“Charity” harkens back to the beginnings of philanthropy, which was largely the purview of women and as such was viewed as tangential to and less valuable than the more important “business” of the male-dominated world.
As social problems mount, we must shift from the “charity” of our predecessors to an understanding of social change as part of everything we do.
And here’s why:
Charity Lives Beside the Economy, Social Change is Baked into the Economy
While charity was just an afterthought of the real work of the world, social change is rapidly becoming an integral part of the economy. The number of nonprofits grew 50 times faster than for-profits in the last 10 years and nonprofit revenues grew at double the rate of GDP growth in the same period. And its not just the size and resources of nonprofits that contribute to an emerging social change economy, the Millennial generation actually thinks about social change as part of every aspect of, not separate from, their work and life. The work of social change is ubiquitous.
Charity Addresses Symptoms, Social Change Addresses Systems
Charity is about remedying the immediate and direct symptoms of a larger problem. It is about feeding the poor, sheltering the homeless, clothing the naked. But as very real structural challenges grow (like the widening income gap) we can no longer just stick a finger in the dike. We must come up with approaches that solve the underlying issues causing those problems.
Charity Requires Spare Pennies, Social Change Requires Significant Investment
Charity existed on the largesse of the profiteers of the last centuries. Once they made their millions, they sloughed off a portion of the excess to the charities who cleaned up the messes they made. But you can’t do much with the dregs. Because social change is about changing larger systems it takes real, significant investment of resources.
Charity Employs Volunteers, Social Change Employs Experts
Charity was always the purview of the wives who didn’t work. As volunteers they devoted their time to helping the needy. But as our social problems become increasingly complex and entrenched, we must employ experts – not volunteers – who through education, knowledge and experience know exactly how to approach the problem and how to solve it. And we must pay them what it takes to keep them working on those solutions.
Charity Apologizes, Social Change Demands
When you are voluntarily acting on behalf of a charity and asking others also to act voluntarily on behalf of the charity, you are often apologizing for the interruption to their “real work.” But social change is very necessary work, and social changemakers must demand the investment, mindshare, time and effort required. There is absolutely no space for apology.
Sometimes words and the baggage of the past really matter. When we stop thinking of the work of social change as “charity” we start demanding and creating real investment, real attention, and real change.
Photo Credit: Library of Congress
For those nonprofit leaders brave enough, capacity capital can be the key to emerging from the continuous nonprofit starvation cycle.
Next month I will be speaking at the Securing the Future Conference in Cincinnati about capacity capital. Beyond looking forward to meeting a new group of nonprofit leaders, board members and donors, I’m particularly excited about introducing them to what I think has the potential to be a transformative concept for the nonprofit sector.
The topic of my speech is “The Power of Capacity Capital,” and in it I will convince the audience that you no longer have to run a nonprofit to the bone, continually starving the organization of the staffing, infrastructure, and systems that you need to effectively deliver social change.
Capacity capital is the money that so many nonprofits need, but most find so hard to raise. It is money for infrastructure and organization building. It is a one-time investment of significant money that can fund a program evaluation, a new data gathering system, revenue-generating staff, leadership coaching, and the many other things nonprofits require in order to be effective leaders of social change.
If you want to move your organization out of the starvation cycle, you have to learn how to raise capacity capital.
For those of you who won’t be at the Securing the Future Conference, but want to learn more about capacity capital – whether it’s right for your nonprofit and how to go about raising it – you can download my on-demand webinar, Raising Capacity Capital.
The 60-minute Raising Capacity Capital on-demand webinar will show you how to:
- Talk about the importance of capacity capital to your donors and board
- Create a budget for the capacity dollars you need
- Develop a campaign goal
- Break the goal into donor ask amounts
- Identify prospective donors
- Give your board a role in the campaign
- Gain the confidence to start asking for the money you really need
Like all of the Social Velocity on-demand webinars, you can watch this webinar whenever and however many times you would like.
You really don’t have to continue to live in starvation mode. There is a path toward a stronger, more effective nonprofit organization. Capacity capital can help you get there.
Photo Credit: panthera-lee
In today’s Social Velocity interview I’m talking with Pat Lawler. Pat is the CEO of Youth Villages, a national nonprofit dedicated to helping emotionally and behaviorally troubled children and their families live successfully. Youth Villages is often heralded as a model for high performing nonprofit organizations. In 2006, Lawler was recognized as one of “America’s Best Leaders” by U.S. News & World Report.
You can read past interviews in the Social Innovation Interview Series here.
