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Board of Directors

10 Most Popular Posts of 2014

typewriterThe year is winding down, and I will be taking some time off to enjoy friends and family (as I hope you are too). But before I go, I want to leave you with a list of the 10 most popular posts on the blog this year, in case you missed any of them.

And if you want to see the 10 most popular posts from 2011, 2012, or 2013 you can do that as well.

I feel incredibly lucky to be able to work with you amazing social change leaders. I am grateful for the amazing work you are doing to create a better world. And I appreciate you being part of the Social Velocity community.

I wish you all a happy, relaxing holiday season, and a wonderful new year. I’ll see you in 2015!

  1. Can We Move Beyond the Nonprofit Overhead Myth?

  2. 7 Rules For Brilliant Nonprofit Leaders

  3. How to Move Your Nonprofit Board From Fundraising to Financing

  4. Why Nonprofits Must Stop Being So Grateful

  5. 5 Questions Every Nonprofit Leader Should Ask

  6. Why Do Nonprofit Leaders Get In Their Own Way?

  7. 3 Questions to Get Your Nonprofit Board Engaged

  8. 5 Ways Great Strategy Can Transform a Nonprofit

  9. Does Your Nonprofit Know How To Attract Big Donors?

  10. It’s Time to Reinvent the Nonprofit Leader

Photo Credit: Steven Depolo

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What Kind of Nonprofit Leader Are You?

nonprofit leaderAs the year draws to a close, and you (I hope) make time to relax, reconnect with friends and family, and reacquaint yourselves with some much-needed quiet, you may also want to reflect on your role as a social change leader. Effective leadership is really, really hard work, but it is also incredibly necessary and needed.

So if you find time over the next few weeks to take a look at your role as social change leader and you want some help along the way, download the Reinventing the Nonprofit Leader book.

Here is an excerpt:

Chapter 3: Refuse to Play Nice

As a by-product of the charity mindset, nonprofit leaders often suffer from being too nice. The thing I love most about nonprofit leaders is that, for the most part, they are truly good, decent people. They are trying to make the world a better place, so by definition they are considerate of others. But sometimes you can take being nice too far. Being nice to the donor who leads your nonprofit the wrong way, or the staff member who is not performing may work for the individual relationship, but is detrimental to the larger organization and ultimately your mission.

Indeed, according to a 2010 study by researchers at Stanford University, nonprofits are perceived as “warm, generous and caring organizations, but lacking the competence to produce high-quality goods or services and run financially sound businesses.” In other words, we think nonprofit leaders are nice — but not competent.

But this reality is often imposed on nonprofit leaders. Nonprofit leaders are encouraged to collaborate instead of compete, hold onto under-performing staff, accept martyr-like salaries, smile and nod when funders push them in tangential directions, and keep quiet when government programs require the same services at a lower price.

This demand that the nonprofit sector play “nice” is the result of (at least) three aspects to the sector:

  1. A Focus on the Social. The sector exists to address and (hopefully) solve social problems. Thus, by definition, it is socially oriented and has an inclusive, consensus-based approach to doing business.

  2. More Customers. Nonprofits have two customer groups, as opposed to the single customer for-profits have: 1) those who benefit from the services a nonprofit provides (clients) and 2) those who pay for those services (funders).

  3. Multiple Players. In addition to their customer groups, nonprofit leaders must corral their board of directors, which often includes individuals with competing interests, and external decision-makers (policy makers, advocates, leaders of collaborating organizations) who have an impact on the change the nonprofit seeks. The end result is that multiple players must somehow be brought together and led in a common direction.

But in order to work toward real solutions and get out from under consensus-based mediocrity, you need to break free from the niceness trap. Rest assured, I am not asking you to get mean and ugly. But there is a way to politely, but assertively, make sure you get what you need to succeed.

In other words, the reinvented nonprofit leader needs to:

  • Say “No” to funders who demand new programs or changes to programs that detract from your nonprofit’s theory of change and your core competencies.

