New Works in the Field

What’s New? Exploring the concept of nonprofit organizational founding

Editors’ Note: Jamie Levine Daniel introduces her research, done with Fredrik O. Andersson, on expanding the definition of nonprofit organization founding, recently published in the Canadian Journal of Nonprofit and Social Economy Research.

“When is a nonprofit founded?” This seems like a straightforward question. However, the answer is anything but straightforward, because founding is a serial, not a singular, event. My recent research with Dr. Fredrik O. Andersson, “What Constitutes a New Nonprofit? Investigating Nonprofit Organizational Founding Dates,” published in the Canadian Journal of Nonprofit and Social Economy Research, underscores just how complicated determining an answer to that question can be. We show how organizations view founding through the lens of ongoing process and highlight what gets missed when we put too much focus on specific founding events.

What does founding mean?

The question of founding is premised on at least two assumptions: 1) “nonprofit” has a singular meaning and 2) founding occurs at a singular, identifiable moment. With respect to the first, the designation ‘nonprofit’ can refer to a legal or tax status (an administrative definition), driver (i.e.: mission, as opposed to profit), or other characteristics. These organizations can be informal, such as a grassroots group started in someone’s living room. They can also be formal legal structures. This distinction connects to the second assumption, which rests on the idea that organizations are founded only when they achieve an administrative benchmark. This narrows the open-ended query “When was your organization founded?” to the specific “When did a tax authority such as the US Internal Revenue Service or the Canada Revenue Agency grant your organization a tax exemption?” Rather than entertaining the idea of founding as process, it winnows founding to a singular moment in time.

Practical and convenient factors may explain this focus. Viewing administrative milestones as the beginning of a new organization, rather than the conclusion of a founding process, allows us to utilize public administrative records to study nonprofits at a large scale. These milestones also offer a standard (albeit insufficient) definition of founding that can be applied across multiple contexts.

However, singular administrative milestones do not necessarily equate to founding even among highly formalized organizations. We used two types of data to analyze founding. The first comes from DataArts, whose cultural data profiles include program, financial, and operating variables. We focused our initial analysis on US-based organizations founded after 2000 who reported founding, incorporation, and tax exemption dates, which yielded a sample of 4,215 organizations. Just looking at the dates reported shows founding is a process. Many of the organizations operated for at least one year before incorporating and at least an additional year between incorporation and receiving tax exemption. Practically speaking, equating founding with incorporation or exemption often overlooks years of operations and distorts what it means to found an organization.

The incorporation and tax exemption dates DataArts asked for in their profiles were straightforward, but we were curious about the founding date. No further information was provided in the profile instructions regarding what this may mean. We decided to dig deeper, so we surveyed the 1,184 organizations who had submitted a profile to DataArts no earlier than 2016. Since respondents were being asked about information related to these profiles, we used date as a cutoff in order to mitigate the influences of respondent- and recall-related biases.

We wanted to learn how founding is conceptualized by people on the ground in their respective organizations. We did not want to bias responses toward administrative data, so we framed the question as: “When (as in which year) was this organization born?” This signaled our understanding of founding as process (akin to gestation, if we want to take the analogy literally). Approximately 70% of respondents responded with a date that matched either the founding, incorporation, or IRS date reported in their DataArts profile. At first glance, this would appear to support the idea that founding can be narrowed down to a singular date. However, we asked respondents to elaborate on founding by answering “What was the specific circumstance and/or action(s)/activities in that year that made you and organizational stakeholders say, ‘Okay, this is more than just an idea, we are now an organization’?”

Only rarely did respondents answer with an administrative milestone. When they did, they often provided context to show they had been operating for longer, e.g., “We operated for over two years out of our own wallets before we incorporated.” They also cited the need for funding or other external pressures to pursue these milestones. As one respondent noted, “The initial idea for the project was to create an organization but it took 6 years before it was ready. Even so the reason for incorporation was practical: we were getting donations.” Another said, “Granting opportunities. We needed to formalize a structure in order to apply for grants.”

