Predictably, my post last week arguing that nonprofit events aren’t efficient fundraisers caused some controversy. In particular, fundraising consultant, Gayle Gifford and I had an interesting (and very polite) debate about the post.
The exchange with Gayle really made me think and further refine my argument (which is really the point of debate, right?). What our exchange made me realize is that my issue with nonprofit fundraising events goes far beyond my belief that they are inefficient fundraisers.
Rather, my distaste for events stems from the fact that they often perpetuate the charity mindset, a destructive approach that keeps the work of social change sidelined and impoverished. The world is changing rapidly and the “charity” model doesn’t work anymore. And in fact, that model holds nonprofits back from becoming more efficient, more sustainable social change machines.
In our debate, Gayle and I discussed how events are merely a symptom of larger changes happening in the economy. As I wrote, nonprofit events are part of a:
“dying mentality that “charity” lives beside,…instead of fully integrated into, the economy. I believe that we are moving to a place where the work of social change (historically the work of “charity”) is fully integrated into the rest of the economy…the work of social change is just as important as the work of making widgets or the work of building roads and everyone understands that in order for all of it to work well, we need to finance it effectively.”
And Gayle argued that what I am describing would be a significant change to the world as we know it:
“I too long for/ and am working for the day when social justice is integrated into our economy as well as our philanthropic life… though that’s going to take some pretty massive restructuring of an economy based on unlimited resource extraction and consumption. But I still hold out that hope.”
But, as I responded, I think that kind of massive restructuring is already well underway:
I agree with you that fully integrating social change into our economy is not going to be quick or easy, but the truth is that it is already happening. There is a real convergence of the nonprofit, for-profit and government sectors and the result is that social change is now rather ubiquitous. At the same time, technology and the ways in which we communicate are changing rapidly as well. Add to that a Millennial generation that bakes social change into everything they do, and I think you start to see the beginnings of the “pretty massive restructuring” you and I are talking about. Nonprofits need to do the analysis and abandon activities that just aren’t effective. And then they need to look to some of these structural changes we are witnessing to find more efficient ways to create a sustainable financial model for their social change work.
In my mind, nonprofit fundraising events are anathema because they are symptom of a larger, ineffective way of thinking about nonprofits and the work of social change. Fundraising events are typically run as an aside, a tangential activity that sucks time and money out of a nonprofit and begs otherwise uninterested participants to pay the price of admission. These events keep charity squarely separate from the “real” work of the world.
And I truly believe we have moved past that. There are just too many social challenges to think that benevolent, reciprocity-based “charity” will work anymore. Social change must be bigger, more effective, and more efficiently financed.
When we stop thinking of the work of social change as “charity” supported in part by inefficient, occasional parties, we start creating real investment, real attention, and real change.
Photo Credit: Gerald Ford Library
In the nonprofit world marketing is fairly misunderstood. “Marketing” is the act of segmenting the potential market for your products or services and then targeting the right segment(s) in order to convince them to “buy.” While in the for-profit world there is typically just one customer, in the nonprofit world there are (at least) two distinct customer groups:
- Those benefitting from your products or services (“Clients”) and
- Those buying your products or services (“Funders”)
Often, marketing to Clients is less tricky because demand is so high for a nonprofit’s services. So the real challenge is to create an effective marketing strategy to attract Funders. But even within that category there can be many different types, depending on a particular nonprofit’s business model. Marketing to foundations vs. individuals vs. earned income customers vs. government contractors — it can get quite complex.
Which is why it is so important for nonprofit leaders to understand some basics about how marketing works.
You Must Know Who You Are Marketing To
Market segmentation is thinking strategically about which specific people you are trying to reach within the vast universe. Anyone who has money should NOT be the target of your nonprofit’s fundraising efforts. Instead, you have to think about what distinguishes people who have an affinity for your work from the rest of the world. Clearly define their particular demographic (age, gender, income, job) and psychographic (lifestyle, interests, attitudes) characteristics. Create some “target personas” (HubSpot has a great tool for this) that define your target group(s) along different dimensions and then tailor your marketing efforts to where they are and what specific messages will compel them to act.
