When profit is not the incentive: for many reasons, nonprofit companies have become major players and employers in the Tar Heel economy.

• Author: Parry, Amanda
• Position: FEATURE

It's not yet 3, but the late-December day is fading as men and women climb out of cars onto the sloped concrete of a parking deck near downtown Charlotte. The Presbyterian Hospital lot becomes a sea of jewel-colored scrubs as nurses, doctors, technicians and assistants in rose, teal and navy blue drift toward the walkway that will take them through patient parking to work. Many call out to workers who have just finished a shift, some stopping to chat before they head in opposite directions. A similar ritual is being played out some 80 miles north at Forsyth Medical Center in Winston-Salem. Ditto at hospitals in Salisbury and Thomasville.

Fifteen years ago, the only thing all these people would have had in common would be job titles. These days, they share the same boss. With 22,000 on its payrolls, Novant Health is the state's fifth-largest private-sector employer and one of its biggest nonprofit companies. More than 237,000 Tar Heels work for a nonprofit--more than do in construction, finance or transportation. Employment figures for the largest rival those of for-profit businesses. Novant has more employees in the state than IBM. Duke University employs more North Carolinians than Bank of America.

This year, BUSINESS NORTH CAROLINA includes nonprofits in its ranking of the state's largest employers for the first time since 1992. Back then, only six made the cut. This year, 15 were on the list, including Duke University, with 30,550 employees; Wake Forest University Baptist Medical Center, 11,400; and University Health Systems of Eastern Carolina, 8,195. Seven more appear on a list from the Employment Security Commission of companies with 1,000 or more employees.

"We have had this ideology that these are basically volunteer-run agencies helping poor people," says Lester Salamon, a founding director of the Johns Hopkins Center for Civil Society Studies in Baltimore. "But not all the services they provide are for the poor. What I think is becoming increasingly clear to people is that nonprofits have developed into enormous employers and very complex organizations."

Straddling the divide between public and private sectors, nonprofits--or not-for-profits, as they sometimes are called, because many run solidly in the black--are strange and resilient beasts. They function in many ways like their for-profit counterparts, charging fees for services and often competing for the same customers. They can make a profit--an operating surplus--but must pour it back into the business. Yet their ties to the public sector are strong: Exempt from federal income taxes, many receive government funding, either through grants or reimbursements. Some, such as nonpublic schools and universities, provide services also offered by government. It's this duality that makes them so strong. Like weeds, they often can grow under conditions others can't.

A recently released study found that employment at North Carolina's nonprofits grew 35% from 1995 to 2003, six times the rate of for-profit businesses. The study, co-authored by Salamon with help from the North Carolina Center for Nonprofits advocacy group, showed growth in nonprofit employment was strong even during the last recession. During 2001-03, when for-profit jobs decreased, nonprofit employment grew an average of 4.4% per year. Because nonprofits tend to be service-oriented, they grow in step with population: The more people, the more services needed--and not just of the assistance variety. Some recreation centers, day-care centers and community theaters fall under the nonprofit umbrella. In the last 27 years, North Carolina's population has increased by 52%. Its nonprofits have been swelling to meet the demand.

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In fast-growing Mecklenburg County, the YMCA of Greater Charlotte has grown at a faster pace than the population. While the number of residents has more than doubled since 1980 to 842,622, Y membership has increased six times, reaching 166,000. The two largest branches in North America are here: the Harris YMCA, with 27,000 members, and the Siskey YMCA, with 26,000. "We're sought out by a lot of developers and corporate entities to see if we can enhance the quality of life in specific areas or subdivisions," says Robbie Armstrong, executive vice president and chief operating officer of the YMCA of Greater Charlotte. Its headquarters and 22 branches employ 3,560, making it the state's 61st-largest private employer.

Though they operate in many ways like for-profit businesses, growth of nonprofits is not always tied to the same economic forces. For example, a downturn can increase demand for social-assistance services, which can create political pressure to increase government funding for the nonprofit groups providing them. At the same time, another major source of revenue--fees for services--remains relatively stable, according to Salamon. "If you're sick, you go to the doctor. If you have kids and need to work, you use day care."

However, nonprofits are vulnerable to recession through their third source of funding--donations. "There are decreases in contributions," says George Bryan, president and CEO of The Children's Home. "People don't want to spend money on going to events and galas." But most nonprofits overcome this loss of individual donations by seeking more government funding or private grants. The Winston-Salem nonprofit, which provides services that include residential care of orphans, foster-care placement, family counseling and mental-health treatment...