Twenty-one DC-area nonprofits announced this week that they had suspended their memberships in the United Way and were linking up with a new competitor. The new umbrella organization is called Community1st, and it includes the region’s largest nonprofits. [UPDATE to clarify: Community 1st is the name of the Washington-area campaign. It is overseen by an organization called America’s Charities.]

There were two reasons for this, and each holds a huge lesson for nonprofit leaders:

Ethics. The main reason the organizations cited was the dramatic downturn in fundraising the DC United Way was able to bring. This downturn (from $90 million per year to $35 million per year) is a direct result of the financial scandal that rocked the organization and forced its leadership to resign.

  • Lesson: Ethics at the top is not a luxury — it has a direct bearing on the bottom line and even on the survival of the organization.
By flickr user texas_mustang

By flickr user texas_mustang

New Realities. “I and a lot of others were stuck in the way things have always been, thinking that the United Way was the only way to do things,” according to one Community1st board member. That’s absolutely true. In the workplace-donations space, the field was (and is) ripe for an upstart that is nimble and can promise that a greater share of the collections will actually make it to the charities in question. Community1st [America’s Charities] promises 98% will go to the orgs.

  • Lesson: These are killer times for old organizations and middleman organizations. They both need to watch their backs. If your organization is both — watch out. You suddenly have competition where there was none.