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Notre Dame’s Thomas J. Harvey Discusses Future of Nonprofits (Part I)

By Bisk

Tom Harvey Notre Dame Nonprofit ProfessorFrom leading one of the nation’s largest coalitions of religiously affiliated social service agencies to being honored as a pioneer in social work, Thomas J. Harvey has earned numerous distinctions during his decades-long career.

Since 2005, Harvey has served on the faculty at the University of Notre Dame’s Mendoza College of Business, where he currently is the Luke McGuinness Director of Nonprofit Professional Development. Prior to joining Notre Dame, he was senior vice president of the Alliance for Children & Families, which comprises more than 300 private, nonprofit organizations that serve millions of disadvantaged clients annually around the world.

During the 1980s and 1990s, Harvey spent about a decade as president and chief executive officer of Catholic Charities USA, which previously was known as the National Conference of Catholic Charities. Harvey, who has master’s degrees from the Columbia University School of Social Work and Gregorian University in Rome, Italy, was named a social work pioneer in 2003 by the Council on Social Work Education. He also is co-author of the 2009 book Nonprofit Governance.

In the first part of our two-part interview with Harvey, we asked him about some of the challenges and opportunities ahead for the nonprofit sector, including economic downturns and donor turnover.

Despite the nation’s wealth, homelessness and hunger persist in the United States, and poverty rates have been rising. How can nonprofits best combat those realities?

The nation’s wealth is virtually not affecting 50% of the nation. It was unionization and a large pool of good-paying, blue-collar jobs that strengthened the economy and lowered the poverty rates during and after the Great Depression. Right to Work laws have weakened unions and good-paying, blue-collar jobs are much fewer in this country, leaving mostly the poorest-paying jobs to the most needy individuals and families. Nonprofits on their own cannot reverse the negative trends. However, they must know that the majority of the nation still considers poverty as a behavior problem rather than as an economic and systemic reality in the capitalist system. What can nonprofits do? If they do not have jobs to offer, they had better educate this nation about what forces create unemployment and by extension, poverty. As the economy continues to grow on a global scale, it will continue to be easy to grow the gap between the rich and the poor.

Economic downturns typically force nonprofits to cut costs by freezing salaries, laying off staff members or serving fewer clients. How can a nonprofit buffer itself against a recession?

a)      A diversity of funding sources will help lessen vulnerability to major cutbacks in one level of government funding. A good fund development arm that raises private, discretionary income is critically important and can act as a tool to educate the public about social problems.

b)      Agencies can be entrepreneurial in offering middle-class services on a sliding pay scale. This permits some programs to be more self-sufficient and income-generating.  It can also expand the organization’s donor base. Wherein poverty clients can usually not donate, more middle-class clients can. Many nonprofit service providers are doing some very innovative work in this area of service and of new income.

Organizations that rely on public donations often experience high turnover in their donor rolls. How can nonprofits retain a larger portion of their donors?

Some donor loss is inevitable due to death, transfers, job loss, illness, etc. However, well-run organizations that efficiently communicate with donors actually will grow their donor base over the years.

What do you see as the biggest challenges facing the nonprofit sector over the next decade?

Much of the challenge will be similar to the problems of the past 25 years:

a)      In most nonprofit service providers, well over 50% of income comes from a governmental source. Thus, they are driven by a decision-making planning process that is more political than rational. Rational planning begins with a needs assessment, reviews the level of resources available, chooses from among options, implements and, after a defined period of time, evaluates the program.  Rational planning rarely happens when governmental funds are involved. A governmental planning process involves a rivalry of interests to find a consensus on what to fund. This process suffers from the competition induced by large deficits (we can’t afford to do what is needed) and from the fact that few people affected by such programs are in the political process, which leads to programs not well aligned with needs.

b)      Government funding for a for-profit program (such as a new highway) will fund at 105% or 110% of the request because materials may rise in cost over the life of the contract. Not so with government contracts with nonprofits. Because of tax benefits, most such contracts pay less than the cost of the program and they only pay for specific program costs with no margin to pay for infrastructure. This means the nonprofit is actually subsidizing the government funding.

c)      Personnel. It is hard to retain the best and most talented employees if there are few or no raises over many years. Thus, while most nonprofits can still hire talented young people who have a passion for some particular service, it is harder to retain more senior employees who have mortgages, tuition obligations, etc.

Read Part II of Tom Harvey's Interview


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Category: Nonprofit Leadership