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How Convincing is Your Nonprofit’s Fundraising Ask?

beggingTired of the endless fundraising circuit, nonprofit leaders sometimes get frustrated when prospective donors won’t invest in their nonprofits, like this executive director:

“Here’s my problem…It’s obvious these people have money, they just don’t want to share it with us.”

What this executive director fails to realize is that the burden to connect the dots for donors lies squarely on her shoulders. It is up to nonprofit leaders to articulate – in a compelling, inspiring way – how their nonprofit is creating a solution to an important social problem, and why donors should care about and invest in that solution.

A Case for Investment can help you do just that.

Now more than ever, nonprofits are struggling for funding amid growing competition and diminishing available dollars. At the same time, burgeoning interest in performance management and impact investing have focused more donors on the outcomes their investment in a nonprofit will bring.

Donors, especially major donors, are less likely to give to a nonprofit because the organization “does good work” and more likely to give because a nonprofit demonstrates how it creates a solution to a social problem the donor cares about.

Those nonprofits that want to continue to attract and grow philanthropic investment must create a compelling, thoughtful argument for why a donor should give to their organization. This argument is called a “Case for Investment.” Driven by a thoughtful combination of data and emotion, a good Case for Investment can help a nonprofit communicate and connect with their target donors much more effectively.

The Case for Investment Step-by-Step Guide can help you create your nonprofit’s case.

case for investment guideAs one nonprofit executive director who used the Guide put it:

“I am using it as a catalyst to create a branding campaign with my Marketing Committee. Of course, this will be used for fundraising and grant writing as well. We really needed the framework to build value for our donors, volunteers, and clients.”

A good case for investment is the fundamental building block from which all donor communications, marketing materials, grant proposals, website language, and more is born.

The Case for Investment Step-by-Step Guide is broken down into ten sections:

  1. Why Create a Case for Investment?
  2. How to Use This Guide
  3. The Need
  4. Solution
  5. Impact
  6. Financial Model
  7. Strategic Direction
  8. Resources Required
  9. Social Return on Investment
  10. Next Steps

In each section there is a series of questions, which you will answer. Your answers to these questions become the basis for your final Case for Investment. Examples of other nonprofit’s cases for investment are highlighted in each section, allowing you to see how others have made their arguments.

The Case for Investment Guide is one of six guides in the Social Velocity Step-by-Step Guide Series. You can learn more and download this and other guides here.

Photo Credit: JHall159

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5 Nonprofit Trends to Watch in 2014

The_Crystal_BallAmong other obvious things, December is a time for reflection on the past year and predictions for the coming year. There have already been some great forecasts about what 2014 will bring the social change sector (here, here, and here). And as is my tradition, I want to add my thoughts about the trends to watch in the coming year. (If you want to see how I did in past years, you can read my nonprofit trends posts for 2011, 2012 and 2013.)

Here’s what I think we should watch for in 2014:

  1. Growing Wealth Disparity
    Evidence increasingly reveals that despite our best efforts the gap between the rich and the poor is widening, not shrinking. This growing disparity means that the work nonprofits do to address the ramifications of these inequities is in growing demand. The problems are simply too big and getting bigger every minute. At the same time government resources are shrinking so the greater burden for solutions is increasingly placed on the shoulders of the nonprofit sector. As problems get worse and money gets tighter the social change sector will take center stage.

  2. Greater Nonprofit Sector Confidence
    As the nonprofit sector is asked to do more and more, nonprofits will no longer be a “nice to have” but an absolute essential component of any way forward. We will move squarely away from the idea of “charity” and toward an economy and a mindset that fully integrates the social. No longer sidelined as a small piece of the pie, the nonprofit sector will be recognized for the undeniable and pivotal role it plays in our economy, our institutions, our systems. As such, the nonprofit sector will stop apologizing for the resources it needs to do the job. The sector will rise up and take its rightful place as a critical force in shaping a sustainable future.

  3. Increased Movement Toward High Performance
    As resources become tighter and we look to the nonprofit sector to solve mounting problems, public and private funders will increasingly want to see the return on their investments. And that can only be done by understanding what results a nonprofit is achieving. The growing push this year away from financial metrics and toward outcome metrics will continue to grow. Nonprofits will have to learn not only how to articulate the outcomes they are working toward, but more importantly, how to manage their operations towards those outcomes.

  4. More Capacity Investments
    And if we are going to get smarter about achieving results in the social change space, more donors will start to recognize that they have to build the capacity of that space. There is no end to the list of capacity-building needs of the sector.  From investing in more sustainable financial engines, to funding evaluation and performance management systems, to financing nonprofit leader coaching, philanthropists will increasingly recognize that if we are going to expect more from the nonprofit sector we must make sure they have the tools to do the job. A handful of savvy foundations and individual donors have already made capacity investments, and as those investments pay off, more donors will follow suit.

  5. Accelerated Effort to Enlarge the 2% Pie
    For the past four decades private contributions to the nonprofit sector have not risen above 2% of the U.S. gross domestic product. In recent years there have been attempts to grow that pie. And the big question whenever a new funding vehicle enters the space (like crowdfunding most recently) is whether it will be the magic bullet to shatter that glass ceiling. But we are not there yet. As social challenges continue to grow, the wealth gap continues to widen, and a new generation of donors comes of age, there will be increasing pressure to channel more money (not just the same money through a new vehicle) toward social change.

