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Leadership

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

 

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Guest Post: The Rebirth of Nonprofit Advocacy

Note: With a current political climate which is arguably more challenging for many nonprofit social change efforts, I believe (along with many others) that now is the time for nonprofits to move more actively into advocacy. But many nonprofit leaders don’t know how to get started. So I asked the expert on all things nonprofit advocacy — Tim Delaney, President & CEO of the National Council of Nonprofits — to write a guest post describing how nonprofit leaders can move into advocacy. Here is his post.

Given the new realities at the state and federal levels of governments, nonprofit leaders (board and staff) are recognizing that nonprofit advocacy is more important than ever before. They suddenly feel compelled to engage in advocacy. Yet many admit privately that their advocacy know-how has either atrophied or never gotten off the ground. As we witness a re-birth of interest in nonprofit advocacy, this article offers initial steps along a pathway to effective advocacy.

Nonprofit advocacy is a lot simpler than most people realize, with easy steps involving the heart, mind, body, and soul.

Heart Steps

Care. The very first step in advocacy is to care deeply about something. For nonprofits, this means caring about your organization’s mission. When you really care, then you will see the barriers blocking your way … and be motivated to remove or overcome those barriers to advance the organization’s mission. Consider this mom who worried that she would be ineffective as an advocate, yet when motivated to protect her child’s safety, she championed changes to federal and state laws.

Know you are not alone. If you start to get weak of heart, know that you are part of a community that includes more than one million organizations, employs ten percent of the American workforce, and contributes billions to the economy. Your nonprofit’s mission is unique, but your organization is part of an expansive ecosystem of nonprofits working in every community across the country. We are all stronger if we honor the Three Musketeers’ motto of “All for one and one for all, united we stand, divided we fall.”

Mind Steps

Realize that you are already advocating. People sometimes fret that they don’t know how to advocate. But it’s so easy that first graders do it! So do you, every day. Did you share an update with your nonprofit’s stakeholders (such as donors, board members, or reporters) recently, so they know about the impact your organization is having in the community? Congratulations, you are already advocating! We like to say that the definition of advocacy is answering the question, “Who can I talk to today to advance my nonprofit’s mission?”

Lean into the news to stay informed. It’s too late for action when reading that the Governor signed a bill to regulate nonprofits or the city council voted to pass an ordinance to tax nonprofit property. Nonprofits need to pay attention to the news so you’re ready to speak up for your communities. To help nonprofits make sense of the swirling policy issues in Washington, DC, we wrote this analysis in the Chronicle of Philanthropy identifying six sector-wide issues that we foresee impacting all nonprofits in the coming months. Your local state association of nonprofits can help keep you up-to-date on what is happening, and you can subscribe to our free policy newsletter, Nonprofit Advocacy Matters.

Focus. One danger of paying attention to the news is most people suddenly will see multiple things that motivate them to action. Yet there is only so much time in each day. When taking the Heart Step of identifying what you deeply care about with your nonprofit’s mission, define and then refine the topics on which your nonprofit agrees in advance that it will devote some of its limited resources to advocate for or against. Reduce that in writing as part of your Public Policy Agenda. (Here’s a link to our Public Policy Agenda, which you can use as a rough draft to start your own.)

Work smarter, not harder. The old Fram oil commercials used to say, “You can pay me a little now … or a whole lot more later.” So it is with advocacy. If you invest a little time now to lift your voice instead of sitting silently while your local government imposes new taxes on nonprofits, then you can avoid the added burden of trying to raise additional money. If government contracts impose mindless administrative burdens and costs, then you can either keep paying people to do wasteful acts or band together with other nonprofits to ease the burdens of government and nonprofits. Our hallmark as nonprofits is that we solve community problems. Advocacy is a powerful leveraging tool to do just that.

Take the (h) election. Sometimes called the best, easiest, and cheapest (free!) insurance in America, filling out IRS Form 5768 can simplify life for most 501(c)(3) charitable nonprofits advancing their missions through advocacy. Taking the “(h) election” doesn’t cost anything, and gives many benefits for nonprofits.