There’s No Such Thing as “Raising Awareness”
I can’t tell you how many times I’ve heard a nonprofit leader say that they are holding an event, or trying to generate media coverage, or sending out a mailer in order to “raise awareness.” Let me be blunt — that phrase is meaningless. Whose attention (specifically) are you trying to capture (see #1 above)? And are you trying to get their attention in the places they already are? And are you talking with them in a way that is meaningful and will encourage them to act? When you attempt to “raise awareness” without a specific and targeted strategy you are just shouting in the wind.
The Market Is Increasingly Crowded
And now more than ever you are shouting in the wind because of the rapidly changing digital environment in which we all live. We are bombarded with an exponentially increasing amount of messages every day. It is completely overwhelming. So unless you get really specific about who exactly you are trying to reach and how exactly you are going to compel them to act (again, see #1 above), you are hopelessly lost.
Push Marketing is Dead
And because of this rapidly changing digital environment, push marketing — the traditional approach of sending out a press release, putting an ad in the paper, sending a direct mail piece, or any other way you PUSH out a message and hope people will act — has become completely ineffective. Instead you want to use PULL activities where you create and participate in communities where your target personas are already present. You connect with them, empower them to get involved and then let them tap into their own networks to help your jointly held cause.
You Must Embrace The Network
In the end you must create a completely different philosophy about marketing. Stop creating your mission in a vacuum and then begging for any and all support to make it happen. Instead, you must break down the walls of your organization and tap into networks outside that have similar social change goals and who can work with you to make that change happen. Rather than investing in an advertising campaign, use those resources to create a network strategy to identify key influencers who can help move your goals forward and connect with them to figure out how you can work together. We live in an increasingly networked world and only those who connect with it will thrive.
You must reinvent your marketing approach. Instead of shouting a message and hoping someone will listen, get strategic about identifying people who can become partners in making a joint social change vision happen.
Photo Credit: pexels.com
Since I was out of the office for a good chunk of July and August, I’ve decided to combine both months into one 10 Great Reads list. But let me be clear, there was still lots going on, I just happened to be (somewhat blissfully) missing it.
From philanthropy’s role in inequality, to climate change preparation, to what the Greek financial crisis teaches us about networks, to civic engagement, to digital’s effect on fundraising, to social impact bond results and pizza on the family farm, they were a great couple of months.
In my (limited) view, below are my 10 favorite reads from the past two months. But because I know I missed things, please add to the list in the comments.
- President of the Ford Foundation Darren Walker made a lot of news this summer, from his announcement of Ford’s shift to focusing on inequality and unrestricted grants, to his July release of a thought-provoking essay in which he took foundations to task. He argued that foundations have been “cutting the pie into smaller slices,” and he instead encouraged funders to embrace “a new era of capacity building investment.” Because, as he put it, “What civil society needs most, and now more than ever, are resilient, durable, fortified institutions that can take on inequality, fight poverty, advance justice and promote dignity and democracy.” Amen! Ford’s move kicked off an excellent Inequality and Philanthropy forum on the HistPhil blog. And Inside Philanthropy‘s David Callahan argued that Walker’s message is about significant change, which may be tough for the sector to hear.
- In a fascinating (and rather depressing) article, Eric Holthaus from Slate talks to climate scientists about how they are personally responding to the climate crisis, particularly how they have “factored in humanity’s lack of progress on climate change in [their] families’ future plans.” Yikes.
- Reserve funds are an incredibly critical (but often misunderstood) aspect of nonprofit financial strategy. But as she always does, Kate Barr from the Nonprofits Assistance Fund provides a clear roadmap to understanding.
- Paul Vandeventer uses the summer’s Greek Euro crisis to illustrate when networks (of which the Eurozone is an excellent example) thrive and when they fail. As he puts it, “Ignoring or giving short shrift to…the fundamental principles by which networks operate wastes precious reserves of time, money, and goodwill, and imperils all the hopeful good that organizations, institutions, and countries set out to achieve when they start down the path of networked action.”
