return on investment
Fundraising is, for the most part, a fundamentally misunderstood activity. There are a lot of misconceptions, among nonprofit leaders, board members — even donors — about effective ways to bring money in the door.
Here are are a few of the worst delusions about fundraising that persist in the sector:
- Events Are Fundraisers
Very few nonprofit events generate a net income after you factor in the direct (food, venue, invitations, entertainment) and indirect (board and staff time) costs that go into them. They simply are not profit-generating activities. If you are looking to your events to bring in a profit, calculate the cost to raise a dollar to see if they actually are. Some nonprofit leaders argue that events generate value beyond profit, vague terms like “awareness” or “goodwill.” That may be, but unless you follow-up with individual event attendees to turn that increased “awareness” or “goodwill” into money, there is little financial value to events. Turn your energies instead to low-cost, mission-focused cultivation and stewardship events for your major donors and major donor prospects, then you might have something.
- Crowdfunding Creates Revenue
Nope, it doesn’t. Revenue is the on-going money you need to keep your doors open and your operations running. A crowdfunding campaign, by definition, is a one-time deal. It is organized around a specific need or timeframe. Therefore the money it generates is not easily or regularly repeated. Crowdfunding could make sense for a nonprofit hoping to raise startup, growth or capacity capital (all one-time infusions of money). But that Kickstarter campaign is not going to keep the lights on, so look elsewhere (like a financing plan) for sustainable revenue.
- Major Donors Can Be Recruited En Masse
Major donors are secured through a long-term, systematic, one-on-one process. There is no quick way to bring large donors on board. My issue with mass major donor fundraising programs (like the Benevon model) is that when you ask people as a group to pull out their checkbooks, you are leaving money on the table. The check someone feels compelled to write after watching a 20-minute presentation with their friends pales in comparison to the one they will write after you’ve built a one-on-one relationship with them over time. Put together a strategic major donor campaign, along with the infrastructure and systems to execute on it, and you will create a long-term major donor base (and its corresponding revenue stream) for years to come.
- Skimping on Fundraising Staff and Systems Saves Money
While you may save a few thousand dollars in salary by hiring a novice fundraiser (instead of an experienced one), you will cost the organization hundreds of thousands of dollars in missed revenue. The same is true with cheap fundraising systems like an ineffective donor database, an unresponsive website, a cumbersome email marketing system, or a poor (or non-existent) marketing strategy. Figure out what it will really cost to build the fundraising team and systems you need and then raise the capacity capital to get there.
- Endowments Solve Money Woes
Let’s face it, an endowment makes sense for very few nonprofits. Even if you were able to convince donors to let their money just sit in a bank account (which is a big “if”), that money won’t really impact your bottomline. Even if you raise an endowment of $1 million, it will only generate $50,000 (assuming a 5% return) of operating revenue each year. Instead raise a much smaller amount of capacity capital which you could use to strengthen your fundraising infrastructure (more staff, better technology). Those improvements could increase your annual revenue by many times more than $50,000.
It’s time to face the facts. There are smart ways to raise money and there are delusional ways to (not) do it. Embrace the power of money and use it as a tool to create a more effective, sustainable organization.
Photo Credit: TaxCredits
Building and keeping a highly effective nonprofit staff is really tricky. The recently released 2015 Nonprofit Employment Practices Survey from NonprofitHR found that 50% of nonprofits surveyed plan to add new positions in 2015, compared to 36% of private companies. But, staff recruitment and retention are still significant hurdles for nonprofit leaders, with 52% of nonprofits lacking a recruitment strategy and 27% reporting their greatest retention challenge is low wages.
So how can nonprofits grow their staffs when they are hampered by significant recruitment and retention challenges?
Here’s how I coach my clients to build a highly effective nonprofit team:
Recruit Outside Your Comfort Zone
The 2015 Nonprofit Employment Practices Survey found that the top recruitment strategy for nonprofit leaders is to “use a network of friends and colleagues.” But that’s not a strategy. As with everything, nonprofit leaders must embrace the idea of a “networked nonprofit,” growing their connections to people and organizations outside their comfort zone. To find your next staff rockstar, be strategic about getting your job in front of new audiences and networks. Come up with a list of 50-100 people who might be connected to someone who fits the job’s qualifications. Think of strategic allies, leaders in the field, funders, volunteers. Send the job posting and ask them to direct great candidates to you. And in addition to posting the position on regular job sites, send it out through all of your social media channels and ask your board, partners, allies, funders, etc. to do the same. Cast your net far and wide in order to recruit the best and brightest.
