Organizations that are created specifically to help nonprofits thrive tend to have trouble surviving financially themselves, according to a new study that suggests a lack of resources is eroding the quality of services these groups provide.
The numbers of those so-called infrastructure organizations, which include groups like the Environmental Grantmakers Association, Hispanics in Philanthropy, and Neighborhood Funders Group, have surged over the past decade.
The proliferation of such organizations has given nonprofits a dizzying array of choices when seeking support for advocacy work, connections with like-minded peers in the field, and staff training, according to the Urban Institute, which conducted the study, along with scholars at George Mason University.
As their numbers have grown, infrastructure groups have chased a limited amount of dollars. From 2014 to 2019, the median annual operating margin for infrastructure groups was close to zero. Large organizations and groups that serve philanthropies were more likely to operate with a more comfortable margin than small groups and those serving other nonprofits, according to the study, which looked at 165 national infrastructure groups. Greater investment in infrastructure organizations, and the nonprofits they support, would better provide for staff and allow them to take chances on new strategies, the study suggested.
Urban used Form 990 Internal Revenue Service filings from 2014 to 2019 and supplemented that data with interviews conducted in 2022, after MacKenzie Scott had contributed more than $100 million to at least 96 national infrastructure groups, by Urban’s count. According to the study, Scott’s gifts have yet to translate into additional support for infrastructure nonprofits, which have consistently relied on grants and contributions for about two-thirds of their revenue.
But many infrastructure groups and the nonprofits they support have benefited from government funds in the form of federal Paycheck Protection Program loans. That aid was made possible by the help of infrastructure providers, who sounded the alarm when nonprofits were initially left out of the program, says Laura Tomasko, senior policy program manager at the Urban Institute and a co-author of the report.
The Chronicle talked with three of the report’s co-authors: Faith Mitchell, a fellow at Urban and the former president of Grantmakers in Health; Benjamin Soskis, senior research associate; and Tomasko. They discussed the huge growth in the number of infrastructure groups in recent years, challenges raising money, and how they can be more effective supporting nonprofits. Their remarks have been edited for brevity and clarity.
What is the significance of the growth in social sector infrastructure groups?
Mitchell: When I was a program officer at the Hewlett Foundation in the late ‘80s and early ‘90s, we worked with virtually no intermediaries. You didn’t have this army of philanthropy-serving organizations and consultants that we take for granted now. In the past 30 years, there’s been remarkable growth.
Soskis: When people think about infrastructure, they sometimes only think about the infrastructure organizations that are kind of nationally known and most prominent. But with more intermediaries, there are more types of service provision out there. A lot of folks find that exciting. But this is a real challenge because there’s now so many options. People are drowning in choice. We’ve reached a stage of expansion where there is a need to help potential users make sure that their needs are being met when they select a service provider.
Dealing with the scale and scope of the available resources is difficult. The word that was most invoked was “fire hose.” There’s a desperate desire for curation.
What roles do social-service infrastructure groups play for nonprofits and which roles need the most attention?
Tomasko: They help in four areas: sustainability, learning, relationships, and influence. And one of the pain points in the study had a lot to do with how infrastructure groups help build relationships. It’s really critical to highlight relationships as a key service that infrastructure provides. But sometimes it’s not seen or fully appreciated or perhaps even fully funded. We think of relationships as part of infrastructure, but it’s not brick and mortar. It’s more a soft, intangible thing.
How do infrastructure groups help nonprofits build constructive relationships with peers and where are they falling short?
Tomasko: People uniformly spoke very highly about leadership-development programs — those cohort-based models that bring people who are tangentially connected together for multiple months to grow together and build relationships. We heard people love those. But some of these programs are expensive. Some of them require being members of organizations. There are issues and challenges with access.
If we had a Yelp-like service, you would see a lot of very mixed reviews about conferences. There are so many conferences and there’s so many consultants, and the quality is really different.
Infrastructure groups reported having about three months’ cash on hand. How does that impact the benefits they can provide nonprofits?
Tomasko: The nonprofit financial literature recommends approximately three months of cash on hand. That is what’s considered a best practice. But say you’re an infrastructure provider that has been doing all these wonderful conferences and leadership-development programs. If there’s something new you want to try, having three months of cash on hand is not going to allow you to bring on a staff member for a long enough period of time to start a program that may or may not be successful in the field.
