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Financing

How Is Nonprofit Overhead Still a Thing?

nonprofit overheadLest you think we’ve made headway on overcoming the Overhead Myth (the false notion that nonprofits must keep their fundraising and administrative costs cripplingly low) you need only look as far as a recent Forbes article, “5 Nonprofit Leaders Share How to Keep Overhead Costs to a Minimum.” And this is perhaps even worse because it is nonprofit leaders themselves, not philanthropists or business leaders, telling nonprofit leaders that overhead is bad.

The Forbes Nonprofit Council made up of “top nonprofit execs [who] offer insights on nonprofit leadership & trends” compiled these 5 “tips” for keeping nonprofit overhead low. And the tips are as insidious as you might think. I know I should take the high road and just ignore this ridiculous article, but I simply can’t. In fact, it boggles my mind that overhead (to borrow a phrase from the brilliant John Oliver) is still a thing.

The Forbes article neglects to point out that the concept of “nonprofit overhead” has undergone a real transformation in the past few years. It assumes that “overhead” is still a dirty word, but anyone who has been paying attention knows that that is no longer a given.

There has been a movement among nonprofits and their philanthropic and government funders to evaluate nonprofits based on their results, rather than just their overhead rate. The federal government and some local governments have moved to increase the indirect costs paid to nonprofits. And just last month a new Bridgespan study analyzed the indirect costs of 20 different nonprofit organizations and found, not surprisingly, that overhead rates vary greatly depending on the business model and industry of a given organization (just as it does in the for-profit sector).

So for the Forbes article to simply encourage nonprofits to keep their overhead as low as possible ignores the changes that have occurred in the sector and the very real fact that different organizations, business models and issue areas might require very different administrative and fundraising costs.

But beyond those huge oversights, the Forbes article does a further disservice to the nonprofit sector by providing 5 ridiculous and crippling “tips” for keeping overhead low. Here’s why each one is so wrong:

  1. “Look for Low-Cost IT Options”
    To the contrary, I would say that many nonprofits don’t spend enough on IT. So often nonprofit leaders are using outdated technology and systems, or worse, not gathering data at all because they simply don’t have the funds. Nonprofits need to spend more, not less, on IT.

  2. “Don’t Overwork Your Team”
    Seriously? Isn’t overwork simply a given in the nonprofit sector? Because nonprofit leaders often don’t have the funds to hire enough staff, they ask the staff they do have to wear too many hats. The solution is not to tell nonprofit leaders to stop overworking their team. Rather nonprofit leaders must raise the funds necessary to fully staff the work. And that means we need more money in the sector for capacity building.

  3. “Reward Innovation”
    The Forbes article advises nonprofit leaders to “create a culture that rewards innovation and encourages employees to be scrappy.” Certainly on this point nonprofits already win in spades — nonprofits are nothing if not scrappy. But I’m not sure scrappiness and innovation go hand in hand. It’s hard to be innovative when you are worried the doors may close tomorrow. Innovation comes with more capacity capital — once nonprofits have the tools, systems and people they need, innovation can follow.

  4. “Maintain a Clear Business Methodology”
    And here’s where Forbes falls back on the old stand by — nonprofits need to act more like businesses. But what clear business methodology advises undercutting the sales function (fundraising in the nonprofit sector), systems, and staffing? Why do we choose only some of the ways we want nonprofits to “be like businesses,” but ignore others? No successful business leader will tell you that is a smart strategy.

  5. “Invest in Community Leaders”
    The Forbes “experts” encourage nonprofit leaders to hire more volunteers, students and interns in order to save on staff costs. NOOOOOO! If we are truly going to solve the challenges we face, we need more experts, not fewer. While volunteers and students are great for rote tasks, that only gets you so far. Nonprofits need expert fundraisers, brilliant program people, IT geniuses and more. We don’t encourage Silicon Valley to hire more volunteers and interns to create the next tech solution, so why tell nonprofit leaders to hire more volunteers and interns to create the next social solution?

Can we please, please, please move beyond this broken and damaging view of nonprofits? We would never ask the makers of the next shiny widget to cut their sales, staff and systems to the bone. So let’s not demand that of those working to save the world.

Instead, let’s have a smarter conversation about how social change leaders must ask for (and receive!) the tools they really need to make our world a better place.

