Follow Social Velocity on Google Plus Follow Social Velocity on Facebook Follow Nell Edgington on Twitter Follow SocialVelocity on Linked In View the Social Velocity YouTube Channel Get the Social Velocity RSS Feed

Download a free Financing Not Fundraising e-book when you sign up for email updates from Social Velocity.

Fundraising

7 Questions to Move Your Nonprofit to Financial Sustainability

Financial sustainability seems to be the Holy Grail of the nonprofit sector. Everyone wants it, but few know how to find it.

But it doesn’t have to be that way.

I firmly believe that financial sustainability is attainable for any nonprofit, as long as board and staff are willing to ask the right questions and do the hard work.

In fact, there is a roadmap to nonprofit financial sustainability, which includes several components. Because a nonprofit’s board, their strategy, their vision and mission, their marketing efforts, their programs, all contribute to or detract from their ability to attract and use money well.

But often nonprofits struggle in so many areas (disengaged board, poor fundraising results, non-existent strategy, ineffective marketing) that it can be difficult for a nonprofit leader and board to know where to start in order to become more financially sustainable. So I’ve developed a list of questions that assess where a nonprofit is on that path and where staff and board should focus their efforts.

This mini-assessment of 7 questions is listed in priority order, so once one area is addressed, you can move on to the next. For example, you may have your “Vision” and “Strategy” all figured out, so next you need to tackle “Program Delivery,” and so on.

So to see where your nonprofit is on the path to financial sustainability, answer these 7 questions:

  1. Long-Term Vision: Do board and staff agree on the ultimate goals of the organization — what you are trying to accomplish in the world? If not, then articulate your Theory of Change, which will help you come to a shared long-term vision.

  2. Strategy: Have board and staff together articulated a strategy — how you will marshall staff, volunteers, programs, activities — to move toward that long-term vision? If not, then create a multi-year strategic plan that ties your long-term vision to the activities and resources necessary to get there.

  3. Program Delivery and Impact: Do your programs work with the people you hope to benefit or influence in your long-term vision? If not, review your target populations and analyze each of your programs’ ability to move toward your vision.

  4. Financial Model: Have you articulated how money will flow into the organization and how that money will be used to make your long-term strategy a reality? If not, then develop a long-term financing plan that articulates how much money you need, over what timeframe, and the tasks in each revenue area necessary to meet (and hopefully exceed) those expenses.

  5. Staff Effectiveness: Do you have the right staff expertise structured in the right way to deliver on your strategy? If not, analyze your staffing structure and capabilities and how they relate to what you need.

  6. Board Engagement: Do the vast majority of your board members embrace your mission and actively participate in moving it forward? If not, set clear expectations, establish accountability, and engage them one-on-one.

  7. External Relationships: Do you have the right partnerships and engagement with the right external people and organizations necessary to deliver on your strategy? If not, seek to understand the world outside your walls, develop a marketing strategy, and build the networks you need.

If you are interested in a deeper analysis of how to move your nonprofit forward on the path to financial sustainability, check out the Financial Model Assessment I conduct for clients.

Photo Credit: Jeff Power

Tags: , , , , , , , , , , , ,

Putting Wealth to Work for Social Value Creation: An Interview with Jen Ratay

In this month’s Social Velocity interview, I’m talking with Jen Ratay. Jen is executive director of the Silicon Valley Social Venture Fund – SV2, a community of families and individuals who come together to learn about effective giving and impact investing while pooling their resources and skills to support promising social ventures. Prior to taking the helm of SV2, Jen served as program officer at the William and Flora Hewlett Foundation where she led its Organizational Effectiveness grantmaking program that helps grantees build high-performing organizations.

Nell: SV2 is a strategic partner of the Social Venture Partners network of affiliates across the country that fueled the development of the venture philanthropy model of making large investments of money and expertise to grow proven nonprofits. The venture philanthropy model is almost 20 years old now, where do you think it stands? What have you learned and where do you think venture philanthropy goes from here?

Jen: Twenty years ago in the heart of Silicon Valley, SV2’s founder Laura Arrillaga-Andreessen launched a team sport approach to grantmaking that pooled donor resources for investment in promising nonprofits. Laura and her peers went beyond pooling monetary donations and invested their time and professional skills to help high-potential nonprofits build strong organizations and scale their impact.

From its earliest days, SV2 focused on finding and funding innovative nonprofits poised for dramatic scale, creating a philanthropic version of venture capital. SV2’s giving approach, along with the broader Social Venture Partners network it helped inspire and now partners with, helped catalyze the global movement known as venture philanthropy.

