A New Vision for Nonprofits: The Insurgent Power of Management Commons

The nonprofit sector stands at a crossroads of chaos and uncertainty in its relationship to both government and the private sector – as well as with American society in general. It’s not entirely clear what will happen next, but it is clear that we are not going back to the same nonprofit playbook that existed prior to the Trump administration.

The vulnerability of the nonprofit sector today is partly due to the fact that the sector never developed its own identity, or more specifically, theory of political economy. That is, the sector never fully defined why it exists, independent of its relationship to the private sector and to government.

For the past 100-plus years, the nonprofit sector has largely been defined as the clean up crew for private sector extraction and, since the New Deal and Great Society eras, as an implementation partner for government. Both identity legacies are now fueling growing threats to the sector and its civil society work.  

What’s the way forward?

The answer, I believe, comes from a very old idea. It involves returning the concept of not-for-profit work to its origins – understanding the sector as the steward of resources that benefit communities, but are owned by neither the state nor private actors. It’s about the ancient idea of the commons.

In essence, a commons is a resource that is shared by a community, managed collectively rather than owned privately or by the state. Commons are stewarded – not owned – according to rules of governance and management established by the beneficiaries to sustain these resources. This concept can apply to resources that are natural (lands, lakes, grazing meadows); manmade (irrigation systems, technology) – and yes, even nonprofit management and administrative infrastructure.

What would the “nonprofit sector as commons” look like in the United States today? To start, it would involve a powerful network of shared management infrastructure. 

Imagine a world where the vast majority of nonprofits operating below $5 million – a group that numbers nearly two million – as well as the thousands of new nonprofits starting up every day, are managed under a network of about 10,000 nonprofit shared management platforms.

We would vastly expand equitable access to nonprofit infrastructure. We would increase our capacity for collective action. And we would provide a degree of safe harbor and a bulwark for civil society programs to resist political attack in these challenging times.

This isn’t theoretical – we already have the baseline architecture in fiscal sponsorship. All of this is possible through the existing tools of fiscal sponsorship, reimagined as management commons: intentional communities of independent nonprofits sharing a common backbone, all the while preserving their independence of vision, agency, and community relationships.

If we reimagine the nonprofit sector as the commons sector, then management commons is its native operating model. This is not just a matter of semantics or marketing legerdemain. In doing so we link the practices of nonprofit management back to commoning as a powerful but underexplored strand of history underpinning the U.S. nonprofit sector and one that might begin to chart a path toward repairing some of its deepest ills. 

Following the thread

Much of the historical analysis of the nonprofit sector focuses on its rooting in Judeo-Christian notions of charitas, including the early influences of the Quaker and Puritan culture on American civic life. While there is some truth to these threads in the historic weft, there is a more ancient and secular strand to pull on. It goes back to ancient Rome.

Back in the 6th century, Justinian I became the Byzantine emperor of Rome, and inherited a far-reaching and fraying demesne. He sought to shore up his domain by unifying its legal systems. To do this, he published a book in 533 AD called Institutiones that became the foundation for much of our modern system of laws.

Justinian organized his book around four categories of ownership. The first two were res publicae (things owned by the state) and res privatae (things owned privately). These were the precursors to our modern public and private sectors.

The latter two are much more interesting and where our story begins. Justinian defined res communes as things owned by the community, but outside of public and private hands – a true third sector. The final category, res nullius, described things owned by no one, like the sky, heavens, and oceans.

We’ve lost res nullius as a concept over the centuries (if anything, much of that domain is fast becoming res privatae, thanks to the avarice of late-stage rentier capitalism). But res communes – the commons – has continued to remain relevant. In fact, there’s an argument that it’s the origin – and could be once again the future – of the nonprofit sector.

A commons in disguise? 

After Justinian, commoning-related ideas continued to appear over the next millennium of Western legal history. 

Commoning shows up in 1217 as an addendum to the Magna Carta. It’s a concept in the Charter of the Forests, a document published in England during the Revolt of the Barrons that outlined principles of managing common woodlands and other natural resources in England.

And it surfaced again in 1601, when Queen Elizabeth I issued the Charitable Uses Act, which was among the first modern notions of public benefit administered outside of the church or state. Elizabeth empowered her nobility to be overseers of resources to be used for public (charitable) good. American law is derived from English law, so this model is the direct progenitor of the charitable purposes language in section 501(c) of the U.S. Internal Revenue Code, formed in the 20th century. We swapped her nobles for our states’ Attorneys General.