If you want to learn more about raising capacity capital to strengthen your nonprofit, check out the Launch a Capacity Capital Campaign Guide and the Power of Capacity Capital book.

Photo Credit: Adrian

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10 Great Social Innovation Reads: May 2016

social change

May offered some interesting insights into the world of social change. From a plea by nonprofit infrastructure groups for more funding, to some criticisms of philanthropy’s unwillingness to invest in rural economies or provide a realistic runway to nonprofits, to digital’s impact on journalism, to the evolving sharing economy, to a call for more nonprofit board resignations, to a way to break the nonprofit starvation cycle, there was a lot to read.

Below are my picks of the 10 best reads in the world of social change in May. But you can always follow me on Twitter (@nedgington) for a longer list.

And if you are interested in past months’ 10 Great Reads lists, go here.

  1. Perhaps the biggest news of the month was the letter written by 22 groups, which provide support to the entire sector (like the National Council of Nonprofits, the Nonprofit Finance Fund, and GuideStar), asking foundations to provide more funding for the nonprofit ecosystem. GuideStar CEO Jacob Harold (here) and National Council of Nonprofits CEO Tim Delaney (here and here) explain why this issue is so important.  But Pablo Eisenberg disagrees.

  2. National Committee for Responsive Philanthropy Executive Director Aaron Dorfman takes philanthropy to task for not investing enough in rural communities, where change is needed most. As he puts it: “The philanthropic sector continues to neglect rural communities. A changing national economy, entrenched racial inequity and foundations’ reliance on a strict interpretation of strategic philanthropy has meant philanthropic resources for rural communities are few and far between, just when the opportunities for change are most urgent. This has to change if we want to see progress on the issues we all care about.”

  3. Piling on to the criticism of philanthropy, Laurie Michaels and Maya Winkelstein from Open Road Alliance, encourage their fellow philanthropists to help nonprofits deal with risk and disruption. As they put it: “Most grant budgets are designed with zero cushion even when the nonprofit is working in tough conditions that can turn the simplest obstacle into an unmanageable issue…any unexpected but inevitable change or deviation in the budget is potentially catastrophic. The nonprofit’s inability to fluidly adapt the budget to manage these roadblocks, however minor, can jeopardize even the largest of undertakings…Risks alone are threatening, but when the concept of risk goes unacknowledged, undiscussed, and unaddressed, those risks are more likely to become realities. All this adds up to lower impact, turning manageable events into liabilities.”

  4. Maybe female philanthropists can turn the tide. The Lilly Family School of Philanthropy released some fascinating new research about how women are changing philanthropy. And Megan O’Neil, writing in The Chronicle of Philanthropy, explains how nonprofits must adapt in order to tap into this growing philanthropic force.

  5. Journalism is changing rapidly, due in part to the growth of digital. Research shows that different social media platforms connect people to news in different ways, and long-form journalism is seeing a resurgence thanks to mobile.

  6. And it’s not just journalism that digital is changing. The Nonprofit Tech for Good blog offers 16 Must-Know Stats About Online Fundraising and Social Media and 5 Ways the Internet of Things Will Transform Fundraising.

  7. The growth of the “sharing economy”, where consumers rent or borrow goods and services rather than buy them, has huge implications for the social change sector. Pew Research outlines 8 key findings about how Americans relate to the sharing economy and interviews NYU professor Arun Sundararajan about how the sharing economy is evolving.

  8. Nonprofit Law blogger Gene Takagi pulls no punches in offering 12 Reasons Why You Should Gracefully Resign from a Nonprofit Board. Yes, yes, yes, to more accountability, honest conversations, and clear expectations on nonprofit boards.

  9. Writing in the Stanford Social Innovation Review,  Jeri Eckhart-Queenan, Michael Etzel, and Sridhar Prasad discuss the findings of a new Bridgespan Group study that analyzed the indirect costs of 20 different nonprofit organizations. What they found, not surprisingly, is that indirect rates vary greatly depending on the business model and industry of a given organization (just as it does in the for-profit sector).  The authors argue that if more nonprofits understand and report their true costs, nonprofits could break the starvation cycle: “It’s clear that philanthropy’s prevailing 15 percent indirect cost reimbursement policy does not take into account the wide variation in costs from segment to segment. Doing so would have far-reaching effects on philanthropy and grantees. If nonprofits committed to understanding their true cost of operations and funders shifted to paying grantees what it takes to get the job done, the starvation cycle would end.”