  • Diversify revenue streams so that you are not beholden to any one funder or funding stream.

  • Demand that board members invest significant time and money in your nonprofit, or get out.

  • Fire under-performing staff. This is such a taboo in the sector, but with limited resources and mounting social problems to be addressed, we do not have time to invest in people who cannot deliver.

  • Be brutally honest with funders and board members about the true costs of running operations effectively and stop apologizing for, or hiding, administrative expenses.

  • Create a bold strategic plan that will drive your nonprofit toward social impact and sustainability, not mediocrity.

  • Make an honest assessment of your nonprofit’s core competencies, competitors and consumers so that you understand and can articulate where you fit in the marketplace — and act accordingly.

  • Stop waiting for your board chair, or a big donor, or a government official to allow you to do something that you know is the right way forward.

  • Refusing to play nice is not easy. And it often culminates in a difficult conversation, perhaps with an underperforming staff member, an ineffective board member, or a time-consuming funder.

In order to manage these difficult conversations for success, you need to approach them in a thoughtful and strategic way. Here are the steps…

To read more, download the Reinventing the Nonprofit Leader book. Or you can download the on-demand Reinventing the Nonprofit Leader webinar.

Photo Credit: Satish Krishnamurthy

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When Should Your Nonprofit Cut Programs?

magnifyOne of the most difficult decisions a nonprofit leader faces is whether to cut a program. The program might be draining staff and offering few results to clients, but once a nonprofit launches a program it becomes almost instantly institutionalized. Even if the program eventually no longer makes strategic sense, it is almost impossible to convince board, staff and donors to end it.

But for a nonprofit to be most effective, its leaders must understand the financial and social impact of all of its programs and make strategic decisions accordingly. And the way to do that is with a Program Analysis Matrix.

Nonprofit leaders are driven by the desire to provide as many services as possible, so to shut down an established program seems so wrong. But nonprofit leaders must regularly analyze their portfolio of programs in order to understand how well each program contributes to the organization’s mission and financial sustainability.

When I assess a client’s financial model, one of the first things I employ is a Program Analysis Matrix that analyzes the social and financial impact of their entire portfolio of programs. I chart all programs and activities comparing each program’s ability to:

  1. Contribute to the social change the nonprofit is working toward (“Social Impact” on the x axis), and

  2. Add or subtract financial resources to/from the organization (“Financial Returns” on the y axis).



A Program Analysis Matrix looks like this:

Program Analysis Matrix

Each program that a nonprofit operates is placed in one of the four boxes depending on how well that program contributes to the social impact (or mission) the nonprofit is working towards and the financial sustainability of the organization. The four options are:

  1. Sustaining: the program has low social impact (it doesn’t appreciably contribute to the nonprofit’s ability to create social change), but does provide financial resources to the organization.

  2. Beneficial: the program has high social impact and provides financial resources to the organization—this is the best of both worlds.

  3. Detrimental: the program provides low social impact and drains financial resources from the organization—this is the worst of both worlds.

  4. Worthwhile: the program provides high social impact but drains financial resources.

This Program Analysis Matrix helps to surface issues that a nonprofit must address, for example when some programs are providing no benefits, or there are too many mission-related programs that don’t attract funding. Typically, a nonprofit has an abundance of “Worthwhile” programs that are integral to the mission and provide important social impact but are financially draining to the organization. In a situation like that, board and staff need to get strategic about developing programs that are “Sustaining” or “Beneficial” and provide a positive financial return.

Board and staff should work together to plot all current programs  in the matrix. Once completed, the matrix can help make the appropriate strategic decisions (labeled as “Strategy” above) about which programs to “cut,” “maintain,” “nurture,” or “expand.”

This analysis can help a nonprofit take a hard look at everything they are doing and start to make some hard decisions. A conversation about cutting programs is always incredibly difficult, but with the right data behind it, the conversation can be a logical, as opposed to emotional, one.

