June 10, 2013

Nonprofit Journalism: A Growing but Fragile Part of the U.S. News System

Taking Care of Business: A Catch-22

When one small nonprofit news organization discussed its ongoing struggle to raise money, the message was simple. "We don’t have time to do this," it reported. "And we don’t know how."

That response highlights one of the most significant challenges facing nonprofit news organizations. The majority of respondents to the survey are small outlets-with five full-time employees or less. Many were founded and are staffed largely by editorial personnel looking to fill a perceived reporting gap rather than by marketing and business experts. And nearly two-thirds of the respondents to the survey identified "finding the time to focus on the business side of your operation" as a major challenge to their financial success-placing it as a bigger problem than even the intense competition for grant money.

In effect, some of these nonprofits describe operating in a kind of economic catch-22. They don’t have sufficient business-side resources to develop the revenue streams that would help them hire the business employees needed to help achieve financial sustainability. At the same time, they may feel pressure not to devote resources to raise revenue because of a nonprofit culture that prizes spending on services over business development.

One way to measure this is to look at the staff time devoted to various tasks. A large majority of the nonprofits surveyed, 80%, say that business, advertising and marketing work consumes some staff time. And 83% said that fundraising also took up some staff time.

But while most organizations are understandably focusing the majority of their time on journalism, the time spent on business tasks often pales in comparison. While 85% of the organizations said that editorial work consumed at least half of their overall staff time, not a single one reported that business, advertising and marketing work took more than 49% of its staff time. Indeed, nearly one-third of them said that kind of work consumed less than 10% of their staff time, and more than half said that business-side tasks accounted for between 10% and 24% of staff hours.

The same phenomenon was true for staff time spent on fundraising. Only one outlet reported devoting at least half its staff time to fundraising, while about a quarter spent less than 10% on that task. The vast majority reported that fundraising consumed between 10% and 24% of their employees’ time.

There are other activities that consume staff time that, while not directly business-oriented, affect the bottom line. Of the 45 nonprofits that reported spending staff time on tasks other than editorial, business, marketing, advertising and fundraising, a little over half (24) devoted time to at least one of the following: community outreach activities, teaching and training or administrative tasks. However, the overwhelming majority said they spent less than one-quarter of their staff time on these other tasks unrelated to editorial or business activities.

When asked about their most important current staffing need, 39% of the outlets said it was on the editorial/reporting side. But more than half (54%) identified revenue-side needs such as business, advertising and marketing fundraising.

In the same vein, Pew Research asked the organizations to evaluate whether certain factors represented a challenge to their financial health. Finding time to focus on business activities was described as a "major" challenge by 62%, while 55% said this about increasing competition for grant money. In addition, only 12% of the nonprofits did not see the need to spend more time on business activities as any kind of challenge.  

While finding the time to focus on business operations is a common problem, the survey data reveal the outlets most likely to identify that as a major challenge are also the youngest, smallest and most cash-strapped.

Of those nonprofits launched in 2008 or later, two-thirds (38 in all) identified the lack of time for business tasks as a major challenge. For those launched before 2000, about half the outlets (seven out of 12) said the same. Similarly, among nonprofits with no full-time staff, nearly three-quarters (17 out of 24 outlets) said finding the time to focus on business was a major challenge, while of those outlets with more than 10 full-time staff, only a quarter (two out of eight outlets) said it was.

Outlets with fewer cash reserves and smaller revenues also tend to be the most concerned about insufficient time for business tasks. Of the nonprofits that had only enough cash on hand to last up to six months, more than two-thirds (21 out of 30 outlets) said it was a major challenge, a number that fell to a little over half (17 out of 31) among those with more than a year’s worth of cash on hand. Among outlets with $100,000 or less in annual revenue in 2011, four-fifths (22 out of 28 outlets) identified this as a major challenge. Of those that brought in more than $1 million in revenue, only three out of the 14-about one-fifth-said it was.

Frustration over finding the time and people to focus on revenue also came through clearly in survey responses to a question about "the biggest current challenge to your organization’s financial health." Of the 88 nonprofits that responded to that question, 70 (or 80%) said they needed more fundraising and revenue streams. A number of them also mentioned the desire to hire more staff or set aside more time for those tasks.

The executive director of one nonprofit with four full-time employees wrote that "finding the elusive sustainability model…is also a matter of capacity…Editing, fund raising, development and back office work falls largely on my shoulders." 

But the problem was evident with some larger nonprofit news outlets as well.

One organization with 10 full-time employees and annual revenues of nearly $900,000 declared, "We need to invest in a business staff that can sustain a business model."

Another nonprofit, which was an outlier in terms of size and earned $5 million in annual revenue, expressed the same concern. It identified "finding new donors and new revenue" as the biggest challenge to its financial health. When asked why that represented such a challenge, the organization cited "a lack of time" and the need to create "a strong infrastructure to manage opportunities outside of the core journalism."

Some of the same sentiments were seen in the response to a question about what business-related decision the nonprofits wished they had made differently.

"We would have budgeted for a dedicated fundraiser rather than lumping that duty into the editorial side," declared one small nonprofit.  "We should have consulted with a firm to develop branding and marketing strategies," said another.

"Hire a business promotion staffer to help us chart strategy," one organization responded. "Though given our limited resources, this wasn’t in the cards when we started."