A recent article in the New York Times talked about the shift in focus of the Hudson-Webber Foundation in downtown Detroit. For years, Hudson-Webber has been funding organizations in the Detroit metro area. Given the changing philanthropic and economic landscape, however, Hudson-Webber has had to start playing a new role: "picking winners and losers."

The report last summer from the Boston Foundation underlines the crisis currently underway in our nation's charities. There are simply too many organizations chasing too few dollars for the system as it currently exists to be sustainable. The "cost of capital" (read fundraising) is too high, administrative costs are too high (on a sector-wide basis), and there's too much overlap in the services provided.

This means that community foundations like Hudson-Webber have to choose "winners and losers" and are starting to compel organizations they choose to work with to merge, downsize, or otherwise restructure in order to get the necessary grants. In the article referenced above, a niche provider was forced to merge with Matrix Human Services, which provides a broad array of services.

What does this mean for us in the sector? Well, it's more important than ever that we begin to professionalize our management structures and ensure that we're focused on strategy. We should also seek to form alliances and coalitions with other organizations that provide like services before they are forced upon us. And we must prove our impact in ways we've never had to before.

The Balanced Scorecard is a way for us to start that conversation, as it helps us frame our discussion around our strategy and our unique characteristics. It's also a way for us to prove our impact with the community, funders, and agencies. Beyond that, however, the Balanced Scorecard is a great way for us to show that we're actively managing and running our organizations for maximum impact.

But whether you run out tomorrow and implement the Balanced Scorecard or not, rest assured that the question is coming -- probably from one of your major funders -- how do you make an impact? And how do you differentiate yourself from XYZ? You need to have a compelling answer.