Today’s guest is Greg Berman, and we talk about nonprofits — Non-Governmental Organizations, or NGOs. Greg’s got a new book out called The Nonprofit Crisis: Leadership Through the Culture Wars, which I enjoyed. I asked him to explain his diagnosis of the nonprofit sector. What’s happened to nonprofits this century? What’s happened to how people perceive nonprofits? And are “NGOs the bad guys”? As critics from both ends of the political spectrum will argue.
Greg was part of the founding team responsible for creating the Center for Justice Innovation, serving as Director from 2002 to 2020, and helping to guide it from a start-up to an org with an annual budget of more than $80 million. Alongside that, he:
Has written multiple books, mostly on reducing mass incarceration, including Trial and Error in Criminal Justice Reform and Good Courts: The Case for Problem-Solving Justice.
Has been at the center of left-liberal attempts to do criminal justice reform, especially in New York City, over the past two decades.
Was on the Board of Correction for Mayor Michael Bloomberg, and the public safety transition team for Mayor Bill de Blasio and Manhattan District Attorney Cy Vance.
Is the co-editor of a publication called Vital City, which I enjoy — it’s one part New York journalism, one part policy journal.
Is the Distinguished Fellow of Practice at the Harry Frank Guggenheim Foundation, investigating various topics related to violence.
Thanks to Charles Lehman, Sean Sullivan, Oliver Traldi, Park MacDougald, Rafa Mangual, Ari Schulman, and many others for their contributions to the thinking behind this piece. Additional thanks to Jasper Placio, Harry Fletcher-Wood, and Shadrach Strehle for their editorial and production support.
We discuss:
Why nonprofits matter to government service delivery
Critiques of nonprofits from the left, the right, and both sides
How the Center for Justice Innovation reduced incarceration, and why funding that work got harder
What nonprofits should do to regain public trust
For a printable PDF of this interview, click here:
It may not be obvious to readers why we’re talking about non-governmental organizations (NGOs) on a podcast about state capacity. Why should people who care about governance care how NGOs operate?
In places like New York City, and arguably the entire United States, the government relies on nonprofits to do service delivery in a host of domains. You can’t talk about education, childcare, housing, and economic development without talking about the nonprofit sector. Coming out of the ‘60s and ‘70s, there was a lot of public discontent with government — a feeling that it had overreached in the War on Poverty. It can be debated whether it failed, but there was a public perception in many quarters that it had.
In places like New York, government over the past 50 years has increasingly turned to the nonprofit sector to deliver services that could be delivered by the state. Viewed in the most positive light, nonprofits are responsible for extending state capacity and improving service delivery. Increasingly that assertion is debated. People worry that nonprofit service delivery organizations are not accountable in the same way as government agencies. A podcast devoted to the work of government should think about NGOs because American governments can’t function without us.
There’s an interesting dynamic here. There was a big backlash across the country to the government running many of these programs in the ‘70s. In New York especially, nonprofits backfilled some of this work, in partnership with the state and the city.
The flip side of that dynamic is that NGOs are increasingly dependent on the federal, state, and local governments. A third of the money that goes into nonprofits is from the government in some form. There’s a more symbiotic relationship than in the past.
I should back up and say: “nonprofit” is an enormous category. It includes everything from your local block association — that has no paid staff, and a budget that maybe can be counted in the thousands of dollars — all the way up to Harvard University, which has an annual budget that dwarfs many nations. It’s hard to talk with a broad brush about nonprofits because they vary so much in scale, size, and what they do. In general, we’re talking about human service delivery organizations connected to the government.
There’s a lot of misconceptions about nonprofits. One is that they’re all charities, the people that work there are doing it out of the goodness of their hearts — volunteering, or making subsistence wages — and they depend upon getting a few nickels from the Salvation Army bucket. In point of fact, at least in New York, there are incredibly sophisticated nonprofits, the management of which rivals the complexity of any business or government agency. Many — including the one that I used to lead, the Center for Justice Innovation — rely primarily on government grants and contributions, rather than individual donations. We should underline the class of nonprofits that we’re talking about.
We’re going to spend most of our time talking about these service delivery organizations.
I’ll put some of my cards on the table, you and I have overlapping takes on the nonprofit sector, but we diverge in places. The think tank Institute for Progress, which I work for, is a nonprofit. We don’t take money from the government or corporations — it’s all private donations — but we’re an NGO, as are the Sierra Club, the Heritage Foundation, the Black Lives Matter organization, charter schools, and local community orgs.
I’ve spent much of my career in the nonprofit sector: a summer interning at Airwars, which tracks civilian casualties from airstrikes. It had a narrow remit when I was there — just tracking deaths in Syria and Libya — but it was funded, among others, by George Soros‘s Open Society. A little later, I worked at a news outlet called the Washington Free Beacon, which is very much on the right politically — that was technically a nonprofit as well. I think I’m one of the few people who have been funded by George Soros as well as by right-wing hedge fund manager Paul Singer. At the Free Beacon, and in the right-wing media background I come from, a lot of us were critical of the role NGOs played in American life. I say that as somebody who’s now working at a nonprofit think tank, and I’m on the board of a nonprofit, the Recoding America Fund. I ran a fellowship program for young folks in tech called Interact, which is a 501(c)(3) organization.
So: you and I are both creatures of the nonprofit sector. We have a lot of affection for it, and a lot of critiques. Let me start with the title of the book, “The Nonprofit Crisis.” I’m sure you’ve answered this on several podcasts, but what is the crisis you’re describing?