  10. A nonprofit dashboard is a good way to monitor and report on a nonprofit’s effectiveness and sustainability over time. Hilda Polanco, CEO of FMA, explains how to create a great one.

Photo Credit: Omarfaruquepro

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What Will Be Philanthropy’s Next Chapter?

antique-typewriter-keysI am often asked by nonprofit leaders, “Where are the funders who understand what nonprofits really need?” Well, they were at the Grantmakers for Effective Organizations conference (#2016GEO) last week in Minneapolis.

After attending the conference and curating a great group of bloggers who recapped each day (you can read Phil Buchanan’s Day 1 post here, Trista Harris’ Day 2 post here, and Mae Hong’s Day 3 post here), I have lots of my own thoughts percolating and wanted to share my takeaways from a great conference.

GEO is made up of 500+ member foundations that strive to be better philanthropists. They are a thoughtful bunch who seek to invest better in the nonprofits leading social change. As Linda Baker from the David and Lucile Packard Foundation said in her session on Real Costs for Real Outcomes, “We want to have authentic, trusting relationships with our grantees. We want them to have the impact they want to have in the world because that’s the only way we will have impact. It’s critical to our success.”

And that, in essence, is what GEO and its member foundations are all about. They view themselves and their money in service to those nonprofits creating social change. It is a different model than the traditional philanthropic model of nonprofits in supplication to those who hold the purse strings.

And because GEO is on the cutting edge of where philanthropy is and should be going, the conference this week encouraged philanthropists to push their work in some exciting new directions.

Here is what I saw emerging at the conference:

 

GEO panelPhilanthropy Must Embrace the National Call for Equity
From the #BlackLivesMatter movement, to student protests on college campuses, there is a growing demand across the country for equity — a level playing field — for all. And philanthropy has to get better at responding to this in the moment. As Alicia Garza founder of the #BlackLivesMatter movement said in her session, “Philanthropy is missing the opportunity to support the very change they are set up to resource.”

And the plenary panelists Peggy Flanagan, Michael McAfee, Doug Stamm and Starsky Wilson would perhaps agree and take it even further, encouraging philanthropist to re-examine the institutional racism inherent in the system. As Michael McAfee said, “I am deeply frustrated at our leadership. At the moment where consciousness about equity is elevated, we shift our priorities, our initiative, we do something to avoid the real work for this moment. We could do something if we could be more courageous.” In this moment where our country is grappling with issues of equity, philanthropy must step up and invest in the hard work of change.

 

grantmaking

Philanthropy Must Invest in Stronger Organizations

GEO members have always been on the forefront of understanding that it takes strong organizations to create real outcomes, but this conference took that to another level. From a session on unrestricted operating support, to one on supporting fundraising capacity, to one on funding nonprofits’ real costs, GEO was pushing its members, and philanthropy as a whole, to recognize that real change will only come when we support organizations, not just programs.

As one attendee put it, “The project funding paradigm ignores the health of the nonprofit organization in which the project lives.” Yes, absolutely. GEO members are recognizing–and perhaps leading the rest of philanthropy to begin recognizing–that you cannot have effective programs, strong outcomes, and ultimately social change without strong, effective organizations behind them.

And that means that philanthropy can and should lead the way in funding the full costs, including program AND operating costs, along with working capital, fixed assets, reserves, and debt. And at the same time, philanthropy must be a partner with nonprofits in figuring out how to overcome their capacity constraints, like lack of fundraising expertise, lack of management knowledge, and lack of adequate systems and infrastructure.

 

Vu Lee

Philanthropy Must Humble Itself 

There is no doubt that GEO members are a humble bunch; they view their role as supportive to the real work of social change, which is different than traditional philanthropy that viewed itself as all knowing. But, perhaps there is still work to be done.

Vu Lee, blogger from Nonprofit With Balls and Executive Director of Rainier Valley Corps, spoke eloquently of philanthropy’s “trickle down” approach to working with communities of color and encouraged philanthropists to take a better approach: “We have to start changing philanthropy’s perception of what communities of color are. Instead of infantalizing communities of color, recognize that communities have the solution, they are the solution, they are the light.”