Photo Credit: John William Waterhouse

 

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Debunking the Nonprofit Overhead Myth: An Interview with Laura Zumdahl

Laura ZumdahlIn this month’s Social Velocity blog interview, I’m talking with Laura Zumdahl, Vice President of Nonprofit Services at Donors Forum. Donors Forum provides networking, education, leadership and advocacy for philanthropists and nonprofits in Illinois. Laura provides leadership to Donors Forum’s efforts to strengthen nonprofits. I wanted to talk to Laura and Donors Forum primarily because of their innovative work bringing nonprofits and philanthropists together to talk about the real costs (including administrative costs) of creating social change through their Real Talk about Real Costs effort I highlighted earlier this year.

You can read past interviews in the Social Innovation Interview Series here.

Nell: What was the impetus for Real Talk about Real Costs and what is your ultimate goal with the project?

Laura: We’ve long known “overhead” has been a challenge in the nonprofit sector. Over the past few years, we’ve been engaged in some conversations and education about overhead and the “starvation cycle” that encumbers nonprofits, but it had been in fits and spurts.

In 2012 Donors Forum decided we needed to do more to directly address the issue with our membership and see what kind of change we could make locally on this tough issue. So we launched a “Community of Practice” focused on bringing together a group of dedicated funders and nonprofit leaders to tackle the issue over the course of a year through education, sharing of stories, and collective action to move the needle on funding nonprofit overhead.

Ultimately, we want to see change in the sector related to funding the full cost of service delivery. We want nonprofits to be able to understand and articulate their true costs of delivering their missions, and we want funders to understand those costs and fund organizations accordingly. We want funders to invest in the impact they can have with their dollars, not just a limited portion of a program that doesn’t include the real costs. For nonprofits to have a greater impact, they need to have their mission fully-funded.

Nell: The underlying assumption behind Real Talk about Real Costs is that it is possible to get nonprofits and funders to talk openly and honestly with each other. But that is something that rarely occurs in the sector because of the power imbalance between grantor and grantee. How do you overcome that imbalance and get to open, honest, productive conversation?

Laura: The power dynamic you articulated is often a huge barrier for authentic, productive conversations between grantors and grantees. We recognize that as part of the challenge of this work and know that we are only going to make change by helping people to shift that in their own work and experience so they can understand the perspective of the “other”.

When we first started this effort we formed a community of practice comprised of about 30 leaders – half grantors and half grantees. This community spent a year coming together every six weeks or so to learn more about overhead cost issues, hear each others’ stories about the challenges related to their work, and develop relationships. We intentionally focused on helping them to create a trusting and safe space where they could understand and learn from each other. It’s not easy to get to open and honest conversation when power dynamics are at play, but we saw this happen when we were deliberate about getting a commitment from participants to engage in this way and create a space for them to develop relationships and trust to allow these conversations to take place.

Nell: What are your plans, or do you have any plans, to take these conversations to a national level? How do we encourage these conversations beyond Illinois?

Laura: We do! We are continuing to work with our national partner, The Bridgespan Group, on the ongoing conversations at the local level in Illinois. We plan to launch another community of practice later this year, which will continue this work that has evolved over the past few years. We also are working with other great national partners, such as Guidestar and Grantmakers for Effective Organizations (GEO), to take the conversations to a national level and encourage change in other locations, not just Illinois.

We need to encourage these conversations across the country – and that happens when people take the risk to build relationships that enable authentic conversations so stories can be shared and nonprofits and funders can work together to make change on how we address the issue of overhead costs in the sector.

Nell: What do you make of Guidestar, Charity Navigator and BBB Wise Giving Alliance’s recent Pledge Against the Overhead Myth? How do you think their efforts will affect donor actions?

Laura: We were thrilled to see Guidestar, Charity Navigator, and BBB Wise Giving Alliance make such a strong statement to the donors of America. Their recognition of how overhead rates can be wrongly used as a measure of effectiveness helps to raise awareness about this misconception and the importance of donors investing in impact.

Their leadership on this issue and the pledge that they’ve asked donors to commit to is an important step in helping to clarify the myths that have long surrounded overhead costs. They are looked to by many donors for signs of what to consider when selecting nonprofits to invest in, and their plea to donors to consider the real cost of outcomes and impact of an organization – not just a ratio that doesn’t tell the whole story – is a clear directive that we hope will affect both individual and institutional donors substantially.

Nell: What do you think it will take to really move the needle and get a majority of donors to recognize and invest in real nonprofit costs?

Laura: Change is hard when you are trying to affect behavior in a whole sector, so it’s not going to happen overnight. It’s a long process of affecting change in some areas that can build and eventually influence others to reconsider how they invest in real costs. We believe that if we can take the lead on making change in Illinois and share that experience with others, it’ll eventually help to influence behavior in other geographic areas across the country – hopefully leading to a wide-spread sector shift somewhere.