Soul Steps

Build relationships. The poet’s line that “no man is an island” underscores not only a universal interconnectedness that feeds our souls, but also a basic tenet of advocacy: relationships are fundamental. You will be more effective when those you are advocating already trust you and know the impact your nonprofit is having. Whether you are advocating to a potential funder or to an elected official (or a member of their staff), relationships matter. Take the time now, before you have a distinct ask to make, to make friends before they are needed. They will come in handy later, for you and for them. Even without further advocacy, informing officials of the work your nonprofit is doing can pay dividends as they consider proposals down the road.

Body Steps

Stand for Your Mission. No matter who is in office or which party is in control, nonprofits can’t afford to sit silently on the sidelines on issues that affect their ability to serve their community and advance their mission. The nonprofit community is at its strongest when every nonprofit, and every person associated with that nonprofit, raises their voice. To help board members in particular, check out this website on steps your nonprofit can take to stand for your mission.

Use Your Voice. Advocacy takes many forms. You can write or call your representatives or attend a Nonprofit Day at the Capitol. You can make a video demonstrating the effects (or potential effects) of an issue. Even social media has become a part of the advocacy toolkit. Read more stories of nonprofit advocacy in action to learn about the other ways you can engage.

Be a Team Player. Nonprofit advocacy is a team sport. Most funders and nonprofits focus on their narrow issue area. But some policy issues affect all nonprofits and thus require collective action. The current federal attempt to erode trust in nonprofits and foundations by removing or weakening the 60+ years of protection against politicizing nonprofits during elections, and local attempts to impose taxes, fees, or payments in lieu of taxes (PILOTs), are attacks on all nonprofits.

Be Vigilant. My football coach used to say, “Keep your head on a swivel,” meaning always be on the lookout, watching everything on the field. Public policy is even wilder than football because it’s played on a three-dimensional chess board, with activity happening up and down the local, state, and federal levels of governments and across the executive, legislative, and judicial branches. While many want to focus on the new President, the White House is only one source of policy action. Federal legislative priorities this year will likely flow down to hit the states to implement. Domestic spending cuts are a near certainty, and with states currently receiving, on average, 30 percent of their revenue from the federal government, it’s important to see the interconnections. The White House might dominate the nightly news, but life is lived at the local level and not in faraway DC.

Just as Plato wrote that “necessity is the mother of invention,” policy threats can spark inspiration for advocacy action. Although dismayed by the cause, I’m heartened by hearing how many nonprofit leaders are now seeing the value and power of advocacy. Let this be the re-birth of nonprofit advocacy, which is deeply rooted in our collective DNA.

Photo Credit: National Council of Nonprofits

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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

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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

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Nonprofit Leaders Have More Power Than They Think

A few weeks ago I wrote a post on a controversial topic, “How to Remove a Troublesome Board Member.” As I wrote in the post,

Of the many taboos in the nonprofit sector, the taboo against asking bad board members to resign is one of the most destructive. Instead of encouraging ineffective or meddling board members to move on, nonprofit leaders often show misplaced gratitude for those errant board members continuing to take up space.

Because it is such a taboo idea, I predictably received several emails, Tweets and comments in response to the post. The most thoughtful of which was from Tom Klaus, who wrote:

Like anyone who has ever led a nonprofit, I’ve wanted to make changes to my board to make everything run a lot better, and I can sympathize with the folks for whom your blog is intended. What I’d like to hear, though, are your thoughts on the legal and ethical aspects of a nonprofit leader making such changes to board.

In most states, the by-laws of a nonprofit organization establish the board of directors as the legal entity upon which the organization is established. The ED or CEO is typically not also a member of the board of directors, in my experience. Hence, there is a legal conundrum facing the leader. He or she may not have legal standing to make the changes to the board you are suggesting in your blog. Now, this is not to say, of course, that nonprofit leaders don’t try to do it anyway; only that doing so might provide the grounds for board members to significantly challenge and even release the nonprofit leader.

The ethical challenge this presents, I believe, is this: Is it ethical for a nonprofit leader to try to change the makeup of the group that hired her or him?

I think the most difficult governance challenge in a nonprofit organization is achieving the delicate balance between the power of the ED/CEO and the power of the Board of Directors. I’m sure we’ve both known organizations that have done this remarkably well, and they become high performing, heartily sustainable, and wildly successful in their work. I’m sure we’ve also both known organizations that just can’t seem to get the balance right.

One of my clients is like this latter. Over the years they have continued to fluctuate between too much power in the hands of the board and too much power in the hands of the ED/CEO. These are among the most unproductive times for them, of course. Just curious about your thinking on this.