Nell: In 34 years of your tenure at Youth Villages you’ve grown the organization from serving 25 youth to now serving 22,000 families. Very few nonprofits are able to grow to that level, let alone sustain it. What are the factors that make nonprofit growth attainable and what holds more nonprofits back from achieving it?
Pat: First, an organization must have a clear mission and defined values. When we started Youth Villages, we knew who we were. We didn’t just want to respond to RFPs; we wanted to do what was best for kids. No more of the status quo, instead we used our expertise and created best practices. We built our leadership team and our culture around a clear mission and set of values. Our culture is a big part of who we are and what we’ve done over the years. We’ve also been willing to change directions. We’re willing to do different things based on the needs of kids and families. At one time, we only provided residential treatment services, but now residential services comprise only about 35 percent of our work. Don’t anticipate the future, create it.
As an organization, we were also careful not to grow too fast. We were constantly assessing what was best and reevaluating. We also implemented a feedback system to learn what was working and what was not so we could improve our outcomes.
It’s easy for nonprofits, especially those focused on social services, to make decisions with our hearts instead of our heads, but we must still maintain a strong focus on the business aspect of our work. After we got through our first 12-13 years, when we were just trying to survive as an organization, we began thinking about strengthening our financial reserves because we were responsible for more children and families, as well as our staff and their families. So we really started trying to build a stronger financial foundation that would help us successfully transition through turbulent times.
Nell: Often when a nonprofit becomes very large finding on-going sustainable funding sources can be difficult. The majority of your funding comes from state contracts. Is government the ultimate answer to long-term funding for large nonprofits? Or are there other ways?
Pat: It depends, but in general, I think it’s important for organizations to have a diverse set of funders to achieve maximum stability. Having at least three or four funding sources and a relative balance among those sources is a good way to go. If government is a major funding source, you want to make sure that’s diversified among different programs, geographies, etc. and not all one contract.
Nell: Youth Villages is also unusual in that you have a robust performance management system and are considered one of the leading nonprofits in the country in that arena. Why did you make the decision many years back to invest in performance management and what do you think the return on that investment has been?
Pat: Youth Villages’ goal has always been to provide the best services for children and families. That’s one of the reasons why we started collecting data, using measurement, benchmarking and total quality improvement. It was all about getting better outcomes for kids. We didn’t realize how valuable our data could be until the mid-‘90s when some of our state funding was at risk. Using our data, we were able to convince the state to spend money for in-home services and develop a continuum of care — because we had really good data to show them what worked and how much more cost-effective it was. Throughout the years, we started trying to convince other states and funders. A few were pretty enthusiastic about our data and outcomes. When the Edna McConnell Clark Foundation met with us nine years ago, they were very interested in our data and outcomes, and that was the first indication that the private sector was becoming interested in doing what works.
Even today, we’re asking ourselves where is the best place to put our resources, and more often, we’re finding it’s better to serve a larger number of children through community-based services rather than in a residential setting. You can make such a greater impact in the community serving a large number of youth, rather than serving a small number with the greatest needs. We’re trying to do both. But we’re asking ourselves what’s the biggest return on our investment so we can have the greatest impact on our community?
Nell: Funders and nonprofits themselves are often reluctant to invest in nonprofit leadership development. How do we solve this need and how did you grow your leadership skills over the course of your career? What role do you think funders should or could play in leadership development for the sector?
Pat: I read a lot, and I’ve been very fortunate throughout my career to have worked with great boards of directors and mentors to shape my leadership skills. At Youth Villages, we have an outstanding leadership team filled with better leaders than I am. Together, we make a strong team. Any of us independently might not be as good. I know I wouldn’t be at all. At all levels of this organization, we have very bright people and that is what makes the difference here.
If I had to start over at the beginning, rather than asking foundations for money for programs and services, I would have asked for funds to put toward business planning, professional coaches, leadership development and communications to help with the things I didn’t know about. I’d have asked for money to help build a stronger organization, while at the same time maybe a little money for programs and services. I believe it’s a waste of money for governments, foundations or anyone to spend money on an organization that doesn’t have the necessary skills, organizational structure, leadership and business planning to achieve the goals of their program. It just makes no sense.
From the time an organization is created, I think they have to ask the questions: Do we have the right people in place? Do we have the right business plan and strategy to execute? Do we have the support of the community and board of directors? I firmly believe every foundation should put a significant portion of their funding toward strengthening the organization versus funding some programs and services. If you don’t have the right people in place to execute the strategy then it’s not going to happen. It’s also important for foundations to give organizations time. It takes time for leaders to develop, they get better as they encounter and overcome problems, and it’s important to stick with those organizations for extended periods of time.
