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
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.
Lest you think we’ve made headway on overcoming the Overhead Myth (the false notion that nonprofits must keep their fundraising and administrative costs cripplingly low) you need only look as far as a recent Forbes article, “5 Nonprofit Leaders Share How to Keep Overhead Costs to a Minimum.” And this is perhaps even worse because it is nonprofit leaders themselves, not philanthropists or business leaders, telling nonprofit leaders that overhead is bad.
The Forbes Nonprofit Council made up of “top nonprofit execs [who] offer insights on nonprofit leadership & trends” compiled these 5 “tips” for keeping nonprofit overhead low. And the tips are as insidious as you might think. I know I should take the high road and just ignore this ridiculous article, but I simply can’t. In fact, it boggles my mind that overhead (to borrow a phrase from the brilliant John Oliver) is still a thing.
The Forbes article neglects to point out that the concept of “nonprofit overhead” has undergone a real transformation in the past few years. It assumes that “overhead” is still a dirty word, but anyone who has been paying attention knows that that is no longer a given.
There has been a movement among nonprofits and their philanthropic and government funders to evaluate nonprofits based on their results, rather than just their overhead rate. The federal government and some local governments have moved to increase the indirect costs paid to nonprofits. And just last month a new Bridgespan study analyzed the indirect costs of 20 different nonprofit organizations and found, not surprisingly, that overhead rates vary greatly depending on the business model and industry of a given organization (just as it does in the for-profit sector).
So for the Forbes article to simply encourage nonprofits to keep their overhead as low as possible ignores the changes that have occurred in the sector and the very real fact that different organizations, business models and issue areas might require very different administrative and fundraising costs.
But beyond those huge oversights, the Forbes article does a further disservice to the nonprofit sector by providing 5 ridiculous and crippling “tips” for keeping overhead low. Here’s why each one is so wrong:
- “Look for Low-Cost IT Options”
To the contrary, I would say that many nonprofits don’t spend enough on IT. So often nonprofit leaders are using outdated technology and systems, or worse, not gathering data at all because they simply don’t have the funds. Nonprofits need to spend more, not less, on IT.
- “Don’t Overwork Your Team”
Seriously? Isn’t overwork simply a given in the nonprofit sector? Because nonprofit leaders often don’t have the funds to hire enough staff, they ask the staff they do have to wear too many hats. The solution is not to tell nonprofit leaders to stop overworking their team. Rather nonprofit leaders must raise the funds necessary to fully staff the work. And that means we need more money in the sector for capacity building.
- “Reward Innovation”
The Forbes article advises nonprofit leaders to “create a culture that rewards innovation and encourages employees to be scrappy.” Certainly on this point nonprofits already win in spades — nonprofits are nothing if not scrappy. But I’m not sure scrappiness and innovation go hand in hand. It’s hard to be innovative when you are worried the doors may close tomorrow. Innovation comes with more capacity capital — once nonprofits have the tools, systems and people they need, innovation can follow.
- “Maintain a Clear Business Methodology”
And here’s where Forbes falls back on the old stand by — nonprofits need to act more like businesses. But what clear business methodology advises undercutting the sales function (fundraising in the nonprofit sector), systems, and staffing? Why do we choose only some of the ways we want nonprofits to “be like businesses,” but ignore others? No successful business leader will tell you that is a smart strategy.
- “Invest in Community Leaders”
The Forbes “experts” encourage nonprofit leaders to hire more volunteers, students and interns in order to save on staff costs. NOOOOOO! If we are truly going to solve the challenges we face, we need more experts, not fewer. While volunteers and students are great for rote tasks, that only gets you so far. Nonprofits need expert fundraisers, brilliant program people, IT geniuses and more. We don’t encourage Silicon Valley to hire more volunteers and interns to create the next tech solution, so why tell nonprofit leaders to hire more volunteers and interns to create the next social solution?
Can we please, please, please move beyond this broken and damaging view of nonprofits? We would never ask the makers of the next shiny widget to cut their sales, staff and systems to the bone. So let’s not demand that of those working to save the world.
Instead, let’s have a smarter conversation about how social change leaders must ask for (and receive!) the tools they really need to make our world a better place.