Not unlike venture capitalists, venture philanthropists believe the success of a great idea is contingent on building a leadership team that can effectively execute against a compelling plan. Key elements of the venture philanthropy approach include offering larger and longer-term grants to support nonprofit growth and core operations, tying continued funding to outcomes and measurable results, and providing coaching and management assistance to nonprofit leaders.

As venture philanthropy has evolved over the years, we’ve learned a number of lessons.

First, venture philanthropy’s historical focus on investing in individual organizations, while important, has rarely been sufficient to drive major paradigm shifts or sustained systems-level change. Achieving transformative impact often requires strengthening the capacity of networks and social movements and engaging government and the business sectors in addition to scaling high-performing nonprofit organizations.

Second, we’ve learned how essential it is for nonprofit CEOs to not just be strong organizational managers but also highly-collaborative network leaders and movement builders, a different skillset altogether.

Additionally, venture philanthropy, which resonates with many Silicon Valley professionals, is not a perfect analog for investing in nonprofits. To be effective, donors must understand that nonprofits differ from for-profits in many meaningful ways including governance, funding flows, scaling challenges, organizational culture, and what it means to attain financial sustainability. It takes time to understand these complexities and execute well – whether as an individual donor or as part of a collaborative donor group like SV2.

Looking ahead, I’d be surprised if we don’t see continued rapid growth in venture philanthropy, as wealth transfers from one generation to the next and Millennials and other new philanthropists seek high-impact ways to put their wealth to work for social value creation. As part of this growth, the hands-on venture philanthropy model with its focus on experiential grantmaking and donor learning continues to be an attractive entry point for emerging philanthropists, whether in Silicon Valley, Seattle, Bangalore or Beijing.

Nell: The philosophy behind the venture philanthropy model is that we should scale proven solutions, but significant growth to nonprofit organizations is tricky because often those organizations lack basic capacity. When does scaling make sense and how can funders effectively support it?

Jen: Yes, scaling nonprofits – even those with proven program outcomes – can be tricky.

For early stage nonprofits, there’s often a capacity building Catch 22 – a nonprofit needs basic organizational capacity to be able to step back from the daily treadmill of client needs and service delivery to invest in strengthening the organization and laying a foundation for future growth.

Compounding this, nonprofits don’t currently work within a well-functioning social capital market that supports organizations through each stage of growth. While making a large impact does not necessarily require a large organizational budget, nonprofits do need a reasonable level of revenue to develop certain core capabilities. The majority of nonprofits also face what has been termed the “social capital chasm,” the huge gap between their current budget and the $10 million or more they would need to move toward full scale.

On top of these financing barriers, compensation for nonprofit employees typically lags behind – sometimes far behind — that offered by foundations and for-profits. There’s no equity for nonprofit founders or executives, which, in highly competitive labor markets like Silicon Valley, can make attracting and retaining top talent a challenge.

And don’t get me started on the nonprofit overhead problem – our sector’s wildly unhelpful myth that at least 85 percent of an organization’s income should go toward programs rather than core operations. This myth is not only illogical, but damaging, as it constrains organizational growth and impact that hinges on strategic investments in infrastructure, people, processes and capabilities.

Despite all this, candidates for nonprofit scaling do exist. Common across them, they have promising programs based on early evidence of impact and compelling business models. They have strong, connected boards of directors and leaders who are coachable, collaborative and brave. Perhaps because of these qualities, these organizations also have the ability to attract talent and new sources of funding over time in competitive human and social capital markets.

Funders can help by playing the higher risk role of “Big Bettor”. A funder willing to make a significant multi-year investment in a promising small or mid-sized nonprofit organization can help them prepare to cross that daunting social capital chasm. These funders clear the way for other funders, signaling an investment in the organization is worth the risk. Early Big Bettors who help a nonprofit prove its model make the waters safer for other grantmakers to jump in.

Nell: The SV2 model is a bit different than other Social Venture Partner models, how does geography play into this? Do you think Silicon Valley funders think about philanthropy and the nonprofit sector differently, and if so how?

Jen: I do think Silicon Valley funders tend to think somewhat differently about philanthropy and the nonprofit sector.

In my experience with Silicon Valley’s giving culture, it’s not uncommon for donors, particularly those coming from the technology sector, to prioritize clear, measurable social impact, innovative or disruptive products and services, tech-enabled platforms, and a lean startup management approach to social change efforts.

On the nonprofit side, we have a crisis in Silicon Valley.

Local community organizations are struggling amidst a perfect storm of increased demand for their services, exorbitant operating costs, and competition for staff talent in one of the tightest labor markets in the country.

Silicon Valley is ground zero for income inequality. Skyrocketing wealth, including 76,000 millionaires and billionaires who live in Santa Clara and San Mateo counties alone, is found alongside rapid displacement of vulnerable families. Even with the nearly $5 billion boom in philanthropy from 2008-2013, 30 percent of Silicon Valley residents require some form of private or public assistance to get by. One in three local kids aren’t sure where their next meal will come from.