Photo Credit: Youth Villages
February witnessed some dissatisfaction with the current state of funding for social change, but also some trailblazers playing with new financial vehicles. I always wonder whether true change to money for social good will come with the next generation. Do Millennials hold the key to fundamental shifts in how we finance social change efforts? We shall see.
Below is my list of the 10 best reads in the world of social innovation in February. But, as usual, please add what I missed in the comments. If you’d like to see an expanded list, follow me on Twitter, Facebook, LinkedIn, or Google+.
You can also find the list of past months’ 10 Great Reads here.
- As we work toward social change, its important to embrace the gray areas. Writing in the New York Times Simon Critchley takes us back to the 1970s BBC documentary series “The Ascent of Man” to make a point about the importance of uncertainty in our search for solutions. As he puts it, “Insisting on certainty…leads ineluctably to arrogance and dogma based on ignorance.” And Fay Twersky seems to agree when it comes to strategic philanthropy, arguing in the Stanford Social Innovation Review that “we need to challenge the certainty creeping into [philanthropy].”
- And speaking of changing philanthropy yet another study of Millennial philanthropists claims that this new generation of donors will be quite different than their predecessors. As Phil DeMuth writing in Forbes puts it, these new donors “are no longer interested in providing an annuity to some tax-deductible charity organization.” They want to see results, and they want to get in and get out.
- But Lucy Bernholz is frustrated by the pace of change, at least in how little the financial vehicles philanthropists use are changing. She argues that in this year’s list of the top 50 philanthropists “the financial vehicles for philanthropy…look not unlike [those] in 1954 or 1914.”
- Tris Lumley from New Philanthropy Capital voices frustration as well, but with the general state of nonprofit finance. He puts forward a new model for the social sector that removes the “funder-centricity” of the “anti-social sector.” Because, as he argues, “the result of this funder-centricity at its worst is that the social sector exists not for those it’s supposed to help, but in fact for those who work in it, volunteer in it, and give money to it.”
- There are some bright spots, at least in the United Kingdom. The country leads the way in the social impact bond trend. Emma Tomkinson provides a map of social impact bond activity in the UK versus the rest of the world and the UK Centre for Social Impact Bonds provides a great site of resources on the new tool.
- And even here at home there are some trend setters, particularly the F.B. Heron Foundation, led by the visionary Clara Miller who also founded and led the trailblazing Nonprofit Finance Fund for 25 years. Clara has announced the F.B. Heron Foundation will account for the mission return of 100% of its assets. Unheard of and definitely interesting to watch.
- There is a constant tension in the nonprofit sector between funding new ideas and funding the growth of proven ideas. Writing in the Chronicle of Philanthropy, Alex Neuhoff, Laura Burkhauser, and Bradley Seeman fall squarely on the side of growing proven solutions, arguing that in order to reach a higher performing nonprofit sector we must “follow the “recipes” that earned proven programs their stellar ratings.”
- There was much for Millennial changemakers to chew on this month. First, there is a growing drumbeat questioning the relevance and value of college. Does the higher education model really work anymore? It’s a fascinating question to contemplate. And Naomi Schaefer Riley does so in the “College Tuition Bubble.“
- I’ve been on a real Steven Pressfield (author of The War of Art) kick lately. His worldview is that each individual was put on earth to create some specific greater good, but Resistance constantly fights to keep us from achieving it. If you need inspiration to overcome Resistance, read his post “How Resistance Proves the Existence of God.” Love it.
- And for those who are pursuing a life of social change despite the lure of a more traditional path, look to Thoreau for inspiration. For as Maureen Corrigan explains in her NPR review of a new biography of the man, “Thoreau’s youth seemed aimless to himself and others because there were no available roadmaps for what he was drawn to be…If Thoreau had committed to a professional career right after Harvard, his parents might have rested easier, but the world would have been poorer.”
Photo Credit: beggs
I came across a great article the other day, Rules for Brilliant Women, and as a female entrepreneur I found it really inspiring and affirming. But I realized nonprofit leaders need a similar list. Because just as women often sell themselves short, so too do nonprofit leaders. In fact, there are some interesting parallels between the place of women and the place of nonprofits in society, but that’s a post for another day.