- Late July saw a fascinating gathering of social changemakers around civic engagement, the “Breaking Through” conference, hosted by the Knight Foundation. Keynoter Peter Levine argued “This is the year that we can take back American politics. It’s up to us.” It was a great lineup of speakers and sessions about getting people engaged again. You can see video from the conference here.
- Is digital becoming a gamechanger in fundraising? Some think so. And in August Facebook launched a new Donate button, but is it really all that helpful to nonprofits? Some argue that Facebook is critical. Others think the Donate button is a fail.
- August of 2014 saw the record-breaking ALS Ice Bucket fundraising challenge. Many (including me) were skeptical of the campaign, but it turns out that last summer’s financial windfall helped scientists make a breakthrough in research to fight the disease.
- This August was the 10 year anniversary of hurricane Katrina. There were many great articles about where New Orleans has been and is now. But my two favorite were Greater New Orleans Foundation President Albert Ruesga’s Ten-Year Perspective on the philanthropic response, and Andrea Gabor’s New York Times article, The Myth of the New Orleans School Makeover.
- The first results came in from the New York state social impact bond experiment, and they weren’t great. Goldman Sachs invested in a Rikers Island program that attempted to reduce recidivism among teenagers.The program failed to meet its goals and Goldman lost money. But New York is not giving up, as first Deputy Mayor Tony Shorris said, “This social impact bond allowed the city to test a notion that did not prove successful within the climate we inherited on Rikers. We will continue to use innovative tools on Rikers and elsewhere.”
- I’m always a fan of examples of innovation. NPR provided a glimpse of how family farms are using pizza to reinvent their business model.
Photo Credit: Anne Adrian
Note: As you know, I am taking a few weeks away from the blog to relax and reconnect with the world outside of social change. I’ll be back later this week, but I have left you in the incredibly capable hands of a rockstar set of guest bloggers. The last, but certainly not least, is Antony Bugg-Levine. Antony is CEO of Nonprofit Finance Fund, a national nonprofit and financial intermediary that works with philanthropic, private sector and government partners to develop and implement innovative approaches to financing social change. Here is his guest post…
When we asked nonprofit leaders to identify top challenges as part of Nonprofit Finance Fund’s 2015 State of the Nonprofit Sector Survey, 32% said “achieving long-term sustainability,” by far the most popular response.
What does it take to reach the promised land of sustainability? It may seem counter-intuitive, but one of the best measures of organizational sustainability is not stability but adaptive capacity, the ability to act as circumstances require and opportunities allow. A truly sustainable enterprise must have the capacity to nimbly respond to external conditions. A strong balance sheet must allow for flexibility.
In the nonprofit sector, where pursuit of a mission is paramount, the ability to thoughtfully tack toward progress as funding conditions and community needs change is a hallmark of a success. That does not change the reality that our sector is notorious for restricted funding and hampered by a lack of available enterprise-level investment capital.
So, how do organizations build adaptive capacity?
Here are a few ways that nonprofits can build their adaptive “muscle” and be better prepared to change as the environment demands and opportunities allow.
Know your costs.
Nonprofits must understand the true costs of providing programs in order to make informed decisions about whether grants or contracts are able to cover those full costs, and how much subsidy might be required from other sources to fill the gap.
Many times, we see nonprofits use a grant amount as a starting point, and try to design a program that fits with the award amount. Heights and Hills, which provides services for older adults in Brooklyn and their families, asked us to help them take a different approach. Using customized tools, leadership now understands not only the current costs of running particular programs, but also how those costs change based on a variety of factors.
Like Heights and Hills, nonprofits need to be able to answer questions such as:
- “Which programs may be too costly if they are not fully supported by direct revenue?”
- “How do our costs change if we expand a program and need to hire additional staff?”
- “What if the amount of grant funding changes?”
- “Where might collaboration with another organization serve us well?”
Just say “no.”
