I love this time of year. Not just because of the approaching space for relaxation, friends and family, and great food, but more importantly because it is a time for reflection. The end of the year offers a natural analytic marker between what was and what is yet to come.
And as is my end of the year tradition on the blog, it’s a time to look ahead to what the coming year might bring for the nonprofit sector. I’ve always said when I create my Trends to Watch lists that I am less clairvoyant and more optimist. I am always hopeful that the nonprofit sector is growing more effective, more sustainable, more able to create lasting social change. That’s the trajectory that (I freely admit) I am predisposed to see.
So here are 5 things I’m really hopeful about the nonprofit sector as we head into the new year.
- Growth of the Sharing Economy
The emerging “sharing economy,” where a good or service is shared by many instead of consumed by one and managed largely through the use of social technologies (think AirBNB, Netflix, TaskRabbit and countless others), will have wide implications for the social change sector. The sector that employed “sharing” long before it was cool will need to understand this changing environment and the implications for their work. Nonprofits should figure out how to navigate this growing interest (and increasing for-profit competition) in the realms of community and goodwill. It will be fascinating to watch.
- More Focus on Crowdfunding
One element borne out of the sharing economy is crowdfunding, and there is no doubt that it is everywhere. I have written before about my skepticism. But my hope is that crowdfunding will move away from ALS Ice Bucket Challenge-like hype and become another financing tool that nonprofits can use strategically. We need to get smarter about what crowdfuding is, and what it isn’t. A Kickstarter campaign makes sense for startup and other capital needs, but not for ongoing revenue. And while Giving Days are exciting, I’d like to see more analysis of what’s new money and what is cannibalized money. There is no doubt that crowdfunding is a force to be reckoned with, I just hope we turn it into a useful, strategic tool that contributes to — not detracts from — sustainable social change financing.
- Decreasing Power of the Overhead Myth
The Overhead Myth, the destructive idea that nonprofits should spend as little as possible on “overhead” expenses (like infrastructure, fundraising, and administrative costs) was laid bare in 2013 when GuideStar, CharityNavigator and BBB Wise Giving Alliance wrote their famous Letter to the Donors of America. This year they wrote a follow up Letter to the Nonprofits of America, arguing that both nonprofit leaders and donors must stop judging nonprofits by their overhead rate and instead focus on a nonprofit’s outcomes. It’s exciting to see this most detrimental of nonprofit myths beginning to crumble, but there is still much work to be done. Not least of which is helping nonprofits articulate and measure their outcomes so that they have a more effective measure with which to replace the overhead rate.
- Growing Emphasis on High Performance
Which brings me to the growing movement for creating more high performing nonprofits. Over the past several years there has been an emerging effort to move nonprofits toward this outcomes approach to their work. The idea is that if nonprofits can better articulate and measure the social change they seek, more resources, sustainability and ultimately more change will follow. In the coming year, a group of social sector leaders (of which I am a member) will release a framework for what practices constitute a high performing nonprofit. But that is just one example of a growing emphasis in the social change sector on results.
- Greater Investment in Nonprofit Leadership
Nonprofit leaders have long traveled a lonely road with inadequate support and resources. Funders and board members often assume that a leader should go it alone, even while for-profit leaders benefit from on-going coaching, training and development. But that is starting to change. A few savvy foundations have invested in nonprofit leadership, and they are beginning to trumpet the benefits of such investments. As more funders understand why investing in the leaders of the nonprofits they fund makes sense, I am hopeful that nonprofit leadership support will become less of an anomaly. And with stronger, more effective and supported leaders comes — I firmly believe — more social change.
Photo Credit: slorenlaboy
Note: In October I interviewed Kathleen Enright, CEO of Grantmakers for Effective Organizations (GEO), on the blog. In the course of that interview, she mentioned GEO’s upcoming study of staffed grantmaking institutions. That study was released a few weeks ago, and I asked Kathleen to provide some perspective here on what the results mean. Her guest post is below.
