It never ceases to amaze me how often nonprofit leaders give away their expertise and their time – for free.
Here’s just the most recent example I’ve encountered.
A leader of an education nonprofit, let’s call her “Amy,” was approached by a group of funders who wanted to start a similar program in a different city. They had already identified a potential leader of the effort, but this leader, let’s call him “Mark,” was pretty inexperienced in working with school districts and in managing a large scale nonprofit effort.
So the group of funders asked if Amy would be willing to help Mark. This would involve Amy sitting in on some community meetings and providing one-on-one coaching on a regular basis to Mark.
Because Amy’s nonprofit also received funding from some of these funders, she felt obligated to comply. And let me be clear, Amy was offered absolutely no compensation for her time, effort and expertise.
There are several things wrong with this situation.
First, although this group of funders found tremendous value in Amy’s expertise, they did not assign any financial value to that expertise. They sought her out, and indeed already determined that their effort would be hampered without Amy’s guidance. However, they also assumed (perhaps subconsciously) that this nonprofit leader was so passionate about the education space, that she would be more than willing to donate her time.
Second, Amy herself did not assign a financial value to her time. She was complicit in the funders’ assumption that, while her time has huge social change value, it has no financial value. But the two must correlate. Amy’s time is a limited resource. And thus she must calculate the financial value of that resource.
But, third, nonprofit leaders don’t necessarily have the tools to calculate the value of their time.
In the hopes that other nonprofit leaders don’t get caught in Amy’s predicament, here’s a quick three-step process for calculating the financial value of your time as a social change expert, based on the financial value your organization assigns to your time.
- Determine Your Annual Cost: Take your annual salary and add the monetary value of your annual benefits (healthcare contribution, social security contribution, etc.). Typically benefits are calculated at an additional 25% of your salary. So, if your annual salary is $85,000 you would multiply that by 1.25 to get the total of your salary plus your annual benefits: $85,000 x 1.25 = $106,250.
- Determine Your Hourly Cost: Then, divide that salary + benefits number by the average number of working hours in a full-time position (so 52 weeks a year at 40 hours per week is 2,080 hours per year). I know you probably work more than 2,080 hours in a year, but this is just a general full-time number of hours. So, in this example, your hourly rate would be $106,250 / 2,080 = $51.08. Or $51 per hour, just to make it easy.
- Determine Your Hourly Value: If you are feeling bold, you can add a profit margin to this number, just as anyone who is paid to offer their expertise (lawyer, consultant, doctor) does. The idea here is that if someone pays you $51 for an hour of your expertise, you are only breaking even. But if you actually want to make a bit of profit that you can plow back into your organization, you could add in a little margin. So perhaps you round up to $65 per hour.
Now, you have a number you can use.
If Amy had been armed with such a calculation, when the group of funders came to her, she could have estimated the number of hours required (including community meetings, coaching, etc.) and then presented it to the funders. Perhaps the hours totaled 50 over the course of a 12-month period. This would have a financial value then of 50 x $65 per hour = $3,250, which I would argue is still a very conservative valuation.
So that group of funders would need to make a payment to Amy’s nonprofit (above their normal contributions) of $3,250 in order for her to agree to their request.
(And now that you have a way to calculate the hourly value of your time, you can also use it to determine the value of your time spent on other things — for example, fundraising activities like this.)
I can hear nonprofit leaders and funders gasping, “How dare you suggest that a nonprofit leader ‘charge’ a funder for her time.” And others might worry that funders would be offended by the request and end their other contributions to Amy’s nonprofit.
But shouldn’t nonprofit leaders be aware of (and transparent about) the costs embedded in how they are spending (and being asked to spend) their time? Nonprofit leaders and funders could then have a more illuminating conversation. Perhaps Amy’s group of funders won’t want to invest $3,250 in starting up Mark’s new nonprofit. If that is the case, then they probably weren’t very committed to the new effort in the first place. Far better to know that up front rather than after Amy sunk 50 hours into something that has nothing to do with her organization.
It’s time for nonprofit leaders (and their funders) to recognize the financial value of the social change expertise those leaders possess and invest accordingly.