Tom raises an excellent point. The nonprofit board of directors are and should be charged with the legal authority to hire and manage the nonprofit executive director. However, that does not mean that they are the only ones to possess the power to make changes in the leadership of the organization. It is important to understand that both board members and executive directors possess power but very different types of power.

In the 1950s two social psychologists, John French and Bertram Raven, defined a new way to think about the kinds of power people possess. They classified six bases of an individual’s social power:

  1. Reward Power is based on a person’s ability to give rewards
  2. Coercive Power is based on a person’s ability to give punishments
  3. Referent Power is based on a person’s ability to make others want to model his/her behavior
  4. Legitimate Power is based on a person’s official title or role
  5. Expert Power is based on a person’s expertise
  6. Informational Power is based on a person’s possession of specific content

Instead of the Legitimate Power that board members enjoy because of their legal title of “board member,” I was referring in my previous blog post to the Expert Power a nonprofit executive director can employ.

A nonprofit’s executive director possesses tremendous expertise in (to name a few):

  • The mission, program delivery and results
  • The organization’s strategy and goals
  • The organization’s day-to-day work
  • The skills, experience, networks needed on the board
  • The resources (potential funding, strategic alliances) available to the organization

The most effective boards are those which are led by the Legitimate Power of the board chair and her committee chairs, paired with the Expert Power of the executive director. Because the reality is that as a group of volunteers who have many more pressing items on their to do list, a board of directors rarely functions at their best when left to their own devices.

Therefore the executive director can and should play a critical role in helping the board leadership to assemble the type of board that will help move the mission forward. This includes:

While the nonprofit executive director does not have Legitimate Power because, as Tom rightly points out, she serves at the behest of the board of directors, she can and should wield Expert Power to help assemble and manage a board that can be instrumental in the nonprofit achieving it’s mission and being sustainable.

To learn more about how to do that, download the 10 Traits of a Groundbreaking Board book.

Photo Credit: 24×7 Photo

 

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How Funders Can Help Overcome the Overhead Myth

Note: In April I will be moderating a panel at the Center for Effective Philanthropy Conference about what funders can do to support nonprofit sustainability. To promote that panel and the conference, the Center for Effective Philanthropy asked me to write a post for their blog, which is reprinted below. You can see the original post at the CEP blog here.

 

Among the many myths that pervade the nonprofit sector, the Overhead Myth is perhaps the most destructive. It is the erroneous idea that nonprofits must keep their fundraising and administrative costs cripplingly low, which leads to anemic organizations that are not as effective as they could be.

In fact, the disparity between the nonprofit and for-profit sector in investment in strong organizations is striking. As just one example, research from the Foundation Center found that in 2011, the business sector spent $12 billion on leadership development, whereas the nonprofit sector spent $400 million. Or, viewed another way, businesses spent $120 per employee on leadership development, whereas the nonprofit sector spent $29 per employee.

But the reality is that nonprofit organizations are no different than for-profit organizations in terms of overhead. Last summer a Bridgespan study analyzed the indirect costs of 20 different nonprofit organizations and found, not surprisingly, that overhead rates vary greatly depending on the business model and industry of a given organization (just as it does in the for-profit sector).

Some nonprofit, philanthropic, and government leaders are recognizing that we must move beyond the Overhead Myth and start building stronger nonprofit organizations. This is partly due to the Overhead Myth campaign, launched in 2014 by GuideStar, CharityNavigator, and BBB Wise Giving Alliance with their famous “Letter to the Donors of America” and follow up “Letter to the Nonprofits of America,” which argue that nonprofit leaders and funders must stop judging nonprofits by their overhead rate — and instead focus on a nonprofit’s results. So the idea is that instead of evaluating the effectiveness of a nonprofit organization based on how it spends money, funders would move to evaluate the effectiveness of a nonprofit based on the results it achieves.

This campaign has gained some traction. The federal government and some local governments have moved to increase the indirect costs paid to nonprofits, which means more money for things beyond direct program costs.

But unfortunately, we are far from overcoming the Overhead Myth. An article just this month in Philanthropy Daily extoled the virtues of the Salvation Army because “the most effective nonprofits are those with lean management. The Salvation Army is a constructive example of an effective charity with very low overhead.” And a recent article in Forbes profiled five nonprofit leaders advising other nonprofit leaders about how to keep overhead costs low.