A few weeks ago GEO released our latest field study, Is Grantmaking Getting Smarter? We conduct this national study of staffed foundations in the United States every three years to better understand how and whether grantmaker attitudes and practices are changing in ways that help nonprofits make faster progress on their missions. In our 2014 survey, we endeavored to understand how funders support and engage in collaboration.
We were anxious to make meaning of the results related to collaboration in part because it was a key theme across the nonprofit listening sessions we conducted last year. Leaders touted the value of funders connecting them with each other and building peer networks. They recommended funders create more opportunities for nonprofit leaders to share ideas and allow collaboration to be an organic outcome of these peer exchanges. In addition, they made a strong case for funding collaborative work. As one listening session participant noted about collaborating, “It is expensive to undertake and not really fully funded.” Hopefully these results will provide an opportunity for funders to look carefully at their own practices to make sure that they are doing what they can to help productive collaboration flourish.
Collaboration in the context of philanthropy has many dimensions (you can find a description of the many forms and uses for collaboration here). In this survey we attempted to learn more about the extent to which grantmakers:
- Fund nonprofit collaboration
- Collaborate with one another
- Create an enabling environment that supports collaboration
The findings in Is Grantmaking Getting Smarter? were mixed on this issue.
Fund nonprofit collaboration. Anyone who has participated in collaborative initiatives knows the truism that they take longer and cost more than you think at the beginning. It follows that successful collaborative initiatives hinge on nonprofits having sufficient bandwidth to meaningfully engage in them. This is why it’s encouraging that multiyear support has rebounded to pre-recession levels and general operating support is on the rise. General operating support increased in terms of share of total grantmaking dollars from 20% to 25%.
Our past two surveys also sought to understand if grantmakers directly support the costs necessary for nonprofits to collaborate. The 2014 findings suggest that grantmakers are now less likely than in 2011 to fund the costs of collaboration or managing strategic relationships among grantees. In 2011, 38% of respondents reported never or rarely funding the costs of collaboration or managing strategic relationship among grantees. In 2014, it got even worse—53% said they never or rarely provide this kind of support.
As the drum beat for collaboration has grown louder, it’s surprising (and a bit worrisome) that direct philanthropic support for collaboration appears to be in decline. Our research partners at Harder+Company hypothesized that improving economic conditions may play a role. Foundations may have seen collaboration as a way to make limited resources go farther in order to withstand the tough economic conditions. Given the rebounding economy, maybe funders see this kind of support as less important.
It is also interesting that general operating and multiyear support are going up at the same time that support for collaboration is going down. Might funders be increasingly providing organizations with flexible, long-term grants as a strategy to support the collaborative work they need to do? If so, that’s a positive instinct. Regardless, if funders expect their grantees to collaborate, they have to be willing to underwrite the costs of doing so. Otherwise it’s an unfunded mandate that is unlikely to succeed.
For the first time this year, we asked a question about what kinds of support funders were providing to enable collaboration. The most common approach is to organize collaborative meetings or events for grantees. Nonprofits who participated in our listening sessions appreciated when grantmakers do this work well.
Collaborate with one another. Most grantmakers (69%, which was the same in 2011) reported developing strategic relationships with other grantmakers. Those who are cultivating such relationships are overwhelmingly motived by achieving greater impact, followed by an interest in tapping the expertise of other grantmakers. The least common reason for collaborating with fellow grantmakers was to minimize burden on grantees.
That such a strong percentage of grantmakers recognize both the importance of and motivations for collaborating with one another is a promising result. However, this further highlights the divide between what grantmakers are willing to support for themselves and what they are willing to fund for their grantees. As more grantmakers engage in collaborative partnerships hopefully the case for supporting similar work for their grantees will grow stronger.
Create an enabling environment for collaboration. In addition to directly supporting nonprofit collaboration and engaging in collaboration themselves, we were also curious about whether grantmakers are doing what they can to create an environment conducive to successful collaboration.
