From Barrier to BuilderCategories Capacity Building, CDFIs, Collaboration, Commons (Nonprofit) Sector, Cooperatives, COVID-19, Fiscal Sponsorship, Funding Policy, Intermediary, MSOs, Nonprofit Effectiveness, Nonprofit Efficiency, Nonprofit Management, Service Organizations
Reframing Intermediaries as Collective Capacity Builders
It’s time to stop using the term “intermediary” and start using the term Collective Capacity Builder for nonprofits that provide resources to other nonprofits.
Why? Intermediary has all the wrong connotations and is likely one of the reasons that funders and donors are still squeamish about supporting infrastructure that seems to “get in between” their resources and the needs on the ground. “Intermediary” invokes bureaucracy, barriers, and needless added expense and complexity. Intermediaries are often painted with the same pejorative brush as “overhead”. Even though we’re starting to chip away at The Overhead Myth, we still battle it everyday. Most funders and donors still find greater appeal in giving to the person or organization that is most directly delivering the benefit than giving to an intermediary. Why not go right to the point of need?
Instead of intermediary I propose the term Collective Capacity Builder, or CCB, if we wish to indulge the power of acronyms to make things seem more legit. (A good acronym is easier to use in a sentence, makes anyone seem smarter at a conference, and mystifies your friends and family. What’s not to love?)
A Collective Capacity Builder is any nonprofit organization that provides resources to other nonprofit organizations, essentially a shared support hub for other organizations. CCBs are therefore different from the vast majority of nonprofit organizations that provide goods or services directly to individuals. “Capacity”, as used by the nonprofit world, refers to the scale at which a nonprofit performs its mission: to serve or support people, or conserve natural resources. So, if the purpose of a nonprofit is to build the capacity of other nonprofits, it is a Collective Capacity Builder.
CCBs describe a family of six nonprofit types that exhibit the common genome of sharing resources with other nonprofits, but differ with regard to the resource(s) in question, mode of sharing (delivery), and manner of governance or stewardship. The first three often exhibit “close” relationships with their constituent organizations, sometimes sharing legal structure and systems in order to provide a “direct” connection to resources, and ideally governed bottom-up by the organizations they benefit (“member” or “peer” governed). The latter three frequently lean more toward top-down, non-member governance and provide their resources more at arm’s length, but with close knowledge and understanding of their constituents.
- Fiscal Sponsors or Commons Managers (to use a new term), describes a group of models in which a single nonprofit provides shared back office support to multiple semi-autonomous missions. “Back office” here includes finance, HR, legal, compliance, risk management, fundraising, and marketing support. Comprehensive or “Model A” Fiscal Sponsorship allows multiple independent missions to operate directly under one nonprofit entity, sharing not just staff and systems, but also legal formation and tax status, while keeping public identity and mission-related decision making autonomous.
- Cooperatives and Collectives Serving Organizations take many forms, but frequently focus on shared use and management of physical resources (space, equipment, land, etc.) or intellectual property (software, ideas, processes, text content, art works, etc.). They can be for-profit or nonprofit, but entail in either case the collective development, management and/or ownership of resources. Both of these models maintain very close relationships with their constituents and invariably are governed by those entities sharing the resource(s).
- Land Trusts and Community Development Corporations (CDCs) are most commonly structured as shared management solutions for real property (buildings and land) of various kinds, in addition to offering other support services. Multi-entity models where distinct properties are managed through a subsidiary formation, are common. As such, land trusts and CDCs are often hubs and shared infrastructure for multiple organizations.
- Associations and Service Organizations include Philanthropic Service Organizations (PSO’s) and Arts Service Organizations (ASOs), as well as any other kind of alliance, association, or service organization that supports a membership or group of other nonprofits. Services and resources here range widely, but often center on field research, convening, advocacy, technical assistance, and grantmaking.
- Management Services Organizations (MSOs) provide arm’s-length (fee for service) back office support to multiple nonprofits that share a common mission or model. For example, Charter Service Organizations provide shared back office support to groups of charter schools.
- Community Development Finance Institutions (CDFIs) provide financial capital in the form of grants and loans. CDFIs also frequently provide other wrap-around services. They are always nonprofits, but can serve both nonprofit and for-profit entities (usually small businesses). The main resources CDFIs share are monetary capital and related financial services (consulting and technical assistance).
We need Collective Capacity Builders now more than ever.
With the sector reeling from the economic and social devastation of COVID-19, we cannot afford to avoid leveraging the scale of shared infrastructure that is already in place! As of this post, we have not even begun to see the impact on the nonprofit sector from the pandemic, as organizations are just now running out of the first round of Cares Act support, such as PPP, with shaky promise for more. Add to that time it takes most nonprofits to really sound the alarm, and we’re looking at late fall 2020 for the real crisis to emerge.