The social sector attracts passionate activists who have a knack for seeing solutions where others see problems, and who are often driven by a deep inclination to say “yes” to those in need. But in order to build and preserve adaptive capacity and to truly remain mission focus, leaders must protect the nonprofit enterprise and its ability to continue its work. The common practice of accepting pennies on the dollar to deliver programs perpetuates unhealthy funding patterns and expectations. Armed with data about true costs makes it easier to say “no” to opportunities that ultimately detract from an organization’s ability to move the needle on mission.
New York’s Committee for Hispanic Children and Families did just that, and declined to pursue a large government contract because it sapped too many “indirect” resources. While at first glance, it seemed that the small allotment for “overhead” was enough, the amount didn’t nearly cover actual costs associated with the time that executive, finance and administrative staff were spending to keep the program afloat.
Saying “no” to a fiscally unhealthy grant preserves the organization’s ability to serve its clients well into the future. If we want to change embedded, unhealthy funding practices — and perhaps even elements of nonprofit culture that fuel these — we must be more willing to say “no.”
Ultimately, the benefit of adaptive capacity is the freedom to pursue what works. Some programs are more easily measured than others, but nonprofits and our funders need to invest in understanding impact. This is especially critical as we move toward an outcomes-based funding environment.
Scenarios USA, a nonprofit that uses storytelling for youth sex education, found a rare partner in the Ford Foundation when it decided to dramatically change its approach. Scenarios was open to asking, “Are our programs working?” and accepted that its core assumptions were inaccurate. With the Ford Foundation’s support, the organization revamped its program to focus on fostering critical thinking, which has tremendous influence on youth behavior.
Evaluating programs, experimenting with new ways of meeting mission and measuring outcomes over time are necessary to positive social change.
Seek support for major changes.
Money for programs is far more plentiful than money for enterprise-level change. Our survey found that nearly half of nonprofits report that they can have an open dialogue with funders about expanding programs, but just 6% feel comfortable conversing with funders about flexible capital for organizational growth or change.
There are exceptions. The California Community Foundation has partnered with Nonprofit Finance Fund and several others to offer strategy, management, and financial services aimed at strengthening the region’s nonprofits and building the durability of the sector. New York Community Trust has launched an initiative to help small arts organizations navigate various transformations and milestones such as leadership succession, business model changes, and facility renovations or moves. And New York’s Change Capital Fund is a collaboration of 17 foundations and financial institutions that is funding five New York community development organizations to help them refocus their strategies and develop new business models to address persistent poverty more effectively.
It is time to challenge the notion that funders aren’t willing to talk about money for adaptation and adaptive capacity, and to make the case for the right kinds of support.
It is hard to know what will be required of our sector in the years to come, but a steady trend of increased demand seems to indicate that the answer will be, “more.” Limited resources make doing more of the same nearly impossible. We must change the way we approach the challenges of our day, and organizations with adaptive capacity will lead the way.
Tris is Director of Development for New Philanthropy Capital (NPC), a U.K. think tank and consultancy that works with both nonprofits and funders. Tris focuses on both the demand and supply sides of innovation around social impact. His particular interest is putting impact at the heart of the social sector, including shared measurement, open data and systems thinking. He helped initiate, and now coordinates, the Inspiring Impact program which aims to embed impact measurement across the UK charity sector by 2022. He is also a trustee of the Social Impact Analysts Association, a member of the EU GECES subgroup on impact measurement in social enterprise, and the Leap of Reason Ambassadors Community.
Nell: A big focus of your work at NPC is making impact measurement ubiquitous in the UK’s nonprofit sector. How far is there to go and how does the UK compare to the US in impact measurement being a norm?
Tris: There’s undoubtedly been significant progress over the last decade on impact measurement in the UK, and NPC has been at the heart of that. There are several ways in which that progress is visible, as well as in the sector level surveys NPC has done to track change. For example, most charities say that they have invested more in impact measurement in the last five years, and as a result we see that it is increasingly the norm for charities to have a defined theory of change, a role within the organisation to lead on impact measurement, and to talk about their impact measurement efforts in their public reporting. Most institutional funders also say that they look for evidence of charities’ impact measurement efforts in their funding decisions. Demand for measurement advice is growing, and the impact measurement industry is growing in response – there are more consultants offering services in this area.
