I was in a meeting with a group of nonprofit leaders the other day, and one of them voiced an often-heard complaint: “There just aren’t many foundations funding nonprofit capacity building.”
I was instantly reminded of my mother’s admonishment when I would come home from school with complaints about a classroom rule or a frustrating teacher. She would say, “Well, you have a mouth on you, don’t you?” Her quip was intended to encourage me to stop complaining about an inadequacy (however small, in my case) and do something to change it.
While I am the first to bemoan the lack of adequate resources in the nonprofit sector, nonprofit leaders themselves do have some agency to turn the tide and find funding to create more effective and sustainable organizations.
Rather than searching for donors who already express an interest in funding nonprofit capacity (like fundraising staff and systems, program evaluation, technology), it is actually more effective if a nonprofit leader takes it upon herself to create her own capacity funders.
But that requires a process, like this:
Move From Scarcity to Abundance Thinking
You can’t hope to solve your capacity challenges without thinking that they are, in fact, solvable. Many nonprofit leaders are so used to going without that they don’t allow themselves and their staffs to envision what could make things better. So start by brainstorming with your staff the hurdles standing in your way (lack of fundraising staff, inadequate technology, poor long-term planning, disengaged board of directors). Then list the kinds of investments you could make to solve those challenges (new staff positions, new technology and systems, strategic planning, board training) without constraining those potential solutions due to their costs.
Create a Capacity Building Plan
Once you have articulated what is standing in your way and the potential solutions to those hurdles, create a plan for overcoming your nonprofit’s challenges. Because funders often see capacity funding as more “risky” than traditional programming support, a nonprofit leader interested in securing capacity building funds must put together a clear plan for the need, solutions, costs and execution plan for capacity support. Clearly articulate what capacity changes you need to make, why, what those changes will help you accomplish, and over what timeframe.
Create a Capacity Building Budget
Attached to your capacity building plan must be the dollars necessary to implement the plan. What would it cost for a new donor database, a program evaluation, or your other needed capacity investments? Do the research and then create the capital requirements, over an adequate timeframe (2-3 years), for the capacity building needs you have. Now you know how much capacity capital you need to raise.
Brainstorm Capacity Donors
Just as you would with a traditional capital campaign, create a list of potential donors to whom you will pitch this “capacity capital campaign.” This is where the real magic happens — when you turn traditional donors into capacity building donors, perhaps without them even knowing it. A good capacity building donor is someone (a major individual donor, board member, or foundation funder) who is already a donor to your nonprofit and can be convinced (through your excellent persuasion skills) that an investment in your capacity building plan (above) will actually help your organization do even more of the things they love.
Work the Prospect List
Just as you would in a major donor campaign, begin meeting one-on-one with these prospective capacity building donors to share your capacity building plan and articulate how critically important these capacity building investments are to the future of your work together. Make a clear, compelling argument about how greater organizational capacity will help you further the mission that these donors love. Connect greater effectiveness and sustainability directly to more programming, more people served, more outcomes achieved.
Demonstrate the Return on Their Investment
Once you’ve secured them, provide those donors who become capacity builders a regular update on the progress of your capacity building efforts. And I have seen tremendous results that nonprofits can report on these types of capacity investments. One of my clients was able to translate $65,000 worth of capacity building investments in strategic planning, board development, fundraising training and leader coaching into 300% growth in the number of people they reached with their services. Another client turned $350,000 worth of capacity building investments in a new donor database, fundraising staff and training, and donor research into a $1.4 million annual increase in fundraising. If you make enough and the right kind of capacity investments, you can see gains in programming, efficiency, and fundraising effectiveness, so share those wins with those who invested in them. And believe me, your capacity donors will be hungry for more.
Instead of continuing to complain about a lack of capacity funding in the nonprofit sector, let’s fix it. A big part of the solution lies in nonprofit leaders planning for and initiating capacity building conversations with their current donors. And in so doing, nonprofit leaders themselves can change philanthropy for the better.
To learn more about turning your donors into capacity funders, download the Launch a Capacity Capital Campaign Step-by-Step Guide.
