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Fundraising

3 Questions To Regularly Ask Your Development Director

Beyond the mistakes nonprofit leaders often make in staffing their fundraising function, the relationship itself between a nonprofit executive director and the development director (or whatever you call the staff person in charge of bringing money in the door) can often be fraught.

In an ideal world, the executive director and development director have a symbiotic relationship: the development director creates the overall annual financial strategy and regularly updates the executive director on where the organization is on achieving that plan, while the executive director works with higher level money prospects and marshals the board to achieve their fundraising responsibilities.

But we don’t always live in an ideal world. And sometimes, as was the case in a recent coaching session I had with a client, an executive director is in the dark about how the organization is progressing on their money raising efforts.

If that is the case in your nonprofit, here are some key questions to ask your head money raiser:

  1. How does the money we’ve brought in to date compare along each revenue line goal? 
    When you create an annual financing plan for your nonprofit (and if you don’t, get on it), you know how much of each type of revenue (individuals, foundations, corporations, government, and/or earned income) you want to come in this year. Then, at any point during the year (and at the very least monthly) you should be asking your chief money raiser, what the organization has actually raised to date for each of those categories. For example, if you are 25% through your fiscal year, but you’ve only raised 5% of your individual revenue goal for the year, that may be a red flag. At the very least it’s cause for conversation with your development director. Perhaps it’s a timing issue (you have a big fundraising campaign closer to the end of the year), and that’s fine. But as the nonprofit leader, you should be able to ask (and get a clear answer to) where the organization’s revenue raising efforts are at any point in time.

  2. How do the numbers and types of gifts we projected compare to what’s actually happening? 
    It’s not enough for a money raiser to have an overall revenue goal for each type of revenue, he also needs to break each of those revenue types down into the number and level of contributed gifts (from individuals), grants (from foundations), or contracts (from government), etc. that will contribute to each revenue line’s overall goal. For example, if your nonprofit has a $250,000 individual donor revenue goal, your development director needs to break that down into the various levels of donors that will make up that $250,000 over the course of the year. You may have both major (one-to-one relationships) and smaller (many-to-one relationships) individual donors. He should project how many donors at each level he will need to hit each part of the individual donor goal. Then he can report to you (again, on at least a monthly basis) how that is progressing. A simple example of such a report (he would fill in the pink areas prior to each update) might look like this:
    And he should create a similar report for the other revenue lines (corporations, government, foundations, etc.) that your nonprofit pursues. The actuals will never completely match what you projected, but this exercise gives you a way to uncover and deal with surprises as they come.

  3. What keeps you up at night?
    Finally, the raw data is not enough. You also want to understand where your development director sees real problems. When you regularly ask this question she may reveal that the board  is not opening enough doors, or her database is inadequate, or the website is not where it needs to be, or her grantwriter needs more help. Then you can strategize together how to overcome those hurdles.

A regular, honest, and data-driven conversation between executive director and development director is the best route to fewer money surprises. And without it, a nonprofit has little hope of achieving financial sustainability .

Photo Credit: Images

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When Nonprofit Collaboration Actually Makes Sense

Let’s talk about nonprofit collaboration for a second. Funders and thought leaders often extol the virtues of collaboration among nonprofit organizations as a way to maximize increasingly limited resources. But pushing nonprofits to blindly collaborate, just for the sake of saving some money (“Can’t you all just work together?”), is really doing no one any favors.

Peter Panepento’s recent article in the Stanford Social Innovation Review, is among the latest of these calls for more collaboration. In fact he explains a sort of magic he sees in collaborations that are forged between quite disparate groups. He argues:

“At a time when nonprofits are getting squeezed by government budget cuts and facing increased need among those they serve, many groups are realizing that they cannot achieve their missions without building new alliances…Interestingly, many of the most successful collaborations have been between groups working on very different missions, or between nonprofits and groups outside the nonprofit field.”

Indeed, innovative collaborations can be very exciting. But we must make sure that when collaboration happens, it follows a thoughtful, strategic approach, otherwise it can come at quite a cost. We can’t just encourage nonprofit leaders to “collaborate more” and call it a day. There are very specific times when, and very specific ways to approach, collaborations that make sense.