If you want to learn more about the Financial Model Assessment I create for clients, download the Financial Model Assessment benefit sheet here.

Photo Credit: Bart van de Biezen

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Overcoming The Nonprofit Starvation Cycle: An Interview With Ann Goggins Gregory

AGGIn today’s Social Velocity blog interview, I’m talking with Ann Goggins Gregory, Chief Operating Officer at Habitat for Humanity Greater San Francisco where she oversees programs, the social enterprise called the ReStore, HR and Operations.

Previously, Ann was a Senior Director at the Bridgespan Group, where she led the organization’s work on organizational learning; managed consulting engagements with human services, education, and youth-serving nonprofits; and spearheaded research efforts on a variety of nonprofit management topics. She remains a Senior Advisor to Bridgespan on issues related to the starvation cycle.

You can read other interviews in the Social Velocity Interview Series here.

Nell: You and your colleague Don Howard are in some ways the catalysts behind the Overhead Myth campaign because of your seminal article, The Nonprofit Starvation Cycle in the Stanford Social Innovation Review back in 2009. How far have we come since that article? How prevalent is the starvation cycle today and what can we do to move beyond it?

Ann: “The Nonprofit Starvation Cycle” names what I consider to be a fundamental truth: “Organizations that build robust infrastructure…are more likely to succeed than those that do not. This is not news, and nonprofits are no exception to the rule.” For decades, researchers and practitioners have argued that low overhead does not equate with efficiency and efficiency, in turn, does not equate with effectiveness.

We are seeing (productive) focus and movement now versus five or ten years ago, yet that starvation cycle is still an entrenched issue. On a positive note, the Overhead Myth campaign has been critical in communicating with donors directly and empowering nonprofits to communicate with “back up.” Though I have mixed feelings about some of the messages in Dan Pallotta’s video, it elevated paradoxes of how costs are treated in the social sector. We’ve also seen targeted efforts to help funders and nonprofits address cost-related issues together. Even the federal government is trying to shift practice: the Office of Management and Budget issued guidance requiring that nonprofits receiving federal funding receive a minimum of 10% indirect rate, or they can negotiate a rate. If this guidance is followed, it will be a major policy win.

Yet we have a long way to go. Talking about terminology isn’t scintillating, but it’s critical to breaking the starvation cycle. Overhead costs aren’t the same as indirect, yet we conflate them. General operating support and capacity building—often seen as ways to help break the cycle—aren’t the same thing. Many nonprofits do not know the full costs associated with their programs, and many funders don’t understand nonprofit finance. Bridging the skill gap on both sides of the equation is critical.

Moreover, a single figure like the overhead rate is appealing because it makes comparison easy. Until nonprofits have better ways to communicate outcomes, we will continue to battle against the simplicity of a ratio. Finally, power dynamics between funders and nonprofits inhibit change; candidly, there aren’t strong forces pushing on philanthropy and government to change their practice. In the absence of such change, nonprofits are understandably worried about shifting their stance on overhead if their competitors do not (I do think there are steps that any nonprofit can take, though).

Nell: Part of what keeps the starvation cycle alive is that it is being fed, as you so clearly point out in your SSIR article, by both funders and nonprofit leaders. One of the things you were working on at Bridgespan was the Real Talk About Real Costs series of nonprofit leader and funder conversations. How effective was it to bring nonprofits and funders together to talk about these issues? And is that potential solution to the starvation cycle scalable?

Ann: Real Talk about Real Costs, sponsored by the Donors Forum with Bridgespan as a partner, brought together 300 leaders from nonprofits and philanthropy to wrestle with what good outcomes really cost. The event built upon a nine-month Community of Practice focused on “tackling the overhead challenge.” This interview has more about how Donors Forum decided to put the cost issue front and center. Another such effort is slated to begin in California in 2015.

