When a Nonprofit Falls Apart, What Do We Owe Each Other?
Picture this: It's a Tuesday morning in a mid-sized city, and three hundred employees walk into work expecting an ordinary day. By eleven a.m., they're holding layoff notices and final paychecks, and the doors are locked behind them. This isn't hypothetical. It's what happened to Hull House in Chicago in January of 2012 — a 120-year-old institution founded by Jane Addams, gone in a matter of hours. As one industry blogger put it at the time, the question on everyone's mind was how a board stacked with lawyers, financial advisers, and corporate executives could have let a century of legacy collapse on their watch.
It's a fair question. And it doesn't have a simple answer.
I've been sitting with a harder set of questions lately, ones that come up almost every time a nonprofit in crisis crosses my desk. When an organization falls apart — whether from a board that lost its grip on governance, or an executive who ran the place into the ground, or some tangled combination of both — what do we actually owe each other? What do we owe the community that trusted us? And when the dust settles, who's responsible for the people left standing in it?
We are the shareholders, whether we act like it or not
A nonprofit isn't a private business answering to a handful of owners. It's a corporation founded for public benefit, governed by a board drawn from the community it serves, sustained by donations, government contracts, and — often — grossly underpaid labor. When a nonprofit falters, the instinct is to point at the executive director or the board chair and ask what they did wrong. Sometimes that's exactly the right question. But it's rarely the only one.
The Nonprofit Quarterly's coverage of a 2014 scandal in Minneapolis is instructive here. When Community Action of Minneapolis collapsed after its CEO was found to have misused hundreds of thousands of dollars in public funds, a major urban area was suddenly at risk of losing critical anti-poverty services overnight — until a neighboring agency stepped in to absorb the work, despite the reputational and operational risk of doing so (Nonprofit Quarterly, 2017). That's not a story about one bad actor. That's a story about a sector that had to decide, in real time, whether it was willing to catch what fell.
We are shareholders in this sector whether we've thought of ourselves that way or not. Our tax dollars, our donations, our board service, our willingness to look away from red flags because we're stretched too thin to investigate them — all of it shapes whether our nonprofits stay healthy or slowly come apart at the seams.
When the corner office starts to look like a corner office
Here's a question I don't think we ask each other often enough: somewhere along the way, did we start managing nonprofits like corporations, with a corporation's instincts about ego, hierarchy, and the bottom line — instead of like the community-serving institutions we actually are?
I want to be careful here, because this isn't an argument that nonprofits shouldn't worry about money. Of course they should. An organization that can't sustain itself financially can't sustain its mission, either, and I've spent a good part of my career helping boards get comfortable with that reality. But there's a difference between managing money responsibly and mistaking the corporate mindset — protecting the brand, protecting the executive, protecting the institution's image — for the mission itself. Nonprofits have a higher calling than profit. That's the whole premise of the tax status.
A piece published this past February by longtime fundraising consultant Jeff Schreifels names this tension about as clearly as I've seen it named. Schreifels argues that most nonprofits define their mission far too narrowly — as only the program, the direct service, the thing that shows up in the annual report — and treat everything else, especially their own staff, as overhead to be minimized rather than people who are also part of the mission. When an organization tells itself that the cause is too important to invest properly in the people carrying it, Schreifels writes, that belief is exactly what produces the burnout, the turnover, and the dysfunction that eventually brings the whole thing down.
That tracks with something nonprofit observers have been warning about for more than two decades now. Back in 2004, the Chronicle of Philanthropy ran an opinion piece arguing that the business culture sweeping through the nonprofit world was threatening the sector's mission and integrity — and pointedly noting that the corporate management record being imitated wasn't exactly one to aspire to, given the excessive executive compensation and governance failures that have defined so much of corporate America. That critique is even sharper now than it was then. An executive protecting their own position, a board more concerned with optics than with honest accountability, an organization more focused on its brand than on the people it exists to serve — these aren't hypothetical failure modes. They're the same pattern showing up in almost every collapse described above.
The people who show up at a nonprofit — as staff, as clients, as volunteers — are trusting that the mission comes first. When ego or image quietly displaces that trust, the organization is already falling apart. The layoffs and the locked doors just make it visible.
Our obligations to each other, as a sector
Here's where it gets uncomfortable. Most nonprofit failures aren't sudden. They're not a single scandal — they're months or years of quiet decline that everyone around the organization could have noticed, if they'd been looking. The Tennessee Nonprofit Network has written about this pattern extensively, describing failing organizations as frogs in slowly boiling water: leadership and staff convinced they're on track, meeting goals, serving their communities well, right up until they're one crisis away from collapse.
A 2025 account of the collapse of a Nevada-based environmental nonprofit lays out the anatomy of that kind of failure in painful detail — a passive board that trusted financial reports without auditing them, no internal controls like dual check-signers or independent audits, and no whistleblower mechanism for staff who might have raised concerns earlier. Forty employees were laid off with only hours of notice, and multiple federal agencies opened investigations almost immediately afterward.
None of that had to happen. As one longtime observer of nonprofit governance put it in a piece for The Commons, most sector failures are failures of infrastructure — inadequate internal procedures, insufficient transparency at the board level — more than they are failures of any single person's character. Board members are frequently placed in an impossible position: legally responsible for an organization's conduct, yet without the practical access to records they'd need to actually catch a problem before it becomes a catastrophe.
That's an obligation the rest of us in the sector share. Nonprofit Quarterly has described the intermediary organizations that offer governance training, financial systems support, and technical assistance to other nonprofits as the sector's actual backbone — and warned that when funders stop investing in that infrastructure, the whole sector becomes more brittle. Healthy nonprofits aren't just the responsibility of their own boards. They're the responsibility of everyone who trains, funds, mentors, and holds accountable the people running them.