So in the hopes of inspiring nonprofit leaders to claim their rightful place as true heralds of social change, here are 7 rules for brilliant nonprofit leaders:
- Find and Keep Your True North
As a nonprofit leader you probably receive advice all day, every day. From board members, to donors, to staff members, to colleagues, to bloggers and consultants (ha!), everyone has an opinion about how you should do your job. So close your eyes, take a deep breath, and find your true north. Don’t do what you think you “should” do, or what someone else tells you to do. Follow what you know deep down is the right path.
- Remember the Dream
The daily grind can wear a nonprofit leader to the bone. It is often an exhausting, thankless job. But you have to remember what got you here in the first place. And I bet that was some huge vision for how the world could be a very different place. Don’t lose sight of your overarching goal. And don’t lose heart that you may never get there. It’s the big honking dream that propels great leaders forward.
- Admit When You Don’t Know
Leaders don’t have to know it all. And in fact the best leaders are those who recognize their weaknesses and figure out how to address them. The first step is openly admitting when you don’t know (to your board, your donors, your staff). Only then will you find the freedom and power to scale that wall.
- Ask for What You Really Need
And once you freely admit what you lack, you must ask for it. Whether you need more staff, better technology, greater knowledge – demand it. Create a detailed list of what will make you more effective as a leader, put a price to those items, and then make the pitch to your board, to funders, to anyone who can help you get what you need.
- Don’t Wait for Permission
How many times do nonprofit leaders wait for their board chair, or a big donor, or a government official to allow them to do something? True leaders find permission internally and then show those around them why their path was the right one. I get that there are times when forging ahead without consent would be politically unwise, but those times are less often than many nonprofit leaders think. Don’t shut yourself and your staff down because you fear making someone else mad.
- Stop Being So Nice
The thing I love most about nonprofit leaders is that, for the most part, they are truly good, decent people. They are trying to make the world a better place, so by definition they are considerate of others. But sometimes you can take being nice too far. Being nice to the donor who leads your nonprofit the wrong way, or the staff member who can’t cut it may work for that individual relationship, but is detrimental to the larger organization and ultimately your mission.
- Hit Pause on Saving the World Once in Awhile
I don’t care how fast-paced and “always on” our world becomes, we always need time and space to breathe, reflect, regenerate. Because you are in the business of improving lives, as a nonprofit leader you are particularly prone to the martyr syndrome of equating taking a break with fewer lives saved. But you will actually be more productive if you regularly focus on things outside the realm of saving the world.
Oh nonprofit leaders, I love you so. You are brilliant, beautiful human beings doing truly amazing things. Own it.
Photo Credit: Shyamal
I recently finished the most amazing book. It wasn’t about nonprofit management, or social entrepreneurship, or leadership, or any of the other topics I usually write about here. But I think it is still quite relevant.
I read Wonder by R.J. Palacio at the repeated urging of my 9-year old son who read it voraciously over a couple of days and was desperate to discuss it. Wonder is a young adult novel about an amazing 5th grade boy named Auggie who was born with countless physical challenges but also a deep wisdom and uncanny ability to change the people around him for the better.
While the book is about Auggie’s more difficult than usual transition into the highly charged world of emerging adolescence, it is also, and more importantly, about what makes humans both incredibly imperfect and deeply beautiful.
The book takes place over Auggie’s 5th grade school year when he enters a private school that first struggles to accept him but later fully recognizes his gifts. Along the way we learn a lot about human nature, it’s depths of cruelty and divisiveness, but also it’s soaring ability to change and to love.
What moved me most about this book was the 5th grade graduation speech by the school principal, Mr. Tushman. In looking back over the last year of Auggie’s remarkable presence in his school, Mr. Tushman finds there the opportunity that we all have as humans to be “kinder than necessary.” He helps his audience, and all those who read Wonder, realize that as humans we hold in our hands – in every choice, in every action – the possibility for tremendous good:
In The Little White Bird [J.M. Barrie] writes, ‘Shall we make a new rule of life…always to try to be a little kinder than is necessary?’ Here Mr. Tushman looked up at the audience. “Kinder than is necessary,” he repeated. “What a marvelous line, isn’t it? Kinder than is necessary. Because it’s not enough to be kind. One should be kinder than needed…We carry with us, as human beings, not just the capacity to be kind but the very choice of kindness…Children, what I want to impart to you today is an understanding of the value of that simple thing called kindness…In the future you make for yourselves, anything is possible. If every single person in this room made it a rule that wherever you are, whenever you can, you will try to act a little kinder than is necessary…And if you do this, if you act just a little kinder than is necessary, someone else, somewhere, someday, may recognize in you, in every single one of you, the face of God.”
