The economics of small churches

The November 28, 2006, issue of Christian Century magazine carries an article by sociologist Mark Chaves titled “Supersized: Analyzing the trend toward larger churches.” Chaves presents research showing that “the number of very large Protestant churches has increased in almost every denomination on which we have data” (Chaves and his team did not investigate Unitarian Universalist churches), and that the rate of increase in the number of very large churches has increased since the 1970’s. Additionally, Chaves says that “the very biggest churches are getting bigger,” and that churchgoers “are increasingly concentrated in the very largest churches.”

None of this should be a surprise to anyone. We all know that the number of megachurches (i.e., churches with greater than 2,000 average attendance each week) continues to grow, and that megachurches continue to get bigger. What may be surprising is Chaves’s analysis of this phenomenon. Forget other explanations you’ve heard about why megachurches succeed, Chaves says:

I suggest another explanation: the increased concentration of people in the very largest churches is cause in part by rising costs that make it more and more difficult to run a church at a customary level of programming and quality.

Churches suffer, I think, from “Baumol’s cost disease.” This is a phenomenon identified in the mid-1960’s by economists William J. Baumol and William G. Bowen. The basic idea is simple: if there is increasing productivity and efficiency in some sectors of the economy, and if wages increase in those sectors, then wages also will increase in other sectors, or else talent will move to the sectors in which wages are increasing.

However, some kinds of activities cannot be made much more efficient…. Activities that have at their core human effort, training, practice, attention and presence cannot be made much more efficient. No technological invention or social innovation makes it possible to reduce the level of input into such activities and still get the same level of output, so enterprises organized around such activities cannot be made more efficient without a reduction in quality.

Churches are subject to Baumol’s cost disease…. The only options [for churches] are to sacrifice quality or increase revenue.

Of course, other observers have come to similar conclusions, but Chaves comes up with good evidence to support his conclusion. Chaves documents that while church revenue has been increasing in American churches since the 1970’s, costs have been outpacing revenue increases, especially in the area of salaries. The result is not surprising:

When cost increases outpace revenue increases, churches cut corners and reduce quality by deferring maintenance, declining to replace youth ministers [or DRE’s and MRE’s in Unitarian Universalism] when they leave, replacing retiring full-time ministers with half-time pastors, and so on.

Some of this can be seen here at First Unitarian in New Bedford. Active membership has remained flat since about 1960, and since that time pledge income has not kept up with rising costs. Although the effects of inadequate revenue have been cushioned by income from a substantial endowment, the last major building renovation was pre-1970’s (when the big growth in megachurches began), and we currently face a substantial backlog of deferred maintenance. The Director of Religious Education position has been cut substantially, and at only 13 hours a week it has gotten to the point where we have had difficulty attracting viable candidates (the position is currently unfilled). Also, quality in programming has clearly declined over the past forty years.

On the other hand, I believe there has been some small increase in efficiency, especially in the church office. Computers have greatly increased the efficiency of producing documents, and increased the efficiency of bookkeeping, and I expect that within the next five years nearly all churches will move towards providing almost all documents via email and the Web, increasing office efficiency further. I also believe that applying modern non-profit management techniques can increase efficiency in church offices (especially since most church offices are run fairly inefficiently to begin with).

But the salaries for minister(s) and for religious educator(s) combined typically constitute more than half of a church’s budget — and there isn’t much you can do to increase the efficiency of ministers and religious educators. In fact, ministers are probably less productive now than they were forty years ago. In 1971, Unitarian Universalist minister Dana MacLean Greeley wrote that he worked an average of eighty hours a week, and that was probably fairly typical. Today, minister work weeks are more likely to average forty-five to sixty hours a week, which keeps pace with competitive jobs such as social work, psychotherapy, university professor, etc. (Part of the change here is that Greeley could work eighty hours a week because he could count on the full-time support from his wife, whereas gender roles and expectations have changed radically since 1971.)

If productivity doesn’t suffer, then quality probably does. Greeley wrote that he spent an average of twenty hours a week preparing for and writing sermons. I spend ten to twelve hours a week on my sermons, because that’s all the time I can set aside. I know the quality of my sermons suffers because I don’t spend enough time on them, but I have no more time to spend. The lack of time spent in sermon preparation may well explain the steep decline in quality of Unitarian Universalist sermons in recent years.

One factor that could lead to increased efficiency for ministers is the increased laicization of ministry. For example, many congregations are developing lay ministry or pastoral care teams, in which volunteers lay people are trained to provide pastoral care to people in the congregation; the minister increases his/her efficiency by extending his/her reach by means of training and supporting volunteers to carry out traditional ministerial tasks. Small group ministries can also be designed to allow volunteers to deliver high-quality ministry under the guidance of a trained minister. Interestingly, megachurches often use such techniques to support their ongoing growth — not only do they take advantage of the economy of scale, they also are increasing the efficiency of their ministers.

A couple of things become extremely clear from all this. Well over half of all Unitarian Universalist congregations are small (less than 100 year-round average attendance at worship). These small congregations face a stark choice. (1) If a congregation wishes to stay small, they must cut services, probably by cutting back on the minister’s salary. They will probably also have to cut the quality and quantity of services, and rely increasingly on volunteers. They will face ongoing problems with deferred maintenance, and they will also face increasing difficulty attracting new members who can still get a high level of services in larger churches. (2) If a congregation wishes to maintain the current (or higher) level of quality of services and programming, they will have to do several things: increase worship attendance to above 300 weekly year-round average; further increase revenue by increasing giving by current individual members (often by as much as 100% per average pledge unit); give up unrealistic expectations about what ministers can do (in a 300 member church, the minister will have far less contact with individuals than in a 50 member church); give up the intimacy of the small church; and proceed with rapid laicization of ministry.

