When we think about the nonprofit sector, we tend to automatically think about the organizations with a mission and vision that provide services in areas ranging from poverty to arts and culture, right? These are almost always 501(c)3 incorporated nonprofit organizations that come to mind. But there are so many more different kinds of organizations that make up the third sector, and it does us all a disservice to ignore or discount them.
So let’s go over some of the different kinds of organizations within the nonprofit sector and a couple reasons why you should pay more attention to them.
Other Section 501(c) Organizations:
Social Welfare Groups- 501(c)4
This grouping also includes civic leagues and local employee associations. Interestingly, these groups are allowed to participate in some political activity (unlike traditional 501(c)3 nonprofits). As long as they spend less than 50% of their funds on politics, they are allowed to keep their nonprofit status.
As per the IRS website, examples of social welfare organizations include:
Business Leagues- 501(c)6
Not just business leagues- this section also includes chambers of commerce, real estate boards, and more. This section of nonprofits are designed to help businesses and professionals advance in their industry or geographical location.These organizations consist of members- either individuals or companies- that share a common business interest, and the focus is to provide value to the members and assist with the local economy.
Social and Recreation Clubs- 501(c)7
This group includes fraternities, country clubs, yacht clubs, and other associations based around hobbies or sports. Generally, these are funded by membership dues rather than donations, although some funding is allowed to come from other sources. These groups are very different from traditional nonprofits in their method of funding and in overall mission- the main focus is to benefit members of the group. However, they do need to file annual returns just like 501(c)3 organizations.
(Note: This list is not exhaustive- there are other tax-exempt organizations that are nonprofit as defined by the IRS, including 527 political organizations.)
Honorable Mention- Social Enterprises
The Social Enterprise Alliance recommends this working definition for what constitutes a social enterprise: “Organizations that address a basic unmet need or solve a social problem through a market-driven approach.”
Although not technically in the nonprofit sector, social enterprises should be given some attention here because they provide social good and can be a great resource for nonprofit organizations. With the overlap between private and nonprofit, there is a lot of room for collaboration and relationships between nonprofit organizations and these socially-driven businesses.
The Value of a Diverse Nonprofit Sector
Some have argued against having so many different groups of nonprofits outside of the traditional organizations. Their main point is that this complicates the sector and cheapens or drowns out the traditional 501(c)3s that are working to benefit society through services and programs.
This viewpoint seems to be missing the point of our “third sector,” however. It is the sum of all of these different groups in the nonprofit world that add value to society in one way or another. Much of our civil society resides in this; and the entirety of all of these different organizations provides a richness and diversity that spreads to the rest of society.
It is important for anyone working in the nonprofit field to understand the different groups at work and what the full spectrum of organizations consists of. The depth and breadth of the nonprofit sector is staggering, and the only way to fully understand the climate in which you are working is to know the different groups that are contributing.
How do you work with and/or collaborate with other groups in the nonprofit sector? What types of organizations did we leave out of this list? Let us know here, along with all of your other comments and questions!
Professional relationships in the nonprofit sector are very different from the business world and can be difficult to traverse- even if you have experience in this field. In the private sector competition drives most everything, so relationships between companies and their executives are fairly simple as they are always competing for customers and profit.
But the nonprofit sector is different.There are no stockholders and the ultimate vision for most nonprofits is the same: to make the world a better place. So we are working towards a common goal to help the same population, but there are still limited resources in this sector- so although there is a common goal, there will also be competition.
So how do we navigate the boundary between collaboration and competition within our relationships with other nonprofit professionals and organizations? Let’s take a closer look into why we compete, why we collaborate, and how to make it work.
Competition Between Nonprofits
Let’s be honest- competition can never be fully avoided. There will always be limited resources and organizations with similar services and programming. Organizations will always have to vie with each other for their donor bases and raising funds, competing for grants, and even in finding and retaining the best talent for their organization.