Photo Credit: Adrian
The Evelyn and Walter Haas, Jr. Fund, a foundation on the forefront of investing in nonprofit capacity and one of the few foundations funding nonprofit leadership development, released a new report this week Beyond Fundraising: What Does It Mean to Build a Culture of Philanthropy?.
While I applaud the Haas Fund for taking a pioneering interest in, as they put it, “understanding how to break out of the nonprofit sector’s chronic fundraising challenges,” unfortunately I don’t think that this report will move the needle on the sector’s money woes.
Their landmark 2013 report published with CompassPoint, UnderDeveloped: A National Study of Challenges Facing Nonprofit Fundraising (of which the Beyond Fundraising report is a follow up) uncovered a real crisis in fundraising staffing in the nonprofit sector. And last year Haas announced a multi-year effort to “to identify gaps that may need to be filled when it comes to helping nonprofits break out of chronic fundraising challenges.”
A sector-wide conversation about money is so incredibly needed that I really appreciate the Haas Fund’s efforts to start it, especially when philanthropists are loathe to talk about the sector’s money challenges, let alone invest in solving them.
But in the hope that debate spurs greater change, and because of Haas’ expressed desire to open a conversation so that they can “learn out loud,” I offer my concerns about the Beyond Fundraising report.
As Linda Wood, Senior Director of Leadership Initiatives at the Haas Fund (and past interviewee on this blog), describes in the beginning of the Beyond Fundraising report, there must be a fundamental change in how nonprofits approach fundraising. As she writes: “Without a deeper shift in how organizations hold the work of fund development, simply adopting new tools and techniques may not be enough.”
The Beyond Fundraising report, authored by philanthropy consultant Cynthia Gibson (also a past interviewee on this blog), starts from where the 2013 UnderDeveloped report left off: that the lack of a culture of philanthropy is the most important issue holding nonprofits back from fundraising success:
By framing the issue as a talent pool problem alone, we neglect to focus more critically upon entrenched organizational factors that contribute to the inability to establish development as a shared function and nurture an organizational culture to sustain it. The right development director hire alone will never break the cycle, but the right person inside an organization that has a culture of philanthropy, can.
The Beyond Fundraising report is an attempt to understand what a culture of philanthropy is and how to encourage its growth. The report defines a “culture of philanthropy” as a situation in a nonprofit where:
Most people in the organization (across positions) act as ambassadors and engage in relationship-building. Everyone
promotes philanthropy and can articulate a case for giving. Fund development is viewed and valued as a missionaligned program of the organization. Organizational systems are established to support donors. The executive director is committed and personally involved in fundraising.
The report delineates four necessary components to a culture of philanthropy:
- Shared responsibility for development
- Integration and alignment with mission
- A focus on fundraising as engagement
- Strong donor relationships
It then provides a list of indicators for nonprofit leaders to use to assess whether or not they possess a culture of philanthropy, a list of “guiding questions” nonprofit leadership can ask in order to build a culture of philanthropy, and a list of roles that development staff and funders can play in bringing a culture of philanthropy to fruition.
While I don’t disagree with any of the indicators, questions, or roles the report describes, I don’t think that any of them, or even their sum total, will solve the lack of financial sustainability at a particular nonprofit, let alone in the nonprofit sector overall.
And this is because I think that only looking at fundraising — the pursuit of philanthropic dollars, which only make up 13% of all the money flowing to the nonprofit sector — is a fundamentally flawed approach to understanding money in the sector. My bias has always been to move the sector from a broken fundraising approach to a more strategic and holistic financing approach.
And while I agree that individual nonprofit leaders are part of the problem, they are just one part. Often their troubled approach to money is simply a reaction to a dysfunctional system. Certainly we need to move away from some ineffective money practices that nonprofit leaders embrace (being reactive rather than strategic about money, not calculating the return on investment of fundraising activities, not aligning money and mission, allowing a board to dismiss their money-raising responsibilities…).
But I worry that by scapegoating the problem to the shortcomings of individual nonprofits we are ignoring the larger financial dysfunctions of the sector. Rather than pull back the curtain on the systemic hurdles causing the nonprofit sector’s money woes, I fear that this report lays much of the blame for financial dysfunction at the feet of individual nonprofit leaders.