SV2 Partners, Alexa Cortes Culwell and Heather McLeod Grant, recently authored a report, The Giving Code: Silicon Valley Nonprofits and Philanthropy, that is elevating an important discussion around the region’s prosperity paradox. This data-rich report shines a light on a sobering donor knowledge gap around acute local needs and understanding of the local nonprofit ecosystem. Much of Silicon Valley donors’ philanthropy flows out of the region.

Alexa and Heather’s research also found a two-way empathy gap between donors and nonprofits. The reality is that Silicon Valley donors and nonprofit professionals tend to run in different circles, and they often have very different life experiences.

The Silicon Valley prosperity paradox, knowledge and empathy gaps are adding urgency and ambition to SV2’s work.

Our mission is to unleash the resources and talents of Silicon Valley to support promising social ventures to achieve measurable impact. An increasingly important role for us is to nurture empathy within and across Silicon Valley. As part of this, we’re sparking tough conversations via experiential poverty simulations and workshops with Silicon Valley donors on topics such as redefining power and privilege in the funder-fundee relationship and philanthropy’s role in advancing equity.

SV2 differs from SVP Network affiliates in that SV2 expanded beyond grantmaking to nonprofits to also invest in mission-driven for-profit companies and provide our donors experiential learning in impact investing. I’m seeing emerging Silicon Valley donors using both grants and investment tools to drive social change, following in the footsteps of Silicon Valley philanthropic leaders like Pam and Pierre Omidyar and Jeff Skoll, one of the earliest SV2 Partners.

I’ve also observed a trend of Silicon Valley donors thinking hard and in a more sophisticated way about where exactly their money sleeps at night. Are donors’ financial assets invested in alignment with their core values and social impact priorities? If the answer is no, local donors I work with are increasingly motivated to change this.

Nell: Prior to running SV2 you ran the Hewlett Foundation’s Organizational Effectiveness program investing in the capacity of nonprofit organizations, so building strong nonprofits is obviously near and dear to your heart. What holds nonprofits and their funders back from creating stronger organizations and how do we get beyond that?

Jen: In my view, trust is the critical lubricant between funders and grantees on the path to building strong, sustainable nonprofit organizations.

Yet it can be hard – even scary – for nonprofit leaders and funders to have courageous, authentic dialogue amidst the very real funder-fundee power dynamics.

This was equally true when I was a grantmaker at the Hewlett Foundation as it is now that I’m on the other side of the table as a nonprofit leader responsible for raising SV2’s entire operating budget each year to make payroll and fund SV2’s learning programs and grantmaking.

When striving for authentic relationships, it helps to consider this: Does it feel like we as funders and grantees are accountable to each other? Or is the grantee solely accountable to a funder? When something goes wrong with a grantee organization, does a funder run away or dig in and engage more deeply? Do funders think to ask a grantee “Is this an effective use of your time?” And respect it when the answer is no?

Whether in Silicon Valley or elsewhere, funders can help build strong organizations by making certain to keep their net grant high — that is, the net actual value of the grant to a nonprofit after subtracting out the costs to the nonprofit of applying for and reporting on the grant.

I’d also encourage funders of all stripes to consider doubling down versus abandoning organizations during leadership transitions. Leadership transitions are inevitable milestones that all organizations face, and are a high-stakes and often fragile time for nonprofits. These transitions can also be a time of revitalization and great opportunity for a nonprofit to evolve toward its strongest and highest-impact future.

Photo Credit: SV2

 

Tags: , , , , , , , , , , , , ,

10 Great Social Innovation Reads: March 2017

March offered lots of insight about how philanthropy should respond in the age of Trump. From investing in social movements, to getting involved in advocacy, to strengthening local communities, to giving more than the required 5%, there was much advice. Add to that a growing interest in how to combat “fake news,” steps to creating a digital marketing strategy, and the idea of employing migration as a tactic to combat poverty, March had much to read.

Below is my pick of the 10 best reads in world of social change in March, but feel free to add to the list in the comments. If you want a longer list, follow me on Twitter @nedgington.

And you can see past months’ 10 Great Reads lists here.

  1. Heinz Endowments President Grant Oliphant takes issue with the current administration’s distaste for the media and the arts (as evidenced by Trump’s elimination of the National Endowment for the Arts in his proposed budget). Oliphant argues that journalists and artists play a crucial role in a thriving society: “The right of artists and journalists to tweak the nose of power, to challenge what we believe, to criticize those in high places, to hold accountable people who otherwise might anoint themselves kings, cannot be abridged because we find it at times uncomfortable. It is that very discomfort that tells us they are doing their part in maintaining a healthy society.”