I don’t know when it started, but it first crossed my radar screen about a decade ago. I’ve spent all of my professional life within the nonprofit sector. I always worked for the kinds of organizations that no one has ever heard of, and that are hard to describe. When I would go out to cocktail parties with people I didn’t know, as a shorthand, I would say, “I’m Greg Berman. I work for a nonprofit.” There would be a smile across people’s faces and a loosening in the atmosphere. There was this general sense of, “I may not understand anything that you do, but you must be trying to make the world a better place.”
That started to erode around 2015. All of a sudden, the response was not warmth, but people looking at me side-eyed, or with overt hostility. I perceive there to be a significant decline in public trust and confidence in nonprofits. That’s happened over the course of my almost 40-year career. It never has come to a head in a way that the sector has had to try to address it — because there’s always 1,000,001 problems to deal with, many of which have taken greater urgency than this crisis of ebbing public trust.
I wrote the book to try to focus the attention of nonprofit executives, and those who love or work in nonprofits, on this problem. You can see this erosion in public trust, not just anecdotally in how people react to Greg Berman, but in the public opinion polling. Places like Independent Sector do polling. The house isn’t on fire. People express more trust in NGOs than they do in Congress or the media.
But that’s a low bar.
Just north of 50% of Americans express support for the nonprofit sector. I would argue that is — if not a red flag, certainly a yellow flag that nonprofits should be concerned about. When you pair that with the fact that we see volunteerism down among the American public — nonprofits are the primary vehicle for volunteerism. And while the dollar figure of donations going to NGOs remains high, the number of Americans that are contributing to nonprofits is going down.
This is a problem because nonprofits are one of the things that is uniquely great about the United States. If you travel abroad, you’ll quickly see that the strength and breadth of our nonprofit sector distinguishes the United States from other countries. In many places, there’s the private sector, the public sector, and nothing in between. When nonprofits are functioning well, they are part of the interstitial glue that ties together this diverse, ginormous, heterogeneous society. I get very worried when I see these yellow flags going up and public confidence in the sector going down.
Before we get into the specific critiques, say a little bit more about how the sector has changed. One of the dynamics you point out is fewer normal people donating, and therefore more large philanthropists. Another is this long thread in American life of civil society being important. Tocqueville talks about this — Americans love to organize themselves outside of business organizations. They like to do other things together. As far back as the founding, that’s a theme of American life.
But a more contemporary dynamic is what one political scientist has called “associations without members.” Another, my friend Steven Teles, has called it “‘advocacy’ rather than representation.” What’s that change in the nonprofit sector?
I think that is a profound and generally unremarked change in American life over the past century or so. This is consistent with the argument that Robert Putnam makes in Bowling Alone — Americans used to be great joiners. That was true for tons of civic associations — the Lions, Kiwanis, the Daughters of the American Revolution. These groups were massive organizations — some of them had hundreds of thousands of members, and that was their strength.
Over time — I don’t think this was anyone’s malign plot; some things just happen — we’ve seen an erosion of those kinds of organizations. One of the things that distinguishes the nonprofit sector has been increased professionalization. Some of that has been positive. Organizations that are not massive membership organizations are lighter on their feet. My sense is that there are more creative, innovative, cutting-edge nonprofits today than 100 years ago. Certainly there’s been professionalization of the management. They’ve become increasingly sophisticated.
But something has been lost in the transition to associations without members. The nonprofits are incredibly prominent, incredibly effective, and have a high degree of access in DC, and to politicians across the country. But I don’t think they are as connected to the general public as they used to be. Even the organizations that still have lots of members — it’s different now. They are small donors who give a couple bucks on the internet. They are not going to community meetings in the same way. They don’t feel that they are equity stakeholders in those organizations, the way that local businessmen did in their Kiwanis club in 1955.
How has public perception shaped the critiques of NGOS that you talk about in the book?
I feel like this is an example of the horseshoe theory of political action — nonprofits are increasingly under attack from both the right and the left. Both critiques are multifaceted, but the specific elements are different. I’m just going to give a quick sketch of them.
In recent years, left-wing critics have looked at nonprofits and asked hard questions about racial disparities — particularly at the executive and board level. Some very hard questions, understandably, were asked about a bunch of nonprofits in the wake of the MeToo movement. There were a bunch of executives, mostly male, that were engaged in sexually harassing behavior. For too long that went unexposed and unpunished. Left-wing critics have also focused on substandard wages paid at the lower levels of nonprofits. Those are all fair critiques — things that the nonprofit sector should take, and I would argue has taken, seriously.
On the right, I see the critique mostly being focused on viewpoint diversity and “wokeness,” for lack of a better word — a feeling that in many nonprofits it has become difficult to voice opinions outside of a very narrow progressive orthodoxy. Frankly, there’s some truth to that critique as well. The nonprofit sector may have over-corrected to the left critique and under-corrected to the right critique.
Both left- and right-wing critics use this phrase — which I hate, but I’m going to repeat it here — “the nonprofit industrial complex,” which is of course such an insult. You have critics saying, “Nonprofits are motivated by elite opinion, funded by out-of-touch elites, and are about perpetuating their own self-interest rather than solving social problems.” That’s not exactly a new critique. You could go back at least 50 years, probably longer, and find echoes. It feels louder now. It’s hard to judge — we live in the social media era, and sometimes it’s hard to separate the signal from the noise. But it feels like those kinds of critiques have a sharper edge, and are gaining more purchase, now, than when I started in this field in the late ‘80s.