Photo Credit: David Lofink
I’m excited to be heading to Pennsylvania next month to speak at the 2016 Nonprofit Day Conference. My keynote address for the conference will be “The Future of the Nonprofit Sector.” I wanted to share an abbreviated version of the speech with you here via the Social Velocity Slideshare library.
In my mind, there are some fundamental shifts happening in the sector that will be important to watch. They include:
- Increasing competition in the space
- A greater demand for results and social change
- An increased use of advocacy to achieve that change
- A move to more “networked” approaches
- Less “starving” nonprofits of their operational needs
- And (of course) a move from fundraising to financing
These are interesting times, and they hold tremendous opportunity, I think, for the social change sector.
I’ve started working in a new area of the social change space that I’m really excited about. Recently I’ve been helping some foundations figure out what market they are (and should be) in. Because if a foundation can be smarter and more strategic about figuring out where they should focus their efforts within a particular social problem, they will see a higher social return on their investment.
As I’ve said countless times, you cannot develop or execute on a strategy without really understanding the market in which you work. Although we might like to deny it, nonprofits (and foundations) exist in a market economy, which means that they (like everything else) must compete amid the other actors and entities in the space. So it is absolutely critical that leaders understand what unique value their work brings to the space. This can be done through a Marketplace Map, which is one of the first exercises (along with a Theory of Change) that I help nonprofit leaders create during a strategic planning process.
An organization is best positioned to create social change in a sustainable way when their core competencies (what the organization does better than anyone else) intersects with a set of social problems apart from potential competitors or collaborators. This is not at all to say that you shouldn’t collaborate. But when you do, you must clearly understand what you bring to the table that is distinct from and additive to what your competitors bring to the table. In mapping their marketplace, an organization can much more clearly understand and articulate their value proposition and can direct their resources more effectively to the realization of that value proposition.
And the same is true for foundations. I am ever optimistic that just as nonprofit leaders are getting smarter and more strategic about the work they do, foundation leaders are as well. I would love to see more foundations taking a step back and really analyzing the social change marketplace in which they operate and determining how they can bring unique value to that marketplace.
Let’s say for example a funder is really passionate about addressing climate change. But there are many moving parts in the marketplace of that social problem. There are scientists and researchers and other experts who have views on the problem and the efficacy of potential solutions. There are many nonprofits in many different categories working on various aspects of the larger problem. There are policies and policymakers who are addressing the issue in various ways. There are other foundations and philanthropists who are investing in different solutions. It can be overwhelming for any particular funder to know where they specifically can have an impact on a very complex climate change marketplace.
So I help the foundation analyze these various elements, where and how effectively each is operating, where trends effecting the social problem are moving, and where the particular funder can add unique value.
While I spend a good deal of time on this blog giving voice to the challenges of the nonprofit sector, there is no doubt that the philanthropy that funds the sector has room to grow as well. And in my mind, part of that growth involves foundations getting more strategic about exactly where they can create the most value with their dollars. Because if both nonprofits and the philanthropists that fund them can be smarter about the marketplace of social problems, we just might get closer to solving them.
Photo Credit: ribosomis
Since I was on vacation in late July and early August, I’m combining the last two months of great reads into one. The summer of 2016 certainly was a dark one. From continuing police violence against black men, to the shootings of police officers in Dallas and Baton Rouge, it seemed we were becoming a nation truly divided. And tremendous flooding and devastation in Louisiana that was largely ignored by the media was heartbreaking to watch.
But, there were also moments of hope. From new research showing that donors are increasingly interested in investing in what works; to philanthropic leaders calling for better partnerships among the public, private and nonprofit sectors; to a way to move the conversation away from “overhead,” the summer months made for some very interesting reads.
Below are my picks of the 10 best reads in the world of social change in July and August. But let me know in the comments what else I missed while I was out.