The growth of social (or impact) investing has also driven greater interest in impact measurement. The industry as a whole acknowledges the centrality of impact measurement and the need for social returns to be as well evidenced as financial returns. There have been a number of key developments to move the field forward here, from Big Society Capital’s outcomes matrix to the G8 Social Impact Investment Taskforce and European GECES reports and guidance on impact measurement – all of which NPC has helped to deliver.
What’s not as clear is how much progress there’s been on the use of impact measurement, rather than its mere existence. When NPC repeats our field level state of the sector research in 2016, we’ll be asking a number of questions to tease out whether impact measurement activity is leading to use of impact evidence in decision-making – whether it’s becoming embedded in practice.
My concern is that we don’t see the signs that impact measurement is driving learning, improvement, decision-making or wholesale shifts in allocating resources towards higher impact interventions, programmes and organisations. It feels like impact measurement is something that everyone acknowledges we need to do, but few have worked out how to use. With the result that it’s bolted on to the reality of organisations delivering services and raising funding, but not embedded at the core.
A few examples of what I mean: if impact measurement were driving learning, I’d expect to see lots of organisations sharing their insights on success and failure, and learning from each other. I’d expect to see common measurement frameworks which allow organisations to understand their relative performance. These are still very rare. I’d also expect to see investment by funders and investors in the infrastructure that we know is needed for learning – journals, online forums and repositories and practitioner networks. There are some emerging examples of these, like the What Works Centres, but they’re still mostly just getting off the drawing board.
Most importantly I’d expect to see charities adjusting strategies and programmes in response to their learning. Maybe I’m not looking in the right places, but the examples I do see are the exception, not the norm.
When it comes to comparing the UK and US, it’s really hard. We don’t have comparable field-level studies, and we need to work together more closely on these if we want robust insights. For example, if you compare the findings in NPC’s 2012 paper with a recent US study it looks like nonprofits are more likely to say the main purpose of impact measurement is learning and improvement. But actually we don’t know if this is the result of the questions we asked and how we asked them.
In both the US and the UK, it’s clear that the rhetoric on impact measurement has advanced over the last decade. What’s not yet clear is how the reality underlying that has shifted.
Nell: While there are many similarities between the US and UK nonprofit sectors there are some fundamental differences, in particular views about how much government (vs. private charity) should do for public welfare. How does the UK’s view of government’s role help or hurt the capacity building efforts of nonprofits?
Tris: The UK government has taken on a leading role in the social investment space, and it’s here that efforts to build capacity are most visible. Investment readiness programmes have been introduced over the past few years to build general capacity to access social investment. More recently, impact readiness programmes have arrived to do the same for impact measurement capacity. NPC has been working within these programmes to help a number of charities, and cohorts of charities, and it’s clear that they can play a major role in helping the sector to improve. But capacity-building in general has felt the effects of austerity just as much as any other area of government funding. Perhaps more so, as limited funds are increasingly focused on service delivery, not on efforts to improve services.
When NPC repeats its survey of the field, I am certain that we’ll find that limited funding to develop impact measurement capacity is still the major barrier cited by charities. It doesn’t look like anything’s going to change that any time soon.
Nell: NPC works at the nexus between nonprofits and funders, helping the two groups to understand and adopt impact measurement. In the US few funders will fund impact measurement systems, even though they want the data. How does NPC work to convince funders of the need for investments in measurement (among other capacity building investments)? What progress have you seen and what’s necessary for similar progress to happen in the US?
Tris: While a proportion of funders have for a long time supported evaluation, the majority still don’t. We’ve worked through programmes like Inspiring Impact (a sector-level collaborative programme to help embed impact measurement) with a group of funders to develop principles, and help them to embed support for impact measurement in their practice. These efforts can help those who already see the benefit of capacity-building to advance their work, but it’s tough to engage those who aren’t already thinking in this way. I think that the leap we need to make is to selling impact measurement through its benefits, by showing how organisations improve, and their impact increases, as a result. And because impact measurement isn’t yet typically embedded in organisations, those benefits aren’t as evident as they should be.
