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May 15, 2013

Community Investment Requires “More Than Just Money”

The pressure on nonprofits remains widespread.  The most recent State of the Sector survey by Nonprofit Finance Fund and Bank of America reveals that in Ohio alone 74 percent of nonprofits are seeing increased demand for their services but almost half do not believe they can meet the demand.

Nonprofits which have served as the primary delivery mechanisms for government services are particularly affected.  Financially almost one-third have less than 60 days of cash on hand yet four-fifths do not get paid on time by the state agencies they serve.  Several organizations have failed or merged as Job and Family Services changed how it pays for residential treatment services.  The recent changes in reimbursement by the Ohio Rehabilitation Services Commission are likely to result in more failures or mergers by the end of the year.

While money is certainly part of any constructive response to this situation, I wrote a book arguing that nonprofit success requires more than just money.  In an article in the Stanford Social Innovation Review, Antony Bugg-Levine, the head of Nonprofit Finance Fund, has coined his own term for what is needed:  complete capital.  Complete capital encompasses four components:  financial, intellectual, human, and social capital.

Financial capital is familiar to most everyone.  It consists of contributed and investment capital to provide money to sustain, stabilize, innovate, and change how society’s social needs are met.

Intellectual capital brings facts, research, and evaluation to bear on which services and approaches produce successful results and which do not.  It avoids reinventing the wheel and discourages persistence in second-best approaches.

Human capital is the expertise to support implementation of effective strategies and restructuring of nonprofit service delivery. Corporate philanthropy nationwide is gradually realizing that the expertise of their staff can be just as valuable as the wealth of their foundation.  Yet most corporate volunteer programs provide staff for unskilled volunteer activities.  When asked what they need to thrive and be effective in the next three years, 75 percent of survey respondents said they needed access to external experts and they needed the right management and staff for the programs they will offer.  This worry substantially exceeded worries about having the right mix of financial resources.

The fourth component that comprises complete capital is social capital.  At a fundamental level, this is the power to convene, to reposition government, private funders, organization leaders, and service recipients in new ways that foster effective collaboration.

Our nonprofit sector does not have enough complete capital.  The community has provided some components at various times.  Imagine what would be possible if we corralled all four to ensure a social sector that is sustainable, effective, efficient, and smart.  Need a reminder why nonprofits need to develop this expertise?  Watch this video.    Still not convinced?  Let me speak to your group on what makes for a sustainable nonprofit business.