If that’s all there was to this, it would be a stark choice indeed: cut services drastically and hold on to intimacy; or cut intimacy and hold on to high-quality services. But then you consider how many people there are out there who really are Unitarian Universalists already, just waiting to be welcomed in by us. I’m happy to give up intimacy in order to provide a welcoming home for those people; if for no other reason than basic hospitality which grows out of the core of a radical Universalism which says that all should be welcomed.

7 thoughts on “The economics of small churches

  1. chutney

    One thing that small congregations thinking about making the plunge into bigness have a hard time grokking is that bigness doesn’t have to decrease intimacy. If anything, it offers more opportunities for intimacy, through small groups and the like, than does a smaller congregation with its more routine intimacy.

  2. Philocrites

    It’s a great article, and I’m glad that you jumped right to the heart of it. Chaves acknowledges that health-care costs have risen even faster than salaries or other costs, and those costs are cutting against the trend toward the professionalization of religious educators and church administrators. The cost of benefits alone deters many churches from thinking seriously about expanded staffing.

  3. Scott Wells

    Yet I wonder, if even a part of the peak-oil disaster scenario is true, car-based church membership is going to be increasingly problematic. Or even just consider the aging Boomer suburbanites who will be loosing their car-keys (and at-will mobility) respective to church membership. Megachurch buildings moored in a sea of parking lots will suffer; so will most Unitarian Universalist churches, given their tendency (outside of New England especially) to be in the suburban hinterland. Neither looks like a desirable situation.

    Mobility is one of the reasons I live urban and church urban. I suspect the small churches will prosper better than you imagine.

  4. Christine Robinson

    One way to increase the productivity of one preacher is to use video to extend the reach of the congregation. This will help us when the travel-based economy starts to change as well. Here in New Mexico we have lots of folks driving 30-180 miles to church (one way). With small town and rural areas having living-room groups which worship together and use a downloaded video for the sermon, the reach of the church’s most expensive employee can be extended, lay ministry increased, intimacy maintained, and the few economies of scale available to large churches can be maximized. We’ll be starting to organize our “Branches” in the Spring, so stay tuned!

  5. Administrator

    Chutney — Yup, you hit the nail on the head.

    Philocrites — Yup, we’re already seeing fewer religious professionals. What irks me is that when congregations see a rise in costs of salary and benefits, they immediately jump to the conclusion that they must cut staffing. A true fiscal conservative (I consider myself one) will consider a full range of options to avoid a deficit, including: economies of scale, increased efficiency and innovative use of technology, increased revenue, and as a last resort layoffs and cutting programs. A true fiscal conservative in a church will also have a far longer planning horizon than the typical businessperson. Business executives today have planning horizons of a couple of years at best, but church executives must have planning horizons of at least ten years. Deferring maintenance now can lead to exponentially increasing repair costs a year or two from now. Cutting staff and programs might balance the books this year, but can lead to a downward spiral in revenues over ten years. We hear about “tax and spend liberals” in politics, but in religion, it’s “slash and burn liberals”. Those of us in liberal churches who are fiscal conservatives, and suggest growth as a viable financial strategy, are too often shouted down. Grr.

    Scott — All true. In order to survive, liberal churches are going to have to adapt. I expect to see the emergence of big churches as collections of house churches (this is already happening in places), served by a centralized staff. House churches will emerge in retirement communities (and this, too, is already happening; I just heard from such a house church that wanted to use some of my worship materials), and it would make sense for retirement house churches to be served by some nearby centralized church staff. I also expect to see the recolonization of urban areas — you and I are examples of people who are already looking ahead and thinking this way — which is good news for urban churches, which will probably start to grow again. I think the churches that are going to get hit the hardest are the suburban churches. One last thing — I think congregations of 300 members will remain financially viable for some time to come, and while 300 members seems large to most UU’s, that’s only because we are so stuck in the mindset of small churches that we have become quite effective at chasing away newcomers (really — I’ve seen it happen over and over again).

    One last general comment about peak oil — in its annual year-end prediction issue, “The Economist” reports on trends towards more fuel-efficient cars using non-petroleum-based fuels like biodiesel (again, think efficiency and innovation, not just slash-and-burn). I think we’ll be seeing lots of car travel for at least another decade.

    Christine — Very cool stuff you’re doing!! This kind of thing is already happening with General Assembly:– there’s a group that meets during General Assembly up in Ferry Beach, Maine, and they watch all the streamed video together, and have by all reports just as much fun as the people who go to the real thing. (The trend will be towards streamed video, by the way, not downloaded video, so your branches can worship in real time; might be worth investing in it now.) As for Sunday school, some of us are already working on mixed-age curriculum for small home-based groups (something I got involved with when I was interim religious educator at CLF). In addition to all this, I would hope to see a rise in summer camps and weekend retreats (for all ages) for churches and districts, I hope along with scholarship money.

    ***And I hope you all notice the common thread running through all of this:– we have to start thinking entrepeneurially when it comes to churches.***

  6. Administrator

    Philocrites — Thanks for the pointer to Thom Belote’s paper. He gets a lot of things right, although I think he’s not quite radical enough. Some day I’ll write a reasoned reply to his paper, but at the moment I’m so frustrated with the narrow thinking of Unitarian Universalism that I would just degenerate into ranting and raving.

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