Photo Credit: taxcredits.net
One of the biggest complaints about nonprofit strategic plans is that once created, they just sit on a shelf. A strategic plan is completely wasted effort if you neglect the final step of operationalizing it.
And by that I mean creating an annual tactical plan and monitoring process that directly tie to the larger strategy. In fact, lack of the operational part of your strategic plan is one of the 3 biggest problems with nonprofit strategic planning.
It does absolutely no good to have big goals that you want to accomplish and a larger future direction for your nonprofit’s work if you don’t have a way to connect that to your day-to-day operations.
So here are the 6 steps to do just that:
1. Create the Strategy
Start with the broad goals and objectives of your strategic plan. Typically, I recommend a nonprofit have 3-6 broad goals over a future (say 3 years or so) period. These should always tie to your longer term Theory of Change, and each goal should be broken down into the 5-10 objectives necessary to get there. And it goes without saying, but you have to create this strategy through a defined strategic planning process.
2. Create Annual Milestones
Once the board has approved those broad goals and objectives, staff needs to create a milestone table that articulates a lead person responsible (“Lead”) and a deliverable for each objective at the end of each year of the strategic plan (“Milestone”), like this:
3. Create a Year One Operational Plan
Once you have that milestone table, you can pull out the milestones for the first year and develop your Year 1 operational plan (below), which lists monthly or quarterly checkpoints for each objective’s milestone for that year. This will helps you monitor (step #4 below) whether the plan is coming to fruition.
4. Monitor Monthly at Staff Level
This operational plan should be reviewed on at least a monthly basis, where the staff comes together to analyze their checkpoints and report on what’s working, what’s not, and where they need to make adjustments.
5. Monitor Regularly at Board Level
Whether your board meets monthly, quarterly or (yikes!) less, you need to report to them on the progress of your strategic plan at every meeting. Since the board is ultimately responsible for the strategic direction of the organization, they need to understand how it is going. Using the operational plan above, you can easily highlight where: things are moving smoothly (green), things need discussion or action (yellow), and serious problems or hurdles (red) lie.
6. Adjust Accordingly
On at least an annual basis, the full board should review the organization’s Theory of Change and goals and objectives of the strategic plan to determine if any revisions (due to changes in internal and/or external circumstances) need to be made.
I believe that a huge reason for the distaste nonprofit leaders have for strategic planning comes from the poor operationalization of those plans. You simply cannot hope to execute on a strategic plan without tactics to get there.
You can learn more about what a strategic planning process looks like here.
Photo Credit: Kevin Utting
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’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
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
There was a very disturbing report last week. An NPR poll found that half of Americans who work 50-plus hours a week don’t take all or most of the vacation they’ve earned. And among those who do take vacations, 30% say they do “a significant amount” of work while on vacation.
I cannot stress enough how important it is to the critical social change work we are all doing to take a break every once in awhile. And I mean really take a break and reconnect with those things that make us human, not machine. I don’t care what your job is and how critically important the work you do is, you will do it more effectively if you are a whole person. And you become and stay a whole person when you take time away from that job.
And because I believe in practicing what I preach, I’m about to take my own advice and disconnect from the world of social change (and social media) for the next few weeks. Instead I will be relaxing, playing with my kids, reading, hiking, and just being.
But in case you’ve already taken your time off (good for you!) and you want some things to read while I’m out, here are a few things to explore:
- If you are feeling uninspired for the work ahead, read this, this or this.
- If you want to read other viewpoints on social change, check out past guest bloggers here and here, or catch up with some interviews with social change leaders.
- If you want to encourage some big, game-changing conversations with your board, have them read this, this or this.
- If you need help moving your nonprofit in a new direction, check out these step-by-step guides or books.
- And if you like lists, check out the best social change books, blogs, or conferences.
I’ll be back to writing the blog in mid-August. In the meantime, I hope you all find some space to breathe, to think, and to reconnect with what you are meant to do. Because believe me, we need you back in the Fall inspired and ready for the hard work ahead.
Photo Credit: Five Furlongs