As I said, one of the biggest challenges to retaining staff is low salaries. But the fact is that staff turnover is an enormous cost to an organization (recruitment, lost time, retraining) so convince your board that you should pay competitive salaries in order to save the organization money in the long run. Do salary research (at salary.com, or from nonprofit salary surveys in your region) and determine what a competitive wage for your position really is. Then convince your board to increase the budget to accomodate it. Move from the scarcity mindset to the abundance mindset, or if you just don’t have the funding right now, raise capacity capital to elevate your fundraising function so that you can recruit and retain top talent.
Hire The Right Person
Nonprofit leaders must go against the default, which is to hire someone with less experience than the position requires (since it’s cheaper). Instead hire someone who can take the position to the next level. Hire the person who has the demonstrated experience you need and is hungry to build that function in your nonprofit. But keep in mind that finding that person takes time. Many nonprofit leaders make quick hiring decisions because they are desperate to fill a position and end up suffering a poor fit later. Instead, create a detailed due diligence process which includes multiple rounds of interviews (quick screening phone calls, longer one-on-one interviews, interviews with their future staff colleagues, interviews with key board members), a written “homework assignment” to gauge their skills, and detailed reference checks. Be thoughtful and methodical in your process and spend the time it takes.
Once you have a great person in place, make sure you lead them effectively by using goals and strategy, not micromanagement. The best way to do this is to schedule a 30-60 minute, weekly, one-on-one meeting with each of your direct reports that focuses on your goals for their position. This allows you to give your staff ample leeway to shine, while monitoring their progress along the way. You will also have fewer interruptions during the rest of the week because your staff feels they get the attention and feedback they need in a regular, dedicated meeting. This creates an empowered staff, a confident leader, and a productive organization.
Like anything else, doing something well takes strategy and the will to effectively implement it. You can recruit and retain a phenomenal nonprofit staff, but you must be thoughtful about it.
If you want to learn more about the coaching I provide nonprofit leaders — on staffing, board development, fundraising, strategy and more — check out my Coaching page.
Photo Credit: Maurice Bramley
In today’s Social Velocity interview, I’m talking with Lowell Weiss, President of Cascade Philanthropy Advisors, which provides personalized guidance to foundations and individual donors seeking to deepen their impact. Previously, he served in leadership roles at the Bill & Melinda Gates Foundation, the Morino Institute, and in the Clinton White House.
You can read past Social Velocity interviews here.
Nell: Why do the Leap Ambassadors believe now is the right time to introduce the Performance Imperative (PI) to the nonprofit sector? There have been past attempts to move the sector toward outcomes and performance. What makes this effort and this timing different?
Lowell: We don’t know if we’ll break through with this effort. But the 70+ members of the Ambassadors Community are committed to giving it our all, because we believe that performance matters more than ever. The social and public sectors are increasingly steering resources toward efforts that are based on a sound analysis of the problem, grounded assumptions about how an organization’s activities can lead to the desired change, and leadership that embraces continuous improvement.
High performance is all too rare in our sector today. In fact, we don’t even have a commonly accepted definition of the term “high performance.” The PI is our attempt to create that common definition and then start the process of creating guideposts to help nonprofits who are motivated to improve their performance for the clients and causes they serve.
We’re not aware of any other effort devoted to this mission-critical topic that has engaged so many top nonprofit executives, funders, and thought leaders as co-creators. Perhaps even more important, the PI goes beyond the typical focus on helping nonprofit leaders do things right. When leaders do things right, they can achieve strong operational performance but not necessarily meaningful results for beneficiaries. To achieve the results embodied in their mission statements, leaders must go the extra mile, through diligent internal monitoring and external evaluation, to ensure they’re also doing the right things.
Nell: Does the PI apply to any and all nonprofit organizations? Is it a measuring stick that any size and domain area nonprofit should use, or are there certain types of nonprofits for which this really works?
Lowell: We believe the insights in this document are most immediately applicable to nonprofit organizations with budgets of $3 million or more. But many of the basic management principles apply to organizations of any size, just in less-intensive ways. Some of the details have a special focus on organizations that provide direct services. We believe the overarching framework is relevant for organizations of almost any type.
