Nonprofits Summary

Nonprofit Quarterly has recently published a very interesting article titled “The Challenges of New Nonprofits”. The article discusses different organizational types of nonprofits, such as an unincorporated association, a charitable trust, and a nonprofit corporation (the most common type in the United States) (Bielefeld, 2014). This discussion is followed by the examination of causes of nonprofit failures. The author mentions the fact that using data on firms started in 2005, the U.S. Census Bureau found that a mere 43 percent of these firms still existed five years later (Shane, 2012). While the percentage depends on the industry and the year of analysis as well as other factors, the conclusion is that the early stage of a nonprofit existence is a dangerous and crucial time for the whole success of the venture.

When talking about the liability of newness, the author emphasizes that some of the key problems that organizations may have during their start-up period are “interpersonal conflicts, difficulties related to how decisions are made (and by whom), and a lack of systems (program protocols, financial data management, human resources, board policies and frameworks, etc.) to support meeting the expectations of stakeholders (including funders, staff and volunteers, beneficiaries of the activity, and so on)” (Bielefeld, 2014, ¶13).

The liability of smallness suggests that smaller organizations have a higher propensity to fail (Bielefeld, 2014). This results from problems in soliciting donations or generally raising capital, recruiting and training employees, and dealing with regulatory compliance (Aldrich & Auster, 1986, pp.165-198). Every person or a group of people that is eager to start a nonprofit should remember these