- By seeking and using input. Asking for and using feedback from key stakeholders lays the foundation for collaboration. At last, the majority of staffed foundations in the US are asking for grantee feedback. Additionally, grantmakers have become more likely over time to engage external voices in decision-making and strategy setting. They were most likely to seek external perspectives on foundation strategy (63% do so sometimes, often or always) and the majority of respondents now seek advice from a grantee advisory committee about policies, practices and program areas (52% up from 42% in 2011). This is good news.
- In how they engage with grantees. Survey participants were asked how important certain funding practices were to their success. Fully 92% of respondents indicated that it is important that staff build relationships with grantees so that grantees can be open about their challenges. A slightly lower but still substantial percentage (89%) indicated that it’s important to provide opportunities for staff members to spend time outside the office with representatives of recipient communities or grantees. Given that strong and trusting relationships are an important ingredient to successful collaboration, this sense of priority is encouraging. However only 63% thought it was important to their success to have staff with experience working at nonprofits like those they fund. Nothing really beats having walked in someone else’s shoes, so it is my hope that more and more foundations will recognize the importance of hiring program officers with nonprofit leadership experience in the years ahead.
I’m curious what you make of these survey findings, so please let us know what you think:
- Do you have ideas for why philanthropic support for collaboration might be declining? Do you think there’s any relationship to the increases in multiyear and general operating support?
- For grantmakers: To what extent are you creating an environment that enables collaboration inside your organization? How are your practices smoothing the way for your grantees to collaborate more effectively?
- For nonprofits: Are you talking with funders about what it takes to collaborate and what your real needs are?
Photo Credit: GEO
In 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
October was another interesting month in the world of social change. Continued efforts to make the nonprofit overhead myth history, a troubling report about the beloved American Red Cross, a dire prediction about Millennial philanthropy, some new models for scaling social change and connecting people to solutions in their community, and a call for funding for nonprofit performance management all combined to make a great month of reading.
You can read past months’ 10 Great Social Innovation Reads lists here.
- The three writers of last year’s Letter to the Donors of America, GuideStar, BBB Wise Giving Alliance and Charity Navigator, have penned a new Letter to the Nonprofits of America in order to encourage nonprofit leaders to do their part to convince donors that financial overhead is a poor way to evaluate nonprofit performance.
- New York Times columnist David Brooks takes a really interesting position on the difference between networks and institutions. He equates the recent government failures to effectively fight ISIS and stop the spread of Ebola with the death of institutions and our overwhelming focus on innovation and disruption as opposed to systematization and execution. As he puts it, “We like start-ups, disrupters and rebels. Creativity is honored more than the administrative execution. Post-Internet, many people assume that big problems can be solved by swarms of small, loosely networked nonprofits and social entrepreneurs. Big hierarchical organizations are dinosaurs…[but] when the boring tasks of governance are not performed, infrastructures don’t get built. Then, when epidemics strike, people die.”
- The American Red Cross came under fire for the disaster response to hurricane Sandy in 2012. NPR and ProPublica created a two-part story (here and here) uncovering serious issues with how the response was handled. But the American Red Cross, typically a model of effective communications, went largely radio silent. Perhaps they will have a more effective response this month?
- Writing at The Daily Beast, Joel Kotkin gives a (perhaps too) chilling prediction for how Millennial philanthropists could impact our world. As he sees it, “Schooled in political correctness, and not needing to engage in the mundane work of business, this large cadre of heirs to great fortunes will almost surely seek to shape what we think, how we live, and how we vote. They may consider themselves progressives, but they may more likely help shape a future that looks ever less like the egalitarian American of our imaginings, and ever more like a less elegant version of Downton Abbey.”
- Sam McAfee takes philanthropy to task for not being truly innovative, and he looks to technology disruptors for a better model. As he puts it, “The vast majority of the social sector is still trying to tackle social problems with program and funding models that were pioneered early in the last century…The philanthropic community should be interested in the agile and lean methods produced by the technology sector, not the money produced by it, and start reorganizing project teams and resource allocation strategies and timelines in line with this proven innovation model.”