First, it’s important to make a distinction between two very different types of collaboration:

  1. Little “c” collaboration where a nonprofit coordinates with other organizations to deliver programs and services and/or share best practices, vs.
  2. Big “C” Collaboration where nonprofit leadership analyzes their external marketplace and forges organization-wide, strategic alliances with other entities that can help move the nonprofit’s social change goals forward.

In their article “The Networked Nonprofit,” Jane Wei-Skillern & Sonia Marciano articulated this difference:

“Many traditional nonprofits form short-term partnerships with superficially similar organizations to execute a single program, exchange a few resources, or attract funding. In contrast, networked nonprofits forge long-term partnerships with trusted peers to tackle their missions on multiple fronts.”

Collaboration with a Big C is a strategic way for nonprofits to operate, but it necessitates that nonprofit leaders have a clear understanding of their individual nonprofit’s core competencies, target audiences, and desired social change outcomes (through a Marketplace Map and Theory of Change), so that they can be very clear about which entities they should Collaborate with in order to move those outcomes forward. And instead of viewing their nonprofit as a single organization, nonprofit leaders can begin to think of their nonprofit’s work as part of a larger network of social change.

So to Collaborate effectively, nonprofit leadership must embark on a 3-part process:

  1. Get clear about the nonprofit’s core competencies (what you do better than anyone else), target populations (who you seek to benefit or influence), and desired social change outcomes (the change you’d like to see in the world). This can be done by creating a Theory of Change.
  2. Map your external marketplace to determine the potential Collaborators out there and where and when it might make sense to forge strategic alliances.
  3. Finally, because these need to be organization-wide alliances, you must engage your board, not just your staff, in creating high-level relationships with those with whom you’d like to Collaborate.

In other words, in order to move your mission forward through Collaboration, you must better understand both your nonprofit and your external environment. By figuring out exactly what your nonprofit brings to the table that is different from and additive to what potential Collaborators bring to the table, you can more successfully develop partnerships with more high-level decision-makers in the nonprofit, government, and/or private industries that affect the social change you seek. And isn’t that what it is ultimately all about?

I’m all for Collaboration — when it makes strategic sense. But the only way Collaboration works is when a nonprofit gets very clear about what change they want and which entities out there can help achieve it.

Photo Credit: Joseph Stalin, Franklin D. Roosevelt, and Winston Churchill on the portico of the Russian Embassy during the Tehran Conference to discuss the European Theatre in 1943, Wikimedia.

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10 Great Social Innovation Reads: May 2017

May was another fascinating month in the world of social change. There are some interesting shifts happening among the institutions and movements working to improve black lives, new polls point to a surging American liberalism (not conservatism), the suburbs are no longer the route to the American dream, anti-hunger efforts may actually be perpetuating the problem, and a librarian who questioned the impact of Little Free Libraries received quite a backlash.

Below are my picks of the 10 best social change reads in May. But feel free to add to the list in the comments. And you can see a longer list by following me on Twitter @nedgington.

You can also see 10 Great Reads lists from past months here.

  1. The first 100 days of Trump’s presidency have been exhausting for the country. The Chronicle of Philanthropy offered some questions for philanthropist to think about after those first 100 days. And Trump’s budget recommendations, if adopted by Congress, could have pretty damaging effects on the nonprofit sector and the foundations that fund them.

  2. A more specific impact \ that the Trump Administration could have on the nonprofit sector would be to eliminate the Johnson Amendment. The 60 year old Amendment has prohibited churches and nonprofit organizations from any political campaigning. Robert Egger, founder and president of L.A. Kitchen and Vikki Spruill, president and CEO of the Council on Foundations, debated whether the repeal of the amendment would be a good or bad thing for the sector.

  3. Despite the fact that state and federal government is being led largely by Republicans right now, it looks like American populism may have a liberal, as opposed to conservative, bent according to some new polls. Ruy Teixeira from Vox analyzed recent poll data and argued that America is actually witnessing a liberal surge:  “Trump in the White House and the Republicans in control of Congress and most states…owes much more to the peculiar nature of the Electoral College, gerrymandering, structural GOP advantages in Congress, and poor Democratic strategy than to the actual views of the American public.”