There is some benefit to this competition, though. Healthy competition can encourage organizations to push themselves to provide the greatest impact and enact best practices in donor stewardship. Competing for funds means that (ideally) the more effective organizations and the ones with the best ideas will be the ones grants and donors choose to fund. In this way, competition drives the best organizations to be able to grow and expand, and less effective organizations fall by the wayside.
Now, for the downside. Competition can waste time, energy, and funds that could be going to support important services and programming. When there are too many groups working towards the same goal, funds are dispersed and no one group is able to provide enough with their funding alone. And when programs overlap, they tend to be less effective and waste more resources. If the goal is to provide as many effective programs and services as possible for community members and constituents, competition between organizations can hinder the ability to do so.
Collaboration Between Nonprofits
Nonprofits collaborate with other organizations in an effort to provide the best and most comprehensive programs and services possible. Organizations are able to do more when they can pool resources, time, and manpower. When nonprofits collaborate to provide services, they are able to limit the amount of overlap and provide better programs that cover a wider reach than if they were to provide them individually. Good collaboration means more effective and efficient programs and services with a greater overall impact.
How to Collaborate
There is an unlimited amount of ways to collaborate with other nonprofit professionals to advance the missions of your nonprofit organizations. It will, however, take some creativity and time. Here are some ideas to get you brainstorming:
What are some ways that you have collaborated with other organizations? Share your stories and ideas below! We also always appreciate comments, questions, and concerns so we can continue to make our blog better for you.
Don’t Skip the Next Networking Event: The Importance of Networking with other Nonprofit Professionals
Networking has always been lauded as an important business strategy, right? “It’s not what you know, it’s who you know.” But is that true for nonprofit professionals, too? And if so- isn’t being on LinkedIn enough? Not even close.
Networking is crucial to your success in the nonprofit sector and can provide a number of opportunities for growth and collaboration for both you and your nonprofit organization. So the next time you think about skipping a local “meet and greet” or happy hour, consider these benefits that face-to-face networking can provide:
Finding a Mentor
If you do not already have a nonprofit professional mentoring you, work on getting one right now. It doesn’t matter if you are an intern or a CEO, having a mentor in your field will provide enormous benefit to you and your career.
Of course, finding a mentor is not as easy as running out and jumping on the first nonprofit executive you see- but through time and networking, you will find a someone who is able and willing to share their expertise and wisdom with you. Look for someone that is in a position that you would like to be in in the next 5-10 years, and let the relationship grow organically before asking them to step into a mentor position.
Future Job Opportunities
We know you love your current nonprofit job. But there is a good chance that you won’t be there forever. According to Nonprofit HR, the nonprofit sector as a whole had a 19% turnover rate in 2016.*
When it is time to take that next step in your career, it will be important to have those professional connections. Nonprofit communities tend to be close knit, so having an “in” with other nonprofit professionals- especially those that do the hiring- will provide you with better opportunities to advance your career.
Especially in local nonprofit communities, collaboration is an extremely important and often overlooked resource. Collaborating with different organizations, foundations, and associations in the area can be mutually beneficial to both the organizations and your constituents. Use your network to increase awareness for your organization, combine resources to provide a service or event to your community, or share knowledge to help boister complementary programming. Collaboration takes creativity and a strong network, but is a highly valuable tool that can bring about great things for you and your nonprofit.
Potential Donors/Board Members
You never know who is going to be your next donor, volunteer, or board member. Continuously building a network will help you reach more people in your community, which in time will help open the doors to people who want to serve your organization in some capacity.
Understand Your Local “Climate”
Nonprofit professionals are expected to have some amount of understanding of the sector in which they work- especially at a local level. Following news and current events is not enough- it is important to have other nonprofit connections in your area so that you are also aware of the less formal, but nonetheless important, news and happenings in your field.
Networking and building relationships with other members of the sector will help you gain knowledge about your local community, which will in turn allow you and your nonprofit to become more engaged- and ingrained- in your community.
There are many different ways to find networking opportunities in your area. Look for a local nonprofit association near you- many of these host networking events every couple months. Ask other nonprofit professionals if they go to any networking events in the area. Or call your local Chamber of Commerce- they have tons of resources about small businesses and nonprofits in your community. Still not finding anything? Start a networking group yourself!!
