When Projects Outgrow Their Founding Organizations

There are times when exciting, dynamic and innovative projects outgrow the Jewish organizations that created them. The professional and volunteer leaders that are committed to these projects begin to question whether it is in their best interest to continue as part of the founding organization. The question is, “Should they separate and establish an independent nonprofit organization?”

Projects that are initiated by nonprofit organizations often find themselves in a situation where their needs are in conflict with those of the founding agency. Although the project is providing a valuable service to the community there may be times when the connection with the founding organization no longer enables it to serve the community effectively. When this happens the people committed to the project must decide whether they maintain their present level of services or plan to scale back their services to the community.

For example, a multi-service agency in a Jewish community responded to the request of a group of young adults who wanted to reach out to the isolated elderly in the community. The nonprofit agreed to host the project and provided a room for the volunteers. In addition, they made their back-office functions available to the group and offered professional supervision in shepherding the project through its infancy. It also provided all the administrative and finance functions and processed contributions so donors could receive a tax deduction. In time the volunteers decided to recruit an advisory board in order to broaden their support in the community.

They were successful in creating an advisory board composed of religious leaders, high profile Jewish people holding public office in the city, committed Jewish communal professionals from a variety of agencies in the community, people who had philanthropic concern for the elderly and survivors of the Holocaust, and other interested parties. The original purpose of the advisory board was to be a thought partner in guiding the project and in developing their approaches to reaching elderly clients in need. In addition, the advisory board members advocated for the project’s annual allocation from the local Jewish Federation.

In time several volunteers became employees and received their salaries through the nonprofit hosting the project. Simultaneously, the discussions among the staff, the volunteers, and the advisory board members began to resemble a board of directors. The discussion quickly focused on the increased requests from clients, and the funds needed to expand their services to meet the clients’ needs. Following these deliberations the employees and volunteers consulted with the founding nonprofit, as well as, the local Jewish Federation, and there was no way the funds could be provided to enable them to keep pace with the growing requests for service.

The active volunteers and the staff debated how they would respond and then they consulted with the advisory board. There were different opinions and perspectives. The most committed people began to speak with a voice that echoed over and over again the need for the project to become an independent nonprofit organization. They had reached a point where the project either had to limit its growth or incorporate as a nonprofit organization. Following negotiations between the advisory board and the staff with the founding nonprofit, and the local Jewish Federation, the project separated and filed for legal status as a separate nonprofit organization.

The advisory board became a board of directors and assumed legal and fiscal responsibility for the organization. The founding nonprofit entered into a contractual agreement to lease space and to continue providing back-office services to the new organization. Of course this meant those involved had added responsibilities, however, they gained the independence and freedom to develop their financial resources and expand programs.

Immediately the board of directors and the staff initiated a strategic planning process and they did focus on how to achieve financial sustainability. When the new nonprofit was created those involved recognized that they would have to work together to raise the necessary funds and they could no longer depend solely on the allocations from the Jewish Federation or the occasional contributions that arrived at the office following the appearance of an infrequent newspaper article or the few donations received from clients’ families.

The new nonprofit became a part of the Jewish Federation’s affiliated agencies. It cooperated with other member organizations in providing comprehensive services to the elderly. In this case it was the best for the project to become an independent nonprofit organization. It is not always the best way to proceed and there are criteria that can be utilized to determine whether a project should remain within an existing agency or becomes a separate entity. Included in these criteria are the following:

  • The confluence of the project’s purposes with the founding organization’s mission.
  • The ability of the founding organization to continue meeting the needs of the population served by the project.
  • The commitment and the ability of the founding organization’s professional and volunteer leadership to continue implementing the project.
  • The financial sustainability of the project within the founding organization.
  • The anticipated level of community support for the project’s services and the feasibility of setting up a financially sustainable independent agency.
  • The ability to create a board of directors that will assume responsibility for the implementation and oversight of the services provided to the community.

Once the founding nonprofit and the project are evaluated according to these, or similar criteria, those involved will be able to decide whether the founding organization is prepared to commit itself to the ongoing support of the project or whether it is necessary to assist in creating a new independent nonprofit. In either case as a result of evaluating these criteria the community’s leadership will have a clearer understanding of what action has to be taken to respond to the needs in the community.

Stephen G. Donshik, D.S.W., is a lecturer at Hebrew University’s International Nonprofit Management and Leadership Program and has a consulting firm focused on strengthening nonprofit organizations and their leadership for tomorrow. Stephen is a regular contributor to eJewish Philanthropy.