Let me add a couple of critiques that you talk about in the book. One, that is also a horseshoe criticism, is the lack of transparency in the sector. We can talk about opaque funders using different vehicles — it’s hard to see where nonprofit money is coming from, including nonprofits that do service delivery. That’s a critique I’ve seen a lot on the right, but as you flag, it’s also a perennial critique from the left.
Another, that I had not fully grasped, is the critique from the left of this historical move — nonprofits now do a lot of service delivery, and many people on the left would prefer the government to do that. The Marxists especially would say, “That’s an erosion of the government’s proper role in civic life.”
Another term of derision that is sometimes thrown at nonprofits, particularly in a place like New York where they’re strong, is that they amount to an unelected “permanent government.” There’s elements of truth to this. Mayors come and go, but if you look at the Mamdani transition committees, some of those are the same people that were on the transition committee for Adams, de Blasio, and Bloomberg. A lot of that continuity comes from large nonprofit service providers that are there no matter who the boss in charge is.
Another critique has been that, particularly up to and through 2020, the NGO class was not just turning woke, swinging to the left, and not open to viewpoint diversity — it was one of the main drivers of the woke turn in American life.
Then another critique is the one Elon Musk and others make: they’re opposed to anything that’s not a for-profit. People like Elon think the structure of the nonprofit is wrong to do social change — that incentives will inevitably be misaligned, because they’re not in touch with a market signal. The Department of Government Efficiency tried to embed someone in the Vera Institute — it’s a nonprofit, but it took money from the government. They said, “No, we don’t have to take you on board.” But it was a remarkable moment for flagging how strong the antipathy towards NGOs was.
I don’t want to blame the victim. Some of the things the Trump administration has done feel motivated by revenge, animus, and bad policy. I’m not a supporter of the attacks on universities, or their threats to go after Open Society and Soros, that they deem to be enemies of the state. There’s been a lot of bad ideas, bad policy and overreach on the part of the administration, and those who support it.
But I would say that they’re responding to something real. If nonprofits don’t take the critique seriously — that they have sometimes been drivers of polarization, been out of touch with mainstream American opinion, and can appear opaque and unaccountable; all real issues that the sector has not wrestled with adequately — that helps to fuel the overreaction that we’re seeing on the right.
I might be a bit more inclined to blame the victim than you are, but broadly I agree: there’s a lot of foolish overreaction in this administration to the sector — and there’s something real that the backlash is about.
But let’s table the partisan critiques for a second. I want to hear about your experience over two decades running the Center for Justice Innovation (CJI). I’d like to just get a couple of basic facts on the board about how an organization like CJI works: who works for it? Who funds it? What does it do? From there, maybe we can start to get a better picture of which of these critiques hold water.
I’ve had the good fortune of living through a golden era of nonprofits in New York. Coming out of the ‘60s and ‘70s, there was a turn to using nonprofits more, because of a backlash to perceived government failures, but also a shrinking public sector. There was a shrinking tax base as New York flirted with the brink of bankruptcy. Nonprofits — I’m thinking here of places like the Central Park Conservancy, the Times Square Business Improvement District (BID), and the other BIDs — were innovative responses to shoring up important city services and civic life at a moment of real crisis. [On Statecraft, Peter Moskos described the role BIDs played in turning around policing in New York City.]
The Center for Justice Innovation has been in similar work over close to 30 years. It’s an organization dedicated to reforming the justice system, predicated on a critique: that the justice system is neither as fair, nor as effective, as it could be. In particular, the birthplace of the CIJ was in Midtown Manhattan, with a project called the Midtown Community Justice Center. It was dedicated to forging a new response to individuals that had committed misdemeanor offenses — like prostitution, drug possession, shoplifting, and fare-beating — in and around Times Square. The idea was that too often the justice system was either doing nothing — letting people go with no penalty for their offense — or over-indexing on sending people to Rikers Island for a few days or weeks.
We created the Midtown Community Justice Center to forge a range of penalties that judges could use, in between nothing and jail. That looks like drug treatment, community service, job training — a whole bunch of alternatives to incarceration. We embedded them in the courthouse apparatus to ensure that they would be used and be high quality.
That project, which was launched in 1993, turned out to be enormously successful in helping to reduce crime and improve local attitudes towards criminal justice. From that base, we went on to create other experimental justice projects that were similar, in all five boroughs, working with different kinds of defendants, including some that had committed very serious offenses — felony defendants for whom we were providing long-term care in lieu of incarceration. We were the first organization that brought the violence interrupter to New York. It has become very widespread in New York City, trying to hire credible messengers — who have been engaged in gangs, drug dealing, or other criminal activity, but have gone straight — and train them in intervening in conflicts, so you didn’t get this cycle of retaliatory violence.
An organization like CJI cannot function without the trust and support of the government. That includes financial support. I don’t know what the ratios are today. I stepped down from running it in 2020. But back when I was in charge, we got roughly equal amounts of money from city, state, and federal government sources. That comprised 75-80% of our budget. 20% would come from private sources. As a nonprofit executive — there are exceptions to this rule — you want to have diverse funding sources so you’re not too dependent on any single funder who can just decide one day that they’re not interested in funding you. It felt to me like we were in a relatively strong position. We certainly would’ve suffered greatly if the state or the city had withdrawn their resources — but we weren’t solely dependent on any one branch of government to support 90% of our operations.
