The importance of understanding nonprofit management

Sixty-thousand people. That was the number of clients the Hull House helped annually at the time it shut its doors. That does not include over 300 more people who worked for the nonprofit. Needless to say, its closing impacted many, many lives.

Nonprofit Quarterly just published an article on the death of Hull House. It analyzes the different organizational factors that lead to the organization’s closing.

When I woke up the morning of January 27, 2012, one of the first stories I heard on the radio was the closing of Hull House. I was shocked. This organization was the first settlement house in the US. People came from around the world to learn more about the Hull House and take the information they learned back home with them to implement successful practices. Moreover, this single event would be the start of a death spiral for many of the working poor who relied on the organization’s services. The inability to find affordable child care (just one of the services) would leave some to miss work – without pay – to care for their children while finding another day care provider. The reduction in pay leads to some not being able to pay for rent, child care, groceries, and many other basic needs. One nonprofit’s mismanagement can negatively impact thousands of lives.

I use this as an example of why learning about nonprofit management is critical. It is different than running a private business, and it is different from running a public agency. Yes, many of the mechanics are the same, but there are differences and understanding them is critical.

Nonprofit have a unique governing structure, and those who serve on a nonprofit board have the legal responsibility to demonstrate duty of care, duty of loyalty, and duty of obedience. Of importance here is duty of care. As stated in the article,  the organization’s financial mismanagement was exacerbated by poor governance, and poor governance led to mission drift.

The authors conclude that

the cause of death for Hull House was a three pronged attack – financial mismanagement, poor governance, and mission drift – that ravaged all facets of the organization. If Hull House had managed one or two of these ares more effectively, perhaps it could have staved off death and even paved the path to recovery. Sadly, it succumbed to all three conditions. (41-42)

I can only hope that students in my nonprofit management and nonprofit financial management courses understand why the material we cover is so important to individuals and communities.

Please take the time to read why the Hull House closed its doors. If you see any similarities in the nonprofit you are working for or you are on the board of, please correct these issues for the health of the organization and the lives it impacts.

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