- Amy Celep and Sara Brenner describe the “Intentional Influence Strategy” that nonprofits, like playground creator KaBOOM!, use to create social change at scale. As they describe it, intentional influence is “moving likely and unlikely stakeholders within an ecosystem to take the actions required to solve a problem at the magnitude it exists.”
- Writing on the UnSectored blog, Patrick Davis from the Calvert Foundation describes their new initiative, “Ours to Own” which takes a “radical inclusion” approach to getting local community members to invest in solutions to the challenges their cities face.
- We cannot expect nonprofits to measure performance without providing the funding necessary to do so. Laura Quinn makes this quite clear, writing “If we demand more data without more funding, it logically follows that what we’ll get is simply data that’s more made up.”
- Mark Rosenman, writing on the PhilaTopic blog, describes the particular role nonprofits must play in a world suffering from the “failures of political leaders and the self-serving nature of the corporate world.”
- And finally, the Ford Foundation launched a new online forum kicked off by eight changemakers that asks the question “Where Markets Lead Will Justice Follow?” The articles will get you thinking.
Photo Credit: Joanna Penn
Today I’m focusing on social change books. I know, books are so over. We have become a society that is about fewer and fewer words, or really, fewer and fewer characters. But there is something to be said for spending 200+ pages really diving into a topic, exploring it and letting it change your point of view. Below are my favorite books in the social change realm.
I have reviewed some of these books on the blog, some I have not. Some are really old, others are brand new. And some are not about social change at all, yet I included them because I think they hold value for social changemakers.
Each of these books has helped me see my work and the work of social change in new ways, even if that was far from what the author intended. Perhaps you will think so too.
Here are my favorite social change books:
- The War of Art (my review is here)
- Leap of Reason: Managing to Outcomes in an Era of Scarcity (my review is here)
- Working Hard & Working Well (my review is here)
- Lean In (my review is here)
- Social Media for Social Good (my review is here)
- How to Change the World: Social Entrepreneurs and the Power of New Ideas
- Beyond Fundraising: New Strategies for Nonprofit Innovation and Investment
- Work on Purpose (my review is here)
- Real Change Leaders
- Quiet: The Power of Introverts in a World That Can’t Stop Talking (my review is here)
- The Mesh: Why The Future of Business is Sharing
- The Big Enough Company (my review is here)
- The Networked Nonprofit
- Measuring the Networked Nonprofit
- Social Change Anytime Everywhere
- Good to Great and the Social Sectors
- Making Good (my review is here)
What are your favorite social change books? Please add to the list in the comments below.
Photo Credit: CBS Television
There were some pretty exciting things happening in the world of social innovation last month. From a new fund to make philanthropy more effective, to a new blog series written by funders making the case for investing in nonprofit leadership, to some ideas for making performance measurement more accessible to small nonprofits and arts and culture organizations, to some interesting partnerships between philanthropy and city government.
It all made for a great month of reads. Below is my pick of the 10 best reads in social innovation in September. As always, add what I missed to the comments. And if you want a longer list, follow me on Twitter, Facebook, Google+ or LinkedIn.
You can read past months’ 10 Great Social Innovation Reads lists here.
- The Fund for Shared Insight, a collaboration among seven major foundations, launched in September. The group plans to “pool financial and other resources to make grants to improve philanthropy…to encourage and incorporate feedback from the people we seek to help; understand the connection between feedback and better results; foster more openness between and among foundations and grantees; and share what we learn.” They plan to be very transparent with this entire experiment. I can’t wait to see what develops.
- Another development in the realm of improving philanthropy was the launch of the Stanford Social Innovation Review blog series where foundation leaders discuss why and how they have invested in nonprofit leadership development. As I mentioned earlier, Ira Hirschfield from the Haas Foundation kicked off the series, and Surina Khan from the Women’s Foundation of California was next up. To have such an open dialogue about nonprofit capacity investments, particularly around leadership development, is amazing. Let’s hope it encourages similar conversations outside the blogosphere.