  2. Vocalizing dissent as Oliphant does is only one path available to philanthropy in these challenging times. Many people had other ideas for how philanthropy should respond, including funding social movementsgetting involved in advocacycountering the increase in hate crimes, strengthening local communities, and giving more than the typical 5% of assets. As Grantmakers for Effective Organizations President Kathleen Enright puts it: “We have a choice to make. We can succumb to the swirling and diverting streams of information that wash over us with every passing week. Or we can use this moment as a call to action, first to crystalize our values and determine what matters most to our institutions. And then to act in support of those values in new, bold and creative ways.”

  3. Philanthropic visionary Clara Miller, president of the Heron Foundation, describes what the foundation will do now that they’ve reached their goal of putting 100% of their assets toward mission. As she writes, “It’s becoming increasingly important to think and act holistically with money and influence within and beyond our sector, seeking impact on both Wall Street and Main Street.”

  4. The revelations that Russia used fake news to influence the U.S. presidential election added urgency to attempts to find solutions to the growing misinformation ecosystem. Pew Research offered a comprehensive report about the future of fake news. And writing in Nieman Reports Joshua Benton compares American distrust of journalism with American distrust of banks. And Marina Gorbis compares our current reality to the creation of the printing press in the mid-1400s, which ushered in political, religious and scientific revolutions.

  5. Speaking of what we can learn from history about today’s challenges, Harvard professor Tomiko Brown-Nagin provides 7 lessons from history for today’s social protests.

  6. Never one to shy away from controversy, Phil Buchanan takes to task those who argue that social problems can be solved by nonprofit and for-profit solutions equally well. As he puts it, “The fact is that in many, dare I say most, of the issue areas in which nonprofits are working to make a difference, there isn’t a way to do it that jibes very well with making a profit. And indeed, that is why the nonprofits were formed in the first place — because markets weren’t taking care of the issue!” Amen!

  7. Writing in his Nonprofit Chronicles blog, Marc Gunther argues that few anti-poverty interventions include the effective approach of encouraging the poor to migrate to areas with better opportunities.

  8. Large and aging nonprofit organization Greenpeace underwent a complete shift toward 21st century fundraising and advocacy efforts using technology.  This fascinating case study describes how they did it.

  9. David Mundy from GuideStar kicked off the first of a great multi-part series on how nonprofits can create their digital marketing strategy.

  10. And Nonprofit Tech for Good offered 24 Must-Read Fundraising and Social Media Reports for Nonprofits.

Photo Credit: Beraldo Leal 

Tags: , , , , , , , , , , , ,

Goodbye to a Mentor and a Friend

I have a heavy heart today. I found out yesterday that my first boss, long-time mentor, and most influential teacher of all things nonprofit management died over the weekend.

Mary Jubitz was the CEO of SMART (Start Making a Reader Today), a statewide early literacy nonprofit in Portland, Oregon. I met Mary when, as a new college graduate, I responded to a classified ad (yes, that is truly how we used to find jobs) for an office manager at a startup nonprofit. I had never worked at a nonprofit, but I was hungry to learn. And Mary proved to be an excellent teacher. So much of what I write, speak and consult about in the nonprofit world today was born out of what I learned at Mary’s side over the first two years of my career.

She was first and foremost an excellent fundraiser. Over the course of her 12 year tenure as CEO, she grew the budget by 400% and built a highly engaged donor base. She did that through an amazing mix of charisma, drive, organization, and exceptional relationship-building skills. I have never met someone who was so incredibly skilled at making a donor or potential donor feel that their involvement was absolutely critical. She rarely walked away from a meeting without the prospect wanting to be part of the exciting, game-changing partnership she described.

From her tenacious ability to find a connection to a prospective donor, to her skilled mastery of the meetings and conversations necessary to entice them to get involved, to her eloquent and (always!) grammatically correct letters and proposals, to her beautiful hand-written thank you notes, to her ongoing invitations to keep the donor invested, she was a thrill to watch.

But it was not just her exceptional fundraising ability — she also translated that relationship-building acumen into deft management of her board of directors. She made a habit of regularly meeting one-on-one with each board member to ensure that they were continually engaged. And it worked. Every single board member was not only personally giving, but also introducing their own networks to the organization. And beyond ensuring the board’s active money role, Mary made sure that they were all completely engaged in board meetings and decisions.

The board was so engaged certainly because SMART was a great cause, but also — and maybe even more importantly — because they simply didn’t want to let Mary down. No one wanted to let Mary down. As a true leader, she set the bar high making those around her want to give their best and then a bit more. She created and continually inspired a winning team of board, staff and donors who truly believed they were changing the future of the children of Oregon.