What does seem to work well is trying to get funders and charities to work together in a specific outcome area to make progress, rather than making a general case for impact measurement. Cohort capacity-building programmes, learning forums and shared measurement initiatives are all part of this. The key thing here is that then the funder is committed to the outcomes everyone’s working towards, and impact measurement becomes a tool for everyone to achieve those outcomes together.
Nell: You are part of the Leap Ambassador Community that recently released the Performance Imperative. Have you seen similar interest groups forming around these issues in the UK? And what role do you think interest groups like these play in a norm shift for the sector?
I have been privileged to be part of this amazing community of leaders, and one of a minority initially from outside the US. I’m convinced we need a similar movement here in the UK, and globally and have been discussing whether and how to approach this with the group from the start. And as co-Chair of Social Value International – a network of those working in the social impact field, I’m part of an effort to do this at the practitioner level too.
The Leap Ambassadors Community brings a human face to what is often seen as a technical subject. After 11 years of working in the social impact field, I am convinced that we cannot sell impact measurement just by increasing the supply of good technical solutions. We need a movement to build the demand for those solutions. We need the right frameworks to measure impact and manage performance. But we need the leaders to demand them, and to harness them to hold themselves accountable, learn and improve, and share what they find.
Photo Credit: NPC
There is an interesting report out today on the effectiveness of the Social Innovation Fund (SIF). Authored by the Social Innovation Research Center (SIRC), a nonpartisan nonprofit research organization, the new report details what has worked and what hasn’t in the six year history of the SIF.
Launched by the Obama administration in 2009, the SIF — a program within the Corporation for National and Community Service — provides significant funding to foundations that follow a venture philanthropy model by regranting that growth capital, along with technical assistance, to evidence-based nonprofits in “youth development, economic opportunity, and healthy futures” areas. In 2014, SIF expanded its efforts to include a portfolio of Pay for Success (social impact bond) grantees.
Now, 6 years on it is interesting to take a look back to understand what, if any, effect SIF has had on the nonprofit sector. The effect of the SIF is also critical given that, as of right now, the House and Senate have both defunded SIF in their respective funding bills.
To date, the SIF portfolio is made up of $241 million of federal investments and $516 million in private matching funds, which was invested in 35 intermediary grantees and 189 subgrantee nonprofits working in 37 states and D.C.
The SIRC report focuses on the current progress of SIF grants made during the first three years of the program (2010-2012). The report finds two clear positive results for the SIF so far. The SIF has:
- Added to the nonprofit sector’s evidence base about which programs work, and
- Built the capacity of nonprofit subgrantees, especially in the areas of “performance management systems, evaluations, financial management, regulatory compliance systems, and experience with replicating evidence-based models.”
On the negative side, however, the report finds that the SIF put real burdens on funders and nonprofits with its fundraising match requirements and the federal regulatory requirements. The report also finds that the SIF has had little effect on the sector as a whole because the SIF has not very broadly communicated their learnings so far.
To me, of course, most interesting are the report’s finding about capacity building at nonprofit subgrantees. There is such a need for nonprofit capacity building in the sector, and this was a clear goal of the SIF.
The SIF is one of few funders that do more than pay lip service to performance management by actually investing in building the capacity of nonprofits to do it. However, the SIF has been criticized for mostly selecting nonprofits that already had strong capacity. And indeed, the SIRC report finds that the SIF was most successful among those nonprofits that already had high capacity (in performance management, fundraising function, etc.) prior to SIF funding. Indeed, the report found that “poorly-resourced intermediaries working with less well-resourced community based organizations have been at a disadvantage.”
One SIF grantee in particular, The Foundation for a Healthy Kentucky, really struggled to build the capacity of their subgrantees whose starting capacity was so low. As they put it:
During the course of participation, it became clear that…[SIF] was really better suited for replicating existing programs or, at a minimum, investing in well-established programs that had some level of sophistication around organization systems and evaluation.
