff or donors. This charge to “do what is best for the public benefit” is a very different way of thinking for anyone without a degree in public administration.”
“While the first nonprofits were created in the late 1890s, they were not immediately popular. In fact, even as late as 1940, there were just 12,500 registered nonprofits (excluding religious institutions which have always been treated differently). WWII and the New Deal dramatically transformed America. Though the income tax had long existed, the 1940s saw withholding tax skyrocket and with it a host of tax code loopholes designed to encourage charitable giving a part of their annual planning. And with that, the nonprofit sector dramatically expanded.
“As of 2012, there were more than 1.5 million registered 501c3 charities in the U.S., with more than 90% founded in just the last 65 years, and I’d argue the number is likely even higher now. Some estimates put the total number of nonprofits in the U.S. at 1.7 million. In 2014 alone, the IRS issued more than 100,000 new 501c3 tax determination letters (against just 500 declinations).
“The explosion in the number of nonprofits has had a big effect, and one not mentioned by Dan Pallotta in his famous talk when he discusses contributions to charities remaining at 2% of GDP since the late 1970s. While GDP has not quite tripled since 1980 ($6.5 trillion vs. $16.3 trillion), the nonprofit sector has quintupled during that same timeframe (320,000 nonprofits in 1980 vs. 1.7 million in 2015).
“The result? Increased competition, duplication of service and inefficiency.”
“This trend is mirrored in Mecklenburg County, where the population growth rate has not kept up with the expansion of the nonprofit sector. Over the last twenty years, Mecklenburg County’s population has roughly doubled while the nonprofit sector has tripled.
“In total, there are 4,930 registered charities in Mecklenburg County. Of those, 551 are private foundations and 789 are other types of nonprofits, including 501c6 organizations that serve as business associations and chambers of commerce. There are 3,590 public charities, which are traditionally what we think of when we hear ‘nonprofit organization.’ This includes very small organizations doing work in discrete sections of the city all the way up to universities, hospitals and massive nonprofit agencies with a multitude of programs.”
“This overview will end with this graphic, which shows that more than a third of public charities in Mecklenburg County have less than $50,000 in annual revenue. These include all-volunteer organizations, newer charities that have yet to expand operations as well as longstanding organizations that have hit a wall. On the other side? More than $1.2 billion in revenue to 2,280 public charities.
“While the instinct may be to see the smaller organizations as ‘cluttering up the landscape,’ the truth is far more complex. I encounter innovative new nonprofits every week that are disrupting the nonprofit sector, challenging the status quo and using evidence base to make an argument for increased contributions. But with competition at an all-time high, entrenchment by established nonprofits and a lack of commitment to true collaboration, the road ahead is not clear. The leaders of charities of all sizes are typically exhausted, fighting to be heard in a sea of messaging. Frustrated, they get discouraged, run out of steam and even abandon the dream. We are losing some of our brightest and most capable nonprofit leaders due to these factors. And if Mecklenburg County is set to grow to more than 1.5 million by 2030, how many public charities might there be by then?
“I’ve established Illuminate to provide a platform for discussion of these and other issues facing the nonprofit sector in our region. The solutions lie not in silos of programming but in collaborative discussions about the ‘public good,’ the charge every nonprofit has been created to carry as a torch for residents. I want to provide a platform for innovative nonprofits that deserve to break through and for dialogue on issues important to us all.”
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While a heavy subject to begin what is meant to be a hopeful workshop series, Josh did outline four areas of excitement for the nonprofit sector:
- Generational Changes – The current generational transfer of wealth from the Silent Generation to the Boomer generation is the largest in history, and it is leading to new perspectives from recent retirees who have a very different world view than their parents. The rise of the Millennial is also a positive trend, with a thoughtful commitment to problem-solving and social connection that promises an exciting paradigm shift for nonprofit engagement.
- Technology – The advent of the Internet radically changed nonprofit management. Social media has made it possible to communicate more efficiently than ever, while ‘big data’ has made generating evidence of impact more accessible to charities of all sizes. If nonprofits are to be held to new standards of effectiveness in the future, it will be because data has led the way.
- Growth – Mecklenburg County’s growth is fueled by transplants. These new residents are a blank slate for nonprofits, unencumbered by history or relational ties. For most nonprofits, their hope for expansion of services lies not with institutional funding from corporations and foundations but instead from philanthropy generated by new Charlotteans with a hunger for social cause.
- Community – Charlotte is an amazing place for a multitude of reasons, but its community may be the most transformative factor for nonprofit organizations. The city is alive with energy and change agents who commit their lives to improving the world in which they live. Indeed, it is with community in mind that the Illuminate series at Hygge was established.
Liking the content? Want to be a part of a new nonprofit movement? Check out the Illuminate page on Hygge’s website and check out the events calendar for the next session. Know of an organization that is deserving of increased visibility and attention? Fill out the form at the bottom of the Illuminate page and let us know!
Special thanks to Eric Gorman from SlowThink for his help with the inforgraphics. Talented fellow, he is.