And they did. Over the course of SMART’s history the organization has reached almost 200,000 children who were found to be 60% more likely than other students to reach state reading benchmarks.

20 years after I left her employ, Mary continued to be a tremendous mentor to me. Throughout my career she was always available for advice, recommendations, words of support. She took real joy in watching the progression of my career, which is as it should be since she built its foundation. As a female leader, she took great interest in other women who were doing their best to rise through the ranks of the nonprofit world and devoted time and energy to helping groom the next generation of nonprofit leaders.

She was an amazing leader. She will be missed.

Photo Credit: Adrian Kingsley-Hughes

Tags: , , , , , , , ,

Nonprofit Capacity Building Works: An Interview with Kathy Reich

In this month’s Social Velocity interview, I’m talking with Kathy Reich. Kathy leads the Ford Foundation’s BUILD initiative both in the United States and in 10 global regions. BUILD is an essential part of the foundation’s strategy to reduce inequality, a strategy arising from the conviction that healthy civil society organizations are essential to driving and sustaining just, inclusive societies. To that end, Kathy guides Ford’s efforts to implement sector-leading approaches to supporting the vitality and effectiveness of institutions and networks that serve as pillars of broader social movements.

Before joining Ford in 2016, Kathy was director of organizational effectiveness and philanthropy at the David and Lucile Packard Foundation, where she led a cross-cutting program to help grantees around the world strengthen their strategy, leadership and impact.

Kathy has long been a friend of the Social Velocity blog. You can read my interview with Kathy when she was at the Packard Foundation here and a guest blog post she wrote for the blog here.

You can also read interviews with other social changemakers here.

Nell:  You recently moved from the Packard Foundation to the Ford Foundation in order to launch their BUILD initiative, which is all about strengthening organizations. What are your goals with this new initiative and what successes have you seen so far? And what are you finding in terms of the areas where nonprofits need most help?

Kathy: The Ford Foundation has two big goals in mind for BUILD. First, we want to foster a measurably stronger, more powerful set of civil society organizations and networks working to address inequality around the world. Second, we aim to build understanding within the Ford Foundation, and ultimately throughout the field of philanthropy, about how strengthening key institutions can advance social justice.

The foundation has committed $1 billion over five years to BUILD because we believe that the fight against inequality needs resilient, durable, and fortified civil society institutions. Individuals and ideas also are critical, but the key role of institutions as drivers of sustained social change is a core, and sometimes overlooked, aspect of social justice work.

Each of the BUILD grantee organizations and networks will receive five years of support, at levels higher than what they have historically received from the Ford Foundation. Much of this support will be as flexible as we can legally make it; most grants will include generous general support. The remainder of each BUILD grant will provide support for nonprofit organizations and networks to strengthen their strategies, leadership, management, and finances. Each BUILD grantee will develop and then implement its own institutional strengthening plan. Although Ford Foundation staff will consult on drafts of these plans, the grantee will be “in the driver’s seat” in determining their institutional strengthening priorities and how best to address them.

So far we’ve made about 90 BUILD grants, and honestly it’s a bit early to say how well they are working. We do know where organizations are planning to spend the money. The vast majority of BUILD grantees, 79 percent, are choosing to strengthen their core operations, investing in areas such as financial management, fundraising, communications, evaluation, and HR. About two-thirds also are investing in strengthening capacities critical to social justice work, such as legal, research, network building, and advocacy. Close to half are investing in strengthening their strategic clarity and coherence, 36 percent are investing in leadership development and governance, and 32 percent are choosing to deepen their organizational commitments to diversity, equity, and inclusion.

It’s important to note that BUILD is not the Ford Foundation’s only investment in strengthening nonprofit institutions. BUILD is part of FordForward, the Ford Foundation’s multi-pronged effort to make philanthropy part of the solution to inequality in a deep and lasting sense. In addition to BUILD, two other aspects of FordForward focus on strengthening nonprofits. The foundation is giving more general support grants across all program areas, with a goal of making general support our default type of grant whenever possible. We also are increasing overhead rates on project grants to a minimum of 20 percent, to more adequately address the indirect costs of executing projects and programs.

Nell: This is a pretty innovative approach to capacity building, how do you plan to share what you learn with other funders and with the sector overall?

Kathy: We’re planning a robust evaluation and learning strategy, although we’re really just getting started. Our hope is to share some early findings by year’s end. We’ll be focusing on three sets of key questions throughout the five-year initiative:

  • Do BUILD grants work? Do the organizations and networks that receive this funding become stronger and more durable over time? And if so, what if any impact does that have on the organization’s effectiveness?
  • If the BUILD approach works, what about it works? Is it the general operating support, or a specific kind of organizational strengthening, or something else?
  • Have we changed the way we do business at Ford, moving away from one-year project grants in favor of larger, more flexible grants?