In the modern era, the most significant contribution to commoning theory was the groundbreaking work of the 20th-century economist Elinor Ostrom, who won a Nobel Prize in economics for her work in formalizing both a mathematical theory of Common Pool Resource Economics, and for her socio-anthropological study of the attributes of ancient commons around the world.

Ostrom traveled around the world, investigating commons that have been continuously stewarded for more than 500 years, mostly irrigation systems, meadows, rice paddies, and the like. She wanted to answer the question: what are the stewardship attributes that ensure the continued survival of a commons against the ravages of time, private interest, statecraft, war, famine, and disaster?

She found that despite being profoundly isolated from each other by time, language, culture, and geography, they all exhibited the same eight principles of stewardship describing how the beneficiary-stewards are defined, rules for management are established and evolved, oversight is conducted, disputes are resolved, and accountability to the community is ensured, among other aspects of commoning.

Sound familiar? Ostrom’s Eight Principles closely resemble the underlying management and public accountability attributes of nonprofit organizations. 

Consider all these resemblances. The nonprofit sector addresses civil society needs that are neither met by government (owing to lack of political unity of will) or the private sector (owing to the anti-prosocial and profiteering proclivities of private interest); many of its practices and guiding laws are resonant with those of commoning; and its regulatory and core fiduciary care management concepts mirror those of commons management.

Take all this evidence with the  fact that both commons and nonprofits enjoy an historic positionality as “third sectors”, and we may assert that the nonprofit sector might be a latter-day manifestation of Justinian’s res communes – a commons sector in disguise.

How did we lose this thread?

So what went wrong? Where did the nonprofit sector deviate from commoning? The answer, I believe, comes from private sector encroachment.

The three sectors today – public, private, and nonprofit/commons – are intended to serve distinct but complementary purposes in advancing civil society. In some ways they resemble the three branches of government – meant to balance potentially conflicting social and economic interests through negotiating conflicting forces and self-correction.

But the history of the sectors is also one of encroachment and co-option, predominantly and most devastatingly from the private sector. The core problem with the nonprofit sector today – and what has made it deviate from commoning – is the overapplication of private sector management values and principles to the nonprofit sector.

The inappropriate influence of private sector thinking on government is a long-standing and widely recognized matter of public debate in American politics, with Reagan’s Movement Conservatism and its alliance with neoliberal supply side (“trickle down”) economics resulting in more and more social benefit work being pushed to the private sector.

When it comes to the nonprofit sector, the encroachment has been more discreet. This influence began in the early creation of the sector, and has advanced through regulations, culture and management conventions that have made the nonprofit sector a mirror of the for-profit sector. 

To start, the nonprofit sector was created, by intention and default, largely in the image of the private sector. Many of its bedrock laws are designed to keep the nonprofit sector from unfairly competing with private sector interests, owing to its tax exemption.

For example, non-charitable activities that are considered inherently commercial by the IRS such as legal services, management services, advertising, accounting, etc., if delivered by a nonprofit, must be priced both below prevailing market and below cost-to-deliver, ensuring that their commercial viability is foreclosed and charitable subsidy required to sustain them. At the same time, nonprofits are constantly under pressure from philanthropy to diversify revenue, including earned sources, resulting in the paradoxical effect that earned (essential commercial) income is the largest portion of the nonprofit income.

Not surprisingly, legal forms and management conventions have also followed suit. In the 19th century, trusts were the prevailing charitable legal form, as distinct from corporations, which are designed to enclose and protect private assets. Today, the norm is the corporation, a form borrowed from the private sector.

We also apply for-profit corporate management models, designed for private asset management, to public trust or commons, which are entirely different kinds of assets. The rise of management consulting starting industry in the 1970s began an incursion into the nonprofit space, preaching the gospel of competitive advantage analysis, market dynamics, and other ideas that don’t (or shouldn’t) belong in a sector devoid of private ownership, where assets are stewarded on behalf of the public by nonprofit staff and boards.

To be sure, there are some commonalities of basic management between the nonprofit and private sectors, but we should regard neither government nor nonprofits as profit-seeking “businesses”, because they aren’t. The result is nonprofit management and governance culture that is often challenged to collaborate on public good out of competitive and enclosionist attitudes toward their “firm” and fiduciary duty. Preserving the organization and its assets and operations are the goal, even at the expense of foreclosed broader public benefit collaborations.   