More often, the founding narratives we received referred to life-related milestones, memorable conversations, momentous opportunities, or commitments of support from key community stakeholders:

  • A breast cancer survivor noted, “Having had previous experience in assisting a nonprofit for women survivors, I saw positives and negatives. A relocation and the cancer death of another volunteer made me realize there was no time like the present!”
  • One founder described, “An opportunity for a historical property that met our needs came available. We started a campaign to save it from demolition, which also gave us a lot of promotion and some street cred.”
  • One reported: “Two of us had coffee and explored the idea of being an affiliate of the [National Organization].” 

The response that best captured founding as process stated, “A full answer to this question requires a conversation because there was not one moment, but a number of specific circumstances that all clicked together.” One example tied together ongoing operations, administrative milestone, and external pressures by explaining, “We started in 2010 and then incorporated in 2015. We grew from an informal network to a more formal alliance when we realized that we wanted to continue working together over time and to be able to more effectively raise funding.”

These findings reinforce what previous researchers such as Jesse Lecy, David Van Slyke, and Nara Yoon have found through survey work on the time between starting operations and reaching administrative milestones. Allison Schnable’s work on grassroots INGOs demonstrates how the founding narrative is not necessarily tied to administrative milestones, as well.

When and why does it matter?

All of this may seem like an exercise in semantics, but a practical understanding of organizational founding has implications for both research and practice. From a research perspective, limiting founding to an administrative milestone only captures those organizations that reach those milestones. This affects our understanding about, for example, the liability of newness that new organizations must overcome as well as about organizational birth and death. This also impacts our understanding of what organizational founding actually is, including the resources and time it takes organizations to achieve certain milestones.

Failure to account for the temporal dimension of founding also has the potential to occlude the true nature of the nonprofit landscape. Though we focused on the 4,215 organizations who reported all three milestones to DataArts, our initial search turned up an additional 1,540 organizations that had profiles and reported at least one of the milestones. Some of these organizations may have closed by the time they submitted a profile and we sent out our survey, but many may be operating. Our own research design necessitated focusing on organizations reporting all three administrative milestones, but our initial findings demonstrate the limitations in this approach by shrinking the sample by approximately 27%.

We also miss entire swaths of organizations that are either not subject to administrative formalization or are shut out of these processes. For example, no legal requirement compels religious organizations in the US to apply for IRS exemption. While many do pursue this milestone, the available data may skew the map of organizations working in a given community, for a given cause. In addition, the focus on set dates and milestones may shut organizations out of funding and resource acquisition opportunities. A foundation that requires an organization applying for funds to be in operation for a specific number of years (as measured from date of incorporation or exemption) disqualifies organizations that may be doing the work but lack the formalized structure. This creates self-perpetuating cycles that institutionalize which organizations are well-resourced and which lack access to these resources. These cycles mirror historical trends that saw, for example, plantation wealth reinvested in philanthropic endeavors only open to certain (white) populations and the simultaneous rise of mutual aid societies, churches, and other organizations serving formerly enslaved Black Americans.[1]

One key theme HistPhil has repeatedly explored is philanthropy’s preoccupation with the new. However, even granted this rhetorical preoccupation with novelty, researchers, grantmakers, philanthropists, and other nonprofit stakeholders often stick with traditional measures and benchmarks that do not capture organizational realities. Failure to recognize what is truly new—and newborn—reflects an inability to capture new organizations, leading to a paradox where an obsession with newness is coupled with an inability to measure what is new, especially when it comes to organizational founding. Our tendency to stick to formalized measures presents a skewed picture of who is doing the work, how long they have been doing it, and the historical context in which the work takes place.

-Jamie Levine Daniel

Jamie Levine Daniel is an associate professor at the Paul H. O’Neill School of Public and Environmental Affairs at Indiana University Purdue University (IUPUI). Her research focuses on the relationship between nonprofit resource acquisition and program service delivery. She has recently published in Nonprofit Management & LeadershipVoluntas, and the Journal of Behavioral Public Administration.

[1] See Martha Jones’ work and my own research with Shonda Nicole Gladden for more on this.

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