Along with our evaluation and learning plan, we’re also developing a communications strategy to share what we learn with the field and engage in dialogue with others. We’ll be publishing evaluation results, speaking at conferences, and making active use of social media.

Nell: Both the Ford Foundation and the Packard Foundation are rare funders in that they are very committed to creating strong nonprofit organizations through heavy investment in capacity building. Do you think philanthropic and government funders are starting to follow your lead? Or what will it take to make that happen?

Kathy: Well, we certainly hope they are! It’s important to acknowledge that capacity building grantmaking is not new; in launching BUILD, we’ve learned from and appreciate the work of leaders in this field like the David and Lucile Packard Foundation, as well as the William and Flora Hewlett Foundation and the Evelyn and Walter Haas Jr. Foundation.

Over time, we hope that the ranks of capacity building funders will grow. We hope that BUILD will influence other donors by contributing to the evidence base that nonprofit capacity building works—that stronger, more durable, and more resilient organizations and networks are more effective at achieving their missions.

We also hope to contribute to the evidence base about what kinds of capacity building work best for organizations and networks of different types and sizes, working on different issues in diverse geographies. That’s a tall order, but one of the great things about being a global funder and being able to invest significant resources in BUILD is that we’re able to try this grantmaking approach with a broad range of institutions.

Nell: The Ford Foundation made a very public move two years ago to focus their efforts on fighting inequality. But that goal has arguably become harder given the political winds. How does a foundation like Ford navigate achievement of their desired impact in a potentially more difficult external environment?

Kathy: The Ford Foundation has worked in the U.S. and around the world for more than 70 years, and we’ve seen a lot of upheaval during that time. We’re acutely aware of the challenges facing our work, but we’re moving ahead with optimism and with what my boss Darren Walker calls “radical hope.”

BUILD is a big part of that hope. I believe strongly that in uncertain times, a BUILD approach to grantmaking is one of the smartest choices a foundation can make. By giving our grantees multi-year general operating support, we are giving them the resources and the flexibility to pivot their work quickly in the face of new realities. By also giving them thoughtful and flexible institutional strengthening support, we are enabling them to invest in their own leadership, strategy, management and operations at a time when they have to be at the top of their games.

Photo Credit: Ford Foundation

Tags: , , , , , , , , , , , , , , , , ,

What Is Nonprofit Sustainability?

Last week I led a planning call among the panelists on the “Supporting Nonprofit Sustainability” session I am moderating at April’s Center for Effective Philanthropy conference (which I described in an earlier post). One of the panelist suggested that we start the session by defining what we mean by “nonprofit sustainability.”

As we started to discuss this, it quickly became apparent that some of us had different definitions of “nonprofit sustainability.” And indeed, in the social change sector more broadly there is a long list of definitions of nonprofit sustainability.

Sometimes people use “nonprofit sustainability” to mean nonprofits moving away from private philanthropy and becoming self-sufficient through earned income sources (the sale of goods or services). I don’t believe that that is ever possible. Nonprofits are often borne as a response to a disequilibrium that the market created (income inequality, racial injustice, failing education). So it is rare that a nonprofit can figure out a way to make the market pay for something that it created. The vast majority of nonprofits will never be fully self-sustaining through earned income efforts; rather they will always be subsidized by non-earned sources, like philanthropy and government.

Others define “nonprofit sustainability” as the ability to attract multi-year, unrestricted funding. While that would be a positive step, foundations are largely the only nonprofit funding source able or willing to make unrestricted, multi-year commitments. Government funding is never unrestricted, and individuals rarely make multi-year commitments. And even if all foundation funders made these commitments, foundation funding only ever totals 2-3% of all of the revenue flowing to the nonprofit sector. So that’s not a big enough piece of the pie to ensure nonprofit sustainability.

Still others talk about “nonprofit sustainability” as having a diversified revenue stream. It may make sense for some nonprofits to focus on one or two revenue streams if that’s where their core competencies lie. So it is not a foregone conclusion that revenue diversification fits every nonprofit business model.

And other people define “nonprofit sustainability” as understanding and funding a nonprofit’s full costs, including direct and indirect costs. While this is absolutely a part of nonprofit sustainability, I don’t think it tells the whole story.

Therefore, none of these definitions of nonprofit sustainability satisfy me. They are either two narrow, too unrealistic, or inaccurate.

My definition, then, is:

Nonprofit sustainability occurs when a nonprofit attracts and effectively uses
enough and the right kinds of money necessary to achieve their long-term outcome goals.