  4. And that populism that is sweeping the country is beginning to target philanthropy. David Callahan argued that the underlying elitism of philanthropy must be laid bare: “America is in the midst of an epic backlash against elites, one that’s put a reality TV maestro in the White House. So far, philanthropy has been insulated from this broader convulsion, but there are good reasons for the sector to engage in its own introspection about elite power…There’s not yet much discussion about the bigger question regarding how much sway private philanthropy—and a growing class of savvy “super-citizens”—should have over public life in a democratic society like ours.” And Kristin A. Goss and Jeffrey M. Berry argued on the HistPhil blog that the populist surge is posing at least 3 challenges to foundations.

  5. There is something interesting happening in the efforts to improve the lives of African Americans. The NAACP fired its president Cornell William Brooks after only 3-years in the hopes that the organization could become more responsive to changing external circumstances. But Cyndi Suarez wondered whether this 100+ year old institution can adapt to and engage with growing social movements like Black Lives Matter.  And earlier in the month she described how BLM itself is evolving amid changing times.

  6. Jay A. Winsten from the Harvard Chan School of Public Health described how a national media strategy, even in today’s very fractured media environment, can move social change forward.

  7. Some new data in May showed giving differences between genders and generations, and the  Master of Public Administration program at the University of San Francisco created a nice infographic on The Current and Future State of Philanthropy.

  8. Something really interesting happened when a Toronto librarian questioned the claim that Little Free Libraries, the small birdhouse-like boxes of free books cropping up in neighborhoods around the country, are actually increasing literacy. People got really mad.

  9. Writing in CityLab, Richard Florida painted a pretty bleak picture of how the suburbs, once the destination for the growing middle class, are now crumbling: “Suburban growth has fallen out of sync with the demands of the urbanized knowledge economy. Too much of our precious national productive capacity and wealth is being squandered on building and maintaining suburban homes with three-car garages, and on the infrastructure that supports them, rather than being invested in the knowledge, technology, and density that are required for sustainable growth. The suburbs aren’t going away, but they are no longer the apotheosis of the American Dream and the engine of economic growth.”

  10. Finally, there’s a new book to add to your reading list: Andy Fisher’s Big Hunger: The Unholy Alliance between Corporate America and Anti-Hunger Groups. Fisher argues that anti-hunger nonprofits are perpetuating the underlying wealth inequality that causes hunger by aligning with corporations that are exacerbating poverty through low wages and job cuts.

Photo Credit: kyle rw

 

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3 Mistakes Nonprofits Make in Fundraising Staff

Before a nonprofit can achieve financial sustainability, the nonprofit leader has to figure out how to staff their money raising function effectively. When I conduct a Financial Model Assessment for a client, one of the sections of my final report is always focused on the nonprofit’s staffing structure and how that contributes to or detracts from the nonprofit’s ability to attract money. More often than not, a nonprofit that is struggling to bring enough money in the door is not thinking effectively about how they staff the money function.

And it typically boils down to three particular mistakes that a nonprofit’s leadership is making. These are:

1. There Is No Financing Strategy
You can’t expect to effectively staff your money raising function if you are not thinking about money in a strategic and holistic way. The very first step in structuring an effective money-raising staff is for a nonprofit’s leadership to figure out their organization’s financial model — how money should flow into and out of the organization. First you must assess what money-raising strategies fit best with your mission and core competencies. And then you need to develop a long-term financing strategy that is directly tied to the goals of your strategic plan. You can’t expect to hire people who will magically make money appear. Effective fundraisers must be driven by a smart money plan.

2. No Single Person Is In Charge of Money
Once you figure out your long-term financing strategy, you need to find (or promote from within) a person to oversee the entire money function of the organization. To truly use money as a tool, you can’t hire someone who can just write foundation grants, or someone who can just work with individual donors, or someone who can just secure government contracts. You need a single person who is thinking 100% of the time about all the ways money flows to your nonprofit. And make sure you offer enough salary to attract and retain a rockstar. It amazes me how many nonprofits expect to entice a great fundraiser by offering a salary that is comparable to someone with only a few years of experience. If you don’t have the current budget to pay a market rate, raise capacity capital to fund the first 1-2 years of the position. Once you have a great money raiser up and running, he will not only raise his own salary, but also grow your nonprofit’s overall financial engine.

