ASU Lodestar Center Blog

Current nonprofit sector research and recommendations for effective day-to-day practice from ASU faculty, staff, students, and the nonprofit and philanthropic community.

Tuesday, August 9, 2011 - 9:06am
posted by
Mark Hager, Ph.D.

Associate Professor,

ASU School of Community
Resources & Development

If you're reading this, you've probably already been indoctrinated into the idea that nonprofit has some particular useful meaning. Not everybody thinks so, or has thought so for very long.

The quibble is that this "sector" is really a whacky collection of radically different organizations. Who would put hospitals in the same bucket as credit unions, and then throw operas in, too? Who thinks social service organizations should fly under the same banner as those that organize the public for political change?

So, these things are all defined under one section of a messy tax code. Is that really a reason to study, talk about, and define a professional identity of a "nonprofit sector?" Better maybe, for the different pieces to keep to themselves, with their own methods, language, and professional development programs? Maybe. My favorite historian, Peter Dobkin Hall, wrote a defining essay in one of his books that describes the "invention" of the nonprofit sector in the United States. It isn't the missions that have so much been invented, mind you — it's the idea of collective sectorness.

Look at it this way. The term "philanthropy" has been in American parlance for a long time, referring to individual action, charitable behavior, and (more recently) the professional field of grantmaking foundations. Google Labs has a cool tool where you can map usage of words in published materials. The map for American English usage of "philanthropy" is below. The term has seen a surge over the past decade, but it's nonetheless about half as popular as it was in 1850. Anyway, the term has been around for a long time. "Philanthropy" is roughly as common now as it was 200 years ago.

In contrast, take a look at "nonprofit." It made its first appearance in the 1930s. It only came into general usage in the 1970s, with the publication of influential reports by the Filer Commission. Although that Commission refers more often to a voluntary sector, the idea of sectorness began to take hold. Today, in less than a generation, the idea of a nonprofit sector is common... even if we can't yet decide whether to hyphenate non-profit, or even split it into two words, or call it something else entirely. The point is that the term is new, and sectorness is likewise fairly new.

In a recent chapter on the history of the U.S. nonprofit sector, Professor Hall opens by referring to "nonprofit sector" and "nonprofit organizations" as neologisms. One meaning of neologism is a "newly coined term" that's in the process of entering common usage. That certainly fits here. However, a student this summer pointed out another meaning of the term: in psychiatry, a neologism is a unique term coined and used by someone with a mental illness, evidence of a thought disorder. This usage should make us stop and consider whether a smattering of policy makers, scholars, and practitioners have introduced an idea that has meaning only to them, resulting in a grand con on the range of individual industries and activities that fit a vague notion of "public good." I mean, really... is it useful to think in terms of one big sector?

Maybe not all the time. But thinking and working as sector has become increasingly useful.


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One reason that sector is useful is because of the increasing professionalization of the field. I can understand why somebody interested in museums wouldn't want to cover ground on health sector management. I also understand why somebody interested in health care wouldn't want to know the ins and outs of museums. However, their points of intersection are becoming progressively apparent. Both hospitals and museums rely to some extent on fundraising, giving rise to a cadre of fundraising professionals. Both engage volunteers, and both benefit from professionals trained in best practices in volunteer management. Both are governed by boards of directors and can benefit from cutting edge knowledge of board development. Both are served by trained executive leaders who can appreciate the breadth of the sector in addition to the substance of their particular mission.

That is, because of the professionalization of these different functions, the points of intersection across the nonprofit sector have become increasingly evident. Through intersection, museum professionals learn from health care professionals, and vice versa. Fundraising professionals cut their teeth in one kind of nonprofit, and then transfer their experience to something completely different. The mission changes, but the skills and applications stay the same.

A second reason why "sector" is useful is because of the strength that comes with numbers. As an industry, legal service charities are small. However, as part of a sector they have an advocacy voice in policy circles. Different varieties of nonprofit do have their own substantive issues, but some key issues cover the breadth of nonprofitdom. The most common kind of nonprofit, the public charity, receives a variety of tax benefits. They enjoy exemption from income taxes, and many also enjoy exemptions from local property taxes. They receive contributions from individuals and businesses because of the deductibility of these donations. Charities receive special benefits on postage, but their volunteers get the short end of the stick on deductibility of mileage expenses. Each of these issues stems from policies that most nonprofits enjoy (or fight) as a class. When challenges come, individual organizations, or particular subsectors, are bolstered by their membership in a choir of organizations that share their threats and victories.

So, sector is important for policy advocacy. Many issues cut across the sector, and executives and board members of nonprofit organizations can best take advantage of sectorness when they understand the broad scope and nature of the sector.

Like it or not, the place of sector is becoming increasingly cemented in American community life. We can build on its strengths. New? So what. Overly broad? Maybe sometimes. With the advent and growth of the nonprofit sector, we can develop and work through professional identities, and engage the policy landscape with a concerted advocacy voice. The alternative is fragmentation and balkanization, which is no alternative at all.

Mark Hager is associate professor of nonprofit studies at ASU. If you enroll in the Master of Nonprofit Studies degree program, you'll take one, maybe two, maybe even three classes with him. If you want to see what all he has written and talked about, click here.

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Wow, Mark, you've done it again! As a long time volunteer in the nonprofit sector, and now, as someone who works with educators providing professional development courses for those working in the nonprofit sector, your blog succinctly, brilliantly, and with great wit, identifies both the tension and value of very diverse types of nonprofit organizations operating as a "sector." Your blog makes me feel like someone just pulled out a sliver in my finger that kept bothering me, but that I couldn't see (articulate) for myself. Thanks for illuminating this nomenclature/sector issue! It all makes better sense to me now as the sector, over time, becomes professionalized (and theorized).

More and more these days, the term I find myself using is "third sector," to account for the several new business forms taken on by those trying to "do good" by the most effective possible means. Social enterprise, for example - for profits with a social good mission. Also - for sustainability and for enhanced spending flexibility - more and more we advise nonprofits to consider cost accounting and profitability-management where they have the "product" and mission alignment to do so. I predict we will soon want to see some new types of business skills training "for the sector." GREAT post, Mark.

Nice article! I definitely see both sides (how can operas and hospitals possibly share sector space?), but for me the strength of shared sector identity comes from the global bottomline of mission above profit. I find I use the term 'social sector' quite a bit, perhaps because I do feel that 'nonprofit' is merely a photo-negative description.

In my group, YNPN Cleveland, we've recently been discussing the local "identity crisis" our sector is experiencing - namely, that many nonprofit professionals don't self-identify as such - social workers, healthcare workers, etc. We recently wrote a paper on the subject (linked with my name above). It's local but hits on the topic of 'nonprofit' identity.

Thanks for this interesting post!

I agree with Katie, it's all about mission over profit that defines the sector and gives it commonality.

For what purpose? The "common good" or profit to shareholders?

I know there is a movement to define the sector as "community benefit" organizations, or the third sector, but in a society which has the primary motive of individual success, as defined by financial profit, saying you are "not for profit" is a big distinction. It could cause one to ask, "Well, if you aren't for profit (i.e. personal gain), then what are you for?".

The common good, others before self, opportunities for people, places, animals, issues, etc. which get left out of the game of personal profit.

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