- More police violence against black men and the shootings of police officers in Dallas and Baton Rouge arguably broke the country’s heart in July. Ira David Socol traced Americans’ growing fear of “the other” over the past few decades and how it has contributed to where we are today. And Pew Research offered some data about how Americans see the Black Lives Matter movement. While Heinz Endowment President Grant Oliphant called for an end to the violence, in an incredibly moving series of blog posts where he wrote: “We are called — by everything our diverse faiths teach us, by everything we believe about ourselves and our country — to come together as one people, whether we bravely wear the blue or have come to fear those who do. We are called by all that is good in our hearts to see ourselves in all the fallen, all the lives lost, all the families grieving, all the communities struggling to make sense of their brokenness. We are better than this violence. Deep down in our souls we know this. We are so, so much better than this.” And President Obama gave an incredibly moving speech at the funerals for the Dallas police officers, where he encouraged us all to, “With an open heart…worry less about which side has been wronged, and worry more about joining sides to do right.”
- But the Black Lives Matter Movement is not just aimed at addressing police violence, the Movement recently released a K-12 education platform designed to fix “a U.S. public-school system…so broken that college is never an option for many young people of color.”
- Amid these deepening divides and a growing wealth inequality, Andy Carroll from Exponent Philanthropy argues that philanthropy can no longer be expected to solve everything. Rather, we need partnerships among the public, business and nonprofit sectors to address our growing challenges.
- And then there was the tremendous flooding and devastation in Louisiana. Despite the fact that it was the largest natural disaster since Hurricane Sandy in 2012, the media and philanthropy largely ignored the disaster.
- Curtis Klotz from the Nonprofits Assistance Fund offers a phenomenal graphic to use in changing the conversation from “nonprofit overhead” to “core mission support” at your nonprofit.
- And speaking of how nonprofits use money, FASB (the Financial Accounting Standards Board) just released some significant updates to their standards for nonprofit accounting. The changes impact net asset classes, investment returns, expenses, liquidity and availability of resources, and presentation of operating cash flows. Every nonprofit leader should understand these important changes.
- Founder of Family Independence Initiative, Mauricio Lim Miller argues that just as businesses constantly use technology to understand consumer behavior, nonprofits should tap into technology to “let the people they serve dictate what works best.” And Melissa Chadburn might agree with Mauricio’s premise that fighting poverty requires a better understanding of the causes of that poverty given her scathing piece, “How Well-Meaning Nonprofits Perpetuate Poverty.”
- Penelope Burk’s annual fundraising study revealed that more donors are interested in results than ever before. Five years ago, only 16% of donors surveyed gave based on a nonprofit’s results vs. a whopping 41% this year. And research from MobileCause shows that Millennials and GenXers are now the vast majority of the U.S. workforce so if you want to reach them as donors you better be online and mobile.
- Ever the trailblazers in foundations interested in building nonprofit capacity, the David and Lucile Packard Foundation unveiled a fabulous new online Knowledge Center with tons of resources for improving nonprofit organizational effectiveness.
- Jim Schaffer questions how “philanthropic” the digital giants Amazon, Facebook and Google actually are. And Lucy Bernholz warns nonprofits of the dangers of trusting Facebook’s new fundraising offerings.
Photo Credit: radness.com.au
Something really interesting could emerge out of new federal rules about overtime pay. My hope is these new rules force a better conversation between nonprofits and their funders about the real costs of creating social change.
This coming December new Department of Labor rules will go into effect doubling the salary threshold for guaranteed overtime pay, from about $23,000 to $47,476 so that employees (in any sector) who make less than that threshold will be guaranteed overtime pay whenever they work over 40 hours a week.
This new rule has a potentially enormous impact on nonprofits, which (because of their resource-constrained nature) often underpay and overwork their employees. Many have pointed out what a burden this will place on an already strapped nonprofit sector, which often tries to squeeze ever more productivity out of staffs that are already working well over capacity.
As the National Council of Nonprofits argues, nonprofits receiving government contracts signed prior to this new ruling will be forced to deliver the same services at a higher cost:
“Nonprofits with government grants and contracts at any level of government (local, state, tribal, or federal) will now be put in the position of having to comply with new federal requirements that impose new costs not known when those grants and contracts were signed. Unlike businesses that can raise prices, or governments that can raise taxes or curtail public services, nonprofits with government grants and contracts may find themselves contractually bound to maintain services at increased costs that may not be expressly covered by existing written agreements.”