3. Money Doesn’t Pervade Everyone and Everything
Finally, once you have a financing strategy and the right person to lead that strategy, then you need get everyone in the organization bought into and contributing (even in a small way) to its success — this is sometimes called creating a “culture of philanthropy.” But I would instead call it creating a “culture of mission financing,” which means every single person in the organization embraces the fact that in order to succeed in your mission, you must effectively finance that mission.  Money troubles often happen when nonprofit leadership offloads all money-raising responsibility to the Development Director. You must make sure that everyone in the organization (board and staff) understand their role in bringing money in the door. Create a culture where a staff member who doesn’t have dollar goals in her job description understands that giving donor tours, providing program outcome data, or writing thank you notes are critical to keeping the organization going. And make sure your board is trained in fundraising, has countless ideas for how each of them can contribute to the financial engine, meets a give/get requirement, and achieves specific individual and full board money goals.

How you staff your nonprofit’s money-raising function is directly tied to how much money you will bring in the door. Therefore you must create a smart financing strategy, hire a staff leader to execute on that strategy, and create a culture of mission financing that ensures everyone plays a role in the financial engine.

If you need help figuring out what’s holding your nonprofit back from financial sustainability, check out the Financial Model Assessment I provide my clients.

Photo Credit: Tax Credits

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Understanding The Full Costs of Nonprofits: An Interview with Michael Etzel

In this month’s Social Velocity interview, I’m talking with Michael Etzel. Michael is a partner in The Bridgespan Group, a global nonprofit organization that consults to nonprofits and philanthropists, provides leadership development support, and develops and shares insights — all with the goal of scaling social impact.

Since joining Bridgespan in 2006, Michael has focused on effectiveness across the full spectrum of social innovation financing, advising corporate, institutional, and family philanthropists and investors. Much of Michael’s work explores what it takes to use tools of innovative finance and impact investing to solve pressing social problems. His work and research in philanthropy also focuses on the question of what it takes to deliver results as a new approach to ending the nonprofit starvation cycle.

You can read other interviews in the Social Velocity interview series here.

Nell: In your research and writing you have focused a lot on what you call “Pay-What-It-Takes-Philanthropy,” the radical idea that different nonprofit solutions have different business models and thus require different costs and investments. This concept is so accepted in the for-profit world that it is a truism, but why is it a radical idea for nonprofit and philanthropic leaders?

Michael: It’s worth pausing for a moment to reflect on why business models and capabilities matter. Every nonprofit operates with an underlying business model and set of capabilities critical for program delivery. Failure to understand an organization’s business model frequently leads to underinvestment in core capabilities, and, as one program officer put it, “a hollowing out of civil society institutions.” We can’t have resilient, durable civil society organizations that deliver successful programs unless they operate from a position of financial strength.

As you highlight, segmentation and analysis of comparable performance data is common practice in the for-profit world. Leaders like Clara Miller, president of The Heron Foundation and former CEO of the Nonprofit Finance Fund, have long called for this kind of thinking in the social sector. But this type of comparison requires transparent and consistent data, something hard to come by. As one nonprofit executive reminded me, “If you think you can analyze a nonprofit through IRS 990 filings, you are in outer space.”

Yet, I wouldn’t say this a radical idea. Organizations like DataArts and CoMetrics show how this is possible. For example, DataArts gathers a variety of comparable revenue, cost, and performance data for arts and cultural organizations, and provides tools for reviewing that data. This provides grantees and grant makers with actionable data to inform management or funding decisions with an eye to effectiveness and efficiency. CoMetrics addresses a more diverse set of enterprises, providing software platforms and tools that enable those enterprises to collect, display, and compare financial, operational, and impact data against their peers. This bottom-up approach gathers data across organizations running the same type of business in the same field to form groups relevant for comparative assessment and learning.

Bridgespan’s preliminary analysis to date has shown that different types of nonprofit organizations have different cost structures based on their business model. Segmenting nonprofits by business model can help us compare similar organizations. When it comes to indirect costs, for example, nonprofit research labs have a median indirect cost rate of 63%, nearly two and a half times the 25% median rate of direct service organizations.