And Deepak Bhargava from Center for Community Change spoke of the typical grantor/grantee relationship being similar to a feudal relationship, where the philanthropist is the Lord and the nonprofit is the serf. Instead, he encouraged the social sector to move to a place of “public friendship” between grantor/grantee where both sides are:

  • United by a vision of big change
  • Accountable to each other
  • Thinking of themselves as custodians of organizations leading to a better place
  • Engaging in creative, generative conflict

He spoke of this ideal as something that we must “persuade a new generation of philanthropists is possible.”

And perhaps this new philanthropy is possible. GEO certainly seems to think so. So let’s hope that this new vision for philanthropy is embraced by the growing GEO membership and that that membership in turn leads philanthropy as a whole to a more effective way of investing in social change.

As Alicia Garza put it, “Effective grantmaking is moving resources to change agents AS change is happening and getting out of the way.” Amen!

Photo Credits: publicdomainpictures.net, #2016GEO

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Blogging the Grantmakers for Effective Organizations Conference

GEO conferenceI’m really excited to announce that I will be doing something a little different on the blog next week. I am attending the Grantmakers for Effective Organizations (GEO) conference in Minneapolis May 2nd – 4th, and GEO has asked me to curate a set of bloggers to report on the conference.

I have rounded up a rockstar group of bloggers who will be sharing their insights from the conference with you here on the blog. And the blog series will be reposted to the Minnesota Council on Foundations blog, which is a co-host of the conference.

GEO is made up of 500 member grantmakers who are working to reshape the way philanthropy operates and promote strategies and practices that contribute to grantee success.

The GEO conference is held every other year and brings together philanthropic leaders from across the country who all share a common vision for advancing smarter grantmaking practices that enable nonprofits to grow stronger and more effective.

Some of the sessions in this year’s conference that I am particularly excited about include: “Can Foundations Help Grantees Build Fundraising Capacity?,” “Real Costs, Real Outcomes. What Funders Need to Know,” and “Supporting Leadership Development in Social Justice Organizations.” In addition, there will be some really interesting plenary sessions about things like culture in philanthropy and philanthropy’s role in overcoming inequity.

It promises to be a fascinating conference.

So, starting next Tuesday, May 3rd you’ll be hearing from this great group of guest bloggers:

 

phil buchananPhil Buchanan, President of The Center for Effective Philanthropy 
Phil is a passionate advocate for the importance of philanthropy and the nonprofit sector and deeply committed to the cause of helping foundations to maximize their impact. Hired in 2001 as CEP’s first chief executive, Phil has led the growth of CEP into the leading provider of data and insight on foundation effectiveness. CEP has been widely credited with bringing the voice of grantees and other stakeholders into the foundation boardroom and with contributing to an increased emphasis on clear goals, coherent strategies, disciplined implementation, and relevant performance indicators as the necessary ingredients to maximize foundation effectiveness and impact. Phil is no stranger to the Social Velocity blog — I interviewed him here, and he guest blogged last summer here.

 

trista harrisTrista Harris, President of The Minnesota Council on Foundations
In her role at MCF, Trista helps award more than $1 billion annually. Prior to joining MCF in August 2013, she was executive director of the Headwaters Foundation for Justice in Minneapolis, and she previously served as program officer at Minnesota Philanthropy Partners. Trista earned her master’s of public policy degree from the Humphrey Institute of Public Affairs, University of Minnesota, and her bachelor of arts from Howard University, Washington, D.C. She is a passionate national advocate for the social sector using the tools of futurism to solve our communities’ most pressing challenges and is a member of the trends in family philanthropy task force for the National Committee for Family Philanthropy.

 

mae hongMae Hong, Vice President of Rockefeller Philanthropy Advisors
Mae is responsible for building RPA’s presence in serving individual donors, foundations and corporations throughout the Midwest. Bringing 18 years of nonprofit and philanthropy experience to RPA, she previously served as Program Director at the Field Foundation of Illinois. Mae actively participates in local and national philanthropic associations and networks, serving in leadership roles on committees, engaging in public speaking opportunities, and facilitating planning and execution of philanthropic initiatives. She currently serves on the boards of GEO, the Illinois Humanities Council and the Daystar Center. She is a past chair of the board of Chicago Foundation for Women.