Nell: What will keep the Performance Imperative from becoming a dusty document rather than a movement? What does success look like for this movement and how will you measure whether that happens?
Lowell: Let’s face it: The topic of high performance is not a lightning-fast meme that will spread like a left shark or right-wing conspiracy theory. It’s a slow, complex idea that will require patient, methodical work to advance. Hence the importance of the Leap Ambassadors Community, a group of leaders who care deeply about high performance and are willing to share the gospel with trusted colleagues and peers.
We believe that when leaders with strong beliefs and passion coalesce around a common purpose, they can build a collective power and influence to drive positive change. They can create an infectious enthusiasm to pull other like-minded players into a growing community of action. That can only happen when you take the time to build relationships, trust, quality work, and collective pride in that work. Overall, we’ll judge our success based on a) to what extent the PI becomes an established framework for increasing the understanding and expectation of high performance as a critical pathway to greater societal impact; and b) to what extent the Leap Ambassadors Community demonstrates itself as a thoughtful, knowledgeable, aligned community of leaders and earns respect, collaboration, and support from prominent players in the field.
To be more concrete about how we will know if we’re on the right track, we’ve established metrics for the growth and engagement of the Ambassadors Community as well as for the value of the PI itself. Here a few of the milestones we hope to achieve over the next year:
- 100‐150 ambassadors have jelled as a community and are truly aligned with the community’s purpose.
- At least 25 nonprofits commit to using the PI to assess their strengths and needs; increase the board’s focus on mission effectiveness; improve their professional-development and organization-building efforts; or otherwise use the PI as a North Star to guide their journey toward high performance.
- Three to five foundations adopt the PI for themselves and their grantees, and they begin to apply the PI in their grant decisions and grantee support.
- Three charity ratings or information providers build the PI into their offerings.
- At least two vendors prominently use the PI in their suites of products and services.
- At least two prominent nonprofit management and leadership programs incorporate the PI as a core staple in their products and services.
- At least one institution creates a prominent award aligned with the PI or adapts an existing award.
Nell: Where do funders and regulators fit into this push for higher performance in the sector? One of the things that holds nonprofits back from high performance is an inability to spend the money it takes to achieve high performance (money for infrastructure, evaluation, staff, etc.). How do we fix that and where does fixing that fit into the movement’s plans?
Lowell: Funders and regulators can and must play a role. Right now, I’m helping a multiservice agency transition from providing compassionate care to ensuring that its clients achieve meaningful, measurable, sustainable life outcomes. The agency is trying to live the PI. But here’s the sad reality: The journey toward high performance is making the organization’s development challenges harder, on net. That’s because there are so few funders who understand the value of high performance—and even fewer who reward it.
To make the leap to high performance, nonprofits need creative funders willing to think big with them—not just ask for more information on results. They need funders who understand that making the leap requires more than program funding and more than the typical “capacity-building” grant. They need funders who make multi-year investments in helping nonprofit leaders strengthen their management muscle and rigor.
That’s why we’re so supportive of the work of Results for America and the Coalition for Evidence-Based Policy, organizations that are helping governments to base funding decisions on evidence and results. And that’s why the Ambassadors Community is developing the case for high performance that we can start bringing directly to funders. Bridgespan Group Co-Founder and former Social Innovation Fund Director Paul Carttar and Center for Effective Philanthropy President Phil Buchanan are co-leading a working group of ambassadors to build the case for funders. They are planning to convene a dozen+ foundation leaders to help flesh out the most effective arguments and evidence we can assemble to persuade funders that they have a better chance of accomplishing their missions if they support their grantees’ pursuit of performance.
Photo Credit: Cascade Philanthropy Advisors
Recent studies of nonprofit donors have found that the majority aren’t interested in impact. But what if that current reality isn’t also future reality but rather an opportunity? What if just as Apple created a market for smartphones where one didn’t exist, we could create a market for social change funding where one currently doesn’t exist?
As I mentioned in my 10 Great Reads list for January, data wonk Caroline Fiennes reviewed recent studies on donor behavior and found that donors don’t increase their donations when shown nonprofit performance data. And Caroline is not alone, others have also argued that donors just don’t care about performance.
