Standing Beside Alaska's Non-Profits

The Next Trend – Structural Evolution

In the January 2011 newsletter, we presented economic trends for the Alaska nonprofit sector to anticipate. The data used to make these assumptions was from the latest Foraker-Institute for Social and Economic Research report on the sector. At that time we predicted three major trends for the coming decade – a funding crisis, “the crash of the herd,” and a need to restructure the sector. The first two trends came directly from data in the study. They were:

  1. A funding crisis – With the inevitable decrease in federal dollars, and with Alaska’s nonprofits depending twice as much on governmental dollars as the sector as a whole, we will have a disproportionate disadvantage and have to adjust quickly. Also, with an uncertain future within the state’s leading industry that also provides a very generous and disproportionately large percentage of the sector’s charitable and volunteer support, the future for the sector could be further compromised.
  2. The crash of the herd – With one nonprofit for every 100 Alaskans, we have one of the highest densities of nonprofits in the country. That means we likely only have 30 potential board members for every nonprofit. The data are clear – we do not have enough people to currently populate the boards in Alaska, and during the next decade we can anticipate that situation becoming an even larger problem. There are 80 million Baby Boomers and only 44 million people in Generation X. Board recruitment is currently the single biggest issue we are asked to address at The Foraker Group. We do not anticipate that this problem will be resolved until fewer nonprofits exist or the Millennial Generation, those under 30 years of age, reach their late 30s. And there is the additional human resource problem for the next decade, finding the right staff for all of these nonprofits, especially when every industry is vying for that limited workforce. Therefore the “crash of the herd” refers to the overpopulated landscape of organizations and, like a herd of overpopulated deer, we will probably see fewer numbers of nonprofits.

We have discussed these trends with hundreds of Alaskans during the past year. Most understood and even accepted our assumptions, even though most still did not think we were talking about their favorite nonprofit, were we?

The third trend we suggested was the inevitable need to restructure the sector. We learned of this possibility through nationally published research. Unfortunately that trend did not seem to resonate with most people, except that with less money and a scarcity of the right people for boards and staffs there would have to be some restructuring. We think this trend is about more than just money and people – we think of it as a universal phenomenon, brought about by technology and the shifting values of the millennial generation, worldwide.

National nonprofit experts like Bridgespan Group and LaPiana and Associates have written very compelling essays on the need for the nonprofit sector to restructure. As with our experience in presenting this concept, they also found few who accepted this potential reality and even fewer who considered their assumptions as relevant for their favorite nonprofit. Maybe these concepts were too abstract or too theoretical to be understood or accepted. However, since then there have been many rapid changes in society that start to exemplify the changes they predicted. Therefore, we want to try again to express the third trend that we see as compelling, and the one the nonprofit sector must address – the need to restructure.

The changes that exemplify the need to restructure are:

  1. The transition from a world where institutions are structured in a hierarchical-silo’ed format (visualize a traditional organizational chart) to a networked system-decentralized format that is aligned through a common purpose and principles. The way to best understand this fundamental shift is to think of Mubarak in Egypt, certainly a top-down hierarchical leader. He had a military establishment and financial resources. But social media and thousands of united citizens were able to oust him from office. While no one knows what the final outcome of that revolution will be – nor with other similar examples throughout the world like Russia, Yemen, and Syria – it’s clear that the world of grass roots organizing has been transformed. The top-down system that those of us older than 40 believed in, trusted, and expected to last forever is being transformed at its core. The world is quickly moving toward networked systems. While these systems are not as well understood, or tested, most organizational theorists now see networked organizations as inevitable. Starting in the 60s and 70s with David Packard, founder of HP, and Dee Hock, founder of VISA, now many other business leaders are experimenting with new structures. Therefore, we would suggest this is not as revolutionary as it may seem, but is just now coming into the mainstream.
  2. Aligned with networked systems is a shift toward increased power and impact of social movements rather than institutions. It seems that because of technology the need for institutions, while not obsolete, will evolve. With technology, people can virtually connect/partner/create and generate a movement that changes the world – then disband and move onto the next big issue. The last presidential election may exemplify this shift. If seen through the eyes of someone from older generations, it may have been misinterpreted. Some may have assumed that Obama’s election was an endorsement of the Democratic Party. But another way to view this victory is that President Obama won in spite of party affiliation. He was the first candidate to use the new, more powerful social networks to create a movement. He won for the same reason Mubarak was overthrown. It has been predicted that the millennial generation is the least likely one on record to want to join institutions. This does not mean that people in this generation are anti-establishment. It does mean that the almost fierce loyalty expressed by Baby Boomers and other prior generations to one’s employer, religious organization, political party, etc. may be less a factor in the future. What theorists predict will occur is the creation of institutions around a movement that will be more nimble and transformative. We will see institutions come and go with more regularity. This trend can be observed with the new Christian religious congregations that seem to emerge from nowhere and overnight, have multiple services on Sundays to accommodate all of their members. Compare those churches to the traditional Protestant congregations that continue to lose members, most of whom are Boomers and older.
  3. The final restructuring trend that’s predicted is also related to the prior two and that’s the re-thinking of leadership itself. Margaret Wheatley’s newest book Leadership in the Age of Complexity identifies what she calls either a “hero leader” or a “host leader.” A hero leader is one who is capable enough to develop a vision and then articulate that vision so that others will follow his or her lead. This is the type of leader that the Boomer and older generations believed in. “If we only elect the right mayor, governor, president, or identify the right CEO or manager, all will be OK.” Meg Wheatley suggests that such leaders are no longer as effective because the world is too complex for any such person to succeed, alone. Think about how many times during recent years you may have been excited about a new leader only to quickly lose that enthusiasm when the person does not perform as hoped. What Wheatley says will emerge as leaders in the future are host leaders. These leaders are not under any delusion that they alone can solve a problem. Instead, host leaders have the capacity to convene the right people, from diverse backgrounds, so that together, complex issues can be addressed. Some may think of Abraham Lincoln as a hero leader. He certainly has been credited with saving the nation. But when we understand that the way he did this was to engage as many of his adversaries as possible in the inner-circle to serve as advisers. Lincoln was a host leader. Host leaders can become a hero – not from their own cognitive intelligence, but from their social intelligence. Social intelligence, or one’s emotional quota, EQ, not the IQ or intelligence quota, has emerged as an increasingly important component in higher education and leadership development. Like IQ, some EQ capacity is innate, but with the right support it can be enhanced. Many of our most successful leaders today may have more EQ than IQ.

The implications from these changes that facilitate restructuring will be significant. The problem with trend analysis is that it is not science. So as we have disclosed in prior articles on trends, these assumptions could be wrong. But having recently presented these thoughts to multiple generations, we have more confidence in their resonance today.

Five years ago we discussed networked organizational structures to the Foraker board and got blank stares from some people or immediate push back from others. When we discussed the same issue in January 2012, there was much more acceptance. While there is no clear picture of what the future holds, collectively people seem open to the possibility of such change.

When we spoke about the funding crisis and crash of the herd last year, those trends were not yet realities. A year later, we are very busy assisting organizations with restructuring through partnerships or mergers, and we are overwhelmed with requests to assist nonprofits going through funding or recruiting crises. So our new predictions include moving from:

  • Hierarchical structures to networked structures,
  • Institutions to movements,
  • Hero leaders to host leaders.

A year from now, let’s check back and see where we are.