There is still much work to be done in recognizing the need for and investing in strong, effective nonprofit organizations.

Which is where progressive funders, like those who will be attending the 2017 CEP Conference in Boston in April, come in. If a critical mass of funders could start supporting nonprofits to create strong and effective organizations, we could perhaps overcome the Overhead Myth once and for all.

But what does that look like? In my mind, funders can lead the effort to eradicate the Overhead Myth by:

  • Working with their nonprofit grantees to uncover the full costs of their work. Instead of hiding or severely limiting non-program costs, nonprofit leaders must fully analyze, report on, and fund ALL of the expenses necessary to achieve results.
  • Uncovering the capacity constraints that impact their grantees. Funders must actively work with their grantees to determine what is standing in the way of building stronger, more effective organizations — and then fund the solutions to those hurdles.
  • Moving from program-specific funding to unrestricted, general operating support of the organization.
  • Investing in the revenue-generating functions of their grantees. It takes money to create mission, so we need more investments in sustainable financial models, which includes (among other things) smart plan development, recruitment of effective revenue-generating staff, and training of board members on their role in the financial model.

The good news is that there are already funders who are doing these things. For example, there is the collaboration of California grantmakers who lead the Real Cost Project aimed at helping grantmakers understand “what it would take to fund the real costs of the organizations they support — that is all of the necessary investments for a nonprofit organization to deliver on mission and to be sustainable over the long term.”

So to help move this conversation and work further, I will be moderating a breakout session at the 2017 CEP Conference titled “Supporting Nonprofit Sustainability,” where Jacob Harold, president and CEO of GuideStar, Vu Le, nonprofit blogger and executive director of Rainier Valley Corps, and Pia Infante, co-executive director of The Whitman Institute, will be discussing how foundations can start advocating for and investing in stronger, more effective nonprofit organizations.

If nonprofits and those who fund them could overcome the Overhead Myth once and for all, it could be a watershed moment for social change.  It would be the point at which we move from a nonprofit sector that is just trying to get by to a nonprofit sector that is armed with the people, infrastructure, and systems necessary to deliver on lasting social change.

I hope you’ll join us for what promises to be an exciting conversation.

Photo Credit: Mike Baird

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Is Your Nonprofit Stuck In A Rut?

The other day I was talking with a nonprofit leader and was suddenly struck by how much his story echoed so many of the stories I hear from nonprofit leaders.

See if your nonprofit fits some or all aspects of the scenario he faces:

  • His board is passionate about the mission and wants to be helpful, but they don’t really contribute much to the financial model.
  • His staff and board want to expand services, but they can’t grow their budget past where it has been for years.
  • Their funding is fairly dependent on just a couple of sources.
  • Their funders support specific projects, rather than the organization or mission as a whole.
  • Their strategic plan hasn’t been updated in 5 years.
  • The board worries whether some of what the nonprofit does duplicates other efforts out there.
  • Board and staff don’t have a common way to articulate what the nonprofit is and does.
  • Their nonprofit is just barely getting by and has no cash reserves.

They, like so many nonprofits, are stuck in a rut.

They want to accomplish something much bigger and better but continue to spin their wheels against what they have always done. It’s really a chicken or the egg scenario. A nonprofit is unable to grow their services, their board, and their supporters because the organization has limited resources. And so they keep soldiering on, same as it ever was.

But let’s face it folks, in times like these, the status quo just isn’t going to work anymore.

Luckily, there is a way out.

When I encounter a nonprofit leader like the one above who has a real desire to break out of this pattern, I suggest a Financial Model Assessment. A Financial Model Assessment analyzes every aspect of the organization (Mission, Vision, Strategy, Program Delivery and Impact, Staffing, Board, Marketing, External Partnerships) in order to understand how each element helps or hurts their financial sustainability and their ability to achieve results. It then analyzes all current and potential revenue streams to find opportunities for sustainable growth. Finally, the Assessment gives very detailed recommendations for creating a more effective and sustainable organization.

I am a firm believer in a holistic approach. You simply cannot bemoan a lack of financial resources and call it a day. You must dig deep and figure out how everything you do contributes to or detracts from your current reality.