CCBs can make funder dollars go further faster. Capital investment and direct operating support to CCBs remains scarce nationally, in particular for fiscal sponsors. Private foundation assets, however, in the U.S. now exceed $1 trillion according to 2019 numbers from Candid. But according to GivingUSA, in 2018 foundation giving was only 18% of all giving in the U.S., totalling $76 billion. (Individual giving, in contrast, was 68% of all giving, totaling $292 billion. But raising funds from individuals for CCBs is even more challenging than foundations, as noted above.) While there are urgent calls for foundations to distribute more than their statutory 5% of assets, in particular in our time of crisis, movement on this front is slow.
At the same time, foundations constantly wring their hands about how the demand on their dollars so greatly overwhelms grantmaking capacity, in particular for unrestricted operating support. (One funder-driven COVID relief fund in Philadelphia received 50,000 applications for only 200 grants!) It’s no wonder: foundations together are a minority player (so long as they keep to their current payout rates) in the charitable economy, despite the outsized attention they receive from the public and grantseekers.
In addition to pushing beyond the 5% payout, foundations as a group need to make a firm and long-term commitment to providing direct operating support to Collective Capacity Builders. By funding CCBs foundations can cut down on paperwork, process, and precious time, while providing real general operating support to multiple missions in one stroke, instead of struggling with the tedium of numerous one-customer-at-a-time operating grants. And CCBs, when well run, can offer a higher quality and more sustainable operating resource (see next bullet) for nonprofits than a small, stand-alone organization is likely able to achieve on its own.
CCBs create strength and resilience out of fragile fragmentation. With 88% of all nonprofits (nearly 1 million and counting) operating with budgets below $500,000 and more than half of these with less than a month of cash on hand, fragmentation and its result, fragility, are perhaps the largest threats to our sector today. There is, however, safety in numbers, both in distributing risk and sharing in collective knowledge and other strengths. By creating a collectivised resource (staff team, technology system, set of policies/processes, financial capital, etc.), CCBs can ensure greater stability in maintaining said resource. Essentially, the risk of failure (losing the asset because one organization can no longer afford it) is distributed among multiple organizations. This is the virtue of cost sharing: if one constituent organization of a fiscal sponsor fails or cannot make its monthly financial allocation, the activity of the remaining organizations can pick up the slack.
CCBs create efficiency in coordinating and maintaining resources. A recent study of 475 arts and culture organizations in Southeastern Pennsylvania by Social Impact Commons found that independent organizations spent between 17% and 27% of revenue on the same back office supports that a fiscal sponsor can provide for between 9% and 15% of revenue–a difference of about 10% of revenue that could reallocated to program or other needs! CCBs offer clear economic benefits, but also tremendous time and effort efficiences in developing a specialized area of support, related systems, and capacity and sharing it out, instead of having individual organizations constantly reinvent the wheel.
CCBs are hubs of learning, knowledge, culture, and trust. Most CCBs that I have observed work best when they nurture a sense of intentional community among their constituents, as opposed to a transactional, arm’s length relationship. This is why I want our sector to return to its roots in commoning, as intentional community building is core to commons management. So many problems fall away when you have a healthy intentional community. This means being clear about shared values, standards of work, and shared impacts, as well as providing opportunities for strengthening social ties and engaging in ongoing peer learning. Trust is the currency of a good CCB, and as they say, effective solutions move at the speed of trust.
CCBs facilitate change and collaboration. Finally, Collective Capacity Builders at their best are dispassionately engaged with their constituents (oxymoronic, but possible), making them often the best facilitators and supporters of difficult change among individual organizations, whether that takes the form of growth, pivot, or wind up.
As dispassionate stewards, CCBs are efficient facilitators of change and collaboration. Given their local knowledge and bird’s eye view of their communities, CCBs can spot opportunities that individual organizations and even funders cannot. More importantly, they are in a position to take action and facilitate, from initial conversation to implementation. With all of the mania around collaboration in recent years, too little attention is paid to the true cost of two (or more) organizations working together. Collaborations are fragile and need to be managed and nurtured, often by a catalytic third-party player. They can produce some wonderful results (innovation, more effective services, etc.) but collaborations are constantly misunderstood to be cost savers. They are not. From a capacity (not output) standpoint, it’s never 1 + 1 = 2. It’s more like 1 + (-1) + 1 = 1. CCBs offer an efficient and sustainable answer to that third-party catalyst and can balance the “math” more to the positive, making 1 + 1 + 1 = 3.
Collective Capacity Builders unite!
The various Collective Capacity Builders named above do not see each other as belonging to one group. Most have their own trade associations, networks, insider lingo, and secret handshakes. Yet each struggles with similar challenges in making the fundraising case to institutional philanthropy, and clarifying their position in the greater Ecosystem of Doing Good.
Most critically, now is the time for our sector to break down barriers and relinquish fiefdoms. If the CCB community were to engage in more intentional communication and coordination, we could reach more struggling organizations and deliver solutions with greater speed and impact.
As the storm and stress of the “Covideconomy” continue to grow, CCBs must coordinate their respective resources pools, share knowledge, and build identity as vital connectors and resource providers in the social good sector.