This could be depressing because if donors aren’t interested in the effectiveness of a nonprofit they won’t shift their money to the nonprofits more effective at creating social change. In other words, we have no hope of solving social problems if we can’t channel money to those entities that are actually solving those problems.
Apple is probably the most obvious example of a market maker, creating consumer demand where there was none. They have continually created innovative products for swooning consumers who previously had no idea they needed those products. Before creating the first iPhone prototype in 2006 Steve Jobs didn’t survey consumers to ask if they wanted their phone to surf the web, send emails, and take pictures. A majority of consumers would probably have said no. Rather, Apple saw a need that consumers didn’t yet know they had (what marketers call a “latent need”) and built a huge consumer base from scratch.
They were market makers, as Fred Vogelstein described in the New York Times Magazine:
Apple’s innovations have set off an entire rethinking of how humans interact with machines. It’s not simply that we use our fingers now instead of a mouse. Smartphones, in particular, have become extensions of our brains…Its technology is changing the way we learn in school, the way doctors treat patients, the way we travel and explore. Entertainment and media are accessed and experienced in entirely new ways.
Jobs and his team created a completely different marketplace, set of cultural norms, and way of interacting with the world around us.
In the world of social change we need a completely different marketplace, set of cultural norms, and way of channeling money. So we need to create the market.
We need to show funders that the current flow of money to social change efforts is not sufficient or efficient. If we truly want solutions to our social challenges, we must create an effective financial market for those solutions.
I believe that funders can be inspired to change their behavior. They have a latent desire to see their dollars actually achieve something. They have been so used to the lowest common denominator of giving based solely on reciprocity or emotion, but that can change.
As Harvard Business Review blogger Umair Haque explains, Apple’s success comes from their ability to rise above the common denominator and create something people love and truly (though they may not yet know it) want:
Most companies…don’t care about what they make. They merely care about what they sell. And so they…offer the people they call consumers the lowest common denominator designed by focus-group led committees at the everyday low price in malls full of stores full of shelves full of…other lowest common denominators designed by committee at the everyday low price. Nobody ever loved anybody who was merely trying to sell them something. Especially not the lowest common denominator. People love people—and organizations—that make their lives better. Even when those things are as simple as phones.
The data and the focus groups may say that donors don’t want impact. Yet. So its up to us to create the market. It is up to us to get donors to love the impact that makes clients’ lives, donors’ lives, and ultimately our communities better. It’s up to us to create demand for funding real social change.
Photo Credit: Matthew Yohe
I love this time of year. Not just because of the approaching space for relaxation, friends and family, and great food, but more importantly because it is a time for reflection. The end of the year offers a natural analytic marker between what was and what is yet to come.
And as is my end of the year tradition on the blog, it’s a time to look ahead to what the coming year might bring for the nonprofit sector. I’ve always said when I create my Trends to Watch lists that I am less clairvoyant and more optimist. I am always hopeful that the nonprofit sector is growing more effective, more sustainable, more able to create lasting social change. That’s the trajectory that (I freely admit) I am predisposed to see.
So here are 5 things I’m really hopeful about the nonprofit sector as we head into the new year.
- Growth of the Sharing Economy
The emerging “sharing economy,” where a good or service is shared by many instead of consumed by one and managed largely through the use of social technologies (think AirBNB, Netflix, TaskRabbit and countless others), will have wide implications for the social change sector. The sector that employed “sharing” long before it was cool will need to understand this changing environment and the implications for their work. Nonprofits should figure out how to navigate this growing interest (and increasing for-profit competition) in the realms of community and goodwill. It will be fascinating to watch.
- More Focus on Crowdfunding
One element borne out of the sharing economy is crowdfunding, and there is no doubt that it is everywhere. I have written before about my skepticism. But my hope is that crowdfunding will move away from ALS Ice Bucket Challenge-like hype and become another financing tool that nonprofits can use strategically. We need to get smarter about what crowdfuding is, and what it isn’t. A Kickstarter campaign makes sense for startup and other capital needs, but not for ongoing revenue. And while Giving Days are exciting, I’d like to see more analysis of what’s new money and what is cannibalized money. There is no doubt that crowdfunding is a force to be reckoned with, I just hope we turn it into a useful, strategic tool that contributes to — not detracts from — sustainable social change financing.
