Article originally published by The News Journal in the author’s column “A Broader Perspective”, March 2009,

Rahm Emanuel, President Obama’s Chief of Staff, advises us not to waste a good crisis. Delaware’s nonprofits can heed that advice and emerge from the current economic crisis as stronger, more vibrant organizations.

During the Legislative Forum for Delaware’s Nonprofits in February, Governor Jack Markell and leaders from donor entities reinforced the need for the sector to reinvent itself. Too many charities and nonprofits are competing for reduced philanthropic dollars.

This crisis can generate the energy to transform Delaware’s nonprofit sector into one that more efficiently and productively serves its diverse constituency and perhaps supplements efforts to foster economic development. Many people count on the unique services they provide.

Globally, the nonprofit sector is large and growing. It has become a major social and economic force in the world, engaging 40 million people.

In the U.S., according to taxexemptworld.com, there are 1.6 million tax-exempt nonprofit organizations with assets of $4 trillion and income of $3 trillion.

In Delaware, there are 6,121 tax-exempt organizations with total income of $13.6 billion. Delaware’s ratio of nonprofits per capita surpasses the nation’s average by 35 percent, suggesting that there may be room for consolidation.

The opportunities to change and come out stronger are evident. The trend in favor of professionalism is inexorable. With consolidation, economies of scale and quality of services could improve.

Some in the sector serve the same clientele with relatively similar programs. Organizations could consider merging similar programs to increase efficiency and have a better chance of securing funding. They will need to demonstrate results towards strategic objectives and be prepared have their results audited.

Informed, sophisticated donors will seek systematic reporting and even a benchmarking of efficiency levels. The need of transformation has found in donor entities a common voice. To increase sustainability over time, nonprofits can implement more of the best practices honed over years in the for-profit sector.

Although they are in a different kind of business, social entrepreneurs in nonprofits face the same pressures as those in corporations to use limited resources effectively to deliver concrete results. Mergers, collaborations, and acquisitions should be part of the discussions particularly in a restrictive funding environment.

Beyond best practices, Jim Collins, the author of Good to Great and the Social Sectors, sustains that what the social sector needs is to embrace the language of greatness.  He outlines five important guiding principles:

• Performance must be assessed relative to their mission, not financial returns. These organizations assemble evidence, quantitative or qualitative to track progress.
• Leaders must make the right decisions for the organization’s long-term achievement of its mission -independently of consensus or popularity. These individuals are ambitious for the cause, not for themselves, and have a compelling combination of personal humility and professional will to create influence.
• The right people need to come on board to advance the organization’s objectives.
• In terms of time, money, and brand, organizations need to connect three important factors. They are what the organization stands for, what it can uniquely contribute to the people it touches, and what best drives its cause.
•  Organizations should gain momentum by building a brand over time. Success and eventually money will come as consequence of consistent efforts.

The Federal government’s recently passed economic stimulus package might ease fund-raising concerns for certain organizations in the short term, but long term fundamental issues in the sector still need to be addressed.

A federal model that could be adapted for the state is the Office of Social Entrepreneurship proposed by Michele Jolin, a senior fellow at the Center for American Progress, which would ensure that all relevant federal agencies spend money to help successful social projects expand. Jolin proposes the creation of an “Impact Fund” to help nonprofit groups collect data and better evaluate their success.

Also proposed is the creation of an annual multimillion-dollar prize for the most creative high-impact solution to a defined social problem and changes to the tax code that would reward partnerships between nonprofit groups and businesses.

By adapting this model, the state government can facilitate the nonprofit consolidation process by providing guidance. Donor entities could work closely with the government to reinforce the need of collaborative work by granting funds only to organizations with unique missions and proven track records of results.

Good crises are to be capitalized on. Let us hope for a transformative crisis in Delaware that leads to greatness in the nonprofit sector and ultimately benefits those who count on their services.