Being constrained by the number of months of cash on hand can really hold providers back from doing all they might be able to do. And it keeps them on a cycle doing the same programs because people seem to like them and they’re working and there’s nothing wrong with them. But where’s the innovation and where’s the ability to go big and do something different?
How can donors and foundations help infrastructure organizations get on steadier financial footing?
Tomasko: The type of support that we heard would be most helpful is multi-year general operating support that comes with minimal application and reporting requirements. We’ve heard it for decades. And that’s really critical because it provides autonomy and shows respect to the infrastructure providers, giving them the flexibility they need to best serve their community.
There’s also a huge role for people in the social sector to play in financing these organizations. They can do that by buying things that are useful, by, to use that old expression, putting their money where their mouth is.
There’s not always a great feedback market mechanism in the nonprofit sector, especially where foundations are paying for programs and someone else is using them. But in the case of some infrastructure services, whether it’s a conference you’re considering or you’re choosing to attend a webinar or a training, you do have a little bit of a mechanism there for the market to figure out whether it is something of high value. We need infrastructure end users, people in the social sector, to use their dollars to show where they see value.
More than half of the nonprofits surveyed said they didn’t think infrastructure providers understand their needs. How can that be addressed?
Tomasko: If I’m a national infrastructure provider, I need to ask if I’m building my staff in a way that reflects all the different kinds of audiences I want to serve. To take that a step further, it’s not enough to just have a diverse staff when it comes to race, geography, or background. You also need to ask if those people on your staff have voice, autonomy, and authority to be able to develop programs, to have ideas, and to work directly in concert with communities. Infrastructure providers need to look at who is making the decisions and who is able to impact services.
How does this translate into which organizations infrastructure groups support if they want to broaden their reach?
Mitchell: We use the concept of equity very broadly, not just looking at race and ethnicity but also geography and size. That includes the differences between large-scale and older organizations and smaller ones. We found that in communities of color are often volunteer-led organizations that are not even necessarily formalized as 501(c)(3)s. That can put those organizations at a disadvantage when it comes to getting help from infrastructure providers.
Soskis: We’re not making judgments about which recipients are more effective. They are all key parts of the social sector. And while there was a pretty striking surge of infrastructure provision, at the same time you had this pretty acute sense of needs not being met based on geography, based on identity, based on size, based on organizational type. It’s not a well-functioning market.
Tomasko: The social sector is bigger than just the organizations that qualify to be members of large national infrastructure providers’ networks. So as infrastructure providers use their influence to change or inform public policy, it’s important to partner with grassroots organizations and movements and folks that might actually have the ability to bring together the voices and representatives of the social sector who are not formally affiliated with 501(c)(3) organizations. They have a really important voice and stories to share.
What can nonprofit leaders so to increase the support for infrastructure providers?
Mitchell: Foundations should look beyond their specific organization and realize that we all stand to gain when infrastructure organizations can strengthen the whole field.
That was how we approached things at Grantmakers in Health. And some funders understood that, and others are more focused on their own concerns. And I think you can kind of generalize from our experience that making the case for the infrastructure is like making the case for physical infrastructure — for roads or clean water — and how we all gain from that.
Tomasko: When we talk about getting people more interested in infrastructure, we often think a lot about the people who are tasked with supporting infrastructure through their portfolios. I was one of these. I worked at the Gates Foundation on the philanthropic partnerships team that is an example of infrastructure funding.
But the Gates Foundation and a lot of other foundations are populated with program officers who are not specifically tasked in charge of infrastructure.
An area of growth and opportunity for funding infrastructure is to get those folks who are not tasked with infrastructure to think not just about supporting those organizations that they want to be big and thrive but also to think about supporting the ecosystem of infrastructure around them so that they can be strong.
Not so much to prescribe that their grantees have to go to these organizations for support, but if they care about supporting climate organizations, how about also making sure that the infrastructure for supporting climate organizations beyond just this one organization is strong?
Soskis: It’s fundamentally difficult to have a precise, quantifiable sense of what you’re getting from infrastructure. And it is kind of easy to take for granted. One of the things we heard across the board is the need for stronger narratives and a stronger need to remind people in the sector that infrastructure does matter. But it’s not the kind of thing that you can do once a year. It has to be baked into the way people think about what makes a strong civil society and a strong social sector.
