Nonprofits and the Problem of Cultural Inertia

The Independent Sector, a leadership network for nonprofits, foundations and corporations working in philanthropy, released a report that looked at management, fiscal, and corporate practices in the nonprofit sector. Over six months in 2015, the Independent Sector convened meetings in 15 cities that attracted 2,000 participants, 71 percent from non-profit organizations. Almost one-third of these were CEOs.

The group collected more than 3,000 comments during the listening tour that were then summarized to form the basis for the report. The purpose was to inform strategic planning in the nonprofit sector.

Perhaps the most significant finding was that "many nonprofits and foundations are operating with organizational structures and revenue models that are decades old." The report concluded: "There is a need for new operational and business models to reflect the changing environment."

To present a balanced picture, the report highlighted successful examples of public-policy advocacy, especially at the state level, and cross-sectoral partnerships, including ones that improved measurable policy goals in areas like childhood obesity and high-school graduation rates. Diana Aviv, who resigned her post to lead America's fourth largest charity, Feeding America, came back to present the findings and cited a number of critical areas for improvement.

The Independent Sector found: "The sector is territorial . . . sector organizations compete with each other for turf and credit on complex issues that require multiple partners to solve them." To offset these findings, the Independent Sector cautioned that nonprofit leaders must "focus more attention on innovation, measuring the impact of their efforts." They should also "create funding structures that encourage risk taking."

The conclusions are instructive for groups across the nonprofit sector, including colleges and universities.

Like most of the American economy, the Great Recession forced American colleges and universities into hibernation, with colleges completing what projects were funded, refinancing variable rate debt, and delaying planning and the start of new initiatives. The prolonged recession also shed a harsh light on how nimble and creative colleges and universities were when dealing with the crisis. And by many measures, American higher education failed to rise to meet the new challenges faced in the 21st century.

First, as the Independent Sector report suggests, American colleges and universities failed to reform antiquated business operations and remained steadfastly loyal to outdated business models. While annual tuition increases moderated somewhat, the old economic models could not sufficiently account for consumer sticker price angst, political pressures to link education to post graduation employment, and the rise of alternative pedagogies and delivery methods infused by technology.

Second, the recession - while deep and prolonged -- was not sufficiently harsh to force a change in campus cultural inertia. For some colleges, it meant hiding their light under the proverbial bushel basket. They could wait out the storm. For a few, endowment returns to pre-Recession levels and belt tightening seemed to work or at least allowed them to kick the can down the road until the next national economic or political crisis. For others, new projects or promises made to conform to the start of comprehensive campaigns gave them the institutional courage to return to the debt market under the premise that new fundraising and improved endowment returns would allow the institution the time it needed to maintain a steady state. Boards of trustees determined to find the money and pay the price - later.

The problem with protecting the campus status quo is that the world had changed everywhere but inside the campus gates. For all of the intellectual debates about "disruption" as the new management buzzword, little actually occurred on college campuses. It's not to say that good work in critical areas like academic programming did not happen. There are innumerable examples of change today as colleges continue to evolve.

In the end, disruption remained largely an intellectual exercise.

We can think about it this way: What is the price paid by board chairs, faculty senate heads and presidents if they assume the role of change agents? What is the incentive to do so?

Third, there continued to be a major failure to educate key stakeholders. The worst offenders are boards of trustees. As my favorite board chair would remind the governance groups, boards are part-time amateurs and volunteers who meet occasionally to oversee full-time higher education professionals. It's a recipe for ineffective, incremental government at best.

Further, the failure of boards and senior staff to welcome faculty to the administrative side of the house, linking academics to the mechanics and economics of education promotes the cultural inertia that the Independent Sector highlighted in its report.

It's sometimes said that the best place to see the promise of America is on a college campus. There is energy and momentum from those who live the life of the mind. On the best campuses, you can feel it. But if the findings of the Independent Sector are accurate, the mechanisms of a college - especially the economics, governance, and education of key stakeholders - must adapt to support a breakout of the cultural inertia that binds a college to its past in ways that no longer serve it.