I Closed my “Own” NPO

by Ephraim Gopin

“Let me tell you a story to illustrate the absurdity of the over-abundance of nonprofits: The Knesset Committee in charge of distributing funds to nonprofits met. First up was the Israeli Association for the Blind. They made a wonderful presentation of their work and funding needs. Next in the room was the Association for the Blind and Deaf in Israel. Next – Association for the Blind in the North. Then the Association for the Blind & Deaf in Jerusalem. You get the idea …

Yes, each separate organization serves the needs of a specific niche. Yes, they each do wonderful work for their constituents. But government ministries and donors have a set amount of funds. Similar-mission nonprofits need to merge, rather than staking out their own territory.”

That is a paraphrase of comments from Professor Hillel Schmid, Director of the Center for the Studies of Philanthropy in Israel (Hebrew U), at a conference I attended in 2008.

No truer words have been spoken.

I read with great interest the point-counterpoint by Robert Evans, Avrum Lapin and Seth Chalmer featured on eJewish Philanthropy recently. As someone who has recommended to a nonprofit Board to cease operations, I feel I have a unique perspective on the issue.

I have worked as a fundraiser and CEO in Israel for the last ten years. I have discussed this countless times with other professionals and I always come to the same conclusion: There are too many nonprofits and institutions in Israel. I firmly believe that merging nonprofits with similar missions will create a more stable, vibrant sector where long term well-being and strategy are dominant, as opposed to the pettiness of “kavod” – honor – taking center stage.

Or as I like to say: Everyone and his brother run a nonprofit here.

Israel has never encouraged this thinking. Until the Knesset passed a new law in 2009, two nonprofits could not merge (the first merger happened exactly one year ago). One had to shut down and then the other could take over its operations. This of course becomes a game of cat and mouse; two nonprofits who are both struggling, they KNOW they need to merge to survive and yet they refuse to yield! Why? The CEO’s can’t imagine working under someone else! They both continue to travel overseas, searching for their share of the ever-shrinking slice of the donation pie.

Israel has 40,000 registered nonprofits – 5-10,000 of which are active at any given time. We all know that a great percentage of them depend on overseas funding for survival. With the world recession and federations keeping more funds at home, we should be REDUCING the number of nonprofits here seeking funding overseas.

I am well aware of the dangers of merging – job and salary slashing being the worst. However, we should encourage this behavior because the alternative is worse: nonprofits who are debt-ridden, can’t pay salaries or suppliers, may have to shut down. In that case, everyone is out of a job. Donors and foundations should be pushing similar mission-oriented nonprofits to merge, as a means of survival if nothing else.

Lest you say I talk the talk but don’t walk the walk, here’s my story: I recommended to the Board of a nonprofit I headed to cease operations.

When I settled into the CEO chair and began looking over the financials, I was shocked: the organization was in major debt. When I sat with the CFO, we tried every which way to avoid the “cut, slash, burn and trim” method of nonprofit management. To no avail; the pit was too deep.

Finally, after all options had been exhausted, I sat with the Board and told them unequivocally: We need to cease operations immediately, declare bankruptcy and try to find another nonprofit to take over operating the facility (this was before the 2009 Knesset law was passed). In this manner, we hoped to save as many staff jobs as possible and work on an arrangement where the nonprofit who takes over would repay the debt to suppliers.

I know there are too many nonprofits, too many institutions in Israel. Some are in debt, are behind in paying staff and suppliers and yet they refuse to shut down. I also know that upper management would never “fire themselves.” But something has to be done because, when a recession hits, the whole sector suffers enough. The problem is compounded when, in reality, a little forethought would have made the sector stronger, not weaker.

Nonprofits won’t consider merging. Maybe it’s time for donors to demand it.

Ephraim Gopin is a Social Media and Fundraising consultant. He works with nonprofits to get them started using social media to engage, cultivate relationships and, ultimately, fundraise. Read Ephraim’s blog to learn more about using social media for fundraising.

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Comments

  1. says

    You are definitely right about the need. And you are almost certainly right that most nonprofit CEOs would rather bleed the entity dry than merge- sometimes due to false hopes, otherwise due to greed. I once sat with a nonprofit CEO whose organization was doing something similar to others’ and asked him: “What’s your competitive advantage?” Response: “Come on, Ben, this isn’t a business.” Oh, yes it is.

  2. says

    Hey Ben-
    yup! how many times have I heard “God will provide.” And salaries are 9 months late…..

    As far as an NPO being a business- 100% agreed! There is no such thing as Not For Profit- if you don’t have enough funds, you can’t provide for your constituents. If that’s the case, shut it down. Harsh? Yes. But necessary for the long-term survival of the sector.

  3. says

    Hi Ephraim (and Ben by extension),

    Thanks for sharing your personal experiences. Definitely some Food for Thought.

    First, I think you raise a very important point, though it was only brought in at the very end: The donors are the ones that are going to have to force the issue.

    It is my belief that competition is good. Seeing another organization encroach on your turf could be just the thing you needed to push your nonprofit to become better. With that said, after the competing charities has been vetted, it is up to the donors to stop spreading their money around and invest in the most effective organization with the greatest impact.

    For my second point, I would like to play Devil’s Advocate. Let’s say you’re right and there are too many charities in one particular field — duplication, excess management and the like. What is to say that merging will actually cost less than running a competing organization? It could very well be that over time — maybe in both the long and short term — it is cheaper to run a second organization that might overlap here and there, but is also leaner and meaner than the competition.

    Regards,

    Shuey
    @nonprofitbanker

  4. Just another voice says

    This is indeed a very interesting if not frustrating subject. As someone who has been involved in NPO activities both in Israel and abroad for over 40 years I must admit that there are tremendous problems with this segment of society. Probably most of it comes from the way that NPOs here in Israel are set up. In cases with which I am personally familiar, the heads of the national organizations get money from the government but seldom share it with their constituent organizations. This has led the smaller groups even those that are affiliated with the national ones to have to acquire their own government funding. It’s tragic because many of these smaller organizations are doing work that the national ones are not doing but can’t get the govt. funding in order to help the very people who need the help.