I’m curious which basic challenges came up for you as a nonprofit executive over those 20 years.
It’s always been a hard job. Running an organization like the Center for Justice Innovation, there’s multiple lines of accountability. If you’re a service delivery organization, you should be accountable to the recipients of your services. You’re accountable to staff at some level, to the board, to donors, and to government. You could argue that nonprofits are some of the most accountable institutions that we have.
Why is that?
Multiple levels of stakeholders that you have to worry about all the time. When it feels good, they’re all pointed in the same direction. But of course, that’s not always the case. Increasingly it’s not the case.
I guess I’ll just be crass with you. The hardest thing about running a nonprofit is raising money. People that rise to leadership levels in the nonprofit sector are those that can raise money. Some of that is a positive thing. To raise money, you have to be able to articulate a vision in a way that makes people — government, individual donors, or private foundations — want to write a check to you and like you. So some of that pressure is healthy for an organization and selects for people who are visionaries — highly articulate and persuasive. But there are some pernicious consequences of selecting leaders based on whether they can raise money. It’s not necessarily the best managers, or the most knowledgeable people about the subject.
Any organization has complicated interpersonal dynamics, and you have to manage that. I was a thoughtful and responsive manager; I was tending to the internal dynamics as carefully as I was tending to the external pressures of raising money. I haven’t polled my peers, but I would be surprised if most nonprofit executives didn’t say something similar — that they felt this tension between needing to spend a lot of the time out of the office, but also spending time inside the office on day-to-day operations. Those things often felt in conflict.
When I talked to people in prep for this episode, I heard different stories about why this nonprofit crisis occurred. One story is about a generational shift: the rank-and-file of these organizations became much more doctrinaire about certain ideas. They pulled their organizations left, which generated tensions between staff and leadership.
But there’s another narrative: rather than a bottom-up pull to the left, there was a top-down pull from philanthropists. The composition of the class of people giving money to these organizations changed. More large philanthropists are giving a larger percentage of the donations. Those elites were driving this shift in behavior.
Which of those narratives do you give more credence to?
Both those things are true. I don’t think they’re in tension. I might be tempted to weigh it 55-45 in one direction, but you could convince me it was the reverse. A lot of the problems I diagnose are downstream of problems in philanthropy. Many foundations are guilty of, over the past 10-20 years, funding what’s known in the business as “intense policy demanders” that fueled polarization, without thinking about the long-term effects on American politics.
Then there’s no doubt — if you take out half a dozen nonprofit executive directors and buy them a round of beers, you’ll hear a range of complaints about young staffers and how doctrinaire they are. Particularly on social media, there’s a lot of anti-woke people who castigate people like me, NGO heads — “They work for you, just tell them to shut up.” Maybe somebody could get away with that, but I don’t feel like I could. It’s a hard way to run an organization. You govern with the consent of the governed, even when you’re paying them. So it’s not so easy to just hand-wave away the priorities and predilections of this younger generation. You have to deal with them. They’re not going away.
I want to take that opposing view here and press you on the relationship to the staff. When you entered a leadership role at CJI in 2002, you instituted a lot of hierarchy. You felt you had to drive the train. But in the book you say, I’m paraphrasing, “I couldn’t do that today. The landscape has changed and it wouldn’t be the right advice for me to give.”
What changed between then and now?
Social media has driven democratization: everyone has a communicator in their pocket where they can communicate to the entire world instantly. That has profoundly destabilized, not just nonprofits, but government and media.
We also went through a moment that felt close to full employment in the nonprofit sector. If you quit your job today, you’d have another job tomorrow. The combination of social media driving democratization, the fear of finding yourself on the wrong end of a social media beatdown, the reality that it’s a highly competitive marketplace for talent — at least for a little while, the balance of power shifted towards labor.
That was profoundly different than when I entered the field. I started working in the nonprofit sector in 1989, on the heels of a recession. I looked for work for six months, I would’ve bitten your arm off for a job, and I wasn’t going to ruffle feathers once I got there. I hope this came across in writing the book — I tried to be very careful. I do have a critique of this younger generation, and I don’t share their values in large part, but I want to be sympathetic to it. I don’t want to be just an old man complaining about the young people.
I’ll be the younger man complaining about the young people on this episode, don’t worry.
I’m the father of 20-something children. They can, at the touch of a button, choose who they want to date, organize their Netflix queue, and personalize the stuff they see on Instagram. That backdrop does create a set of expectations that, “When I go to the workplace, why can’t I personalize that in the way that I personalize everything else?”
I’m also curious about the talent pool that you were drawing from, if you were a nonprofit with an orientation towards criminal justice, say — it’s not like you could fire half the team and find new people who wouldn’t have those instincts about where the organization should go. The people who want those jobs have similar politics.
I don’t think that’s universally true, but the more elite the institution was, the more that was the case. The more that you’re drawing from a college- or elite-educated population — because your employees are lawyers or what have you — I think that critique is fair. Some of the problems in the nonprofit sector are downstream of problems in philanthropy. Some are downstream of how kids have been educated in universities, high school, and other institutions.
You think some of the pressures from below were salutary: fights over sexual harassment in the workplace; fights about wages.
