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building nonprofit capacity

A Call to Arms for the Nonprofit Sector

Mario Morino’s new book, Leap of Reason: Managing to Outcomes in an Era of Scarcity, is probably misnamed. It is not the boring, theoretical guide to evaluation, measurement and logic models that the title implies. It is much more a call to arms for the nonprofit sector.

Morino, co-founder of Venture Philanthropy Partners, one of the oldest venture philanthropy funds, argues that every nonprofit MUST, if it wants to survive in this new environment of “brutal austerity,” create a culture of performance. Indeed, he argues that “we will need nothing short of a quantum, sector-wide change.” Status quo simply will not work in the nonprofit sector anymore. And to help the movement along, they are offering the book in multiple formats, including free download on the VPP site.

As I read this book, I kept wanting to shout out, “Amen!” Finally someone argues so clearly why understanding if a social solution is working is not a luxury or a “nice to have” but rather an absolute necessity for our new reality. As Mario so eloquently puts it:

The magnitude of the combined hit – greatly reduced funding and increased need – will require organizations to literally reinvent themselves. Incremental responses will be insufficient…We can respond with infighting, robbing Peter to pay Paul, or continuing our incremental efforts to be better. Or we can respond with greater discipline, unity, and focus on making a quantum change in the effectiveness and impact of our entire sector.

He doesn’t pull any punches. It’s a completely new day.

Mario argues that every nonprofit organization must find a way to demonstrate the results of the work they engage in. And he and the other essayists in the book give some very clear reasons, beyond increased funding, why nonprofits must manage towards outcomes:

  1. To improve the lives of their clients. If you are tracking and analyzing whether you are making a difference in people’s lives, you are more likely to actually make a difference in their lives.
  2. To contribute to the larger and future field. Future solutions will be stronger because they will be based on learnings from past solutions.
  3. To stay competitive and relevant. The field of impact investing (investors who provide money to social entrepreneurs who can provide a financial and a social return) has increased the pressure for any social impact organization (nonprofit or for-profit) to demonstrate a social return.

Ultimately Mario is encouraging nonprofits to answer the very simple, but fundamental question “To What End?” So many nonprofit organizations simply exist to “do good work.” But that is just not enough anymore. It’s not enough for those that fund the work, and it’s not enough for those who receive the services. Money is increasingly hard to find, while the problems that nonprofits exist to solve are growing increasingly complex. Nonprofits must determine what they exist to change and whether they are actually creating those changes.

Mario is ever-mindful, however, that large scale evaluation projects are simply unrealistic for the vast majority of nonprofits. They don’t have the money or time to devote to such projects. After laying out his “call to arms” in the first half of the book, he and other experts provide key initial steps and case studies to encourage nonprofits to develop their own ways to manage to outcomes.

At the core, Mario is arguing for a culture shift. He believes that if nonprofit leaders can start to move their organizations towards the mindset and discipline of answering “To What End,” the sector as a whole will be transformed and ultimately more effective at creating change.

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A Case Study in Raising Money to Grow On

Last fall I wrote a blog post arguing that small nonprofits need access to philanthropic equity (money to build their organizations) just as much as larger, more sophisticated nonprofits do. My post was in response to George Overholser’s Social Velocity blog interview where he argued that philanthropic equity (or growth capital) campaigns, where a nonprofit is raising money to build the infrastructure of the organization, are not feasible for small nonprofits. George’s argument and my subsequent post set off a chain of events that led Social Velocity to work with Charlotte Chamber Music to plan and prepare for a philanthropic equity campaign. Over the course of the next several months I will give you an insider’s view of our work with CCM in order (I hope!) to prove my argument that philanthropic equity campaigns can and should be accessible to any nonprofit that has a vision for something bigger and the determination to put that vision to action. Today is the first post in this Raising Money to Grow On series.

In George Overholser’s September 2010 Social Velocity interview he argued that philanthropic equity campaigns just aren’t feasible for small nonprofits:

What about the small organizations that DO aspire to undergo a big transformation?…I believe that it is absolutely vital that we come up with a way to better capitalize these smaller organizations. Sadly, though, at this stage of capital market evolution, it is still quite expensive to prepare for a successful nonprofit equity campaign. Unless several million is being raised [the costs are] prohibitively high. This constrains us to campaigns of $5 million or more, which, in turn, constrains us to organizations that are already pretty large.

A Social Velocity blog reader, Elaine Spallone, Executive Director of Charlotte Chamber Music took issue with George’s argument and responded in the comments:

As the ED for a very small nonprofit (<$300K) I am greatly disheartened to essentially read “yes, we can cure the large guys, but for the rest of you -80% – well good luck! No answers for you yet.” WOW…Really is education and awareness for buyers to support the whole organization vs. its programs enough? (Although I agree wholeheartedly, a needed step.) I believe there has to be a way to “create compelling ‘asks’ for equity capital” that is less expensive. There has to be way to finance a small organization’s desire to meet the needs of the community, which could mean doubling their impact. We are asked to relearn, redo, change our practices to support (finance) the organization’s mission to change the world, but is no one considering the relearning, redoing or changing the expensive processes/methods so all nonprofits can benefit?