We plan to push ahead this year to refine and deepen our understanding of segmentation and how it applies to nonprofit cost structures and capital needs. Having this information will benefit funders and grantees alike when it comes to funding discussions.

Nell: You work with both nonprofit and philanthropic leaders, so you likely see both sides of this dysfunction. What do you think it will take to move the field to a place where those with potential solutions to social problems have enough and the right kinds of money to see their solutions come to fruition?

Michael: Nonprofits exist in a complicated marketplace, seeking capital from a broad range of funders. As in any marketplace, some influential market makers set the rules. The practice of setting limits on indirect costs in project grants to nonprofits/NGOs has its antecedents in the US government’s approach to funding R&D at universities during the post-World War II era. The federal government has changed practice dramatically since 1958, embracing the “fair share” approach—that federal agencies pay their fair share of true costs, including indirect costs.

Among private foundations, indirect cost rate policies have been common for decades. A RAND report from the 1980s captured the variety of policies at that time: “many foundations customarily pay full indirect cost as budgeted in a proposal. Other foundations may pay only a portion of… or specify a cap on the support of indirect costs.” More recently, our research has shown that many large foundations set a cap of 15% or lower on indirect costs. Yet, among the 20 large nonprofits we sampled, indirect costs comprised between 21% and 89% of total costs, with the median at 40%.

I offer this history because I see the indirect cost conversation changing. For decades, much of this conversation has been driven by nonprofit and NGO leaders’ concerns about caps on indirect cost reimbursement. But funders have begun to engage more deeply in this conversation over the last several years. In 2013, Forefront (formerly Donors Forum) convened a cross section of staff from smaller Midwest foundations to discuss barriers and potential solutions to funding indirect costs. In 2015, the three California Regional Associations of Grantmakers launched the Real Cost Project (now the Full Cost Project) with the dual goals of increasing the number of funders providing real-cost funding and building the skills and capacity of grantmakers.

Having philanthropic leaders at the table is important to overcoming the reality of power dynamics. In the same breath, it’s also important to see this issue for what it is—a complex systems issue. Acknowledging this complexity helps approach this issue from a place of empathy for funders that want to do the right thing, and nonprofits that want to own and manage the costs of delivering impact.

Funders have the opportunity to ask grantees their true costs of programs and to be prepared to pay their fair share of the operational and financial support it takes to deliver those programs. Meanwhile nonprofits can focus on knowing their costs and advocating for them. Funders cannot pay their fair share if grantees don’t tell them what it is!

Nell: Beyond researching and consulting on these topics, you also serve on the board of two nonprofit organizations. What has been your on-the-ground experience as a board member trying to put these concepts to practice?

Michael: Creating space for a conversation among peer board members has been important in establishing a shared understanding of the issues—and why sometimes the executive director very rightly chooses to say “no” to a grant that doesn’t cover true costs.

The reality of this “complex marketplace” also hits home—there is no one-size-fits-all solution. That puts a big burden on the executive director and finance team to effectively report and manage costs.

Photo Credit: The Bridgespan Group

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10 Great Social Innovation Reads: April 2017

April saw a debate about whether or not crowdfunding is transforming philanthropy, critiques of Harvard Business School, a report on the lack of philanthropy in the Deep South, a first-person account of the effects of founder’s syndrome, and tools to help more funders engage in advocacy. Add to that a new Supreme Court Justice, some new data about fundraising, and two fascinating new books, and April was a very interesting month in the world of social change.

Below are my 10 favorite reads about nonprofits and philanthropy in April, but feel free to add to the list in the comments. And, as always, for a longer list, follow me on Twitter @nedgington.

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

  1. The dramatic growth of person-to-person crowdfunding efforts may be fundamentally transforming philanthropy argued Ben Paynter in an interesting long read in FastCompany. As he puts it: “[This] vast pool of money [is] fundamentally shifting who is funding charitable work and how that work gets done.” But Eduardo Andino would seem to disagree. Writing in Philanthropy Daily he argues that crowdfunding is not all that different or disruptive: “As has always been the case, Americans give money when they see an organization with a mission they believe in or a person whose need moves them. GoFundMe simply allows more Americans to encounter more people in need of immediate assistance than ever before.”