- And the third piece from the world of philanthropic enlightenment, Daniel Stid of the Hewlett Foundation wrote a great post about ending the nonprofit starvation cycle. As he put it, “Effective leaders need to be willing to take the risk of saying something that a funder might not want to hear when their organization’s long run effectiveness is at stake. If they are not, then shame on them. Funders, for our part, should fund the full cost of the work we are asking our grantees to undertake in a way that leaves their overall organization and its finances whole; if we don’t, then shame on us.” Amen!
- There is further evidence that philanthropy as we know it is changing – a new report by The Economist takes a hard look at how Generations X and Y (those born between 1966 and 1994) are transforming philanthropy, particularly around “a strong desire to have a measurable, enduring impact.” This is exciting because if donors increasingly invest based on results, we can shift more money to social change. As the authors of the report put it, “The young generation of givers is focused on data, measurement and demonstrable results. More than any other generation, they want to check facts, know all the information ahead of time and ensure that they are well-informed at every stage of the process.”
- And there was lots to say about measuring performance this month. The Foundation Center and WINGS, a global network of 90 support organizations serving philanthropy in 35 countries, announced the creation of The Global Philanthropy Data Charter to gather and share philanthropy data for public benefit.
- Measuring impact is complex and costly, but Carly Pippin from Measuring Success, offers 4 steps for how small nonprofits can assess impact affordably.
- Measurement is particularly challenging in the arts and culture arena because, as Natasha Bloor of The Old Vic Theatre explains, “There is an understandable reticence within the cultural and creative industries when it comes to proving the social value of art. For many, the arts have an intrinsic worth that cannot be mapped or measured, with the primary benefit found in creative self-expression itself, rather than the longer-term effects experienced afterwards.” But she offers a new approach that they have found very effective.
- And for a completely free way to assess the social value of building low-cost housing, child-care centers, and health clinics there is the Social Impact Calculator, developed by the Low Income Investment Fund. They developed the tool to measure the effect of their own work and then decided to share it.
- Stephanie Jacobs of the Nonprofits Assistance Fund offers some tips to turn your board into the financial leaders they need to be.
- And finally, there were some interesting examples of partnerships between local government and philanthropy aimed at strengthening cities. Rona Jackson from Living Cities described 5 ways philanthropy and local government can work together. And the Kalamazoo Promise, a partnership between local philanthropists and city schools that pays tuition at a Michigan college for any student who graduates from a Kalamazoo school, shows these ideas in action.
Photo Credit: Valerie Everett
Something pretty exciting is going on. Perhaps I’m an eternal optimist, or I’m suffering from confirmation bias, but it seems to me that more funders are starting to talk about investing in the capacity of nonprofits, particularly around nonprofit leadership development.
The Stanford Social Innovation Review kicked off a new blog series this month focused on the topic. Over the next three months, six foundation leaders will blog about why they have made investments in the leadership development of their nonprofit grantees and what the return on investment has been.
This is phenomenal because the more we talk about and demonstrate the return on investment of nonprofit leadership development, and really of any capacity investments, the more likely we will be to see other funders follow suit.
As Ira Hirschfield, president of the Evelyn and Walter Haas, Jr. Fund, points out in the inaugural post in the new SSIR series, less than 1 percent of overall foundation giving went to leadership development between 1992 and 2011, while the private sector allocates billions of dollars to it.
Why are we not investing in our nonprofit leaders? If we truly want to create change to some of our most pressing social issues don’t we need the strongest, most effective leaders possible?
As Hirschfield puts it so well:
Foundations ask a great deal of the organizations we support…in short, we hope grantees will deliver transformational results for the people and places they serve. So it’s striking how seldom we back that up with funds to help organizations develop and strengthen the ability of their leaders to meet those high expectations. People are not born with everything it takes to manage and motivate a team, build coalitions, and lead change…Leaders who have the opportunity to reflect on their strategies and hone their skills make better choices, develop innovative solutions and forge stronger collaborations. This is what leadership development is about—and to the extent that foundations decide it is important and fund it, then we and our grantees will be better positioned to achieve our goals for impact.