- Decreasing Power of the Overhead Myth
The Overhead Myth, the destructive idea that nonprofits should spend as little as possible on “overhead” expenses (like infrastructure, fundraising, and administrative costs) was laid bare in 2013 when GuideStar, CharityNavigator and BBB Wise Giving Alliance wrote their famous Letter to the Donors of America. This year they wrote a follow up Letter to the Nonprofits of America, arguing that both nonprofit leaders and donors must stop judging nonprofits by their overhead rate and instead focus on a nonprofit’s outcomes. It’s exciting to see this most detrimental of nonprofit myths beginning to crumble, but there is still much work to be done. Not least of which is helping nonprofits articulate and measure their outcomes so that they have a more effective measure with which to replace the overhead rate.
- Growing Emphasis on High Performance
Which brings me to the growing movement for creating more high performing nonprofits. Over the past several years there has been an emerging effort to move nonprofits toward this outcomes approach to their work. The idea is that if nonprofits can better articulate and measure the social change they seek, more resources, sustainability and ultimately more change will follow. In the coming year, a group of social sector leaders (of which I am a member) will release a framework for what practices constitute a high performing nonprofit. But that is just one example of a growing emphasis in the social change sector on results.
- Greater Investment in Nonprofit Leadership
Nonprofit leaders have long traveled a lonely road with inadequate support and resources. Funders and board members often assume that a leader should go it alone, even while for-profit leaders benefit from on-going coaching, training and development. But that is starting to change. A few savvy foundations have invested in nonprofit leadership, and they are beginning to trumpet the benefits of such investments. As more funders understand why investing in the leaders of the nonprofits they fund makes sense, I am hopeful that nonprofit leadership support will become less of an anomaly. And with stronger, more effective and supported leaders comes — I firmly believe — more social change.
Photo Credit: slorenlaboy
Today I’m focusing on social change books. I know, books are so over. We have become a society that is about fewer and fewer words, or really, fewer and fewer characters. But there is something to be said for spending 200+ pages really diving into a topic, exploring it and letting it change your point of view. Below are my favorite books in the social change realm.
I have reviewed some of these books on the blog, some I have not. Some are really old, others are brand new. And some are not about social change at all, yet I included them because I think they hold value for social changemakers.
Each of these books has helped me see my work and the work of social change in new ways, even if that was far from what the author intended. Perhaps you will think so too.
Here are my favorite social change books:
- The War of Art (my review is here)
- Leap of Reason: Managing to Outcomes in an Era of Scarcity (my review is here)
- Working Hard & Working Well (my review is here)
- Lean In (my review is here)
- Social Media for Social Good (my review is here)
- How to Change the World: Social Entrepreneurs and the Power of New Ideas
- Beyond Fundraising: New Strategies for Nonprofit Innovation and Investment
- Work on Purpose (my review is here)
- Real Change Leaders
- Quiet: The Power of Introverts in a World That Can’t Stop Talking (my review is here)
- The Mesh: Why The Future of Business is Sharing
- The Big Enough Company (my review is here)
- The Networked Nonprofit
- Measuring the Networked Nonprofit
- Social Change Anytime Everywhere
- Good to Great and the Social Sectors
- Making Good (my review is here)
What are your favorite social change books? Please add to the list in the comments below.
Photo Credit: CBS Television
Something pretty exciting is going on. Perhaps I’m an eternal optimist, or I’m suffering from confirmation bias, but it seems to me that more funders are starting to talk about investing in the capacity of nonprofits, particularly around nonprofit leadership development.
The Stanford Social Innovation Review kicked off a new blog series this month focused on the topic. Over the next three months, six foundation leaders will blog about why they have made investments in the leadership development of their nonprofit grantees and what the return on investment has been.
This is phenomenal because the more we talk about and demonstrate the return on investment of nonprofit leadership development, and really of any capacity investments, the more likely we will be to see other funders follow suit.
As Ira Hirschfield, president of the Evelyn and Walter Haas, Jr. Fund, points out in the inaugural post in the new SSIR series, less than 1 percent of overall foundation giving went to leadership development between 1992 and 2011, while the private sector allocates billions of dollars to it.
Why are we not investing in our nonprofit leaders? If we truly want to create change to some of our most pressing social issues don’t we need the strongest, most effective leaders possible?