Then there’s another set of pressures that were more about, “What’s the mission of this organization?” We could go down a list of NGOs that had these tumultuous fights in public over what they were about [The Poetry Foundation, Fridays For Future, Planned Parenthood, the ACLU, to name a few]. The Sierra Club had this big New York Times piece about how it tore itself apart — largely over nonenvironmental issues. There’s a great line where one staff member gets criticized for focusing on Colorado’s protections for wolves because, “What do wolves have to do with equity, justice, and inclusion?”
There was a tight labor market, and therefore more standing to lobby for your own interest internally. But that sat alongside a different instinct from staff: “We should be able to change what this organization does.” [Readers may enjoy reading the response to the NYT coverage from the Progressive Workers Union, which represents Sierra Club staff.]
I think that’s true and unfortunate. That’s where one would like to see more pushback from leaders than there sometimes has been. I don’t think this is exclusively a problem on the left. What’s happening at Heritage is a very similar story. The terms of the fight are different, but it’s a generational schism.
I’ve got a groupchat with some family members called the Heritage Crisis Comms Channel, where we’re following the latest in that schism. I totally agree. It is not a uniquely partisan dynamic.
But I do think that something has shifted. I don’t know if you read Yuval Levin, who I think is very strong on this point.
I used to work for him!
I just know him from reading him. But he’s made this point that we used to go to institutions and expect that they would shape us in our behavior. Increasingly, people are going to institutions — whether it be Congress, nonprofits, or the New York Times — and viewing them as platforms for doing their own thing. That’s a profound shift. I’m not quite sure what’s at the root of that, but I do think that’s a problem. It’s important that nonprofit leadership push back on that — the staff’s job is not to reshape the mission of the organization.
I’m so glad you mentioned Yuval, because I got to work on the promotion for his book A Time to Build, in which he talks about “institutions as molds” versus “institutions as platforms.” It’s been a very helpful frame for me. I’m at a nonprofit where some of this work is a platform. Because of the institution, I host a podcast, I get to talk to you, and I get to claim some of that credibility for myself. But there’s a real risk in any of these forums that you cannibalize the credibility of the institution to get a little bit more clout for yourself. A danger for me would be seeing IFP as just a way to publicly position myself.
I’ve hired maybe thousands of people over 20 years. It used to be, “We say what the mission of the organization is, and if you come to work here, it means that you bought into it.” But increasingly, towards the tail end of my time, it didn’t feel that way. People were coming to the organization because they were roughly interested in criminal justice, but really, “I’m going to come here and change this place.” Some of that energy can be healthy, if channeled in the right direction. But some of it has proven to be incredibly destructive for these organizations.
You used the phrase “intense policy demanders” to describe what philanthropists were drawn towards funding. I haven’t heard that phrase before. Will you describe what you meant?
I’ll speak to the field that I know best, which is criminal justice reform. Philanthropy has driven polarization because there’s been a desire to fund advocacy over service delivery. One of the pernicious effects of the past 20 years is that we’ve seen a bunch of service delivery organizations feel like they have to open policy shops. A bunch of organizations that were devoted to policy have opened 501(c)(4)s and gotten into direct political funding. It’s hard to say that you’re a nonpartisan, above-the-fray organization when you’re funding politicians.
A lot of that has been driven by philanthropy wanting to have wins they could claim responsibility for. When people complain about “the groups” that have so much power, in the Democratic Party in particular, a lot of those are single-issue organizations. Whether it be education, criminal justice, housing, homelessness, LGBQT — they think their issue is the only one that matters. They just want to drive extreme policy on it. That’s been to the great detriment of the Democratic Party. You may have more window into whether a similar dynamic pertains in the Republican Party.
I think less so, in part because the demographic base of the parties has been different, although that may be changing.
Where does that demand from funders comes from? If I was a philanthropist, and I had a lot of money to deploy on service delivery, what would make me think, “I’d like to fund an advocacy group instead”?
I’m not 100% sure what drives it, whether it’s guilt — I haven’t been on the philanthropic side. I’ve been a professional supplicant most of my life, trying to curry favor with philanthropists. I try to get into their heads, but I can’t speak to the dynamics of how things have shifted.
When I was at the Center for Justice Innovation, towards the end, if I went to a foundation and said, “We run this program, the Brooklyn Mental Health Court. We’re working with 200 felony offenders every year. We can show you hard research by independent evaluators that we’re improving outcomes for this population: reducing incarceration, and improving their mental health outcomes and job prospects.” I always slept very easily at night, because I could show you 200 people per year whose lives were measurably better based on the work we were doing. At a certain point, foundations ceased being as interested in that story. It felt like, “That’s cute, but that’s 200 people. What we want is transformational change.” It became very hard to raise money for discrete service delivery programs like the Brooklyn Mental Health Court, and much easier to raise money for, “Help us do this campaign to close Rikers Island.” That’s where the heat was.
Philanthropy is faddish. Things wax and wane. When I was coming up in the nonprofit sector, there was a whole critique that it was touchy-feely. People like me could come tell you a story about one person they helped, but — “We need some hard-minded business thinking here. Let’s focus on statistics and evaluation.” That was the dominant trend for the first 20 years of my career. At a certain point it shifted. What became hot was issues of racial justice and transformational structural change. I think that may have crested and we’re onto something else now.
A lot of the way you describe the culture of philanthropy — the faddishness, the boredom with small or medium-sized effects — mirrors what I’ve seen in my time around the venture capital space. I wonder if there is some crossover in ideas between VCs and philanthropists — some of whom are the same people — where there’s more interest in catalytic change. They favor funding new organizations over existing ones, or funding a new special project at an existing organization, instead of the core work.