So to break that down, nonprofit sustainability includes these elements:

Knowing Your Long-Term Outcome Goals
To be sustainable, a nonprofit must articulate the long-term outcomes that they are ultimately trying to accomplish (through a Theory of Change). You cannot hope to be sustainable if you can’t articulate why you exist and what you ultimately want to accomplish as a social change organization.

Having a Strategy to Achieve Those Goals
And you won’t achieve those outcomes (and be sustainable) if you don’t have a long-term strategy to get there. The strategy doesn’t have to be set in stone — it should be malleable as internal and external circumstances change — but it should ultimately guide your course to achieving those outcome goals.

Effectively Using Enough Money
But its not enough to simply plan for the future, you must then figure out what staff, board, volunteers, systems, technology, marketing, and other resources you need to bring your strategy to fruition. You must articulate the business model you will employ, and the corresponding money required, to realize your long-term outcome goals. And I don’t mean the band-aid version — I mean what it will really take to achieve the long-term outcomes you seek.

Attracting the Right Kinds of Money
But it’s also not enough to figure out what it’s going to cost. You have to figure out the other side of the money equation, which is how to bring that money in the door. A smart financial strategy attracts money that is the right fit for your organization. You have to be strategic (not reactive) about how money flows to the organization (fundraising, government grants, earned income). It might be that you focus solely on private sources, or you may have a mix of government and earned sources. But your financial model must align with your core competencies and your mission.

Nonprofit sustainability means that a nonprofit board and staff know what they want to accomplish, develop a smart strategy and business model, and use money as a tool to make it happen.

But nonprofit sustainability should not be up to just nonprofit leaders to figure out. Anyone who wants to realize social change (the government, private funders, social change leaders) must advocate for and support more sustainability in the sector. It must be a larger conversation. I hope that conversation grows far beyond the CEP conference in April.

Photo Credit: Philip Taylor

 

Tags: , , , , , , , ,

10 Great Social Innovation Reads: Feb 2017

Whew, are you as exhausted as I am? As I said last month, with the January inauguration of President Trump, it seems we moved into hyper drive. And February didn’t slow down a bit. From debates about the right political role for nonprofits, to advocacy in new areas like science, to efforts to reinvent journalism, to new grassroots organizing campaigns, to new ways to think about marketing in the nonprofit sector, there was a lot going on in the world of social change.

Here is my pick of the 10 best reads in the world of nonprofits, philanthropy and social change in February. If you want a longer list, follow me on Twitter @nedgington. And check out past months’ 10 Great Reads lists here.

  1. A big contributor to the exhausting pace is the daily onslaught of new and shocking pronouncements from the Trump administration. One with a potentially huge impact on the nonprofit sector was Trump’s call for an end to the Johnson Amendment, which limits the election-related activity of nonprofits. Many argued that this would be a destructive development for the sector, from limiting the collaborative position of the sector, to moving philanthropy away from social change and toward politics, to contributing to an elimination of the charitable tax deduction, to increasing dark money contributions to political campaigns. But others disagreed arguing that repealing the Johnson Amendment would level the playing field with for-profits.  As always, the HistPhil blog gives some much needed historical perspective on the issue.

  2. Another victim of Trump’s ire in February was the news media. Journalism has been struggling for years amid falling advertising revenues and a changing digital landscape. But it seems the Trump administration may just be the impetus the industry needs to reinvent itself. As Jeff Jarvis argued: “Now we reinvent journalism. Now we learn how to serve communities, listening to them to reflect their worldviews and gain their trust so we can inform them. Now we give up on the belief that we are entitled to act as gatekeeper and to set the agenda as well as the prices of information and advertising. Now we must learn to work well with others. Now we must bring diversity not just to our surviving newsrooms — which we must — but to the larger news ecosystem, building new, sustainable news services and businesses to listen to, understand, empathize with, and meet the needs of many communities.” And Nieman Lab hosted a conversation among journalists and editors from The New York Times, The Wall Street Journal and The Huffington Post about the future of journalism. And Democracy Fund launched a cool new project, the Local News Lab, aimed at making local news more sustainable.

  3. In these uncertain times where many nonprofits are feeling under attack, advocacy has become a more important tool than ever. Writing in the Stanford Social Innovation Review, Jim Shultz offers some guiding questions for developing your nonprofit’s advocacy strategy.

  4. And speaking of new levels of advocacy, while scientists once strived to remain separate from politics, some scientists are finding themselves in the political arena just by investigating areas at odds with the Trump administration, like climate change. And some scientists created a network of scientists who could offer temporary space to U.S. scientists stranded overseas by the immigration ban.

  5. The Johns Hopkins Center for Civil Society Studies released a new online database that lets you slice and dice data on the U.S. nonprofit economy. Fascinating.