In watching funder-nonprofit “mixed company” interactions, I was struck by how many funders expressed dissatisfaction with the grant-making status quo, yet frustrated that foundation trustees did not feel the same way. And I noticed how uncomfortable both funders and nonprofits were about having a tough conversation about full costs. At the event, we gave participants a role-reversal case study where a fictitious grantee and grant-maker had to discuss the terms of a grant; nonprofit attendees acted the part of the program officer and vice versa. In feedback surveys, the majority of comments focused on the discomfort and lack of knowledge they felt in talking about costs. Finding more ways for nonprofits and funders to wrestle with cost issues together would go a long way to building empathy and skills.

I don’t see a single scalable solution, but what feels most scalable as a starting point is a fundamentally different approach to communicating about costs: on websites, in collateral, and in conversations between nonprofit and funder. I believe that most funders can still make restricted grants without making unrealistic demands about how the funds are spent. For instance, what if funders asked “what type of capacity will you need to deliver on this grant?” vs. “what is the overhead for this project?” What if funders moved away from prescribed budget templates that don’t align with how nonprofits think about their resources? Even these seemingly small steps would go a long way to empowering nonprofits to communicate differently. Below I share a few specific ways I think nonprofits can help break the cycle.

Nell: The starvation cycle is just one example of the many ways we hold the nonprofit sector to a higher standard than we do the for-profit sector (costs for R&D, marketing, infrastructure, technology are taken as a given in the business world). Why does that discrepancy exist and how do we overcome it?

Ann: Overhead in the for-profit world—sales, general and administrative costs as a percentage of total sales—is 25% across all industries and 34% for service industries. The cruel irony of holding nonprofits to a much tougher standard is that donors often say that they do this because nonprofits ought to “run more efficiently, like a business.” Most people don’t know the overhead of businesses because profitability matters more.

Unlike businesses, nonprofits can’t report results in a single figure that makes apples-to-apples comparisons easy. One way to overcome this challenge is to move toward highlighting outcomes. I don’t mean standardizing outcomes (although efforts like Perform Well are very powerful), and I don’t mean doing away with financial indicators entirely. I mean moving from touting our overhead to sharing our program results. In an ideal world, nonprofits would be able to share not only their outcomes but also the costs associated with producing them.

I know this doesn’t happen overnight. Starting immediately, I would love to see more funders speak out in support of—and actually fund—these investments. And nonprofits have a role to play in shifting the conversation: by sharing for-profit overhead as a way to challenge assumptions; by taking down the overhead pie chart and other “we’re lean!” messaging from websites; and using systems like the Guidestar Exchange to share our goals and strategies in our own words.

Nell: You recently left the consulting/thought leader side of the sector (as a senior director at The Bridgespan Group) to work in the nonprofit trenches as COO of Habitat for Humanity Greater San Francisco. What are you learning as you work to turn theory about overcoming the starvation cycle into action inside a nonprofit organization?

Ann: I am learning that it is doable and reminded that it is hard. In the last few months, we have taken down the efficiency statement on our website (“87 cents of every dollar goes to helping families…”) and will soon to replace it with statements of outcomes we see for Habitat homeowners. We walked away from a $100K+ funding opportunity because the grant would have allowed a maximum of 10% for indirect costs, and we estimated that the compliance costs alone would have been 2-3 times that. The grant’s focus aligned well with a nascent program, so it was a tough decision.

Under our finance team’s leadership, we also implemented a time tracking system. We now have better information on how people spend their time and can compare actual versus what was allocated in the budget. We learned, for instance, that in the last quarter we spent more time on G&A than we’d projected. This makes sense: this summer a small team of board and staff, including myself, negotiated a lease for a new office space, then transitioned to managing the move out- and move-in process. I don’t think anyone would say that was a waste of time; finding a space that met our budget in the San Francisco real estate market has been a challenging but important task.