Certainly in the short-term this new overtime rule puts nonprofits in a really difficult position.
But I wonder if in the long-term this new rule could shine a light on the impossible situation in which many funders put nonprofits. With a new ceiling on just how many staff hours a nonprofit can get out of a dollar, I wonder if nonprofit leaders will be forced to stand up and say “Enough is enough!”
Writing in The Atlantic about the potential impact of the overtime rule change on nonprofits, Jonathan Timm seems to think the solution is for nonprofits to simply charge funders more for their services, as he put it:
“If nonprofits truly care about the well-being of their staffs, one easy place to start is simply to write higher salaries into budget proposals. Likewise, government and philanthropic funders could be a lot wiser in how they dole out money: Scarce public-service dollars can impose a state of financial stress on the people who put them to use.”
Ahhhh, if only it were that easy…
But at its core, that is the problem. Nonprofit leaders are wary of calculating and articulating the full costs (including all staff costs) of their programs, and government and philanthropic funders are unaware of and unwilling to pay those full costs. But with growing demands on a nonprofit sector already stretched to the brink, something has to give. Perhaps this new reality will force a conversation about what it really costs to address the social challenges we face, and how we must effectively and adequately support the nonprofit sector we have charged with addressing many of those challenges.
The problem has always been that nonprofit leaders are so committed to the work they do and so empathetic towards their clients that when budgets and staff are tight, those leaders simply work longer and harder and ask their employees to do the same. But with these new rules that can no longer be the case.
Program budgets will have to grow to reflect the real costs of those programs (including all of the countless staff hours previously hidden by free overtime). And funders who want more and more services at lower and lower costs will be forced to reckon with the actual costs of the programs in which they want to invest. These new overtime rules will force the “real costs” conversation that many in the nonprofit sector have been encouraging, where nonprofits calculate and report the full costs (including the actual cost of staff time to deliver the work) of the work that they do.
So instead of being a negative change, perhaps these new overtime rules could actually serve to propel nonprofits and their funders toward calculating, articulating and investing in what it really takes to create social change. Call me an optimist.
Photo Credit: Dave Dugdale
Because I talk about change in the nonprofit sector a lot, I sometimes get inquiries from nonprofit leaders who think they want change at their organization, but actually don’t.
A nonprofit leader might be excited by the idea of dramatically improved fundraising results, or a board who is engaged and invested in the work, or funders who want to step up, but she isn’t willing to do the hard work to realize that change.
I recently talked with a nonprofit leader who was interested in a Financial Model Assessment because he was intrigued by the idea of potential revenue increases. But when I explained that realizing those changes might necessitate other changes — like how he structures his staff, how involved in decision-making he allows the board to be, even how he crafted their long-term strategy — he began to balk.
But the fact is that you simply cannot expect a different result if you continue to operate in the exact same ways.
When I work with a nonprofit organization, my role is to lead a change process so that when I leave, the organization is more sustainable, more engaged and engaging, more strategic and integrated, and ultimately more effective at creating social change.
But significant change is not easy. And for it to truly come to fruition it requires that the nonprofit leader must fully commit — and get her board and staff to fully commit — to creating real, lasting change.
The nonprofit sector is sometimes criticized for being too stuck in its ways. And indeed it can be hard to create change amid a sector that is so consensus-based. Sometimes even the smallest decisions must involve discussion among staff, the board, even funders and other stakeholders.
So if you really want the reality that your nonprofit faces to be different, if you want to find greater financial sustainability, if you want to achieve more program results, if you want to attract more and bigger funders, if you want a stronger, more effective board, you have to commit to real change. And then you have to get others at your organization to commit to real change as well.
I can often tell the difference between a nonprofit leader who is just playing at change, and one who is actually committed to doing the hard work. Ask these questions to determine if your nonprofit is truly ready for meaningful change:
- Are we willing (at every level of the organization) to take a hard look at how we operate and make changes where behaviors or systems no longer make sense?
- Are we willing to have difficult conversations, perhaps on formerly taboo topics, in order to find a better way forward?
- Are we excited enough by the potential rewards of change to work hard to convince skeptics (on the board and/or staff) to come along?