Am I making up that parallel?
You’re connecting some dots for me that I don’t think I have properly connected on my own. That’s a plausible explanation. You can see it in the vocabulary of many of these foundations over the past 10-20 years. Increasingly, people talk about, “We’re in the business of placing big bets.” That’s not so different from venture capital saying, “We’re going to fail with 100 things, but we’re hoping to find one unicorn.”
I imagine some of the appeal of a big campaign to close Rikers Island, is if it hits, it feels like you’re returning the fund in venture capital, even though many of those messaging efforts will fail.
One thing I’ve seen a lot is philanthropists who want to give restricted funding — for just the specific project — instead of funding an organization and trusting it to do what it does best. When I talk to professional supplicants, this is a big complaint: philanthropists want to have their name on a pet project. Maybe it’s not as exciting to say, “I supported the ongoing operations of organization X.”
How did you run into that dynamic?
That was certainly a dynamic that I ran into all the time. Fun is too strong a word, but part of that was the delightful challenge of fundraising. My organization wants to do X. A philanthropist wants to fund Y. The challenge of being a successful fundraiser is to either convince them that what you’re doing is actually Y, or to find the overlap in the Venn diagram where their interests oversect with yours.
There’s been a big push over the past five to seven years to do more general operating support. People have listened to the critique of professional supplicants and are trying to get better at that. I do think that philanthropy is trying to reform itself on that dynamic.
I want to talk about some of the critiques that people make of service delivery organizations — the subdomain of nonprofits that you’ve spent most of your career in — because the Heritage Foundation or the Black Lives Matter organization are slightly different beasts, even though they’re all 501(c)(3)s.
There’s been a lot of conversation, especially around the city of San Francisco, although I think you’ve seen it in New York as well, about inefficiencies in the nonprofit sector, graft, skimming off the top, and structural disincentives to solve the problem that your nonprofit is formally about.
There’s a piece that you and I both read about an affordable housing org in San Francisco [TODCO, also covered here]. The money that nonprofit made was directly correlated to the rents in that neighborhood. The way the incentives lined up, it benefited from there being no other building of affordable housing.
One critique would be that that case maps to a structural pattern lots of nonprofits have, maybe subconsciously — a disincentive to actually solve the problem they work on, because then the funding stream would dry up. A business would not have that challenge.
What do you think of that structural critique?
Let me give you an emotional response that’s perhaps inappropriate: it infuriates me. It feels incredibly disrespectful. I do think it’s one sign of just how far nonprofits have fallen — that people actually think there are affordable housing nonprofits and homeless service providers that would prefer people to be unhoused, just so that they can continue to exist and draw huge salaries.
I don’t doubt that there are some examples of perverse incentives out there. Let me not deny that there are cases of graft, corruption, and malfeasance. I would like to tell you that nonprofits are immune to these things, but they are staffed by fallible humans, who make mistakes — sometimes criminal mistakes. For sure, we should root that out where we see it.
But at a meta-level, this notion that nonprofits want to perpetuate social problems couldn’t be further from the truth. The stereotype — that the people attracted to work in nonprofits want to do good in the world, solve social problems, and make San Francisco, New York, name the place, better — my experience has been that is almost 100% the case. I know people that run large nonprofits that provide homeless services. They’re passionate about solving the homelessness problem. It saddens me that we’ve reached a stage where they can somehow be construed as the villains in the story rather than part of the solution.
Let me go slightly further. This gets to the critique, “Why do we need nonprofits? Government could just do this work.” In my experience, government is worse than nonprofits, mostly. Generally nonprofits are less bureaucratic, lighter on their feet, and more mission-oriented, creative, and idealistic.
Look at whatever domain you want. If my child had to be arrested and receive services, I’d much rather they receive them from a nonprofit than the Department of Probation. So when I run up against people who seem to think that nonprofits are not just not a force for good, but a force for evil; that they’re engaged in perpetuating social problems — the thought experiment I would turn to you is, if we could get rid of all the nonprofits tomorrow and have that work performed by business or government, would the world be a better place? I think the world would be massively worse.
You couldn’t convince business to do most of this work, because there’s no profit to be gleaned from it. We have all had horrible service experiences with government. There’s nothing to say that government is going to supply these services better than NGOs. I think the preponderance of evidence suggests that they provide these services worse.
I agree with you in part: I think the number of people working in the nonprofit sector who are explicitly motivated by graft, or who don’t have ideological commitments to the work that they’re doing, is very slim. That is not my experience in either the policy and research world, or in my limited experience with service delivery.
But there is still a question here about the structural incentives, and the narratives we tell ourselves. You had a great survey piece a couple of years ago with current and former nonprofit executives. You quote one of them admitting, “there is corruption, waste, and pocket-lining in the nonprofit sector,” and that “highly motivated and savvy nonprofit executive grifters can go for years without getting caught.” Somebody else you spoke to pointed out there’s little incentive for nonprofits to be efficient, which can lead to “bloated organizations and overpaid chief executives.”
I don’t think many people are becoming billionaires in the nonprofit sector. But there can be a nice overlap between doing the work in a particular way and making a lot of money doing it. If you’re not effective, you may have structural incentives not to pay close attention to that outcome.