 

And once the conference is over, I will plan to do a wrap-up blog post on my thoughts and insights from the conference.

If you plan to be at the conference, please let me know, I’d love to see you there! And if you can’t make the conference but want to follow the content from afar, follow the Twitter feed at #2016GEO.

Photo Credits: GEO, CEP, MCF, and RPA

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Building Better Nonprofits: A Podcast

podcastLast month I was asked by Ted Bilich, CEO of Risk Alternatives — a Washington, DC firm helping nonprofits manage their organizational and financial risks —  to participate in a podcast. This is part of their ongoing podcast series “About Risk” which talks to thought leaders about risk management and process improvement for nonprofits, small businesses, and startups.

In the podcast Ted and I talk about:

  • How the nonprofit landscape has become more competitive
  • Why nonprofits need a theory of change
  • How and when to engage in strategic planning
  • How nonprofits can determine if they are applying best practices
  • The benefits of a financial model assessment
  • How to address common risks involving a board of directors
  • And much more

You can listen to the podcast below, or click here.

And you can see all episodes in the “About Risk” series here. And if you want to listen to more podcasts about the evolving nonprofit sector, go here, here or here.

Photo Credit: Patrick Breitenbach

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10 Great Social Innovation Reads: March 2016

spring readingMarch was a whirlwind in the world of social change. From successful nonprofit advocacy efforts, to new ways to measure fundraising effectiveness, to finding inspiration in small American cities, to a disconnect between civic engagement funders and activists, to new technology to serve the homeless, and a lot more in between, there was much to read.

Below are the top 10 things that caught my eye in the world of social change in March. If you want to see the longer list, follow me on Twitter @nedgington. And if you want to see past months’ 10 Great Reads go here.

  1. SeaChange Capital Partners put out a stunning report about the depressing state of financial risk management in health and human services nonprofits in New York, but their insights could really be applied sector-wide. As the report cautions: “Trustees must strive to maximize the good that their organization does while managing its risks. Balancing these can be challenging because of the passion they feel for the organization and its mission. Nonprofits lack the indicators of organizational health that reach the directors of for-profit businesses, such as stock prices or credit spreads…In this context, nonprofit trustees in leadership positions must ensure that well thought through risk management processes are in place. In a challenging operating environment, the status quo is no longer acceptable.”

  2. Perhaps help is on the way. A fascinating conversation happened between the head of the Nonprofit Finance Fund, Antony Bugg-Levine and Fred Ali, head of the Weingart Foundation and champion of the movement to cover full costs and give nonprofits unrestricted flexible funding. Ali is a huge proponent of investing in nonprofit capacity, as he describes: “The incessant [funder] focus on restricted programmatic grants has come at a huge cost to our sector. When we were considering a shift to unrestricted grants, we took a look back and found that many times the organizations we were supporting were not producing the outcomes we were looking for because they didn’t have the ability to invest in the kind of infrastructure that is necessary to produce those outcomes. So when I hear foundations object to our approach, I have to ask, ‘What are you trying to accomplish? Does your grantmaking approach help or hinder the development of capacity and sustainability?’ It is pretty clear that we have a lot of nonprofit organizations that are doing incredible work, being asked to do even more work, and they are not getting the kinds of support they need to that work effectively.” Yep.

  3. Pew Research is really knocking it out of the park lately. Every day they come out with fascinating data slices that are relevant and topical. Like their infographic on the 10 demographic trends that are shaping the U.S. and the world, which blew my mind. And if you want to dig into data just on the nonprofit sector, check out this in-depth report from The Bureau of Labor Statistics, which The Nonprofit Quarterly calls “required reading for leaders and board members of nonprofits and philanthropy.”

  4. On Monday, the governors of both California and New York signed legislation raising the minimum wage in their states to $15 per hour. Apparently we have the advocacy efforts of nonprofits to thank for this social change.