Since that is exactly why I launched Social Velocity, to help smaller nonprofits benefit from new ideas like philanthropic equity, Elaine and I began to talk about the challenges that Charlotte Chamber Music was facing.

Elaine felt that CCM was stuck. As a small, but beloved arts organization they had a great product, but they couldn’t get beyond the vicious cycle of never having enough money, never being able to expand their presence and impact. They had a solid board, and a great vision for the future, but lacked philanthropic equity to build the organization to achieve that vision. They had been talking to consultants about conducting a capital campaign to raise money for a permanent artistic director and a new or refurbished building. As Elaine recalls:

At first, we thought we had to launch a major campaign to raise funds for an Artistic Director- that was our major missing piece, and we seemed lost as to how to make that leap in securing significant funds. That is where we were stuck — for over a year.

But I counseled Elaine that they couldn’t get unstuck until they created a strategic direction and plan to get there that included the various infrastructure elements they needed to get to the next step. Again, Elaine recounts:

What Nell helped to clarify in the beginning is that investing in infrastructure will change our picture. It’s not just about one person [an artistic director]. We were a step ahead of ourselves. To get there, we needed to create the compelling plan for philanthropic equity…we were missing a huge step by not having a detailed plan for our future.

I suggested that they launch a philanthropic equity campaign, to raise money for an artistic director, fundraising infrastructure, technology, systems, all the things they needed to build a more effective, sustainable organization. But, before they think about a philanthropic equity campaign, they needed a compelling strategic direction and a plan for getting there. Because people don’t invest significant money in an idea, they invest in a coherent, compelling, executable, exciting, measurable plan for the future.

We put together a proposal for how Social Velocity could help Charlotte Chamber Music create

  1. A compelling, investable strategic plan, and
  2. A pitch and prospect strategy to raise the philanthropic equity needed to execute on that plan.

Elaine then went to her board and a few key major donors to make the case that in order to get out of the vicious starvation cycle, expand their impact, and become the top-tier arts organization they knew they could be, they had to invest in an organization-building process. A couple of key donors stepped up to make the investment to hire Social Velocity.

In the next post in this series, I’ll discuss how we went about creating a compelling, investable strategic plan and the pivotal moment when Charlotte Chamber Music realized that they had a tremendous opportunity to develop a new model for the 21st century arts organization.

Photo Credit: naitokz

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Tools to Build Smaller Nonprofits

I started Social Velocity because I saw a real hole in the nonprofit sector. Small and medium nonprofits working on social change lacked access to expertise and resources to strengthen and grow their solutions. The Teach for Americas of the world were building impressive organizations and replicating their solution far and wide. But they were doing so with the help of venture philanthropy funds, national consulting firms and broad and deep networks of experts and money. They were the lucky ones.

But there are some equally impressive solutions housed in much smaller, less resourced nonprofit organizations that aren’t really seeing the light of day.  Because these organizations don’t know how to put a growth plan together, figure out how to finance the impact they want to have, or create a compelling ask for money to build, their solutions are not reaching as far as they could.

Social Velocity exists to help those small and medium-size nonprofits who want to be entrepreneurial, who want to grow their programs, who want to get their board engaged and invested, who want to raise money to build their organization, who want to break out of the starvation cycle. I’m very passionate (and opinionated) about the fact that the bottom 80% of nonprofits need help to become stronger, better, more effective and sustainable at creating social impact.

So in order to reach more nonprofits, Social Velocity has a growth plan ourselves. And that growth plan involves creating tools, trainings, e-books, guides, worksheets, templates and other things that nonprofits can download in order to start thinking and doing things differently.

We’ve already made our step-by-step guides available for download, and our blog often has tips and tools to get started, but we want to do more. Some of our initial ideas for tools include:

  • A sample pitch for growth capital
  • An earned income analysis worksheet
  • A step-by-step tip sheet to get your board fundraising
  • A financial plan outline
  • An exercise to understand your nonprofit’s place in the external market
  • Sample language to start messaging around impact
  • Questions to guide your case for support creation
  • An investment range chart to break down a growth capital fundraising goal

But I want your input. How can we help you take social innovation ideas and put them into action? What kinds of tools would help you go from wanting to grow your programs to starting to put the plan in place?  What guides would allow you to move from being intrigued by the idea of philanthropic equity to putting together your own fundraising campaign to raise money to hire more staff, buy more computers, etc.?  What’s holding you back from being able to do things differently and move out of the starvation cycle?

Let me know what tools you’d like to see, either below in the comments, or on our Facebook site. Thanks for your help!

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