- Are we as an organization willing to invest the time (and patience) in a change process that could take months or years to fully realize?
- Are we willing to open everything we do as an organization to discussion and analysis?
If you can find a critical mass of board and staff members who can answer yes to these questions, then your nonprofit is a candidate for true change and a more effective and sustainable path forward.
Because change is really hard. But with effective, meaningful change can come great reward.
Photo Credit: Pat Ronan
One of my favorite parts of my job is the time I spend working one-on-one to coach nonprofit leaders. One of my clients jokingly refers to our coaching sessions as “nonprofit therapy.”
While we certainly don’t delve into psychology when we meet, it is, I think often cathartic for nonprofit leaders to have an impartial third party who can listen to their frustrations with a disengaged board, understand the loneliness of leadership, appreciate their dismay with funders who are pulling them in too many directions, empathize with their fear that fundraising goals won’t be met.
We all — every single one of us — need someone in our lives who understands the challenges we are facing and can offer some guidance, new ideas, insights that can move us from a rut to a more productive path.
When I start a coaching session with a nonprofit leader, I often ask some key questions to get us moving forward:
What is the biggest thing bothering you right now?
Sometimes nonprofit leaders are so stuck in the weeds, so overwhelmed, so exhausted, or so alone that they cannot pinpoint one issue, let alone figure out a way forward. So I start by encouraging them to just unpack everything. This will often result in a venting session, and that’s completely fine. Letting off steam is absolutely crucial. And nonprofit leaders have very few confidants with whom they can share those struggles. Since a nonprofit leader always needs to put on a brave face to her staff, her board and her funders, she has very few people she can tell the bitter truth, so that’s a big part of my role.
How can we prioritize these challenges?
While it might be tempting, we cannot stop with venting. Once we’ve made a list of the challenges, frustrations and concerns a nonprofit leader is facing, I help her to prioritize those challenges in terms of the biggest threats and their dependence on other things to be resolved. So for example, a nonprofit leader who is struggling to meet her fundraising goals, is frustrated by an ineffective board, and lacks enough staff must analyze how large a threat each of those issues is related to the others, and which are dependent on the others to solve. It may be that kicking the board into gear might help alleviate the other two problems because if the board can start helping bring money in the door, she can better address her fundraising goals which leads to her ability to add additional staff.
Where can we tap into your existing assets?
But how do you do that? As I’ve said, nonprofit leaders are often very isolated and think it is all up to them. But if a nonprofit leader can think strategically about who might be able to help, he can move forward more effectively. A nonprofit leader who is struggling without enough staff and is challenged by his ineffective board could potentially find an ally or two among his board and/or funders. I help a nonprofit leader to think through potential allies who can help overcome a hurdle. A one-on-one conversation with a quiet, but well-respected board member about the specific challenge a nonprofit leader faces may yield that board member’s support and voice toward bringing the rest of the board around. Similarly, identifying one or two funders who could be convinced of the need to invest in capacity-building could yield additional staff and infrastructure to overcome those challenges.
I firmly believe that there is a solution to every challenge a nonprofit leader faces. But in order to get to that solution, a nonprofit leader must be willing to analyze the problem and think strategically and creatively about how she can solve it.
If you want to learn more about the nonprofit leader coaching I provide, download my Coaching benefit sheet. And if you want to learn more about being a strong nonprofit leader, download the Reinventing the Nonprofit Leader book.
Photo Credit: Vinoth Chandar
In this month’s Social Velocity interview I’m talking with Dan Cardinali, the new president and CEO of Independent Sector, a national membership organization that brings together nonprofits, foundations, and corporations to advance the common good.
Prior to leading Independent Sector, Dan was the president of Communities In Schools, the nation’s largest dropout prevention organization, with operations in 26 states and the District of Columbia. While there he led efforts to develop and advance an evidence-based model of integrated student service provision and launched a national growth strategy to increase the organization’s impact on improving public education. He is a 2007 Annie E. Casey Children and Families Fellow, serves as a trustee for America’s Promise, and is on the board of Child Trends. In May 2011 he was appointed by President Barack Obama to the Presidential Advisory Commission on Educational Excellence for Hispanics. He is also a member of the Leap Ambassador Community of nonprofit and philanthropic leaders.