As Hirschfield puts it so well:
Foundations ask a great deal of the organizations we support…in short, we hope grantees will deliver transformational results for the people and places they serve. So it’s striking how seldom we back that up with funds to help organizations develop and strengthen the ability of their leaders to meet those high expectations. People are not born with everything it takes to manage and motivate a team, build coalitions, and lead change…Leaders who have the opportunity to reflect on their strategies and hone their skills make better choices, develop innovative solutions and forge stronger collaborations. This is what leadership development is about—and to the extent that foundations decide it is important and fund it, then we and our grantees will be better positioned to achieve our goals for impact.
In other words, foundation funding will go further if funders also invest in the leaders of those organizations they fund.
It seems like a no-brainer. And it is a no-brainer in the for-profit world. But as we so often do in the nonprofit sector, we are selling the sector, and its leaders short.
But it is not enough (nor are we anywhere near it anyway) for funders to understand the need for investing in nonprofit leaders. Nonprofit leaders themselves need to stop apologizing and start demanding (in a nice way!) investment in their own capacity. And leadership development is only one of the many areas in which nonprofits need capacity investment. Nonprofits also require fundraising expertise and staffing, program evaluation, technology and systems, and the list goes on.
So if we are to have any hope of moving this topic beyond the blogroll, nonprofit leaders and funders need to start having better conversations about what it will really take to accomplish their joint impact goals. Because if, at the end of the day, we are all looking to achieve more impact, then capacity to deliver on that impact must be part of the conversation.
If you want to learn more about capacity investments from both the nonprofit and funder sides, download the Power of Capacity Capital book, and if you want to learn more about nonprofit leadership, download the Reinventing the Nonprofit Leader book.
Photo Credit: Clinton and Charles Robertson
In this month’s Social Velocity interview, I’m talking with Rick Moyers, vice president for programs and communications at the Meyer Foundation in Washington DC – a regional grantmaker that is nationally recognized for its capacity-building programs. Rick is a co-author of the Daring to Lead 2006 and Daring to Lead 2011 national studies of nonprofit executive directors, and has written and spoken extensively on executive and board leadership. He currently serves on the boards of BoardSource, the Alliance for Nonprofit Management, and the Community Connections Fund of the World Bank Group.
You can read other interviews in the Social Velocity Interview Series here.
Nell: You write a lot about nonprofit boards of directors. As a general rule, because they are volunteers, nonprofit boards tend to be pretty ineffective and disengaged from truly leading their organizations. Can the current structure of nonprofit leadership be made more effective? Or is there a better structure, and if so, how would we undertake such a fundamental shift in the sector?
Rick: We can’t give up on boards just because many boards are ineffective, any more than we can give up on public schools just because so many are struggling. And the fact that board members are volunteers doesn’t necessarily account for their disengagement—some of the most passionate and productive contributors to the nonprofit sector are volunteers.
But just because I’m not ready to give up doesn’t mean we can just keep doing the things we’ve been doing to improve boards, hoping our efforts will produce better results, and wringing our hands when they don’t. We’ve heaped so many expectations and roles onto the backs of boards that I’m not sure it’s possible for any board to fulfill all of them all the time. A good place to start improving things would be to become much more focused and pragmatic about what we expect from boards. A clear set of expectations – one that’s not simply a laundry list of everything we wish boards would do – would be a start. Along with the recognition that organizations need different things from their boards depending on their circumstances.
We need to recruit board members with at least as much thought and effort as we put into recruiting employees, if not even more given that board service is a multi-year and often multi-term commitment. I know board members who have been invited to join the boards of organizations with which they were completely unfamiliar after a 15-minute conversation with the chair of the nominating committee—or a casual lunch with the executive director. And then we wonder why they have a hard time engaging. If we recruited board members as if the job mattered and their selection was an important decision, perhaps they would start taking the job more seriously. We can’t give up on boards without doing a better job of trying to help them function better.
At the same time, there would be enormous value in trying out alternative structures and talking openly about whether they worked any better than the current model. My hunch is that alternatives are being tried out quietly, but we don’t talk about them much. I’d be interested in learning more about very small boards (four or five carefully chosen people), the impact of compensation on board member performance, boards with greater staff representation, and boards that are more democratic and representative of the constituencies and communities being served. I’m not confident in suggesting any of these as an alternative to current practice because I don’t think we know enough. But we don’t know enough because most organizations don’t believe they have permission to experiment (and maybe they don’t). There’s enormous pressure for “normative” behavior in governance, even though we know that normative behavior often produces mediocre results.