I just went on a passionate rant defending nonprofits. Now I’m going to talk out of the other side of my mouth. I’m not going to deny what you say. You can survive in the nonprofit sector, because it isn’t subject to the same market pressures as businesses. A lot of nonprofits continue to exist, year after year, regardless of whether they’re having a good impact. At a high level, I would defend the nonprofit sector against incursions from government or business trying to provide the same services. But in any specific case, you can find plenty of nonprofits that are not good — where executives are overpaid and they’re not delivering services as effectively as they could.
The maximalist view of this critique would be something like Elon Musk’s perspective: these institutions are disincentivized from paying close attention to impact, because they are not tethered to a profit motive. For all the flaws of business, if a business isn’t selling products, they know immediately, and everyone’s livelihood is on the line.
What do you make of that high-level critique of the form of the nonprofit?
I guess I feel like nonprofits are being held to a very high standard. Have they succeeded in solving the problems of poverty, racism, and social inequality? No. But the reasons that they haven’t solved those problems — despite plenty of them being devoted to solving them — number one, the limits of the human imagination. I don’t think we actually know how to solve a bunch of the social problems that nonprofits are chartered to solve. Number two, the political will doesn’t exist in the country to solve these problems. To beat up nonprofits because they haven’t magically made homelessness go away feels like moving the goalposts in a way that’s very difficult for any organization to meet.
The book I wrote previously was called Gradual. I tried to make the case for incremental change, against those who argue for radical change. It’s not that the argument that you’re ventriloquizing is totally stupid and should be shot down. There’s a germ of truth to it. Part of the motivation for writing this book is to get nonprofits to wrestle with these questions of public accountability, and lining up their interests with the public good — so that they don’t get subject to the kind of radical, bad change Elon Musk tried to bring.
One common thread from critiques on the right and the left is this demand for more transparency. You could take the graft view: “We need more transparency to make sure these people aren’t skimming off the top.” Or you could take a less cynical view and say, “It’s often very opaque who is funding a given nonprofit, because of some neat financial architecture in the American system, that means often you don’t have to disclose, if you’re a funder, what you’re funding.”
I would push back a little on that. They’re not perfectly transparent, but most nonprofits have to file an IRS 990 every year. Those are all publicly available. You have to list where the money came from. I think part of the problem for nonprofits is the opposite. They’re pretty transparent about some things, including where the money is coming from. So if you’re a muckraking ideologue, and you’re unhappy with George Soros or the Koch brothers, you can immediately figure out who they’re funding, and turn your arsenal on those NGOs that have received money.
Well, the recent salaries of people at my institution and yours are public, yes, anyone can look up the 990 forms. But the names of individual donors are not disclosed to the public.
It’s not perfect, but I would argue that it’s much more transparent than the average non-publicly traded business.
Sure, but we’re talking about critiques of the nonprofit sector. I’m drawing this from the first couple of chapters of your book, where you say transparency is a continual ask from critics.
Maybe I’m pushing back too hard. I do think that nonprofits can and should be more transparent. One of the things I’m most passionate about — which is a slightly different point, but related — I find that many NGOs have essentially given up on persuasion; on speaking to the bulk of the American public. When I look at newsletters, websites, or annual reports, I often see ideologically-freighted language, some of which is unintelligible if you are not already in the elite left club. I think that’s a profound problem. When they’re communicating with the world, NGOs should be aiming to convince people, speaking plain language in a way that is intelligible to the bulk of the American public. A lot of organizations over the last decade are guilty of not doing that.
I’d agree, although I’d argue that your critique doesn’t go far enough. There was a lot of messaging from these institutions that was not aimed at persuasion at all. If you look at the nonprofits that advance journalism, for instance, there was a turn away from persuasion, towards an idea that they existed to protect the American people from themselves, and from believing false things — rather than trying to convince them of things the nonprofits believed were true.
But that’s more about political tactics: maybe it’s unwise to make certain arguments, or use freighted language. The broader critique from the right is that using the phrase “BIPOC,” or capitalizing “black,” is a symptom. The underlying beliefs were the problem.
I think both are true. But it speaks to, “Who are the nonprofits for? Who are they accountable to? How do they perceive their mission?” Nonprofits are organizations that have been granted an incredible privilege by the federal government. They’re exempt from tax under 501(c)(3). That is a gift given under the assumption that they are operating in the public good. A lot of organizations — again, it feels maybe too harsh to say — have lost track of the fact that they’re supposed to serve the broader public.
I don’t mean to suggest that just tidying up some language is going to solve the problem, because it’s more than a linguistic problem. It’s about an orientation towards the world. The public includes, not just Democrats, but independents, moderates, and Republicans. Nonprofits should seek to serve them too.
Transparency is always the first thing that critics can complain about, even when the institution is fairly transparent. When I was covering DOGE and USAID, I criticized what I thought was a reckless attack on these foreign aid programs (something we discussed with Dean Karlan, USAID’s former Chief Economist). Someone tried to draw a little red-string-on-a-pegboard connection between me and USAID to imply that I was being paid by the federal government to defend graft in USAID programs. Which was pretty deranged, but you see that a lot: that conspiratorial instinct is very normal in American life today.
All that to say, I take your point, transparency is not the be-all and end-all of good governance of nonprofits.
We were talking about places where you think nonprofits do a lot better in providing a service than the government. I’d be curious to hear what domains that’s true in and why. As we’ve talked about, some big, public failures in the ‘60s and ‘70s mobilized this trend for nonprofits to do more of this work. But I assume it’s historically contingent, and dependent on the nature of the government institutions.