  5. But economics professor Mark Hendrickson doesn’t see a lot of value in the nonprofit sector. If you feel like getting justifiably incensed, take a look at his eye-popping read in Forbes where he is responding to what he calls the “turf war” between philanthropy and capitalism. Hendrickson provides many stunning quotes about the nonprofit sector, including this whopper: “Many non-profits do good work (albeit without the efficiencies imposed by the profit-loss calculus). However, they have no moral standing to criticize or condemn those who create the wealth that the non-profits spend. Non-profits essentially are professional mendicants trying to do good with other people’s money. It’s time for the non-profits to abandon their petty turf war and to muster enough grace at least to keep silent if they can’t bring themselves to express gratitude for the dominant, indispensable role of the profit-makers in advancing human welfare.” Wow.

  6. So now that you’re mad, let writer James Fallows inspire you. He and his wife Deb have been on a three-year journey across the country visiting small cities to understand what contributes to their cultural and economic resilience. What they found is that despite political dysfunction at the national level, there is some very inspiring progress happening at the local level: from urban renewal, to bipartisan compromise, to educational reform, to state-of-the-art job training and much more. As Phillip Zelikow, a professor at the University of Virginia and quoted in Fallows piece put it: “In scores of ways, Americans are figuring out how to take advantage of the opportunities of this era, often through bypassing or ignoring the dismal national conversation. There are a lot of more positive narratives out there—but they’re lonely, and disconnected. It would make a difference to join them together, as a chorus that has a melody.”

  7. And speaking of innovation, some nonprofits have developed apps to better serve the homeless, to varying degrees of success.

  8. Writing about civic engagement in The Nonprofit Quarterly Austin Belali bemoans the disconnect between those who are leading a new surge in civic movements (like Black Lives Matter) and the philanthropists funding civic engagement efforts, noting: “While the leaders of what could be described as a twenty-first-century movement for inclusive democracy are largely women and people of color, civic engagement philanthropy and the organizational leadership it supports is stubbornly the opposite.” And looking at a specific kind of civic engagement (voter turnout among young people), Abby Kiesa and Peter Levine might agree when they argue in the Stanford Social Innovation Review: “We must ask whether society supports youth engagement, and, if it does, how that support can be made equal for all youth, regardless of education, race, and income. We believe that encouraging youth to engage and to contribute their skills and values can help improve the political culture, but major institutions—educational, governmental, political, and civic—must actually want that to happen.”

  9. Adding to what has been a scarce (but hopefully growing) body of research on fundraising effectiveness, The Bridgespan Group released a new study about calculating the fundraising effectiveness of each affiliate within a national nonprofit network (like Big Brothers Big Sisters or the YMCA). They created a calculation they call “share of wallet,” which they define as “current fundraising performance compared to fundraising potential as gauged by the pool of donor dollars you draw from.” This fairly simple calculation of how much each site raises vs. what is possible to be raised can help a national nonprofit uncover which sites are more successful and why, and then hopefully help lower performing sites raise more.

  10. And finally, social media maven Beth Kanter urges us all to take a digital detox day. Sounds fantastic…how about a week instead?

Photo Credit: David McSpadden

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Social Change Requires a New Nonprofit Leader

leadershipNote: Earlier this month I was asked by the Philanthropreneurship Forum to write a piece about nonprofit leadership, which follows. The piece originally appeared on the Forum here.

The new millennium has been a difficult one. A struggling global economy, threatening climate change, crumbling education and healthcare systems, and a widening income gap are just a few of the social problems we face. And as our social challenges mount, and the government increasingly offloads services, the burden shifts to the nonprofit sector.

Now more than ever nonprofit leaders must step up to the plate. In fact, it is time for a new kind of nonprofit leader, one who has the confidence, ability, foresight, energy, and strength of will to find and deliver on solutions. It is time we move from a nonprofit leader who is worn out, worn down, out of money and faced with insurmountable odds, to a reinvented nonprofit leader who confidently gathers and leads the army of people and resources necessary to create real, lasting social change.

In my mind, here is what the new nonprofit leader should look like:

Unlocks the Charity Shackles
“Charity” is more than a word, it’s a destructive mindset that keeps the work of social change sidelined and impoverished. “Charity” harkens back to the beginnings of philanthropy, which was largely the purview of women and viewed as tangential to and less valuable than the more important “business” of the male-dominated world. While charity was an afterthought, social change is rapidly becoming an integral part of the economy. As social problems mount, we must shift from the “charity” of our predecessors to an understanding of social change as part of everything we do. And nonprofit leaders must confidently and assertively articulate the critical importance of their work and why it requires real investment, because social change is about changing larger systems. So it takes real, significant investment of resources, not the pennies that charity requires.