Next on the list is an internal conversation about Charity Navigator and the way we promote our four-star rating on our website. It will be a healthy debate. On the one hand, I appreciate the focus on accountability and transparency, and I’d be naïve if I thought we hadn’t received donations from donors who use these ratings. On the other hand, I have deep reservations about Charity Navigator’s financial health methodology, particularly in that it penalizes nonprofits with higher overhead regardless of context. If we invest to support our growth—spending time finding a new office in a tough market, or upgrading our HR systems to find and retrain the best staff—we ought not to feel embarrassed about that, nor be penalized for it.

I am fortunate to work with a board and staff who are open to these changes and debates. My hope is that our experiences can serve to keep my perspective about the starvation cycle grounded and productive.

Photo Credit: Habitat for Humanity Greater San Francisco

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How To Recruit The Nonprofit Board You Really Need

board recruitmentThere is a fundamental error that nonprofit leaders make when recruiting new board members. And that is to be vague about the kind of board members they need. Nonprofit leaders often think in very general terms about the makeup of their board while ignoring their nonprofit’s specific needs. It then becomes almost impossible to get new recruits (let alone old board members) active or engaged because they are unclear about the unique role they should play in the organization.

A board matrix is a tool that many nonprofits use to analyze what traits their current board has and where the holes lie. Often the traits used include very general things like:

  • Gender diversity
  • Racial diversity
  • Geographic representation (for national and regional organizations)
  • General sought-after skills like marketing and fundraising expertise
  • Access to vague networks, like “connections to people with deep pockets”

But this is the wrong way to think about who your board members should be.

To recruit the board you really need, you have to connect the skills, experience, and networks of your board to the specific goals of your long-term strategy.

Here are the steps to get there:

  1. Divide Your Strategic Plan Into Board Vs. Staff Roles
    Take a hard look at each goal of your strategic plan and ask what the board needs to do versus what the staff needs to do to make that goal a reality. For example, if your nonprofit runs an in-school literacy program and your first goal is to grow the number of students by 50%, you probably need your board to open doors to school district decision-makers so that you can grow to additional schools and secure more district support. So at least one or two of your board members must have connections to school district leaders.

  2. Analyze Current Board Members
    Once you’ve made a list of what you need from your board for each of your goals, add those elements to the top of your new board matrix. Make sure these are very specific skills, expertise areas, and networks. So for the example above, they would include things like: “Connections to School District Decision-Makers,” “Experience Growing Organizations,” and “Ability to Understand and Articulate Literacy Data.” At the end of the process, you should have 10-15 skills, expertise areas, or networks that your board must possess. Now list all of your current board members along the left side of the matrix and mark the characteristics that each member has.

  3. Recruit To Fill The Specific Holes
    Once you’ve completed the matrix, you may see areas where your board falls short. Now you know exactly what kinds of board members you need on your board. Give this list of missing skills, expertise, and networks to your Board Recruitment Committee so they can find the specific people necessary to fill those holes.

  4. Give Each Board Member a Unique Job
    Once you are clear about what you need from your board to deliver on your strategic plan, give each board member (current members and new recruits) a unique role to play. People function best when they are very clear about their specific role. If each individual member knows exactly what piece of the strategic plan is theirs to carry out, they will be much more engaged and active. So get specific: “We need you to secure meetings with district-level staff,” or “We need you to look at our growth model and ask hard questions.”

If you want a board that works for you, get specific about the kind of board you really need. To learn more about building a groundbreaking board, download the 10 Traits of a Groundbreaking Board book, or the How to Build a Groundbreaking Board webinar.

Photo Credit: Library of Congress

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9 Ways to Get Your Board Fundraising [Slideshare]

It is such a common complaint. Nonprofit boards are notorious for shirking their fundraising duties. But the good news is that there is a solution, and it doesn’t involve pleading or bribery. As part of the growing Social Velocity Slideshare library, today I offer the 9 Ways to Get Your Board Fundraising Slideshare.

If you want your board to share the responsibility for creating a sustainable nonprofit, you must get strategic. And you must stop apologizing. This Slideshare helps you begin to understand the steps for transforming your board into a financial workhorse.