Because in my mind, the real problem is not the approach of individual nonprofit leaders, although that is important. I think the financial problems of the nonprofit sector run much deeper. If we truly want to address those problems we must have bigger conversations, and ask harder questions, like:
- Why is there a lack of financial acumen (how to effectively attract and employ money) throughout the sector (present among both nonprofits and their funders), and how do we solve that?
- Why is long-term organizational and financial planning not encouraged and supported throughout the sector?
- Why is there not enough investment in the financial function of nonprofit organizations (the staffing, systems, technology, planning, and marketing necessary to build sustainable financial models)?
- Why aren’t there many, many more funders like The Haas Fund discussing and investing in solutions to the sector’s money problems?
- Why are we still focusing on philanthropic dollars alone when we need to understand and integrate money as a whole into social change efforts?
And that’s just a start.
My fear is that if we place the full weight of nonprofit financial dysfunction on the shoulders of an individual nonprofit’s culture, or if we look only at fundraising, we shirk our duty to dig deeper and remedy larger, structural dysfunctions in the sector.
I applaud the Haas Fund for their determination and courage to create a space, through their capacity investments and on-going research, for the incredibly important conversation about money in the nonprofit sector. But I would love to see this effort grow to become a bigger conversation about how we solve the endemic financial challenges nonprofits face.
Photo Credit: The Evelyn & Walter Haas, Jr. Fund
Fundraising is such a misunderstood enterprise. And it’s not just misunderstood by nonprofit leaders in the trenches.
I was talking to a normally very savvy foundation program officer the other day who wondered if one of his struggling grantees should think about launching a new gala event to raise some additional money. I swallowed my first inclination to scream “NOOOOOO!” in the middle of a crowded restaurant and instead calmly explained why events are a bad money fix, and why any short-term money generating strategy is probably a really bad idea.
But this well-meaning program officer is far from alone in his understanding of financial sustainability in the nonprofit sector. If I had my way, nonprofit leaders would stop making these 5 big fundraising mistakes:
- Taking a Short-Term Approach
If you don’t have enough money today, a single fundraising activity isn’t going to solve the problem in the long-term. If you want to solve your ongoing money woes, you have to create a long-term plan. The single best way to bring more and larger dollars in the door is to create a smart, long-term strategy for your nonprofit. And that long-term strategy must include a corresponding long-term financial strategy. With a compelling Theory of Change (an articulation of the value your nonprofit creates), what you are hoping to accomplish, and how you will get there, you will be better able to convince funders (no matter what your financial model) to come aboard. People invest in a compelling and believable vision for the future. If you are just raising money for the day-to-day, you will always struggle.
- Looking Under the Same Rocks
Often when there is a money shortfall, nonprofit leaders think they simply need to ask the same people to give again or more. If only it were that easy. To attract more people and organizations you have to have a wider net. But not just on your Facebook page or in your mailing list. A wider net means that your board’s networks need to grow, your distribution channels need to grow, your friend-raising activities, your strategic alliances need to grow — the overall network of your nonprofit needs to grow. You need to think holistically about how to grow the reach of your organization and get everyone involved in making that happen.
- Chasing A Magic Bullet
Seriously, listen when I say this: There Is No Magic Bullet to Fundraising. Fundraising, like so many things, often falls victim to shiny object syndrome. From the Ice Bucket Challenge, to crowdfunding, to social media, it seems there is always something new that nonprofit leaders, philanthropists, or board members think will finally solve a nonprofit’s money woes. But the reality is that finding enough and the right kind of money for the results you want to achieve as an organization is hard work. There is no easy fix. Instead you have to get strategic and create, and then systematically execute on, a financial plan for your nonprofit. It may sound boring, but believe me, once you attach strategy to money, the transformation — to your staff and board, to your funders, to your financial model, to your overall results, to your effectiveness and sustainability as an organization — can be incredible.