And it occurs to me that in the work of social change, we as social entrepreneurs are making a conscious choice to be kinder than is necessary. We are choosing to go against the status quo of growing poverty, crumbling educational and political institutions, climate change. We are choosing a different, harder, but better path.
So when the news of the day, or the many problems of the world get me down, I think back to Mr. Tushman’s speech. I think about the power that we all, as single individuals, have to make this world a kinder, better place. And I think of the many social change leaders across the country, across the world who are choosing every day to be kinder than is necessary. And that makes me smile.
Ever since last year’s Letter to the Donors of America from GuideStar, Charity Navigator, and BBB Wise Giving Alliance there has been a growing movement to debunk the “nonprofit overhead myth,” the notion that donors should evaluate nonprofits based on the percent they spend on “overhead” (fundraising and administrative) costs.
More and more articles (a most recent one here) are cropping up explaining the overhead myth and highlighting donors who overcame it. And even fundraising journal Advancing Philanthropy is devoting their entire Spring issue to the topic.
But at the same time we have very obvious examples of the continuing strength of the overhead myth. The latest is nonprofit darling Charity:Water, which is often held up as the gold standard of innovative fundraising and nonprofit strategy, claiming that 100% of their donations go “directly to the field.” And thus the overhead myth lives on.
Will we ever be rid of the idea that nonprofits can somehow achieve a nirvana where very little (or no) money goes to boring things like salaries, technology, infrastructure, fundraising, leadership development, planning, R&D?
I wonder if we could gain more traction by talking less about the negatives of an overhead myth and talking more about the positives of nonprofit organization building.
For example, one of the things that is often considered “overhead” and rarely gets funded is nonprofit leadership development. But in the for-profit sector, leadership development is viewed as an incredibly important and worthy investment. According to a recent article by the Foundation Center, the business sector spent $12 billion on leadership development in 2011, 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.
And leadership development can have such a positive return on investment. A stronger nonprofit leader can:
- Recruit, train and manage a more productive and effective staff
- Engage a more invested board of directors
- Use money and other limited resources more strategically
- Open a nonprofit to bigger and better networks
- More effectively manage to outcomes
- Create an overall more highly performing nonprofit
So what if we refocused the overhead myth discussion on the power of nonprofit organization building? Beyond leadership development, investing in nonprofit organization building means money for things like: talented, effective fundraising staff; smart long-term planning; performance management systems; effective technology.
At the core, organization building is about creating a smart, strategic nonprofit that can actually realize the outcomes it was set up to achieve. Organization building can make the difference between a nonprofit that is just getting by and a nonprofit that is actually solving problems.
Photo Credit: liquidnight
“Here’s my problem…It’s obvious these people have money, they just don’t want to share it with us.”
What this executive director fails to realize is that the burden to connect the dots for donors lies squarely on her shoulders. It is up to nonprofit leaders to articulate – in a compelling, inspiring way – how their nonprofit is creating a solution to an important social problem, and why donors should care about and invest in that solution.
A Case for Investment can help you do just that.
Now more than ever, nonprofits are struggling for funding amid growing competition and diminishing available dollars. At the same time, burgeoning interest in performance management and impact investing have focused more donors on the outcomes their investment in a nonprofit will bring.
Donors, especially major donors, are less likely to give to a nonprofit because the organization “does good work” and more likely to give because a nonprofit demonstrates how it creates a solution to a social problem the donor cares about.
Those nonprofits that want to continue to attract and grow philanthropic investment must create a compelling, thoughtful argument for why a donor should give to their organization. This argument is called a “Case for Investment.” Driven by a thoughtful combination of data and emotion, a good Case for Investment can help a nonprofit communicate and connect with their target donors much more effectively.
The Case for Investment Step-by-Step Guide can help you create your nonprofit’s case.
“I am using it as a catalyst to create a branding campaign with my Marketing Committee. Of course, this will be used for fundraising and grant writing as well. We really needed the framework to build value for our donors, volunteers, and clients.”
A good case for investment is the fundamental building block from which all donor communications, marketing materials, grant proposals, website language, and more is born.
The Case for Investment Step-by-Step Guide is broken down into ten sections:
- Why Create a Case for Investment?
- How to Use This Guide
- The Need
- Financial Model
- Strategic Direction
- Resources Required
- Social Return on Investment
- Next Steps
In each section there is a series of questions, which you will answer. Your answers to these questions become the basis for your final Case for Investment. Examples of other nonprofit’s cases for investment are highlighted in each section, allowing you to see how others have made their arguments.
Photo Credit: JHall159
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