Moves From Misplaced Gratitude to Impregnable Confidence
In the nonprofit sector there is such a pervasive power imbalance that misplaced gratitude, or gratitude for acts that are actually NOT helpful, often gets in the way of real work. If a nonprofit leader acts grateful when she should actually voice frustration or disappointment (with a delinquent board member or a meddlesome funder), she is cutting off authentic conversations that could result in more effective partnerships. Nonprofit leaders must rise from bended knee with confidence in themselves, their staff, and their social change work to articulate what they really need. To be truly successful, a nonprofit leader needs a board that will move mountains, donors who fully fund and believe in the organization, and a staff that can knock it out of the park. And they get there by being honest about, not grateful for, the roadblocks in the way.

Lives, Breathes and Leads Strategy
Real social change is only a pipe dream if it is not connected to smart strategy. To get there a nonprofit leader must ask board and staff to answer some key strategic questions like:

  • What change do we want to create?
  • Where do we fit in the external environment?
  • How do we measure if that change is happening?
  • What are the right activities to get to there?
  • What is the most sustainable financial model to get there?
  • What people and networks do we need with us?

These are not easy questions, and finding the right answers is even harder. But that is true leadership.

And part of that strategy may involve a (formerly feared) move into advocacy. 501(c) 3 organizations have long been told to stay out of politics. The myth is that charity is too noble to be mired in the mess of pushing for political change. But the fact is that simply providing services is no longer enough to solve the underlying problems. Nonprofits are increasingly recognizing that they can no longer sit by and watch their client load increase while disequilibrium grows. Nonprofits must (and many already are) advocate for changes to the ineffective systems that produce the need for their existence.

Uses Money as a Tool
Without money, a compelling, inspiring, world-changing vision for social change is only a sentence on paper. As much as we might like to deny it, nonprofits exist in a market economy, and without a smart plan for how a nonprofit will secure and use money there is no mission. So instead of dreaming up magic bullet fundraising schemes, a nonprofit leader must develop an overall financial model for her work that fully integrates with the organization’s mission and core competencies. And because money is so central to mission, you cannot make decisions about the organization, about programs, about staffing, really about anything without understanding the financial implications of those decisions.

Embraces the Network
If instead of building an institution, a nonprofit leader built networks, she could be much more effective at creating long-term social change. A true leader leaves her ego, and the ego of her organization aside in order to assemble all necessary resources (individuals, institutions, funding) to chart a path towards larger social change. Instead of thinking just about her organization, her staff, her mission, her board, her donors, the nonprofit leader must analyze and connect with the larger marketplace outside her walls, the points of leverage for attacking the problem on a much larger scale than a single organization can. A nonprofit leader understands that the network approach — particularly for nonprofits that are so resource-constrained — can create a much larger effect than a single entity can.

I believe that what separates great leaders from mediocre leaders is an ability to inspire others to greatness beyond what they thought possible. A true leader asks us to rise above our current circumstances – and in the nonprofit sector where more and more is being asked of organizations with less and less, those circumstances are often dire — to do more and be more than we ever thought possible. It is with that kind of real leadership that lasting social change can happen.

Photo Credit: Chuck Abbe

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10 Great Social Innovation Reads: Feb 2016

social change readsFebruary focused (at least in my mind) on innovations in philanthropy. A new growth capital fund for nonprofits, radical philanthropists, trends in charitable giving, and philanthropy’s role in creating the future. Add to that a bold move by a nonprofit to wrest a lucrative city recycling contract from a for-profit company, research on Millennials’ hopes for the future, and a call for presidential candidates to take a lesson from history. It was a great month.

Below are my picks of the 10 best reads in the world of nonprofits, philanthropy and social change for the month of February. And if you want a longer list of what catches my eye, follow me on Twitter @nedgington.

You can also see past months’ lists of 10 Great reads here.

