Volume 9 Issue 3 – Open Access Journal. Free to view here.
A US journal has recently published a whole issue devoted to developing a tool to assess the health of US nonprofit sector. In the context of the ACNC Commissioner’s initiative to define and measure Object 2 of the ACNC Act (The objects of this Act are “(b) to support and sustain a robust, vibrant, independent and innovative Australian not‑for‑profit sector”)[1], this is a timely piece of academic endeavour. I encourage all those involved to consider and reflect upon its insights.
I have taken a few excerpts from the journal issue which is freely available. I recommend all to read the issue in full. It represents an attempt at a multi-disciplinary and balanced approach to the task of assessing sector vitality.
Myles McGregor-Lowndes
ACPNS Founding Director
Assessing the Vitality of the U.S. Nonprofit Sector: Toward a Nonprofit Health Index
Alan J. Abramson Allison L. Grayson Jeffrey G. Moore
“While the Dow Jones Industrial Average and other indicators provide timely information about the health of the business sector in the U.S., there is currently no comparable measure of how the country’s nonprofit sector is faring.”
“We believe the development of better approaches for assessing the state of the U.S. nonprofit sector will be helpful to nonprofit and foundation leaders, policymakers, and others who care about and benefit from the health of this important part of our society. In recent years, the nonprofit sector has been buffeted by government spending cuts, reductions in private giving resulting from the Great Recession and tax reform, increased demand for assistance from individuals affected by natural and man-made disasters or not being helped by economic growth; increased competition from hybrid social enterprise organizations, generational changes in the nonprofit workforce, and other trends. More timely and complete information about how nonprofits are coping in these challenging times should help nonprofit and foundation leaders plan better and make more strategic investments, and help policymakers make smarter decisions about nonprofit issues.”
Moreover, a well-conceived nonprofit index has the potential to help the general public engage on issues affecting nonprofit operations. The nonprofit sector’s lack of visibility and complexity holds the public back from becoming active when public policy or other forces undermine nonprofit well-being. A visible, easy-to-understand health index would put the sector more firmly on the nation’s radar screen, much as nightly reports on the Dow Jones index, monthly announcements of the unemployment rate, and quarterly reports on the growth of the nation’s Gross Domestic Product focus our attention on the business sector.
“In many ways the four papers in this volume are an initial brainstorming effort to “stir the pot” on the issue of a nonprofit health index. Reflecting the fact that this is an early stage undertaking, the papers in this collection address very different issues related to the development of a nonprofit health index. The paper by Sarah Pettijohn and Elizabeth Boris, “Testing Nonprofit State Culture: Its Impact on the Health of the Nonprofit Sector,” explores how an important environmental factor, namely a state’s culture for nonprofit activity, may affect the health of nonprofits. For example, in states with a complementary nonprofit culture, like Michigan, New York, and Pennsylvania, nonprofits work extensively in partnership with higher tax and spending state governments to provide services. The paper’s findings affirm that environmental factors, like state nonprofit culture, matter to the health of nonprofits.
In “Nonprofit Social Capital as an Indicator of a Healthy, Nonprofit Sector,” Patrick Bixler emphasizes that a healthy nonprofit sector contributes to society through the social capital that it helps to build. As Bixler points out, “social capital” has a variety of definitions but broadly refers to the web of relationships, or networks, that an individual or organization is part of. According to Bixler, a nonprofit sector high in social capital is better able to build relationships to leverage resources and better able to withstand external financial or political strains. If nonprofit social capital were measured on a regular basis, nonprofit leaders, policymakers, and philanthropists could more easily support efforts to increase nonprofit social capital. In particular, Bixler sees special value in aid for umbrella organizations that weave nonprofits together, thereby increasing the nonprofit sector’s social capital.
Elizabeth Castillo’s contribution, “Qualities before Quantities: A Framework to Guide Dynamic Assessment of the Nonprofit Sector,” recommends a “capabilities approach” to designing a nonprofit health index. Castillo suggests a healthy nonprofit sector has the capacity to create sustainable value and wellbeing for individuals, organizations, and society. Castillo’s index would assess nonprofit capabilities in terms of the stock of multiple forms of capital – social, intellectual, political, reputational, financial, and others. An index that reflects capabilities and multiple forms of capital would help philanthropists and policymakers support the development of capabilities to produce increasing returns.
In “Evaluating a Nonprofit Health Index as a Policy Tool,” Roland Kushner draws on his experience in helping develop a National Arts Index to identify key considerations in establishing a Nonprofit Health Index. The National Arts Index adopts a balanced scorecard framework with measures of financial flows, capacity, arts participation, and competitiveness. Interestingly, Kushner found more attention to the arts index at the local rather than national level, with counties and cities using their index values to compare themselves to other jurisdictions. Drawing on the experience of the National Arts Index, Kushner suggests that a Nonprofit Health Index should be parsimonious, comprehensive of the field being studied, communicated clearly, and be supported by a measurement system that delivers clear answers.
While these four papers will certainly help to inform efforts to develop a nonprofit health index that are starting at Independent Sector and perhaps elsewhere, we are confident that the authors would agree that the papers in this volume just begin to scratch the surface on this important, complex topic. Recognizing the many challenges ahead, we invite others to join us in working to create meaningful, useful measures of the health of the nonprofit sector.”
[1] Note that the object is that of the ACT not the ACNC.