The above observations provide the essential underpinning for understanding the most catastrophic result of private sector thinking in the commoning realm: the false axiom that independent missions require independent corporate and management infrastructure.

Our sector’s indulgence of this false axiom is the reason we have 1.9 million nonprofits populating the American landscape, 89% of which operate below $500,000 in budget (97% below $5 million), with most intentionally operating at small scale, owing to their mission and/or local focus.

‍Two million and counting

There are some good reasons for this abundance of nonprofits. The staggering scale of this fractured landscape draws some of its motivations from the American proclivity famously identified by de Tocqueville. We are an entrepreneurial country and humans in general are deeply prosocial animals and drawn to organize for social good.

The nonprofit sector is also underpinned by a strong commitment to pluralism, greatly accelerated by nearly fifty years of neoliberal economic policy. As the conservative establishment has pushed more and more civil society functions out of government, many have landed in the private sector, and likely more have landed in or been picked up by the entrepreneurial spirit of the nonprofit sector. 

But while these smaller nonprofits provide essential services and maintain the closest relationships of trust with communities, they are perennially challenged to build truly sustainable and high-quality management capacity. Sector surveys by Forvis, Nonprofit Finance Fund, and others report the same year over year challenges charities face with maintaining management capacity and meeting demand for services. 

“While smaller nonprofits provide essential services and maintain community trust, they are perennially challenged to build truly sustainable and high-quality management capacity.”

As a result, we have a sector consisting of a vast and unnecessarily redundant landscape of infrastructure in the form of millions of charitable corporations. If we accept that the assets of one nonprofit have the same “owner” as another nonprofit, namely the public and not private interest, then why do we need so many separate corporations to enclose these assets?

The answer is, we don’t.

In fact, I would assert that the radical fragmentation of our sector is fundamentally incoherent with the very legal, philosophical, and functional nature of the third sector and with commoning principles. And this is the main reason that we fail to solve the civil society problems that the commons are most wieldy to address.

We need to recover the nonprofit sector from its wayward private sector modes of management and return it to its roots in commoning and stewardship. We need to focus our efforts on sharing the infrastructure that is mission and vision agnostic, everything behind the curtain, while preserving the independence of agency for founders, leaders, and the folks focusing on mission. 

The essential balance is achieved most effectively through comprehensive fiscal sponsorship – reimagined as management commons.

Right-sizing the sector

Fiscal sponsorship describes a set of business and operating practices through which nonprofit 501(c)(3) organizations share aspects of their core infrastructure (staff, systems, legal form, tax status, policies, practices, etc.) with other independent but mission-aligned charitable initiatives. Lack of public data on the field makes it hard to map, but we can identify about 1,400 organizations offering this kind of resource sharing, supporting an estimated 40,000 charitable initiatives and about $24 billion in assets.

There are six identified “models” of fiscal sponsorship, of which two dominate, and one is particularly relevant to our case for commoning.

Perhaps the best known approach to fiscal sponsorship is the re-granting model (Model “C” Pre-approved Grant). This model allows non-tax-exempt individuals and companies to access gifts and grants. The sponsor nonprofit receives donations and grants on behalf of a charitable activity housed and operated by a taxable individual or company, and regrants those funds to that person or corporation to conduct the charitable work, with accountability back to the funder via the sponsor. 

The second approach–and one most relevant to our argument for commonized infrastructure–is Model “A” Comprehensive fiscal sponsorship. In this model, the charitable activity exists as a program inside the sponsor nonprofit, and as such, enjoys all of the shared back office functions any program would enjoy: comprehensive financial management, HR, legal, insurances, fundraising support, tax and regulatory compliance, etc.

Unlike a conventional in-house program of a nonprofit, however, the sponsored project preserves its independent public identity and agency related to mission and overall organizational direction, as well as stakeholder relationships. The comprehensive form offers a dynamic balance between maintaining independence of mission identity and agency, while enjoying the benefits of shared infrastructure efficiency and true collective capacity building. It commonizes all of the essential, but mission-agnostic systems and staff.  

In this manner, comprehensive fiscal sponsorship not only can support temporary projects and start-up initiatives: it can also be a permanent alternative to stand-alone nonprofit operation.

