Nonprofit organizations have adapted to new marketplace realities in various ways, ranging from subcontracting to partnership to outright conversion to for-profit status.
Consider "single signatory contracts," which allow government agencies to execute a master contract with a single provider. Essentially, the government outsources the outsourcing the provider delivers the services and manages the service delivery system. Under this kind of arrangement in Dade County, Florida, for example, Lockheed Martin hired nearly 30 agencies to supply various welfare-to-work services — including transportation, child care, mental health services, and treatment for drug and alcohol abuse, not to mention job readiness, skill training, and job placement services. The administration of this project — the creation of subcontracts, the billing, and the management of information across systems — is itself daunting. Government agencies don't want the burden, and many nonprofits are incapable of handling it. Therefore, for-profits that are already experienced in managing complex projects, generally corporations with excellent managementinformation systems, will fully assume the role when and if the price is right.
Ironically, for-profits need good nonprofits with programmatic expertise and access to hard-to-reach neighborhoods in order to deliver on these contracts. Many nonprofits are happy to subcontract for for-profits because this piggybacking allows them to participate in huge contracts they could not handle alone. Such collaboration will go a long way to ensure that even small nonprofits continue to have substantial opportunities to provide social services.
Even more striking, perhaps, are the nonprofits that have been willing not only to go along with forprofits but to seize the initiative. Consider the YWCA of Greater Milwaukee. Large and sophisticated by any nonprofit standard, this YWCA concluded that it could not go it alone. To handle the demands of a comprehensive, $40-million welfare-to-work contract, it created a for-profit limited liability corporation with two for-profit partners. According to its executive director, Julia Taylor, if the group had chosen not to compete for the new welfare-to-work contract, it would have lost up to 4o% of its public funding, which was being reorganized into the welfare program.
The YWCA of Greater Milwaukee needed scale and managerial capacity to compete for the contract, so it sought two for-profit partners. The new company, YW Works, provides services from 7 A.M. to 7 P.M., staffs a 24-hour resource line, provides transportation assistance, emergency loans, and job-site clinicians, and has better assessment and placement programs with improved information technology. In short, YW Works provides almost every service needed to help someone find a job.
Abraxas, a nonprofit organization with a 25-year track record in the field of at-risk youth, went even further. CEO Arlene Lissner wanted to increase the organization's access to capital. She assessed Abraxas's future and estimated that the risks of staying independent were greater than the risks of being acquired by a for-profit. Specifically, Lissner believed that a conversion deal would enhance Abraxas's access to capital while preventing it from being driven out of the market by a larger competitor. She concluded that only an outright acquisition by a hand-selected for-profit could ensure Abraxas's survival. Her board agreed, so they hired SunTrust Equitable Securities to find for-profits that might want to acquire the organization. Nine for-profits were interested in this win-win situation a new infusion of capital and scale for Abraxas and a demonstrated program capacity and scale for the for-profit. Abraxas struck a deal with Cornell Corrections, a leading prison-management company. Lissner was given a seat on the Cornell board, and the Abraxas Group, as it is now called, retained its own identity, staff, and board.
Lockheed Martin, YWCA, and Abraxas are examples of organizations that took action in response to market changes. Together, they show how providers are struggling to adapt to a marketplace that wants it all the complex projectmanagement skills of a for-profit and the grassroots strengths of a community-based nonprofit. Forprofits stand to gain by playing in the new environment they can grab contracts, market share, and profits. But nonprofits face a risk. The new marketplace will force them to reconfigure their operations and organizations in ways that could compromise their missions. How big is this risk? To answer that, we must revisit both the mission of nonprofits and the needs of the community.
Nonprofits now find themselves in a world in which they share the same territory with for-profits, sometimes as competitors and sometimes as collaborators. The distinctions between these organizations will continue to be blurred. It is precisely this blurriness that could endanger the nonprofits as they are forced to adapt — and perhaps abandon the very qualities that enabled them to advance social causes in the first place.