- Giving People a Free Pass
When you tell certain board members or certain staff members that they don’t have to worry about money, you are essentially giving them a free pass and placing a larger burden on the rest of the organization. While money must be led by your Chief Money Officer (whatever their title — Executive Director, Development Director, CDO), it must be a team effort. Your money person’s job is to develop an overall money strategy and then mobilize all her resources (staff, board, other volunteers, technology, systems) to bring that money strategy to fruition. She CANNOT do it alone or with only half a board. Money has to be part of the conversation for everyone in the organization.
- Not Fundraising for The Fundraising Function
If you want to get better at raising money, you must invest in the right strategy, staff, and systems — your fundraising function –to raise that money. You need to pay market rate for a fundraising person who is a smart, strategic leader. You need to put time and effort into an overall financial strategy, and you need to create the infrastructure (technology, systems) to make that financial strategy a reality. To make these investments, you might have to raise capacity capital from your donors, a one-time infusion of significant money that helps strengthen your organization. A capacity capital investment in your fundraising function can more than pay for itself in a few years when your transformed financial engine is running at a much more profitable rate. But failing to invest in your fundraising function means you will continue to struggle financially.
Oh nonprofit leaders, please stop hitting your heads against the fundraising wall. I promise you, a more sustainable financial engine awaits if you simply invest the time and energy into a smart strategy, a broader network, effective staff and systems and a real team effort.
Photo Credit: hobvias sudoneighm
As I mentioned earlier, it is so important to take time away to rejuvenate and reconnect with your passions, family and friends. So I am taking my own advice and taking some time off later this summer to connect with the world outside of social change.
And so for the second summer in a row I’ve asked a group of social change thought leaders to write guest blog posts in my absence (you can read last summer’s guest blog posts here).
I am so excited about this year’s group of amazing social change thinkers. They are experts in social change finance, philanthropy, political reform, outcomes data, organizational effectiveness and much, much more. They are smart, thoughtful, engaged and visionary leaders. And they are all helping to move social change forward in big ways.
Below is the lineup of guest bloggers with background information on each of them. Their posts will begin in late July. Enjoy!
Antony is the CEO of Nonprofit Finance Fund (NFF), a national nonprofit and financial intermediary where he oversees more than $340 million of investment capital and works with philanthropic, private sector and government partners to develop and implement innovative approaches to financing social change. NFF also creates the annual State of the Sector Survey. Antony writes and speaks on the evolution of the social sector and the emergence of the global impact investing industry. Prior to leading NFF he was Managing Director at the Rockefeller Foundation. He is the founding board chair of the Global Impact Investing Network and convened the 2007 meeting that coined the phrase “impact investing.” You can read my past interview with Antony here.
UPDATE: Here is Antony’s guest post.
Kelly is a program officer at the Hewlett Foundation working on their Madison Initiative, which focuses on reducing today’s politically polarized environment. Before joining Hewlett, Kelly worked as a strategy consultant with the Monitor Institute, a nonprofit consulting firm, where she supported a range of foundations’ strategic planning efforts. In addition to her experience as a strategy consultant, Kelly has worked with various nonprofit and multilateral organizations including Ashoka in Peru, the World Bank’s microfinance group CGAP in Paris, Technoserve in East Africa, and both The Asia Foundation and Rubicon National Social Innovation in the Bay Area. Kelly guest lectures on impact investing at Stanford’s Graduate School of Business and often writes for the always thoughtful Hewlett Foundation blog.
UPDATE: Here is Kelly’s guest post.
Phil is President of the Center for Effective Philanthropy (CEP), a nonprofit that is the leading provider of data and insight on foundation effectiveness. CEP helps bring the voice of grantees and other stakeholders into the foundation boardroom and encourages foundations to set clear goals, and coherent strategies, be disciplined in implementation, and use relevant performance indicators. Phil writes and speaks extensively about nonprofits and philanthropy and rarely pulls punches when he does. He is a columnist for The Chronicle of Philanthropy and a frequent blogger for the excellent CEP Blog. He was named to the 2007, 2008 and 2014 “Power and Influence Top 50” list in The Nonprofit Times. You can read my past interview with Phil here.
UPDATE: Here is Phil’s guest post.