This mirrors earlier criticism of the SIF that it was set up to grow only those nonprofits that were already doing well, while those nonprofits that struggled with basic capacity issues were left out. The SIF has struggled to determine whether it is funding innovation (new solutions with limited capacity), or proven solutions (with a long track record and the corresponding capacity). It seems the two are mutually exclusive.
What the SIF is trying to do is such tricky business. To identify, fund and and scale solutions that work is really the holy grail in the social change sector. Certainly there are hurdles and missteps, but I think it’s exciting when government gets in the social change game in a big way. Six years is really too soon to tell. So I hope that this brief SIF experiment is allowed to continue, and we can see what a social change public/private partnership of this scale can really do.
To read the full SIRC report go here.
Photo Credit: Obama signs the Serve America Act in 2009, Corporation for National and Community Service
In the nonprofit world there is often a disconnect between funders of nonprofits and their understanding of the fundraising activity necessary to secure their gifts. Funders (and board members) rarely understand how critical fundraising is, how it works, and what’s required to do it well.
But in the hope that greater understanding leads to better actions, I’d like to offer 7 of the most important things funders (and really the sector as a whole) should understand about fundraising:
- Nonprofits Must Fundraise or Perish
It seems so obvious, but so many in the nonprofit sector act as if fundraising can be ignored or shuffled to the side. Board members hate to do it, and foundations refuse to fund it. But let’s be clear. Without a strategic, sophisticated mechanism for bringing regular revenue in the door there is no organization and certainly no social change. Fundraising must happen, and it must happen effectively in order for a nonprofit to survive and thrive. So funders (and board members) do not have the luxury of saying they don’t want to talk about, think about, or fund fundraising efforts.
- There is a Sector-wide Lack of Fundraising Knowledge
Because fundraising has for so long been ignored or sidelined, most nonprofit leaders and their board members don’t have sufficient fundraising experience or training. And neither do funders. There hasn’t been enough research into the fundraising discipline broadly and little investment in educating nonprofit leaders about how to do it well. The end result is that few people know how to crack the fundraising nut.
- Every Nonprofit Has Two Customers
Part of the solution to cracking that nut is understanding that unlike for-profit entities, nonprofits have two (not just one) set of customers. Nonprofits provide products and/or services to the first customer (“Clients”), but “sell” those services to the second customer (“Funders”). Therefore “sales” in the nonprofit world is much more complex than it is in the for-profit world. Yet for-profit businesses can spend much more money on their sales and marketing staff, training, systems and materials than a nonprofit is allowed to spend on fundraising.
- It Takes Money to Make Money
So in order to do fundraising well nonprofits must invest in their fundraising function (planning, staff, training, systems, materials). Those nonprofits that develop a strategic financial model that is fully integrated with their mission and core competencies will be more sustainable and more effective at creating social change. So nonprofit leaders must start asking for the money necessary to build effective financial models.
- Sustainability is a Funder’s Problem Too
And funders must start providing it. Funders often want a nonprofit to demonstrate financial sustainability, but those same funders won’t invest in the capacity necessary to create that sustainability. Instead of just pointing out the sustainability problem, funders must become part of the solution. Funders should step up to the plate to help nonprofits create a capacity building plan and then provide capacity capital (along with other fellow funders) to build a more sustainable organization that will survive once a funder is gone.
- Earned Income is Not a Solution
But a more sustainable organization does not mean one based on earned income, or selling a product or service. Nonprofits will always be subsidized, at least in part, by private and/or public contributions. By definition, nonprofits exist to address a failing in the market economy (i.e. not enough food or jobs). Thus, those failings will never be overcome purely by market forces. So while earned income is something every nonprofit should explore, it is not right for every organization and will never become 100% of a nonprofit’s revenue model. So don’t confuse sustainability, which means a longterm financial model, with earned income.