What are we missing? Comment below with other benefits of networking with nonprofit professionals. Have a good idea for a networking event? Share with us! We also love comments, questions, and concerns so we can continue to make our blog better for you.
*For the full study, see Nonprofit HR’s Nonprofit Employment Practices Survey Results here.
The nonprofit sector is highly unique from the other sectors, and some aspects can be tricky to navigate - even for seasoned nonprofit leaders. With so many different words and nuances, it can be difficult to find the correct language or know which phrase is appropriate to use in particular settings. So, if you are new to the nonprofit world or just need a refresh, here is a quick guide to some of the unclear and disputed commonly used terms in the nonprofit sector.
Philanthropy vs. Charity
This one comes up time and time again in the sector. The most commonly agreed upon definition of philanthropy was coined by Robert Payton as “voluntary action for the public good.” But what is not so commonly agreed on is the line between philanthropy and charity, or if they are actually synonymous.
We tend to use the word philanthropy more nowadays and refer to charity when speaking about the past. This is because most of the sector perceives philanthropy as impact-driven and scientific-based social change, whereas charity invokes an idea of more passive giving and short-term goals.
So when in doubt, use the term philanthropy when referring to long-term systemic change and charity for providing short-term solutions and relief.
Something else to consider: Eli Broad once said, “Charity is just writing checks and not being engaged. Philanthropy, to me, is being engaged, not only with your resources but getting people and yourself really involved and doing things that haven't been done before.”
Nonprofit, Social, Independent and the Third Sector
What we know for sure is that somewhere between the private sector and the government sector, there is another faction providing important social services and programming and creating social change in innumerable ways. And there is no one right way to refer to this “third” sector: nonprofit sector, social sector, independent sector, third sector, and the list goes on.
Most of us would agree that all of these words are synonymous. It is difficult to pinpoint exactly what this third sector provides: this sector is and will always be more nebulous than the private sector (companies and corporations) and the public/government sector (which includes all levels of government and its services) because it includes more aspects of society than the other sectors.
So if someone references any of these terms, rest assured that you are probably talking about the same thing. Heck, you should work on trying to use all of them! These terms all help to define what makes our sector unique.
Is it Development, Fundraising, or Fund Development?
It is common for a Director of Development to be a Certified Fund Raising Executive (CRFE) and have a strategic plan titled “Fund Development” in his/her office. There are many words in our sector to describe the act of soliciting donations and increasing funding for nonprofit organizations, and for the most part these terms can be used interchangeably.
501(c)3, 501(c)4, 527, and Other IRS Lingo
IRS lingo can be especially tricky when navigating the nonprofit sector, especially because the terms are used by nonprofits in the everyday to differentiate what “type” of nonprofit they are incorporating as legally.
A 501(c)3 is your average nonprofit organization- they are tax-deductible organizations with a mission and vision that rely on donations to supply services and/or programming. This group also includes churches/religious organizations and private foundations, among other organizations.
A 501(c)4 will either be a social welfare organization or a local association of employees. So groups like a homeowners association or labor unions are all included in this grouping.
A 527 is a nonprofit political organization. Contributions are not tax-deductible and they are allowed to lobby and be engaged in the political process at a local and state level.
This list is not exhaustive- there are WAY more, so if you really want to know all of the lingo, the IRS would be happy to help go over all of these with you…
Board of Directors or Board of Trustees
Some organizations refer to their governing body as a Board of Directors and some call is a Board of Trustees. Although many people use them interchangeably, there is a legal difference between the two.
Board of Trustees are subject to higher standards legally than a Board of Directors. As it turns out, some state laws dictate that the term ‘trustee’ is only to be used in relation to charitable trusts, while the term ‘director’ is used only for nonprofit organizations.
So while it is common in the nonprofit world to use both Board of Directors and Board of Trustees, with this one it is better to air on the side of caution and only use the term Board of Directors when referring to a nonprofit board.
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