Alliance Report Predicts Opportunities and Pitfalls for Nonprofits in the Near Future

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A series of disruptive forces in the delivery of human services will offer nonprofits willing to take chances, forge networks and share information the ability to thrive in coming years, but could be the death knell for organizations that are inflexible and stuck in survival mode, a report released today by the Alliance for Children and Families states.

The report, prepared by the Milwaukee-based membership organization with the assistance of nonprofit accounting and consulting firm Baker Tilly, identifies six “disruptive forces” that could create “such dramatic change that it transforms existing industries or creates new ones.” 

“Because most organizations have been in survival mode over the past several years, we have witnessed many of them adopting a bunker mentality,” the report stated. “To execute a large-scale sector shift … no less than an alteration of this business model is required.”

One of the major disruptive forces, or changes, is the disclosure of personal information within the health and human services field.  The availability of widely shared information online will make regulations like the Health Insurance Portability and Accountability Act (HIPAA) “lose its exact relevance,” said Baker Tilly Director Monica Dalwadi, speaking at the first public presentation of the findings at the Alliance’s national conference in Washington today.

While the availability of such information will provide massive opportunities to research and evaluate youth-serving programs, it will challenge a long tradition of privacy protection when it comes to youths and parents involved in government-run systems such as child welfare and juvenile justice.

“We were surprised how open people were to talking about” information sharing, said Alliance CFO John Schmidt after the presentation.

The report identifies five other disruptive forces:

Purposeful Experimentation: Providers will have to be willing to try out new technology involved in the delivery and measurement of services, the report said, which goes against the traditionally risk averse nature of nonprofits and their boards. Funders should assist in this by creating endowments for research and development, the report states.

Integrating Science: New advances in medicine and therapy pose new avenues of success and new costs for providers seeking to treat patients, particularly those suffering from mental illnesses.

The report uses the example of new advances in the treatment of Post Traumatic Stress Disorder, in which new medications have been shown to erase the underlying memories, according to the report. Attorney General Eric Holder has brought PTSD and other effects among children exposed to violence to the forefront with the Defending Childhood initiative, a modestly funded Justice Department effort to implement services for such youths, who are statistically at high risk of becoming victimizers themselves.

Uncompromising Demand for Impact: “The ability to demonstrate that particular interventions have efficacy will result in payment,” the report said, referring to the increased expectation for outcomes and cost accountability on the part of funders and government agencies. “Funding will be directly aligned to the ability to articulate proven, low-cost impact.” The Obama administration has embraced this “evidence-based standard” for federal contracts.

Branding Causes, Not Organizations: The traditional marketing strategy of connecting donors and customers based on name and specific services will give way to branding strategies focused on leveraging “causes based on issues [rather] than on their particular brand and programs.”

Attracting Investors, Not Donors: As branding strategies take a wider angle, the report predicts, the predominant funding mode will shift from isolated grant makers or donors to aggregated investors. “Collaborative investment by multiple investors with a common mission will likely be the norm of the future versus individual donors,” the report said.

The Growth Capital Aggregation Pilot, started by the Edna McConnell Clark Foundation, is listed as an example of the emerging trend. EMCF used $39 million of its own money to leverage $81 million from 19 co-investors to invest in three youth-serving programs: Nurse-Family Partnership, Youth Villages and Citizen Schools.

The report also notes the increased interest in social impact bonds, a financial scheme in which n funder pays out on a social program only after the service provider has achieved certain outcomes. The Obama administration has proposed to include $100 million in the federal budget for such ventures.

Existing nonprofits must take advantage of these disruptive forces as they face competition from new and different faces in the near future, said Baker Tilly Principal Christine Smith, speaking at the conference today. She predicted a “significant growth in culturally-based programs that will compete with current ones,” with the most likely boom occurring in the development of programs designed for Hispanic populations.

For-profit entities and ventures started under the low profit limited liability corporation (L3C) will also be a larger player in human services, she said. Schmidt said he believes for-profits will enter the human services market in larger numbers, similar to the way that they rose to prominence (and in some cases, infamy) in the world of higher education.

The list of disruptive forces was developed through the creation of an advisory committee of experts, some from Alliance member organizations, which worked on the issues from March through July, and an online survey of 150 nonprofit leaders conducted over the summer.

The report makes no specific recommendations for organizations past a basic recognition of the importance of networking with other companies and nonprofits to maximize new opportunities.

“There must be a shift from an organizational-centric focus to an acknowledgment of the importance of networks and collaboration,” the report stated. “This shift will be difficult and will require many key players to set aside their own egos and become less defensive of their ‘home turf.’ ”

Attendees grabbed up hundreds of copies of "Disruptive Forces" on the way out of the session, even though no one offered a question to presenters. Later, at a small group workshop about the report, attendees expressed surprise at the branding forecast and indicated an existing acceptance of the need for networking.

How to Transform the Report to Action

“This conference in the past five years has invested time and effort on branding of  organizations,” said one attendee from a provider of residential and community youth services. “I’m struck by the conflict between” that and the report’s highlight of issue branding.

Another attendee pointed out that the two often coexist in private industry. For example, she said, various milk-producing companies pay for the U.S. Dairy Council to promote consumption of milk while they advertise their own labels.

A group of attendees at the report workshop discussed existing networks they participated in, and acknowledged that more intense connections among groups – including acquisitions and mergers – were already a reality.

“You aren’t going to make it without doing these things,” said an attendee from Florida of networking. Another attendee from Ohio described reactive ways he had already partnered his program with other service providers by outsourcing his transportation and nursing services.

The Alliance and Baker Tilly both intend to host webinars and training sessions about the report and its findings.

“We’re going to make this a cornerstone of the work we’re doing going forward,” said Schmidt.

Click here to read “Disruptive Forces.”

A Memorial

Families International paused this weekend to remember its longtime leader, and then used its annual conference to reassure members with the introduction of a high-profile successor.

Susan Dreyfus, Family International's former chief operating officer who currently leads the Washington Department of Social and Health Services, was introduced in person on Monday as the organization’s new CEO at the annual conference of the Alliance for Children and Families, a Families International subsidiary. The organization announced its hire of Dreyfus in a statement on its website last week.

On Sunday evening, the organization held a memorial service for Peter Goldberg, its CEO of 17 years, who died of a heart attack while hiking in Maine over the summer.

Dreyfus said she could only hope to meet and exceed Goldberg’s expectations of her. Fighting back tears, she told the crowd on Monday that Goldberg’s daughter, Jessica, had written her an e-mail encouraging Dreyfus not to base her decisions on what Goldberg would have wanted.

“She said her father was not big on following other people’s legacies,” Dreyfus told the audience.

Dreyfus said she intended to use the Alliance’s newly released report as a “roadmap” for her initial work at the organization. She will take the reins in January after leading Washington DSHS during a special session of the state legislature in which the agency’s fiscal future will be discussed.

“I will love my work, and I am proud to serve and represent you,” she said.