  6. Some nonprofits have enjoyed dramatic donation and follower increases as a result of the election. One of these, the ACLU has developed a pretty impressive social media strategy and plans for a much larger ground game. Similarly, Planned Parenthood is using their increased support to develop their grassroots organizing efforts.

  7. All of these efforts to resist the Trump Administration got David Brooks thinking about resistance movements throughout history and which might be most applicable now.

  8. Taz Hussein and Matt Plummer offered a wakeup call to social change leaders who think they don’t need to generate demand for their social change work: “It’s time [nonprofits] and their funders heed business findings on increasing noise in the marketplace and the need to make any new offering, even a life-saving one, stand out. In other words, they need to pay what it takes to actively drive demand.”

  9. And speaking of marketing in the nonprofit sector, Ann Christiano and Annie Neimand argued that nonprofits needs to stop “raising awareness” and instead create strategies for changing behavior: “Because abundant research shows that people who are simply given more information are unlikely to change their beliefs or behavior, it’s time for activists and organizations seeking to drive change in the public interest to move beyond just raising awareness. It wastes a lot of time and money for important causes that can’t afford to sacrifice either. Instead, social change activists need to use behavioral science to craft campaigns that use messaging and concrete calls to action that get people to change how they feel, think, or act, and as a result create long-lasting change.” Amen!

  10. Writing on the PhilanTopic blog, Kyle Crawford argued that chatbots — computer programs that conduct a conversation via voice or text — have a real role to play in social change, and nonprofits should become early adopters of this new technology.

Photo Credit: Max Pixel

Tags: , , , , , , , , , , ,

Nonprofit Leaders, Get Outside Your Walls

It amazes me how many nonprofit leaders form their organizational strategy, their fundraising pitch, or their program model inside their nonprofit’s own walls. In order to be successful, you must understand the market in which you operate. And in order to understand it, you must go investigate it.

It is a simple fact that nonprofits must compete for funding, for clients, for volunteers, for staff, for board members, for mindshare, for policymaker will and commitment. So you must understand the market in which you work – what’s happening out there and how you fit in.

Ongoing market research can help you understand how your clients and potential clients think, what your funders want now and in the future, what your competitors and collaborators are doing and where they might be going, and how the very problems you exist to solve might be changing over time.

And there is another huge benefit to this data gathering — it forces you to expand and strengthen your network, because in the very act of finding out what’s happening outside your walls, you will forge new and deeper connections with others out there. So while market research should definitely be part of your long-term strategic planning process, it is also something you should continue to do on at least an annual basis.

Market research is where you test the assumptions baked into your work. You are seeking to find the answers to questions like:

Competitors/Collaborators

  • How are the efforts of other groups in our space changing over time?
  • How are these other groups funded?
  • What are their program delivery models?
  • What are their plans for the future?
  • Where are there opportunities for alliance?
  • How do they define the social problems they are working on?

External Context

  • What other social, technological, economic, demographic, political, regulatory shifts are happening outside our walls that might affect the problem(s) we are working on?

Target Populations

Of those people or groups you are trying to influence or benefit (like your clients) find out:

  • What are the demographic (age, gender, race, ethnicity, income, etc.) characteristics of these groups?
  • What are their psychographic (attitudes, interests, goals, etc.) characteristics?
  • How can we best reach them and change their attitudes and/or behavior?
  • What specific subsets of these populations can we have the greatest impact on?

Funding

  • How might our various funding streams (government, earned income, private donations, etc.) change over time?
  • What might our current or future funders want in the future?
  • What appeals to them about our solution?
  • What appeals to them about alternative solutions?

Before embarking on any market research, think through questions like these and figure out which are most applicable to your situation. This becomes your market research list.

Then determine how you will find the answers to those questions. Very few nonprofits can afford a comprehensive market study, so it will likely be up to your staff to do the digging. This can include activities like:

  • Web research on your competitors, collaborators, funders.
  • One-on-one interviews with current and potential funders, collaborators and competitors, experts in your field.
  • Surveys of your current or potential clients, members, influencers, funders, volunteers.
  • Review of existing research on the social issues on which you work.

And don’t assume that you will do this type of market research only once. Rather, you want to make it a regular part of operations (at least annually, if not more often), so it shouldn’t be overly burdensome. Make it easy and interesting for you and your staff to get beyond your walls and better understand the market in which you work.

Armed with new and ongoing knowledge about your market, you will be better able to design effective programs, attract additional support, articulate your nonprofit’s unique value, grow your network, and much more. So get out there!

Photo Credit: Ministry of Information Photo Division Photographer, Wartime Social Survey

Tags: , , , , , , , ,


Share




Popular Posts


Search the Social Velocity Blog