Kathy is Organizational Effectiveness and Philanthropy Director at the David and Lucile Packard Foundation where she helps grantees around the world improve their strategy, leadership, and impact. Her team makes grants on a broad range of organizational development issues, from business planning to social media strategy to network effectiveness. She also manages the Packard Foundation’s grantmaking to support the philanthropic sector. Prior to joining the Foundation, she worked in a non-profit, on Capitol Hill, and in state and local government in California. Kathy serves on the board of Grantmakers for Effective Organizations and on the advisory committee for the Center for Effective Philanthropy. You can read my past interview with her here.
UPDATE: Here is Kathy’s guest post.
I asked David to be a guest blogger again this summer because he is so insightful and often points out things that few others in the sector are willing to acknowledge. He is Director of Analytics for Family Independence Initiative, a national nonprofit which leverages the power of information to illuminate and accelerate the initiative low-income families take to improve their lives. David is also the former founder of Idealistics, a social sector consulting firm that helped organizations increase outcomes, demonstrate results, and organize information. He writes his own blog, Full Contact Philanthropy, which is amazing. You can read his past guest blog post here and my interview with him here.
UPDATE: Here is David’s guest post.
In the nonprofit world there is often a disconnect between funders of nonprofits and their understanding of the fundraising activity necessary to secure their gifts. Funders (and board members) rarely understand how critical fundraising is, how it works, and what’s required to do it well.
But in the hope that greater understanding leads to better actions, I’d like to offer 7 of the most important things funders (and really the sector as a whole) should understand about fundraising:
- Nonprofits Must Fundraise or Perish
It seems so obvious, but so many in the nonprofit sector act as if fundraising can be ignored or shuffled to the side. Board members hate to do it, and foundations refuse to fund it. But let’s be clear. Without a strategic, sophisticated mechanism for bringing regular revenue in the door there is no organization and certainly no social change. Fundraising must happen, and it must happen effectively in order for a nonprofit to survive and thrive. So funders (and board members) do not have the luxury of saying they don’t want to talk about, think about, or fund fundraising efforts.
- There is a Sector-wide Lack of Fundraising Knowledge
Because fundraising has for so long been ignored or sidelined, most nonprofit leaders and their board members don’t have sufficient fundraising experience or training. And neither do funders. There hasn’t been enough research into the fundraising discipline broadly and little investment in educating nonprofit leaders about how to do it well. The end result is that few people know how to crack the fundraising nut.
- Every Nonprofit Has Two Customers
Part of the solution to cracking that nut is understanding that unlike for-profit entities, nonprofits have two (not just one) set of customers. Nonprofits provide products and/or services to the first customer (“Clients”), but “sell” those services to the second customer (“Funders”). Therefore “sales” in the nonprofit world is much more complex than it is in the for-profit world. Yet for-profit businesses can spend much more money on their sales and marketing staff, training, systems and materials than a nonprofit is allowed to spend on fundraising.
- It Takes Money to Make Money
So in order to do fundraising well nonprofits must invest in their fundraising function (planning, staff, training, systems, materials). Those nonprofits that develop a strategic financial model that is fully integrated with their mission and core competencies will be more sustainable and more effective at creating social change. So nonprofit leaders must start asking for the money necessary to build effective financial models.
- Sustainability is a Funder’s Problem Too
And funders must start providing it. Funders often want a nonprofit to demonstrate financial sustainability, but those same funders won’t invest in the capacity necessary to create that sustainability. Instead of just pointing out the sustainability problem, funders must become part of the solution. Funders should step up to the plate to help nonprofits create a capacity building plan and then provide capacity capital (along with other fellow funders) to build a more sustainable organization that will survive once a funder is gone.
- Earned Income is Not a Solution
But a more sustainable organization does not mean one based on earned income, or selling a product or service. Nonprofits will always be subsidized, at least in part, by private and/or public contributions. By definition, nonprofits exist to address a failing in the market economy (i.e. not enough food or jobs). Thus, those failings will never be overcome purely by market forces. So while earned income is something every nonprofit should explore, it is not right for every organization and will never become 100% of a nonprofit’s revenue model. So don’t confuse sustainability, which means a longterm financial model, with earned income.
