What To Do About Zombie Nonprofit Organizations?

What To Do About Zombie Nonprofit Organizations?

In my work with nonprofits it can feel like I’m in the Land Of The Living Dead with all the zombie organizations I encounter.  At times it feels like the world is awash in nonprofits which lumber on with grossly underpaid employees and dysfunctional infrastructure. Our communities are chock full of organizations with caring but demoralized staff, outdated information systems, semi-functional Boards Of Directors.

So why aren’t more leaders asking themselves about their own relevancy.  If a nonprofit cannot raise enough capital to pay employees adequately as well as maintain a functional infrastructure, then perhaps it is time for the Board to ask, ‘If we can’t be first class, is it time to get out of the business?”

In the Age Of Austerity nonprofits must continually surround themselves with different kinds of talent and ultimately discuss if the community would be better served by either merging or else relocating programs and closing up shop.

It's the Board Of Directors!

It’s the Board Of Directors!

In the private sector, companies frequently reach the limits of growth in their current state and face the choice of either gradual decay or of selling the operation. They can’t, on their own, acquire the resources to take the enterprise to the next level of competitive excellence. Unless they find a partner or buyer, the company eventually employs round after round of cost cutting: gutting professional development, sticking with antiquated equipment, eliminating employee benefits, job consolidations, layoffs, etc. This continues until a fire sale or bankruptcy.

Yet in the nonprofit sector this continual decay never seems to reach the terminal stage. Organizations are able of secure just enough contracts or donations to barely limp along in a somnolent fashion. Not quite dead, but far from vibrant. These are our Zombie Nonprofits.

Organizations are people, yet the gross under-investment in human capital in Zombies is a continuing black mark on the entire sector. The sense that professional development is a frill is stunning after all we’ve learned about management, yet these investments are usually the first on the chopping block. The emotional desire to ‘put all resources into services’ is noble, but ultimately counter-productive. It’s better to have a first class staff manage a second class program than having a second class staff manage a first class program.

The second area which suffers is technology infrastructure. It is not uncommon to experience a nonprofit where the hardware is antiquated and software systems are disjointed: case management software can’t talk to fiscal, which can’t talk to evaluation teams which can’t talk to senior management. The result being a single client’s information may be entered 3 or 4 times resulting in huge inefficiencies. The point here is if a nonprofit cannot raise the resources to adequately invest in its people and technology, then it’s time to consider getting out of the business.

To be clear, this is not a decision an Executive Director is likely to recommend, research indicates the self-interest is too great. This is a Board responsibility. They must honestly evaluate the organization and determine if its time to relocate programming to another organization which can provide the proper staff and technology support. In the end it’s the public which suffers from Zombie Nonprofits.

5 Comments

  1. Nicely said. We need a market clearing mechanism such as investors serve in for profits. There is too much dead wood in the nonprofit world.

    Reply
  2. This is a good companion piece to what Simone wrote at NPQ. There are far too many nonprofits stuck in the same old. I think recognition of the need to change is widespread among nonprofit staff members (and most consultants, some funders, and many board members) but there is paralysis when it comes to the question of what to do about it.

    Reply
  3. At the Aspen Ideas Festival last year, one leader from the US put it this way: Some nonprofits, he said, are stuck on “the philanthropy dole.”

    A MAJOR philanthropist noted there’s been literally trillions and trillions of dollars given through nonprofits, with limited results. As a businessman turning toward social change ventures, that nonprofit model baffles him. In essence, his point was: “If you give me money, I produce results,” he said of his company. “If I don’t produce results, I don’t get more money.”

    That's what drives socially responsible investing. In the new world, 'investors' are willing to trade their money for achieving some social change, or “social return.” No change, no more money.

    Period.

    Reply
  4. We distribute over $1 million a year in aid. The bind faced by foundations is that by eliminating funds for a bad or 'Zombie' organization (I love that term and will be using it in our internal discussions) is an immediate hole in community services. They may be bad nonprofits and inefficient, but they still touch a segment of our community with a vital service. How do we cut someone loose without hurting the underclass?

    Reply
  5. Momitrimmy….haven't heard the phrase 'underclass' in a long, long time. Do use that in your documents?

    Reply

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