Partners, Volume 15, Number 2, 2005
Partners, Volume 15, Number 2, 2005
|Sustainability and Scale: New Buzzwords or Tools for Survival?|
Current economic and political conditions call for new ways of thinking about community development. “Sustainability” and “scale” are crucial concepts in today’s tight funding environment.
As needs outstrip available resources, market forces drive stakeholders to cut costs through structural or functional combinations and greater standardization in order to grow—or merely to survive. The community development industry stands at an important crossroads, and new approaches are essential for its continuing viability. “Sustainability” and “scale” are indeed more than just new buzzwords.
Funding pressures call for greater efficiency
But now more than ever, organizations are being forced to look at additional ways to cut expenses, increase productivity, or both in response to funders’ expectations. Funding is becoming so scarce and difficult to obtain that many community organizations may face demise unless they implement major changes.
Some might argue that increased government spending is the solution to sustaining community development. But it’s unrealistic to expect government funding to serve as a cure-all, given current policies and competing priorities. Nor can the collective resources of financial institutions or philanthropy keep pace with growing demands.
The bottom line is that many community development organizations will need to rethink long-range plans as they evaluate program costs and assess their effectiveness. Maximum internal efficiency will become increasingly the starting point in seeking and justifying resources.
Leveraging resources through alliances
Granted, recommending leverage through alliances is easier said than done. Issues often arise concerning leadership, control, and inevitable staffing cuts in a merged organization. A successful alliance requires that both groups understand and recognize the quantifiable value of a combination—without ever losing sight of clearly defined goals about what’s best for everyone, especially the community being served.
Clear communication that builds trust among all parties is vital, especially among the boards of directors. In addition to evaluating the structural aspects of a merger, risks should be explored thoroughly, including legal matters. Third party professionals can be engaged to provide guidance any step along the way.
Improving marketplace sustainability
In considering sustainability at the level of individuals and families, it has become apparent that creating affordable homeownership must be complemented by access to mainstream banking products and services. Continuing reliance on expensive, fringe service providers drains precious wealth-building opportunity and threatens personal financial sustainability. At all levels of community building, best practices maximize use of limited resources.
Encouraging more standardization
The push for greater scale comes largely from the marketplace, which seeks consistent and predictable standards to mitigate risk. Standardization creates larger markets by increasing participation through greater understanding, which in turn fosters higher confidence.
Individual organizations can achieve greater efficiencies of scale in small ways such as taking advantage of external service providers. For example, a small or mid-sized nonprofit probably can’t process its own payroll as efficiently as an external payroll firm that has achieved economies of scale through volume.
Achieving greater scale will take significant time, especially since so many nonprofits are small shops. Some organizations still lack Internet access and even computers. But the wheels have been set in motion by market forces that crave efficiency.
Another reality touchstone is recognizing that changes often take significant time. While an ideal merger could occur in a matter of weeks or months, some processes can take many years or even decades. Again, continued viability should be stressed as the rationale for advancing these concepts.
The role of the Federal Reserve
Nevertheless the Federal Reserve Bank of Atlanta’s regional managers stand ready to discuss opportunities for enhancing programs and organizational efficiency to promote stronger communities.
This article was written by Wayne Smith, Community Affairs Director at the Atlanta Fed.