- Nonprofit Leaders Fear Funders
Let’s just be honest. A funder is providing much needed resources to a nonprofit and that automatically creates a power imbalance. Until we figure out a way around that inherent dynamic, funders must limit the hurdles they put in the way of nonprofit leaders and instead give them the financial runway to make their social change vision happen.
Let’s face it, without money there is no social change. But the knowledge, experience and infrastructure necessary to generate enough money is woefully short in the nonprofit sector. That could change if funders lead the way toward more investment in strategic, sustainable financial models.
Photo Credit: 401K Calculator
There was a great post on the Stanford Social Innovation Review blog last week that clearly articulates a dysfunction in the nonprofit sector and when recognized by nonprofit leaders and their funders could reshape the sector.
In the SSIR, veteran nonprofit leader Kristen Joiner argues that because 86% of Fortune 500 leaders are men and 70% of nonprofit workers are women “gender dynamics” often cripple the nonprofit sector:
Like the provider of old, heading off to the office for a day of work, the private sector is focused on money and profit. The nonprofit sector, as the nurturing caretaker, is charged with caring for the young, the sick, the elderly, and the poor…This creates a have-and-have-not situation, where one side holds the money and power, and the other side asks for an allowance to do their “good work,” trying to get traction but more often getting stuck in a rut created by this dysfunctional dynamic…Investors in the social sector make it difficult for nonprofits to gather the resources to measure and pivot as necessary for success. They are looking for the proverbial “good girl”—an organization that doesn’t rock the status quo, that gives them a credential to show they “care” or “contribute.”
Joiner’s argument is not a new one, in fact Robert Egger voiced it in a 2008 Chronicle of Philanthropy article, where he described how the modern nonprofit sector was born out of the gender biases of the mid-20th century:
[In the 1970s and 80s] the number of nonprofits in the U.S. exploded…[led by] tens of thousands of college-educated, stay-at-home mothers…Many of these “founding mothers” brought with them an internalized understanding of their “role”…As long as these new organizations limited their work to nurturing, feminized charity work…they were humored, and even honored. [And foundations were] often dominated by men who were charged with dispensing money made by other men. Foundations rarely awarded money that fostered independence for grantees…In these formative years, and even today, grants are primarily made to submissive organizations — those willing to jump through countless hoops, those that would not push back when confronted with short-sighted policies, and those that would make do with much less than they knew was needed to do the job right…The rules that govern our sector — indeed, the very nature of our how we view ourselves — is rooted in systemic sexism.
Although I have worked in the nonprofit sector for 20 years, this “systemic sexism” never occurred to me until I read Egger’s article a few years ago. But now I see it often. And while I don’t think sexism should become a shorthand for everything that ails the nonprofit sector, I do think nonprofit leaders, board members and funders must be more aware of the underlying forces at play, so that we can all work to overcome them.
There are several key areas where this systemic sexism results in an uneven playing field for nonprofits:
- Less Access to Capital. Businesses have access to various forms of capital (startup, mezzanine, risk), whereas nonprofits struggle to attract day-to-day revenue, let alone the capacity and growth capital they so desperately need.
- Inadequate Sales Function. In the for-profit sector, sales and marketing are a much researched, supported and heralded part of a business model because it is well understood that without sales there is no business. But in the nonprofit world, sales — called “fundraising”– is misunderstood, under-supported, and sometimes ignored by nonprofit leaders, board members and funders.
- Tighter Limits on Overhead. Although this is starting to change, nonprofits are often encouraged to spend only a small amount of money on infrastructure, administration and fundraising (overhead expenses), but for-profit companies can spend whatever it takes.
- Less Investment in Leadership. Business leaders are encouraged to invest in professional development, training, and leadership coaching, but a nonprofit leader often must figure it all out on her own.
- A Restricted Role in Politics
While businesses can spend millions on lobbying and supporting political candidates, nonprofit political action is much more restrictive.
And the list goes on. Many of the dysfunctions present in the nonprofit sector are rooted in years and years of sector inequality. If we hope to make social change more effective and sustainable, we must free the sector of these shackles.
Photo Credit: Campbell’s Soup