In other words, foundation funding will go further if funders also invest in the leaders of those organizations they fund.
It seems like a no-brainer. And it is a no-brainer in the for-profit world. But as we so often do in the nonprofit sector, we are selling the sector, and its leaders short.
But it is not enough (nor are we anywhere near it anyway) for funders to understand the need for investing in nonprofit leaders. Nonprofit leaders themselves need to stop apologizing and start demanding (in a nice way!) investment in their own capacity. And leadership development is only one of the many areas in which nonprofits need capacity investment. Nonprofits also require fundraising expertise and staffing, program evaluation, technology and systems, and the list goes on.
So if we are to have any hope of moving this topic beyond the blogroll, nonprofit leaders and funders need to start having better conversations about what it will really take to accomplish their joint impact goals. Because if, at the end of the day, we are all looking to achieve more impact, then capacity to deliver on that impact must be part of the conversation.
If you want to learn more about capacity investments from both the nonprofit and funder sides, download the Power of Capacity Capital book, and if you want to learn more about nonprofit leadership, download the Reinventing the Nonprofit Leader book.
Photo Credit: Clinton and Charles Robertson
In this month’s Social Velocity interview, I’m talking with Rick Moyers, vice president for programs and communications at the Meyer Foundation in Washington DC – a regional grantmaker that is nationally recognized for its capacity-building programs. Rick is a co-author of the Daring to Lead 2006 and Daring to Lead 2011 national studies of nonprofit executive directors, and has written and spoken extensively on executive and board leadership. He currently serves on the boards of BoardSource, the Alliance for Nonprofit Management, and the Community Connections Fund of the World Bank Group.
You can read other interviews in the Social Velocity Interview Series here.
Nell: You write a lot about nonprofit boards of directors. As a general rule, because they are volunteers, nonprofit boards tend to be pretty ineffective and disengaged from truly leading their organizations. Can the current structure of nonprofit leadership be made more effective? Or is there a better structure, and if so, how would we undertake such a fundamental shift in the sector?
Rick: We can’t give up on boards just because many boards are ineffective, any more than we can give up on public schools just because so many are struggling. And the fact that board members are volunteers doesn’t necessarily account for their disengagement—some of the most passionate and productive contributors to the nonprofit sector are volunteers.
But just because I’m not ready to give up doesn’t mean we can just keep doing the things we’ve been doing to improve boards, hoping our efforts will produce better results, and wringing our hands when they don’t. We’ve heaped so many expectations and roles onto the backs of boards that I’m not sure it’s possible for any board to fulfill all of them all the time. A good place to start improving things would be to become much more focused and pragmatic about what we expect from boards. A clear set of expectations – one that’s not simply a laundry list of everything we wish boards would do – would be a start. Along with the recognition that organizations need different things from their boards depending on their circumstances.
We need to recruit board members with at least as much thought and effort as we put into recruiting employees, if not even more given that board service is a multi-year and often multi-term commitment. I know board members who have been invited to join the boards of organizations with which they were completely unfamiliar after a 15-minute conversation with the chair of the nominating committee—or a casual lunch with the executive director. And then we wonder why they have a hard time engaging. If we recruited board members as if the job mattered and their selection was an important decision, perhaps they would start taking the job more seriously. We can’t give up on boards without doing a better job of trying to help them function better.
At the same time, there would be enormous value in trying out alternative structures and talking openly about whether they worked any better than the current model. My hunch is that alternatives are being tried out quietly, but we don’t talk about them much. I’d be interested in learning more about very small boards (four or five carefully chosen people), the impact of compensation on board member performance, boards with greater staff representation, and boards that are more democratic and representative of the constituencies and communities being served. I’m not confident in suggesting any of these as an alternative to current practice because I don’t think we know enough. But we don’t know enough because most organizations don’t believe they have permission to experiment (and maybe they don’t). There’s enormous pressure for “normative” behavior in governance, even though we know that normative behavior often produces mediocre results.