You can read interviews with other social change leaders in the Social Velocity interview series here.
Nell: You have just become the new head of Independent Sector (IS). In a diverse and growing nonprofit sector that includes many ecosystem organizations like Independent Sector, what do you think the value proposition is for IS? What is the unique role that IS can and should be playing?
Dan: We were founded by John Gardner who was of the sector and believed deeply in the importance of the sector. It was distinct from government and the for-profit sector and uniquely positioned to support the American project. It played a unique and critical role to sustain American democracy and was also a source of profound community co-creation, rising up to provide really good solutions where there were problems and innovating to help communities evolve and grow, and supporting culture and defending the environment. At a time when civil society is shrinking around the world, the independent sector has an even more important role to play.
As for our capital I, capital S organization’s value proposition, we are unique in the country in spanning the sector. We hold the entirety of the grant seeking and grant making organizations and that purview we want to steward very carefully and thoughtfully. We want to be hyper disciplined in a world where there are a number of infrastructure organizations doing really good work, not to duplicate but align and leverage through collaboration. But there are still holes in our estimation in the landscape of what the sector needs. So we are going to remain disciplined in our role as an organization that is sector spanning and national in scope, grounded deeply in community, to determine what we do to add value to the original vision for a more robust social sector.
Nell: Independent Sector can potentially play a unique role because it stands at the intersection between nonprofits and those who fund nonprofits. Is there a bigger role for IS to play in bringing those two sides closer together, breaking down the power dynamic and helping more money to flow to effective organizations? If so what does that look like?
Dan: We are playing a role and part of it is modeling that these are two sides of the same coin – grant seekers can’t exist without grant makers and grant makers can’t get along without grant seekers. It would be naïve to pretend that those with financial resources don’t have an advantage, yet I equally think in the social sector that grant seekers at times abdicate the power that comes with knowing what they know to be effective and owning that. The opportunity exists to partner with grant makers, not just in the transactional sense, but in the co-creation of solutions to ensure that culture flourishes and that the environment is protected and flourishes, and that problems are solved.
In the Threads conversations IS convened with more than 80 partners across the U.S., concerns about the power dynamic were voiced at every stop. In response, IS and member organizations and experts are cooperating to model the best strategies for working together. We need to refocus the relationship on bringing the needed human, financial, and intellectual resources to bear, calling all people of good will to a higher purpose, rather than organizational sustainability.
Nell: Recently 22 nonprofit infrastructure organizations (like GuideStar, Grantmakers for Effective Organizations, etc.) wrote a public letter urging foundations to invest more in infrastructure organizations. Independent Sector was not one of the 22 organizations, but what are your thoughts on their argument and how does, or should, Independent Sector fit in?
Dan: What was encouraging about that letter from very reputable organizations is that it opened up a conversation. The philanthropic community has a role, an obligation, to support effective infrastructure organizations, and we have a responsibility to be effective. But IS will not be in a position to request that support without a discussion of what needs doing, how well we all are doing it, and how can we better leverage each other’s work. I am passionate about this topic, and I appreciate that this letter advanced the conversation. I expect IS will partner closely in the future conversations.
Nell: You come to IS after many years at the helm of Communities In Schools, which moved during your tenure to a very evidence-based approach. Do you see IS moving itself and/or helping the sector as a whole to move toward a more evidenced-based approach?
Dan: What we did at CIS was to create a virtuous circle between our programs and practice and our data and research to continually generate insights, make course corrections as needed, and build on success. This is how we roll. IS has been applying this approach for a long time. In the Threads conversations, we engaged practitioners using a credible analytic process. We listened to them, without presupposing what they would say, and we applied social science to produce a document, the Threads report. We then co-created a strategic framework that engages members and develops our partnership, just as we do with the IS conference coming up in November.
So the evidence-based approach is alive and well. Going forward we can look for ways to accelerate its use across the organization, through a thoughtful integration of technology and 21st century methods of engagement.
Photo Credit: Independent Sector