In what places would it be appropriate for a nonprofit to say, “We’re wrapping up, because we think we can help the feds or the state do it better”?
I don’t have an easy answer to your question, like, “Let’s rely on nonprofit service providers in housing, but not in education.” To riff on your question a little bit, when nonprofits outperform government, there’s a number of reasons for it. It’s not magic. One is that they tend to be less bureaucratic — they’re not encumbered by civil service rules. Another reason is that they tend to be cheaper. Their employees often make less than comparable workers in government.
It’s certainly true in New York City, broadly about 20% less.
Another reason is that there are plenty of mission-driven people in government, but there is a higher preponderance in nonprofits. One concern I have is that as nonprofits turn towards unionization, become more bureaucratic, and invest more in HR and other bureaucratic staffers, they begin to erode their advantages over government. If these trends continue in the nonprofit sector, you can make a strong case that 10 years from now there will be no difference. Why outsource these things when government can perform at the same level?
We did an episode with Professor David Schleicher about this looming pension crisis in some cities — Chicago specifically. Since nonprofits have lower labor costs, typically, than the comparable government department, it can make fiscal sense for a mayor to encourage outsourcing to nonprofits — it’s a lot cheaper. But that’s not only because nonprofits are more mission-aligned and less bureaucratic: if civil service laws were relaxed, the government could achieve that goal more cheaply.
I think that’s fair. That terrain may shift in the future.
I want to come back to this question about the tactics and language think tanks use, and the way they think about their relationship to their work and to the American people. Whatever happened in 2020, there was a change in how nonprofits saw themselves and what they did. That has driven a lot of the backlash — which up till then had not coalesced, even if there was mounting frustration.
It’s hard to know how you convince people to trust the nonprofit sector again without some shift in how they govern and see themselves. Their rhetorical approach alienated a lot of people, and led to circular firing squads internally about what words to use and how. But if they just change their tactics, because of the realization that it didn’t work in 2020, why should Americans trust that they will perform differently?
Changing communication style is an important step, but if that’s all it is, it will not be sufficient. Nonprofits should take pains to articulate that they are welcoming to staffers across a broad political spectrum — in a way that they have not been explicitly saying on their websites and in their public utterances in recent years.
In terms of, “How do they regain trust?” — mission creep, and getting embroiled in political controversies beyond the scope of your organization, has clearly ensnared many organizations. The Sierra Club is Exhibit 1A. I recommend everyone reads that article from the New York Times. There’s no reason I can perceive for the Sierra Club to opine on the war in Gaza. I don’t think you’ll ever convince me that it’s essential for an American environmental organization to take a political position on that. Much greater mission discipline is part of the answer. It’s going to be a long road back.
The most important thing they can do is just do a killer job of whatever their mission is. The more that you can show that you’re reducing homelessness, educating people — that’s going to be the best bastion against the erosion of public support.
The big challenge right now, as I talk about this book and say, “Here’s the nonprofit crisis, it’s this erosion in public trust.” People sometimes look at me and say, “What are you talking about? The nonprofit crisis is Trump and the federal government.” That is a crisis too. Trump is engaged in some very dangerous behaviors. But in figuring out how to confront the challenges that the federal government presents right now, nonprofits have to be very careful. The more that opposition to the Trump administration looks like just another battle between the right and the left — it’s a bunch of progressive NGOs and philanthropists who don’t like Trump — the worse the nonprofit sector will come out of it.
Maybe you’ll deride this as just a tactical move, but I do think it’s important for nonprofits, and the foundations that fund them, to be doing cross-partisan work, engaging people in the center and the right of the political spectrum in standing up for the sector, and values of civil society. That’s the only way they’re going to be effective. One of the concerns I have is that the more that NGOs look like politicized institutions that just exist to resist Trump — they do long-term damage to themselves.
In Statecraft-y language, we’re interested in principal-agent problems — where the organization formally wants to do one thing, but in practice you have to work with a bunch of other people to execute, and those people have other goals. Some of these nonprofit organizations have been around for a very long time and there’s been mission creep over the course of their lifetimes. The Sierra Club and the American Civil Liberties Union might be examples. You could name any number of organizations where this is a natural drift — you talk about O’Sullivan’s Law, that organizations that are not explicitly right-wing tend to become left-wing over time.
Let’s say a nonprofit executive really wants to take your advice, to try and build those cross-partisan alliances and refocus on the mission. What are they supposed to do tomorrow?
There’s a lot of forces above and below, and on social media, driving nonprofit executives into confrontation mode, and driving nonprofits to carve out public positions on a host of controversies. My instinct — I’m not sure this is right; some of this is just my personality — points in the opposite direction. Which isn’t to say that it’s always wrong to take public positions — there’s lots of NGOs where that’s intrinsic to the work. This is maybe what I’m trying to argue in the book — nonprofits should keep their heads down and stick to their knitting.
I would tell any friend who’s just ascending to nonprofit leadership, “The most important thing you can do is focus on achieving the goals of your organization.” We have a real signal-and-noise problem in our culture right now. There’s so much noise, so much to distract attention, and so many forces tugging at you — whether it be donors, clients, staff, or government. But to have as a touchstone, on your desk, the mission of the organization — and that you are a servant to that mission, rather than the organization being a servant to your ambition — I think that’s where the road back to the full trust, faith, and confidence of the public starts.