  2. A new report on the state of philanthropy in the Deep South showed the dramatic discrepancy in per capita funding there versus other areas of the country. As Ruth McCambridge from The Nonprofit Quarterly described the findings of the report: “Funders do not invest in homegrown power-building efforts in the Black Belt because they are not drawn in the image of the more-built-up grantees they know well and favor.”

  3. Now is definitely the time for more philanthropists to engage in advocacy, and to help in that effort The Foundation Center released a suite of tools for funders interested in advocacy collaborations.

  4. Two new (and diametrically opposed) books came out in April. First, Duff McDonald’s The Golden Passport (reviewed by Andrew Ross Sorkin of The New York Times) took a hard look at Harvard Business School, which McDonald argued bred a greedy generation of corporate leaders. And for a completely opposite worldview, check out the new edition of The Power of Kindness: The Unexpected Benefits of Leading a Compassionate Life by Piero Ferrucci (reviewed by Mirielle Clifford on the PhilanTopic blog), which could be a balm for our divisive times.

  5. Linda Wood, Senior Director of Leadership Initiatives at the Haas Jr. Fund, encouraged other foundations to invest in the capacity not just of individual organizations, but also larger social movements. As she put it: “We need to be more attentive to the interplay between the strength and agility of leaders and organizations and the dynamics of their broader movements.” And Patrick Guerriero discussed the evolution of the social movement that resulted in marriage equality.

  6. I think I could probably very happily spend hours digging into Pew Research data. It is fascinating stuff, especially their recent 10 demographic trends shaping the U.S. and the world in 2017.

  7. Speaking of data, there was new fundraising data on donor retention and how more effective an in-person (versus email) solicitation is.

  8. An anonymous nonprofit staff member in the United Kingdom wrote a scathing critique in The Guardian of their nonprofit’s founder who has stayed at the organization too long.

  9. April saw the nomination, confirmation, and swearing in of a new Justice on the Supreme Court, and Michael Wyland provided an analysis of what the implications of a court with Justice Gorsuch could mean for the nonprofit sector.

  10. And finally, if you are feeling a bit overwhelmed by these challenging times, look no further than Steven Pressfield who wrote: “You were born for adversity. It’s in your DNA as much as it’s in the DNA of a shark or an eagle or a lion…Our stubby little ancestors left us not just the ability to endure adversity, but the capacity to thrive under conditions of adversity.” Yes!

Photo Credit: Andy Roberts

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3 Things I Wish Funders Would Ask Nonprofits

I think we can all agree that most philanthropists truly want to be helpful to the nonprofit recipients of their dollars. However, because of the inherent power imbalance, it is often challenging, if not impossible, for a funder and a grantee to have a candid conversation about what it will really take to achieve the social change that they both seek.

I think part of the answer may lie in funders initiating more productive conversations with their grantees about what truly holds a nonprofit back from becoming more sustainable and effective at creating social change.

So here are some questions that funders, who hope to help their most beloved grantees achieve their mission, can employ:

  1. What holds you back?
    Rather than hearing this most critical question asked of them, nonprofit leaders often hear a very different question from their funders: “Why don’t you grow your programs?” In fact in the most recent Nonprofit Finance Fund State of the Sector Survey, 49% of nonprofit leaders said they could have an open dialogue with their funders about expanding programs, but only 17% said they could have a conversation with funders about organizational change or adaptation.  Instead of pressuring nonprofit leaders to grow, funders should ask about the capacity constraints that are holding those nonprofits back. And once a nonprofit leader reveals what those constraints are, funders and nonprofit leaders together should brainstorm how to overcome those hurdles, with capacity capital.

  2. What would it really cost to achieve your long-term goals?
    Nonprofit leaders are rarely asked what their long-term goals are, let alone what it would take to achieve them. For so long the incentives in the nonprofit sector have encouraged nonprofit leaders to hide their full organizational and infrastructure costs and operate on a short-term view. So they rarely give themselves the luxury of planning for the long-term, let alone calculating what the long-term might cost. Instead, funders should encourage the leaders of the nonprofits they fund to take the longview (perhaps starting with a Theory of Change), and to include ALL the costs (program, infrastructure, reserves, staffing and systems) necessary to get there.