But because nonprofit leaders are usually consumed by putting out fires and worrying when the next check will come, they don’t have the ability to take a big step back and figure out how all of the pieces can and should fit together. So a Financial Model Assessment allows a nonprofit board and staff to understand what is holding their organization back from becoming financially sustainable AND achieving more mission-related results.

Once I’ve written my final Assessment, I lead a change discussion among board and staff. We delve into the Assessment and discuss how and why I came to the conclusions I did. This is often a galvanizing moment for the nonprofit — a moment when board and staff finally understand together a way forward that can allow them to be smarter, more strategic, more sustainable and ultimately achieve more results.

If you are interested in big change and need help navigating how to get there, download the Financial Model Assessment Benefit Sheet that describes the process in more detail. And if you’d like to read about other nonprofits who undertook a change process, check out these case studies.

Photo Credit: Public domain via Wikimedia

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10 Great Social Innovation Reads: January 2017

In January it seemed as though we moved into social change hyper drive.

With the inauguration of a new president, a litany of controversial executive orders, numerous efforts to block or minimize them, and advice for or frustration with the nonprofit and philanthropic sectors’ responses, the world of social change moved at warp speed.

Add to that lots of predictions and advice for the nonprofit sector, and some small, but inspiring efforts to feed and comfort those in need and January was a very busy month.

Below are my picks of the 10 best reads in January, but feel free to add to the list in the comments. If you want a longer list, follow me on Twitter @nedgington, and if you want to see past months’ lists go here.

  1. Some still struggled to understand the 2016 election. Continuing his 4-year series on the smaller cities of America for The Atlantic, James Fallows argued that while Americans distrust national policy and institutions they still have faith in local government: “City by city, and at the level of politics where people’s judgments are based on direct observation rather than media-fueled fear, Americans still trust democratic processes and observe long-respected norms.”  And Eytan Oren offered some insight into how social media and major technology companies took civic engagement to a new level in the 2016 election.

  2. A few days before Trump was inaugurated, President Obama gave a farewell speech that focused on the need for greater civic engagement, and he and Michelle Obama launched a new foundation to help deliver on those ideas. And Pew Research crunched the numbers on how America changed over his 8-year term.

  3. Quite quickly after his inauguration, President Trump signed several executive orders, and a “resistance” movement that is rather unprecedented in U.S. history mobilized in response.   thing the resistance movement has going for it is their savvy use of social networks.

  4. In particular, Trump’s executive order banning immigration from 7 Muslim-majority countries created some soul-searching in the philanthropic sector. Inside Philanthropy‘s David Callahan expressed frustration about a seeming silence among philanthropic leaders on Trump’s immigration ban, asking “What’s the point of being in charge of society’s risk capital if you don’t take risks at a moment like this?” But 50 philanthropic leaders signed a strong statement against the ban.

  5. Amid all of the uproar surrounding the immigration ban, there was light in small places. A group of people from New Jersey launched a supper club that creates community among and raises money for Syrian refugees.

  6. Because January started a new year, there were the usual posts predicting what the new year will bring for philanthropy and nonprofits.

  7. But this year was different because several writers argued that the nonprofit sector needs to move more strongly into advocacy. And there was lots of other advice about how nonprofits should approach the Trump era, from building resilience, to messaging more effectively in a “post-truth” world, to making America “good” again, to answering 12 “Ifs”.

  8. A rather more sweeping bit of advice for the social change sector came from Pablo Eisenberg who argued that the organization Independent Sector should no longer be an association of both nonprofits and foundations, but just nonprofits. The HistPhil blog asked him to elaborate on the history of that important institution.  

  9. BoardSource, GuideStar, BBB Wise Giving Alliance, and the Association of Fundraising Professionals partnered to release a new method for evaluating a nonprofit’s fundraising effectiveness. The method looks at three metrics in a nonprofit organization: the fundraising net revenue, the cost of fundraising, and the dependency quotient (the percent of the budget funded by the nonprofit’s top 5 donors). Because let’s remember, as Rick Moyers pointed out, Development Directors Are Not Miracle Workers.

  10. Finally, a tangent into something small and really cool. The idea of little free libraries that have been cropping up on people’s front lawns has gone in a new direction. Mini food pantries have started helping neighbors in need.

Photo Credit: Jens Schott Knudsen

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