|
Importance of the Nonprofit Sector by Peter Manzo, Former Executive Director, Center for Nonprofit Management This article originally appeared in The Los Angeles Business Journal, Vol. 20, No. 46, November 16-22, 1998 How is it that the most sophisticated fund managers and investors, the most sought after economists and analysts, know almost nothing about a sector of the economy that contributes 8% of GDP, employs 10% of the workforce, generates approximately $700 billion in annual revenues? This sector, of course, is the charitable sector.
As these employment and revenue figures show, charity is serious business. Charitable organizations are no longer (as many assume) simply associations of volunteer do-gooders. Nonprofit organizations provide medical care, preschool through university-level educations, museum exhibits and arts performances, care, workforce training and education, counseling, food and shelter, housing and economic development, and much more. Yet, all of this activity goes unreported in economic news, perhaps because nonprofits do not post quarterly earnings reports or feature P/E ratios. In fact, most nonprofit organizations confront many of the same challenges as for-profit enterprises: attracting investment, hiring and realigning skilled employees, controlling quality, marketing and maintaining a competitive advantage. They do so, however, with fewer resources than their for-profit counterparts. Of course, they differ from for-profit businesses in several key respects. Nonprofits typically must satisfy at least two customer groups, their donors and the users of their products or services, and sometimes other stakeholders as well. Finally, the mission of many nonprofits is to alleviate some of the most intractable problems of our society, far more difficult to achieve than maximizing shareholder wealth. When we consider the impact the nonprofit sector has on the living standards and quality of life of everyone, even the wealthiest people, it is hard to understand why it is not better understood. Nonprofit civic and charitable groups touch us in all aspects of our lives. Yet most of us discount our reliance upon them. For example, our children may receive afterschool care at a community childcare center or Boys and Girls Club, play in a local soccer league, take swimming lessons at the YMCA, and watch Sesame Street on the public television station; we may listen to the local public radio station during our daily commute to work; our whole family may be born in and cared for at nonprofit hospitals, and visit museums or attend public arts performances; a homebound relative or neighbor may receive food and companionship from a Meals On Wheels program. For the most vulnerable members of our society, nonprofits are there with food for the hungry, shelter for the homeless and refuge for victims of domestic violence. In Los Angeles´ distressed neighborhoods, nonprofit community development groups build new affordable housing, acquire and rehabilitate existing units, renovate deteriorating commercial buildings, help local residents start and manage new businesses, as well as provide job training, computer literacy workshops, child care to assist low income working parents, and much more. Perhaps the most important role the nonprofit sector plays is to provide an arena for civic involvement. Former U.S. Senator Bill Bradley has observed, " neither government, the domain of law, nor the market, governed by economic self-interest, can itself make for sustained civilization." Charitable groups bring people together to work on common problems and interests and offer ways to connect to the larger community. Nonprofits also provide room for innovation and experimentation, free from the constraints of the market or government regulation. This combination of freedom and interaction between people sharing passion for a goal can produce incredible results. Indeed, no less an authority than Peter Drucker has observed that virtually every important improvement in the quality of American life has roots in the nonprofit sector, from abolition of slavery, child labor and racial discrimination to advances in medicine, education and technology. A month ago, Amartya Sen received the Nobel Prize in Economics for his compelling studies showing that the wealth of a society cannot be measured solely by per capita income or the estimated value of good and services bought and sold, but must also include measures of the quality of people´s lives (perhaps most notably, the health and educational status of women). What was true in Dr. Sen´s studies of lndia and China is even more true for the United States. We are immeasurably enriched by what the charitable sector produces, though this may never be reflected in leading economic indicators. v |