  1. There was a really exciting development in philanthropic support of nonprofit capacity in February. Ten donors led by the Edna McConnell Clark Foundation joined together to form Blue Meridian Partners, which will award $1 billion worth of unrestricted, performance-based grants, via 5 to 10-year investments of up to $200 million per nonprofit. According to Edna McConnell Clark Foundation president Nancy Roob, this venture is a new way to invest in high-performing nonprofits, because as she puts it: “Without large, long-term investments of growth capital for organizations with proven results, we’ll continue to salve but not solve our big social challenges.” Yep.

  2. And speaking of innovations in philanthropy, Inside Philanthropy provides a really interesting profile of philanthropist Farhad Ebrahimi and his Chorus Foundation, which although a relatively small foundation is taking an unusual approach to environmental giving by using a spend-down plan, providing long-term general support grants, and practicing mission investing.

  3. In analyzing Blackbaud’s 2015 Charitable Giving Report and comparing it to other available data both in the US and Canada, Amy Butcher of The Nonprofit Quarterly finds some interesting insights about how philanthropy is evolving.

  4. But perhaps it isn’t evolving quickly enough. Minnesota Council on Foundations President Trista Harris recently attended the Abundance 360 Summit about the technology of the future and was disappointed at the lack of a philanthropy presence. As she puts it, “Change in the world and our communities is happening at a breathtaking rate, driven by access to infinite information and exponential increases in computer processing speeds. This accelerating rate of change makes the challenging work of doing good even more difficult. Foundations are trying to make the world a better place, but we are often using yesterday’s information to do so. What if we could predict the future and prepare for the realities that will soon impact our communities? I believe it is our responsibility, as philanthropic leaders, to learn the skills necessary to understand and create the future.”

  5. Pew Research does an excellent job of unearthing data that relates to the issues of the day. In February I was especially interested in their report that while Millennials are less confident than Gen X or Baby Boomers about America’s future, so were their parents and grandparents when they were young.

  6. And while we are on the topic of history…Every once in awhile New York Times columnist David Brooks really strikes a chord. In February he used his column to pen a letter to several of the remaining presidential candidates encouraging them to use a “Roosevelt Approach,” as Brooks describes: “Many Americans feel like they are the victims of a slow-moving natural disaster…it’s a natural disaster caused by structural forces — globalization, technological change, the dissolution of the family, racism. A great nation doesn’t divide in times of natural disaster. It doesn’t choose leaders who angrily tear it apart. Instead, it chooses leaders like Franklin Roosevelt and Dwight Eisenhower…they were…able to set an emotional tone that brought people together and changed the nature of Americans’ relationships with one another. During their presidencies, the bonds of solidarity grew stronger and the country more formidable. They were able to cultivate a deep sense of unity, responsibility and sacrifice.”

  7. Writing in the Stanford Social Innovation Review, Daniela Papi-Thornton, deputy director of the Skoll Centre for Social Entrepreneurship, is quite critical of what she calls, “Heropreneurship,” when social entrepreneurs who have little experience or training are generously funded to solve complex social problems. According to her: “Unfortunately, all too often, the people who get the funding to try their hand at solving global challenges haven’t lived those problems themselves….We’re wasting limited resources on shallow solutions to complex problems, and telling our students it’s OK to go out and use someone else’s time and backyard as a learning ground, without first requiring that they earn the right to take leadership on solving a problem they don’t yet understand.”

  8. Nonprofit Tech for Good offers a nice list of 36 apps and online tools for nonprofits.

  9. In an interesting decision, the Minneapolis city council voted to award the city’s 5-year recycling contract to a nonprofit, instead of the for-profit that manages recycling for most of the country. Writing in The Nonprofit Quarterly, James Araci sees an exciting trend: “It’s a smart move for nonprofits to shift perceptions of America’s waste from a commodity to be sold to countries like China to an engine of local job creation and environmental benefits.”

  10. And finally, head of the Nonprofits Assistance Fund, Kate Barr takes aim at the nonprofit overhead myth by encouraging nonprofit leaders to change their own language and thinking: “If we in the nonprofit sector want to bust the overhead myth and bring attention to the things that really matter, then it’s our responsibility to take the lead by communicating differently and better. In order to take that lead, don’t wait for the question to come in and then argue why the [overhead] ratio isn’t important or meaningful. We have to replace it.” Sing it, Kate!

Photo Credit: jwyg, cropped version of “Work with schools : after a book talk, showing boys gathered…” from New York Public Library

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