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October 30, 2020
 
It's Time for Nonprofits to Rethink Their Model
By Thomas A. McLaughlin

Tom McLaughlin 90 x 90
Tom McLaughlin
The halving of the U.S. birth rate following the Baby Boom means nonprofits today and for the foreseeable future will face challenges recruiting replacement leaders, but the same conditions offer opportunities for organizations to re-think the way they operate.

Overall Impact
Nothing brings as much pressure on a nonprofit organization as the lack of staff. The Boomers’ exits are already being felt on both ends of the generational spectrum. Naturally, the first shortage is likely to be felt in the executive ranks as those individuals either reach their preferred retirement age, or move on. But there are also staff shortages in direct care.

There are a few sources of labor (and optimism), many of which relate to immigration. For example, the Pew Charitable Trusts report that the foreign-born U.S. population grew 109% between 1990 and 2012 (the overall impact of immigration varies significantly in different parts of the United States). Moreover, the Pew Charitable Trusts quote Census Bureau projections that net international immigration, based on recent trends, will be the major driver behind U.S. population growth between 2027 and 2038.

What Can Be Done
If the shortage of available employees follows predicted trends, virtually all nonprofits could be affected. A major part of the pressure will come from the fact that the birth rates of both the latter part of the Gen Xers’ generation and all of the Millennials’ generation are half that of the Boomers.’ Today’s status quo will eventually feel more like the status squeezed.

This situation will evolve relatively slowly over a period of time, which should make it easier to accommodate but harder to recognize. Start your strategy planning now so that it fits the circumstances before you feel the pinch. Here are some suggestions:

Re-Work Your Staffing Patterns:
If you are feeling the pressure at the bottom of your workforce as well as at the top, it’s time to re-think your staffing patterns.

It would not be a surprise if your underlying assumptions about staffing needs are still embedded in the 1980 to 2000 era. And while you’re doing this, be sure to apply the same scrutiny to your assumptions about your most senior executives. Do you really need a CIO and his full staff now that you have that 24-hour technology company on call?

Re-Think Your Service Models:
If you don’t already know the year your nonprofit was founded, pull out your most recent federal Form 990 and look exactly three inches below the word “income” as in “Return of Organization Exempt From Income Tax.” You’ll find a box labeled “L” and the words Year of Formation followed by the four-digit year of your corporation’s founding. If your organization was founded in the two or so decades since 1970 there is a chance that the organization is still at least partially grounded in that era. That could mean that some of your service models are similarly aged.

Consider a Merger:
One way to accommodate the realities of the 21st century is to grow your scale. The combination of declining birth rates (labor) and steady needs for service (aging clients with longer lifespans) will put pressure on many nonprofits. Lately there has been less instinctive opposition to mergers than had been true in the past. The advantage of larger scale operations run correctly is that the resulting efficiencies—e.g., one “back room,” one Human Resources department, etc.—can strengthen the entire organization.

The U.S. economy has never had aging Baby Boomers like we see today, nor a 50 % drop in birth rates that followed them. Navigating the next two or three decades will force many nonprofit managers to change their models and to try different approaches. Being wanted will be just part of the terrain.

Thomas A. McLaughlin is the founder of the consulting firm McLaughlin & Associates and the author of Streetsmart Financial Basics for Nonprofit Managers (4th edition), published by Wiley. Email him at tamclaughlin@comcast.net. An earlier version of this article was published in The NonProfit Times.
July 2018
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