And if you want to learn more about getting your board moving, download the the How to Build a Fundraising Board on-demand webinar.

You can see the entire library of Social Velocity Slideshare presentations here.

9 Ways to Get Your Board Fundraising from Nell Edgington

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How to Create Capacity Builders on Your Board

Nonprofit capacitySomething really interesting happened the other day to an executive director I know.

A couple of board members approached her to ask what she needed to continue to move forward. They wanted her to be blunt about the obstacles in her way. She was equally honest, telling them she could really benefit from leadership coaching on how to manage a staff, grow an organization, continue to develop the board, build financial sustainability. The board didn’t bat an eye. They told her to figure out how much it would cost so they could foot the bill.

How amazing is that?

A group of board members not only recognized that their executive director might have challenges that she wasn’t expressing, but also listened to those challenges and invested in their solutions. What a dream scenario!

How great would it be if more board members, and even some donors, did that?

There is some hope. A small subset of funders are recognizing and investing in the tremendous need for leadership development in the nonprofit sector.

But a nonprofit leader who is really struggling doesn’t have the luxury of waiting for her board (or donors) to wise up and ask her about the challenges she is facing. So in lieu of a truly enlightened board of directors, here is what you can do to encourage your board (and close donors) to become capacity builders:

Identify a Few Allies
As executive director you probably have at least one or two board members, and perhaps a couple of donors, who are very supportive of what you do. They strongly believe in the work of your organization and your ability to effectively lead that work. Meet with them one-on-one to discuss the challenges you are facing – not in order to vent your frustrations, but rather to explore proactive solutions.

Describe the Capacity Challenges
Really analyze what is holding you and your organization back. Where do you struggle? Why are you hitting your head against the wall? Describe in an honest (but not whining) way the capacity constraints (lack of adequate staff, effective technology, long-term planning, verified program results) and how those issues keep you from delivering more social change.

Quantify the Capacity Building Solutions
Figure out what it would take to clear those hurdles. How much would a Development Director cost? Or an evaluation program? Or a strategic plan? Then break those costs into investable amounts. A single board member or donor may not be able to fully fund a $50,000 evaluation program or a $75,000 Development Director. But if 3-5 board members made their own investments and then identified a couple of other people who could also invest, you would quickly get there. Show your allies how achievable, with their (capacity capital) support,  the solution is.

Create Champions in the Cause
But don’t let them off the hook when they write that check. Enlist their help in convincing others inside and outside the organization why you need to invest in capacity building. Have them articulate to others how important this next step is and the potential return on investment to the organization, and the social change you all seek. Create an army of champions who will advocate for your capacity building cause.

The challenges you face as a nonprofit leader are very real. But they won’t get any better unless you become proactive. Find partners among your board and donors to help you remove those obstacles standing in your way.

If you want to learn more about the leadership coaching I provide nonprofit leaders, click here, and if you want to learn more about raising capacity capital, download the Launch a Capacity Capital Campaign guide.

Photo Credit: Paul Keheler

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What Nonprofits Really Need From Their Donors [Video]

My hope in creating the growing library of Social Velocity videos is that nonprofit leaders will use the topics as a jumping off point for honest discussions with boards and donors. It can often be intimidating for a nonprofit leader to raise a controversial question like:

A nonprofit leader could set aside 30 minutes in a board meeting agenda for a discussion kicked off by a 2-minute video. Play a video, and then simply ask “What do you think?” Or you could show a video to a donor when you meet and ask for their opinion.

Some will disagree vehemently with what I have to say, but others might agree, or at least be open to thinking in new ways. An interesting, thought-provoking conversation might ensue. From that discussion you might start to plant seeds for change.

So to add to the library of conversation starters, today I offer this video on What Nonprofits Really Need From Their Donors.  And if you want to see other videos in the series go to the Social Velocity YouTube channel. Good luck!

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