Thoughts on Social Innovation

Last month I attended the Social Venture Partners International conference in Dallas. It was a great gathering of an organization that is helping to lead the movement for social innovation. In 25 chapters in the US, Canada and Japan, 2,000 social venture partners contribute time, money and expertise to the nonprofits in their communities. The goal is two-fold: 1) to create communities of lifelong, informed and inspired philanthropists, and 2) to make strategic investments that build long-term capacity for nonprofits.

Theirs is an innovative model for creating engaged philanthropists who understand the need to strengthen the capacity of the nonprofit sector.

While I was there, I met up with Stacy Caldwell, Executive Director of Dallas Social Venture Partners and the creator of their Maximizing Social Impact podcast series–interviews with some of the leaders in the social innovation movement.   She asked to interview me about my thoughts on social innovation. So here is the podcast of that interview:

Maximizing Social Impact-Nell Edgington

Tags: capacity, Dallas Social Venture Partners, Nell Edgington, Philanthropy, Social Venture Partners, Stacy Caldwell

Making Donors Organization Builders

The “starvation cycle” of nonprofit organizations doing more and more with less and less has to end.  But how can nonprofit organizations break out of this cycle when donors won’t fund nonprofit capacity?

The news last week that the Boston Foundation will shift the majority of their competitive grants to unrestricted operating support, which in reality means capacity building, is fantastic.  The Boston Foundation is one of the few foundations that understands that strengthening nonprofit organizations, through money to support technology, infrastructure, fundraising, top talent, management expertise, strategic planning, evaluation, research and development, is absolutely key to making social change possible.

But the Boston Foundation is just one in a sea of foundations and individual philanthropists who have yet to understand the importance of money to build nonprofit organizations.

But perhaps there is hope.  Social Velocity has helped many nonprofits convince foundations and individual donors, who previously may have only provided direct service funding, to become organization builders.

I have discussed before Social Velocity’s work to help Heart House, an after-school program for at-risk kids in Austin and Dallas, strengthen their plan to grow statewide and create a pitch for growth capital.  Heart House could not pay for this planning work through their operating budget, so they went to a foundation that was already supporting their program and asked them to invest in this growth planning.  When the foundation understood that a small investment in organization building would help this organization that they love improve the lives of even more children, they were happy to invest.

Another example is Social Velocity’s client, English at Work, a nonprofit that teaches ESL classes to the employees of restaurants and hotels.  English at Work is a subsidized social enterprise where the hotels and restaurants pay them a fee to run these classes.  The nonprofit is demonstrating great results and has real potential to replicate the model.  First, however, they need to strengthen their overall revenue function to position them for growth, which is where Social Velocity came in.

But again, English at Work didn’t have the operating revenue to pay for that outside expertise. So they approached a foundation in their fold and made the case for how a strengthened revenue function would put English at Work in a position to start planning for replication. And that replication would mean that their results-achieving model could provide more people with stronger English language skills.  Stronger English language skills mean better, higher paying jobs, less stress on the social safety net and a stronger, healthier community.  And what English at Work helped their donor understand is that to get to that positive outcome, English at Work as an organization has to be more effective.  They have to learn how to create a stronger, more sustainable revenue function that can support a larger organization over the long term.  And figuring that out costs money.

Nonprofit organizations need to start approaching the donors and board members who are already supporting their programs and make the case, in an articulate, reasoned, but passionate way that for more results, they have to invest in organization building.  And they need those closest to the organization to make those investments.  It is a process of educating those nearest and dearest to the organization about the power of a stronger internal organization.  It’s a new conversation, but an important, and potentially game-changing, one.

Tags: Boston Foundation, capacity, English at Work, Foundations, Heart House, nonprofit, organization-building, Philanthropy, Social Velocity, starvation cycle

Reinvent Austin’s Social Sector

There is much talk lately about what the fallout of our deepening recession will be for the nonprofit sector.  Paul Light gives four future scenarios for the sector, others are pinning their hopes on the new Obama administration, a new economic stimulus plan, and/or the Serve America Act to revitalize and strengthen the sector.  Who really knows what the future will bring.  However, I firmly believe that if we realize the opportunity in these unknowns, we can fundamentally transform a fairly broken sector.  And let’s be honest, the sector is fairly broken:

• The sector is sorely undercapitalized.  It is very difficult to find capital to scale successful organizations, to take out an expansion loan, or to build capacity.  Nonprofits are forced into a continuous fundraising cycle that is difficult at best and nearly impossible in times like these.  And we tend to reward those organizations that keep their “administrative costs,” the very costs that will help them be more effective at what they do, to an absolute minimum.
• Because nonprofit organizations are undercapitalized they cannot pay competitive salaries to attract or keep top talent in their organizations.  That’s not to say there is not top talent in the sector, to the contrary there are incredibly talented people, but they are working much too hard, with very little resources (including adequate staffs) and are burning themselves out.
• Nonprofit boards of directors, the stewards of these organizations, are often not trained in their duties and are too strapped for time to help organizations achieve their missions, grow, and become financially stable.
• The process for becoming a 501(c) 3 is too easy and somewhat unregulated, creating incredible competition for very scarce resources.
• The high-dollar philanthropic funding for the sector comes from individuals and foundations who often have their own theories of change.  Grants tend to be direct-service, not infrastructure, focused and put too many strings on the money.
• Governments who contract with nonprofits increasingly push them to deliver the same or increased level of services for less and less money, creating a move towards rock-bottom priced services.
• There are no rewards in the sector for innovation or risk-taking, in fact innovation is disincentivized.

So, how could we seize the opportunity that the changing economic, social and political climate affords the social sector? What could we in Austin do to innovate out of this situation:

• Our city government could partner with local businesses and venture capital firms to fund a local version of the proposed federal social investment fund.  A pooled fund of government and private money could be invested to grow and build the capacity of nonprofits and social enterprises that deliver great solutions to our community.
• Philanthropists, both individuals and foundations, could make a commitment to fund the capacity and infrastructure of those nonprofit organizations that are demonstrating real results.  These investments would not be direct-service program investments, but rather investments in the high-quality capacity and infrastructure (technology, staff, consulting, etc.) these organizations need to be successful.
• Nonprofits could talk about the social return on investment they offer investors and how they are providing real solutions to the problems we face.  They could encourage their board members and funders to understand what it really costs to provide the high quality services they provide (both direct and indirect costs) and what it would really take to grow to meet the increasing need.

And finally, we could all start to recognize that we can no longer leave nonprofits alone to figure out how to serve more people with fewer resources while the problems that affect all of us get bigger and more complex. We need to recognize that things are changing.  Our economy is changing fundamentally; the government, private and nonprofit sectors are converging; a movement for social innovation is going on nationally.  There is real opportunity for Austin to get involved in, profit from (socially and economically), and potentially lead this movement.  Let’s start that conversation.

Tags: Austin, capacity, Obama, Paul Light, Serve America Act, social investment fund