  3. What other funders or influencers can we introduce you to?
    Beyond actual money, there is much more that philanthropists could be doing to support their grantees. Whether they realize it or not, funders often are connected to other key people who could help move a nonprofit’s mission forward. That might include other funders in the same issue area, or policymakers with an influence on the nonprofit’s mission, or others with a role in whether or not a nonprofit’s desired outcomes will come to fruition. Instead of being overly protective of their desirable network, funders should actively make connections for those nonprofits that they want to succeed.

I know I’m an optimist. These are hard questions for funders to ask and equally hard questions for nonprofit leaders to candidly answer. But the only way we are going to move beyond the power dynamic and an under-resourced nonprofit sector is if funders and nonprofit leaders have more open and honest conversations about what it will really take to move social change forward. So get talking.

Photo Credit: DuMont Television/Rosen Studios

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Do Your Programs Contribute to Mission AND Money?

There is a tool that I think is incredibly helpful to nonprofit leaders trying to figure out where to focus their resources and how to plan for the future. Indeed it is typically one of the first activities in the strategic planning process I use with my clients.

The Program Matrix helps a nonprofit board and staff analyze their portfolio of programs to understand their overall mission and money mix.

Because those two elements — mission and money — are inextricably bound in an effective nonprofit organization. You simply cannot achieve your mission without an operation that attracts and uses money sustainably.

The Program Matrix looks like this:

And, here’s how to fill out yours.

List Your Programs
A nonprofit leader makes a list of all their mission-related programs and initiatives. But don’t include organization-building work, like pure fundraising activities, or board development. While those activities are absolutely critical to your success, they are a means to an end. For example, conducting a fundraising appeal has the goal of raising money to plow into programs. So in Program Matrix, we want to look at just the mission-related programs.

Plot Your Programs on the Matrix
Once you have that list of programs, plot each individual program on the matrix based on that program’s ability to contribute to:

  1. Social Impact: The social change outcomes you are working toward, which are found in your Theory of Change (on the x axis), and

  2. Financial Returns: The financial sustainability of the organization (on the y axis). A program that can attract enough money not only to cover its own direct and indirect costs, but also to subsidize other programs would be above the line (“positive”), whereas a program that cannot attract enough money to cover its own costs would be below the line (“negative.”)

Analyze the Results
Once you have plotted your entire portfolio of programs on the matrix, take a look at where they fall in the four boxes. These are:

  1. Worthwhile: The program significantly contributes to the nonprofit’s mission and desired outcomes, but it drains financial resources from the organization. A nonprofit will always have programs in this box, and that’s fine.

  2. Sustaining: The program doesn’t appreciably contribute to the nonprofit’s mission and desired outcomes, but it does provide a surplus of financial resources to the organization, which is great.

  3. Beneficial: The program contributes to the nonprofit’s mission and desired outcomes AND it provides excess money that can be plowed into “Worthwhile” programs — this is the best of both worlds.

  4. Detrimental: The program doesn’t contribute to the nonprofit’s mission and desired outcomes, AND it drains financial resources from the organization — this is the worst of both worlds.

Once filled out, the Program Matrix helps to surface issues that a nonprofit must address. First, any “Detrimental” programs should be significantly reconfigured, given to another organization to run, or abandoned. Second, in order to ensure financial sustainability, make sure that there are enough “Sustaining” and “Beneficial” programs to subsidize the “Worthwhile” programs. If not, you need to get strategic about developing programs that can offset the financial drain of the “Worthwhile” programs.

Repeat the Analysis Often
Once you’ve completed the Program Matrix analysis, rinse and repeat. On a regular basis (at least annually) board and staff should take a look at an updated Program Matrix and make any necessary programmatic adjustments. And any time you are thinking about adding a new program, redo the Program Matrix to include your best guess of where this new program will fall, so that you can understand its impact on the overall social impact and sustainability of your new portfolio of programs.

Armed with the power of the Program Matrix, nonprofit leaders can create a mix of programs that ensure achievement of their social change goals in a sustainable way.

Photo Credit: ParentingPatch 

 

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