I don’t have a good answer for how we break this cycle, but I think we need a “learning lab” for governance practices. We need to be bolder in our experiments, and more open in sharing the results, even when they are unsuccessful.
Nell: The Daring to Lead studies that you co-authored with CompassPoint demonstrate a deep leadership crisis in the nonprofit sector – nonprofit leaders are burned out, planning to leave, and lack support for leadership development. Is more money for leadership development the answer, and if so, how do we get funders to understand the need and fund it?
Rick: More money is the answer, but not necessarily more money for leadership development. My take-away from this body of work is that chronic under-capitalization is at the root of executive director burnout and dissatisfaction. The problem is not just that organizations don’t have enough money for leadership development. They don’t have enough money for anything.
While I applaud funders that invest in leadership development—and the Meyer Foundation is among them—there’s also a danger that funder-driven leadership development programs become simply another demand on already overextended executive directors. Funders need to recognize the importance of leadership development, but also need a keen understanding of the financial and organizational constraints that have a profound impact on executive directors who may already be accomplished leaders. One of the lessons from my foundation’s experience is that large grants for leadership development can be hard to use when executives are facing so many other challenges and distractions, many of which are related to finances and fundraising.
Nell: Why is leadership development taken as a given in the for-profit sector, but taboo in the nonprofit sector? Why do we assume that nonprofit leaders should be able to go it alone? And how do we change that attitude?
Rick: In the for-profit sector, there are more vehicles for ensuring adequate capitalization and leaders have greater discretion over how they can use that capital, with the mandate of producing the greatest return for owners, investors, and shareholders. That said, it’s very telling that so many large companies spend freely on leadership development without questioning the return on investment, while nonprofit leaders are conditioned to question every penny spent on anything other than program delivery. Boards can be especially shortsighted in this regard, under-investing in current executive directors without considering the costs—in money, organizational reputation, and lost momentum—of an untimely transition. We need more evidence, both anecdotal and quantitative, of the ROI for leadership development in the nonprofit sector. Producing that evidence and telling that story will require resources, but I’m concerned that without that investment we’ll never be able to make a convincing case to boards and funders that are increasingly focused on evidence-based approaches.
Nell: Do you think as Millennials age into leadership positions in the nonprofit and philanthropic sectors they will fundamentally change nonprofit leadership? And if so, how?
Rick: While not wanting to sound cranky, I object on principle to making generalizations about a group of 80 million people as if they were a single thing. And as a member of Generation X, I also must point out that we’re the ones who are currently aging into leadership positions. What about us, damn it?
Crankiness aside, as someone who works with younger leaders every day, I have noticed some differences that hold promise for the future. Many in the rising generation are much more socially aware, passionate about social change, and optimistic that they can make a difference than I was at their age. They are choosing careers in the nonprofit sector with more thought and intention than previous generations. The dramatic increase in the number of academic centers and degree programs focused on the nonprofit sector and philanthropy over the past 20 years is producing accomplished young leaders with broad skill sets and considerable insight into nonprofit work.
I do notice a more conscious commitment to work-life balance, and more intentionality around achieving it, which I hope will help reduce burnout and abrupt departures of nonprofit executives. Just within the last six months, I’ve watched three younger executive directors transition out of their jobs because they were seeking greater work-life balance. The difference from what I’ve seen in the past is that these executives decided to leave after successful tenures of more than five years, and after working intentionally to develop a strong board and staff leadership team that could handle the transition. These leaders stepped down before they burned out, and handed off strong organizations that were prepared for the change. That’s very encouraging, and I hope it’s a trend.
A committed and talented cadre of younger leaders is already in the nonprofit leadership pipeline – not by accident, but because they want to be here. Daring to Lead and many other studies have highlighted the challenges inherent in being an executive director, so these younger leaders know what the role entails. And they still want to do it. I think that bodes well for the future, and I’m optimistic.
Photo Credit: Meyer Foundation
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