I don’t have a good answer for how we break this cycle, but I think we need a “learning lab” for governance practices. We need to be bolder in our experiments, and more open in sharing the results, even when they are unsuccessful.
Nell: The Daring to Lead studies that you co-authored with CompassPoint demonstrate a deep leadership crisis in the nonprofit sector – nonprofit leaders are burned out, planning to leave, and lack support for leadership development. Is more money for leadership development the answer, and if so, how do we get funders to understand the need and fund it?
Rick: More money is the answer, but not necessarily more money for leadership development. My take-away from this body of work is that chronic under-capitalization is at the root of executive director burnout and dissatisfaction. The problem is not just that organizations don’t have enough money for leadership development. They don’t have enough money for anything.
While I applaud funders that invest in leadership development—and the Meyer Foundation is among them—there’s also a danger that funder-driven leadership development programs become simply another demand on already overextended executive directors. Funders need to recognize the importance of leadership development, but also need a keen understanding of the financial and organizational constraints that have a profound impact on executive directors who may already be accomplished leaders. One of the lessons from my foundation’s experience is that large grants for leadership development can be hard to use when executives are facing so many other challenges and distractions, many of which are related to finances and fundraising.
Nell: Why is leadership development taken as a given in the for-profit sector, but taboo in the nonprofit sector? Why do we assume that nonprofit leaders should be able to go it alone? And how do we change that attitude?
Rick: In the for-profit sector, there are more vehicles for ensuring adequate capitalization and leaders have greater discretion over how they can use that capital, with the mandate of producing the greatest return for owners, investors, and shareholders. That said, it’s very telling that so many large companies spend freely on leadership development without questioning the return on investment, while nonprofit leaders are conditioned to question every penny spent on anything other than program delivery. Boards can be especially shortsighted in this regard, under-investing in current executive directors without considering the costs—in money, organizational reputation, and lost momentum—of an untimely transition. We need more evidence, both anecdotal and quantitative, of the ROI for leadership development in the nonprofit sector. Producing that evidence and telling that story will require resources, but I’m concerned that without that investment we’ll never be able to make a convincing case to boards and funders that are increasingly focused on evidence-based approaches.
Nell: Do you think as Millennials age into leadership positions in the nonprofit and philanthropic sectors they will fundamentally change nonprofit leadership? And if so, how?
Rick: While not wanting to sound cranky, I object on principle to making generalizations about a group of 80 million people as if they were a single thing. And as a member of Generation X, I also must point out that we’re the ones who are currently aging into leadership positions. What about us, damn it?
Crankiness aside, as someone who works with younger leaders every day, I have noticed some differences that hold promise for the future. Many in the rising generation are much more socially aware, passionate about social change, and optimistic that they can make a difference than I was at their age. They are choosing careers in the nonprofit sector with more thought and intention than previous generations. The dramatic increase in the number of academic centers and degree programs focused on the nonprofit sector and philanthropy over the past 20 years is producing accomplished young leaders with broad skill sets and considerable insight into nonprofit work.
I do notice a more conscious commitment to work-life balance, and more intentionality around achieving it, which I hope will help reduce burnout and abrupt departures of nonprofit executives. Just within the last six months, I’ve watched three younger executive directors transition out of their jobs because they were seeking greater work-life balance. The difference from what I’ve seen in the past is that these executives decided to leave after successful tenures of more than five years, and after working intentionally to develop a strong board and staff leadership team that could handle the transition. These leaders stepped down before they burned out, and handed off strong organizations that were prepared for the change. That’s very encouraging, and I hope it’s a trend.
A committed and talented cadre of younger leaders is already in the nonprofit leadership pipeline – not by accident, but because they want to be here. Daring to Lead and many other studies have highlighted the challenges inherent in being an executive director, so these younger leaders know what the role entails. And they still want to do it. I think that bodes well for the future, and I’m optimistic.
Photo Credit: Meyer Foundation
- Download a free Financing
Not Fundraising e-book
when you sign up for email
updates from Social Velocity.
Sign Up Here
- Tired of begging your
board to raise money?
Learn how to
Build a Fundraising Board
in this month's
Social Velocity webinar.