- Nonprofit Leaders Fear Funders
Let’s just be honest. A funder is providing much needed resources to a nonprofit and that automatically creates a power imbalance. Until we figure out a way around that inherent dynamic, funders must limit the hurdles they put in the way of nonprofit leaders and instead give them the financial runway to make their social change vision happen.
Let’s face it, without money there is no social change. But the knowledge, experience and infrastructure necessary to generate enough money is woefully short in the nonprofit sector. That could change if funders lead the way toward more investment in strategic, sustainable financial models.
Photo Credit: 401K Calculator
There was a great post on the Stanford Social Innovation Review blog last week that clearly articulates a dysfunction in the nonprofit sector and when recognized by nonprofit leaders and their funders could reshape the sector.
In the SSIR, veteran nonprofit leader Kristen Joiner argues that because 86% of Fortune 500 leaders are men and 70% of nonprofit workers are women “gender dynamics” often cripple the nonprofit sector:
Like the provider of old, heading off to the office for a day of work, the private sector is focused on money and profit. The nonprofit sector, as the nurturing caretaker, is charged with caring for the young, the sick, the elderly, and the poor…This creates a have-and-have-not situation, where one side holds the money and power, and the other side asks for an allowance to do their “good work,” trying to get traction but more often getting stuck in a rut created by this dysfunctional dynamic…Investors in the social sector make it difficult for nonprofits to gather the resources to measure and pivot as necessary for success. They are looking for the proverbial “good girl”—an organization that doesn’t rock the status quo, that gives them a credential to show they “care” or “contribute.”
Joiner’s argument is not a new one, in fact Robert Egger voiced it in a 2008 Chronicle of Philanthropy article, where he described how the modern nonprofit sector was born out of the gender biases of the mid-20th century:
[In the 1970s and 80s] the number of nonprofits in the U.S. exploded…[led by] tens of thousands of college-educated, stay-at-home mothers…Many of these “founding mothers” brought with them an internalized understanding of their “role”…As long as these new organizations limited their work to nurturing, feminized charity work…they were humored, and even honored. [And foundations were] often dominated by men who were charged with dispensing money made by other men. Foundations rarely awarded money that fostered independence for grantees…In these formative years, and even today, grants are primarily made to submissive organizations — those willing to jump through countless hoops, those that would not push back when confronted with short-sighted policies, and those that would make do with much less than they knew was needed to do the job right…The rules that govern our sector — indeed, the very nature of our how we view ourselves — is rooted in systemic sexism.
Although I have worked in the nonprofit sector for 20 years, this “systemic sexism” never occurred to me until I read Egger’s article a few years ago. But now I see it often. And while I don’t think sexism should become a shorthand for everything that ails the nonprofit sector, I do think nonprofit leaders, board members and funders must be more aware of the underlying forces at play, so that we can all work to overcome them.
There are several key areas where this systemic sexism results in an uneven playing field for nonprofits:
- Less Access to Capital. Businesses have access to various forms of capital (startup, mezzanine, risk), whereas nonprofits struggle to attract day-to-day revenue, let alone the capacity and growth capital they so desperately need.
- Inadequate Sales Function. In the for-profit sector, sales and marketing are a much researched, supported and heralded part of a business model because it is well understood that without sales there is no business. But in the nonprofit world, sales — called “fundraising”– is misunderstood, under-supported, and sometimes ignored by nonprofit leaders, board members and funders.
- Tighter Limits on Overhead. Although this is starting to change, nonprofits are often encouraged to spend only a small amount of money on infrastructure, administration and fundraising (overhead expenses), but for-profit companies can spend whatever it takes.
- Less Investment in Leadership. Business leaders are encouraged to invest in professional development, training, and leadership coaching, but a nonprofit leader often must figure it all out on her own.
- A Restricted Role in Politics
While businesses can spend millions on lobbying and supporting political candidates, nonprofit political action is much more restrictive.
And the list goes on. Many of the dysfunctions present in the nonprofit sector are rooted in years and years of sector inequality. If we hope to make social change more effective and sustainable, we must free the sector of these shackles.
Photo Credit: Campbell’s Soup