Our obligations to the people left standing
Even when a collapse can't be prevented, how it's handled still matters enormously — and this is where I think our sector most often falls short.
Blue Avocado's guidance on closing a nonprofit responsibly makes a point I come back to often: insolvency, like most hard things, can be handled poorly or well. Handled well, it means client services aren't abruptly disrupted, staff get real help with their job transitions, and the people the organization served are connected to somewhere else that can help them. Handled poorly, it means exactly what happened at Hull House and too many organizations like it — a phone call, a locked door, and hundreds of people scrambling with no warning at all.
The practical playbook for doing this well isn't a mystery. Nonprofit Quarterly's guidance on dissolution recommends treating the closure itself with as much care and planning as the years of programming that came before it, leaning on legal counsel, HR support, and outside expertise rather than trying to manage it all internally. Firms that specialize in this work emphasize honest, consistent communication with staff, volunteers, and clients throughout the process, and — critically — referring beneficiaries to other organizations that might be able to pick up where the closing nonprofit leaves off.
That last part is where the sector's obligation to itself becomes an obligation to the people we exist to serve. A client mid-treatment, mid-case, mid-relationship with a caseworker they trust doesn't stop needing help because the organization ran out of money or ran out of good governance. Someone has to be willing to say yes to picking that up, the way that Minneapolis agency did in 2017.
What Pema Chödrön might say about all this
I keep coming back to a book that has nothing to do with nonprofit management on its surface, and everything to do with it underneath. In When Things Fall Apart, Pema Chödrön writes about what happens when the ground we thought was solid gives way — and her central teaching is almost the opposite of what most of us reach for instinctively. Rather than resisting the collapse, or looking for someone to blame so the fear can resolve into something more manageable, she counsels moving toward the difficulty itself, with curiosity rather than judgment (Chödrön, When Things Fall Apart: Heart Advice for Difficult Times, Shambhala Publications).
Chödrön's concept of tonglen — a meditation practice of breathing in pain and breathing out relief, for yourself and for others — feels almost literally applicable to what a healthy sector could look like in the aftermath of a nonprofit's collapse. Instead of averting our eyes from a failing organization until it's too late, or writing off its staff and clients as someone else's problem once the doors close, what would it look like to breathe in that difficulty as a sector and breathe out real support?
Chödrön also writes about impermanence — the idea that clinging to the illusion of permanence, whether in an institution, a role, or a relationship, is itself a source of suffering. Nonprofits are not meant to be forever. Missions get accomplished. Funding landscapes shift. Sometimes closure is genuinely the healthiest outcome for everyone involved, and treating every closure as a scandal to be mourned rather than sometimes a natural ending can keep organizations limping along past the point where they're actually serving anyone well.
But when a nonprofit falls apart because of leadership failure rather than a natural and well-planned ending, groundlessness isn't a philosophical abstraction. It's a very real staff member who doesn't know how they'll make rent next month. It's a client who doesn't know who to call. Meeting that groundlessness with curiosity and compassion, rather than blame or denial, doesn't mean excusing the leadership failures that caused it. It means asking, honestly, what we're each responsible for doing next.
So, what do we do?
I don't think there's a tidy answer here, and I'd be suspicious of anyone who offered you one. But I think the questions worth sitting with are these: Are we, as board members, staff members and community members actually asking the hard questions before a crisis forces us to? Are we, as a sector, building the kind of infrastructure — governance training, financial oversight, whistleblower protection — that catches problems while they're still small? Have we let corporate instincts about image and ego quietly take the place of our actual mission? And when an organization does fall apart, are we the kind of community that shows up for the staff and the clients left in its wake, the way that Minneapolis agency did?
I think about the people who could have named a problem earlier and didn't, not out of malice, but because that's not how our sector has trained itself to operate. And I think about how much better we could be — to each other, to our staff, to the people who walk through our doors needing help — if we treated a struggling nonprofit the way Chödrön suggests we treat any difficulty: not as something to look away from, but as something to move toward with open eyes.
If your organization is navigating a leadership crisis, a struggling board, or the early warning signs of something worse, I'd be glad to think through it with you. Book a consultation at yourmissionmaven.com or drop me a note.
References and further reading
Chödrön, Pema. When Things Fall Apart: Heart Advice for Difficult Times. Shambhala Publications. shambhala.com
Schreifels, Jeff. "Your Nonprofit Mission Is Bigger Than You Think — and Misalignment Is Costing You." NonProfit PRO, February 10, 2026. nonprofitpro.com
The Chronicle of Philanthropy. "The Public Loses Out When Charities Become Too Businesslike." philanthropy.com
The Chronicle of Philanthropy. "Hull House Collapse Is a Cautionary Tale for Boards and Executives." philanthropy.com
McCambridge, Ruth. "Post-Nonprofit Meltdown in Minneapolis, A Neighboring Organization Steps Forward, But It's Not Easy." Nonprofit Quarterly. nonprofitquarterly.org
Dean, Kevin. "10 Warning Signs Your Nonprofit Organization Will Fail." Tennessee Nonprofit Network. tnnonprofits.org
"Collapse at the Parks Foundation: How It Imploded and Why No One Stopped It." Mike's Reno Report. mikesrenoreport.substack.com
"Nonprofit Failures Can Be Prevented." The Commons. commonsnews.org
Nonprofit Quarterly. "Nonprofit Dissolution: What to Do When Closing the Doors." nonprofitquarterly.org
"Closing Down the Right Way." Blue Avocado. blueavocado.org
"Closing a Nonprofit Organization." CRI Advisors. criadv.com
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