We are seeing more rising nonprofit leaders and founders reach for comprehensive sponsorship as a long-term operating model. And with the ever growing stresses of the current political and economic environment, we’re seeing existing nonprofits put their entities on ice and move operations under comprehensive sponsors to access more and better shared management and in many cases, safe harbor.

Once you have multiple organizations plugged into common infrastructure, there’s a lot more you can do with greater ease, such as collaborative grantseeking, shared staffing among subgroups of projects, program- and impact-focused collaboration, and so on. When comprehensive sponsorship is practiced with commoning values, such as governance by local stakeholders (the individual charitable activities themselves), intentional community building, and ongoing learning, it becomes a management commons. 

Comprehensive sponsorship, reimagined as management commons, is also a more just, socially equitable, and economically scalable alternative to mergers and acquisitions–all the economic and programmatic benefits of a merger without the high psychological and financial transaction costs.

The latter generally only concern two to three organizations at a time (whereas comprehensive sponsors can be home to many hundreds of initiatives), are accompanied by significant psychological and social resistance (owing to the one-way nature of things), and as one-way transactions, often eliminate the identity and agency of the merged or acquired.

This form of commonized infrastructure is one of the ways in which commoning practice appears natively in the nonprofit sector and thus a path to recover the sector from the degradation and fragmentation wrought by application of private enclosure.

What a management commons does well

A well run management commons does three things well.

‍Lets leaders and nonprofit teams focus on what they do best

This is the goal, right? Nonprofits are almost always started by leaders and teams focused on a particular program or service, not bookkeeping, HR, or other infrastructure support. The story of start-up and scale is generally one of building those underpinning supports to sustain their work. In many cases the model of capacity building involves training the program-focused folks to do many of the functions of administration as they grow to a more departmentalized scale.

Many organizations resist this, not because the teams aren’t capable of doing the administration, but because time and attention capacity is spread too thin–too many people wearing too many hats. Moreover, program-focused staff generally don’t want to do (are not interested in) the administrative work, and as a result, do it poorly.

Affords easy, equitable access to nonprofit resources

Management commons affords nonprofit leaders plug-and-play access to full-charge nonprofit management support while retaining creative independence. Removed are the knowledge and financial barriers to forming and managing a nonprofit, or any legal entity for that matter.

There is no need to legally form anything or even open a bank account. And because the workaday job of fiduciary oversight is provided by the sponsor’s board, and nonprofit leaders don’t even need to bother with building a traditional board, unless they desire. Management commons can reduce the need for the acres of well meaning but poor governance that burdens our sector.

Fosters right size, efficiency, and collective capacity

Lastly, commonized infrastructure allows organizations to be the size and shape they want to be, while assuring sufficient, high-quality management support.

Just about every founder I’ve ever known has a sense of right size for the scale of their work. Management commons provides holistic support in an amount that can vary proportionate to need. Costs for these supports are allocated as a percent of income, generally 10% to 15%, fluctuating with need and scale of practice, but always at right size.

Comparative cost studies done by Social Impact Commons have shown that up to 50% of overhead costs can be saved through sharing a common backbone versus operating alone for organizations under $2 million in budget. And since management commons organizations can support multiple independent charitable initiatives, a model for collective capacity building and risk management emerges: an investment in the sponsor’s capacity is an investment in the capacity of all the projects under that sponsor.

How do we get there?

So how do we get to a vision of the sector organized around a landscape of management commons instead of millions of small nonprofits leading lives of quiet desperation? I offer three calls to action necessary to continue our movement toward more shared infrastructure and an ecosystem of management commons for the nonprofit sector.

1. Build more management commons organizations with the values and tools to preserve cultural diversity, agency, and ownership.

2. Challenge the assumption that stand-alone nonprofit formation is the only or better path for nonprofit and civil society organizations. 

3. Educate the funders, advocacy organizations, consultants, lawyers, and accountants that support our sector about the benefits of management commons as a path toward greater flourishing.

By taking every opportunity to engage in these actions, we can continue down the road toward a more just and flourishing nonprofit ecosystem. Today, we face many challenges of colossal scale and complexity–climate change, social division, economic inequality, to name few.

If we are to meet these challenges with the true force of solution they require, we need to build for greater collective action and resource efficiency in the sector, and management commons is the model for this new nonprofit infrastructure of the 21st century.