Several years ago nonprofits and funders weren’t talking about this issue together – and now, in some small pockets – they are. That’s a step in the right direction. And those of us in the sector need to support this work by making a personal commitment to address the myths around overhead whenever we can so we are part of making change happen.

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Listening to Nonprofit Beneficiaries: An Interview with Perla Ni

Perla NiIn this month’s Social Velocity blog interview, I’m talking with Perla Ni, CEO of GreatNonprofits. Perla was the founder and former publisher of the Stanford Social Innovation Review, the leading journal on nonprofit management and philanthropy. Prior to her work at SSIR, Ni co-founded Grassroots Enterprise, later acquired by global public relations firm, Edelman. A frequent speaker on nonprofits and philanthropy, she has been named a “Top Game Changer” by the Huffington Post.

You can read past interviews in the Social Innovation Interview Series here.

Nell: GreatNonprofits is an interesting spin on the growing nonprofit ratings market in that you gather consumer reviews of nonprofits. Why do you think what donors, volunteers, and clients have to say about a nonprofit is important to potential donors?

Perla: We think people with direct experience with a nonprofit, especially the nonprofit’s beneficiaries, are in the best position to tell us about the difference that that nonprofit has made in their life or their community.

In the seven years that we’ve been doing this, we have learned a couple of things about collecting beneficiary feedback. It’s not only the right thing to do – to empower the voice of beneficiaries so that they are treated with dignity – it is also the smart thing to do. It’s the smart thing to do because it is highly correlated with actual program outcome. We’ve seen the linkage between effective outcomes and organizations that collect and listen to their beneficiaries.

Although there are ongoing conversations about the best metrics for judging quality, there is agreement that, for almost every sector, consumer satisfaction and feedback drive quality through transparency and competition.

A trend toward human-centered design, where products are designed and rapidly iterated upon with feedback generated from users, is another example of how client responsiveness leads to improved outcomes.

GreatNonprofits has been collecting feedback about a wide variety of health, human service, arts and education organizations.

Nicole Molinaro, former executive director of Communities in Schools of Pittsburgh-Allegheny County, a Pennsylvania-based dropout prevention program serving at-risk youth, found great value in constituent feedback, “What interested us in being open to reviews from our constituents is really the desire to improve our services. Without hearing feedback about what we’re doing well and what we can do better, we really can’t make improvements in how we serve our kids.”

Due in part to feedback submitted by students, the organization added a student lounge as a safe, accessible place for the students to spend time in before and after programs.

In a recent GreatNonprofits survey of nonprofits, we found that a large number of nonprofits are listening to beneficiary feedback and some are taking action.

  • 78% share reviews with board members
  • 72% share reviews with staff
  • 54% share reviews with volunteers
  • 49% share reviews with donors
  • 23% share reviews with clients
  • 26% say reviews have impacted their operations

In fact, in Learning for Social Impact, a report for donors and foundations by McKinsey & Company, the number one recommendation given to funders is for them to “hear the constituent’s voice.”

These rich, detailed and concrete experiences from people who have actually experienced the work of the nonprofit—been fed by the food bank, helped by the after-school program—are a better way to discover the most effective charities than through tax forms. According to our survey of our users:

  • 90% of donors say that reading reviews of clients help them understand the work of the nonprofit
  • 80% of donors say that it influences their decision to give

Nell: How does a great customer experience (a review from a volunteer that had a great experience with a nonprofit) translate into a nonprofit’s ability to create social change? Or should or does a donor care about that?

Perla: In the excellent article “Listening to Those Who Matter Most, The Beneficiaries” in the Stanford Social Innovation Review, the authors show that, in the studies about school performance and patient outcomes, there is a high degree of correlation between listening to the student/patient and success.

Donors care about real world outcomes–how is my money helping?

Nell: What do you make of the growing debate about what information donors want and actually use in making their funding decisions? Do you think how donors make their giving decisions and what information they use to make those decisions has or is changing?

Perla: It starts with the donor. Donors want to improve the world, to make a difference. And the donors typically want to spend their time and money effectively. How do you find a nonprofit that is aligned with your passion and making a real difference on the ground?

Well, it requires listening to the voices of people on the ground – the ex-felon in a job training program, the student receiving mentorship, the volunteer who organized the environmental conference, the donor who visited the school in Cambodia – who have seen the first-hand impact of nonprofits.

These are not the usual people that donors listen to – they may be different from us in so many ways – income, class, geography, or race.

And if the donor wants to empower real, tangible changes in the lives of people and communities they want to improve, he/she needs to have the discipline to do that. It’s part of the first rule of philanthropy “don’t do something about me, without me.”

It’s a radical discipline, transparency and accountability that we must hold each of ourselves to, including the donor.

We don’t see this discipline as just funding decision-making. We see this as community engagement. The donor and the beneficiaries needs to be part of this philanthropic marketplace together to share insights on what works, what doesn’t yet and what could help to make a greater difference.

Nell: You were also the founder of the Stanford Social Innovation Review which is currently celebrating its 10th year. 10 years in to this world of social innovation what do you think we have to show for it? Have we gotten better at solving social problems?

Perla: If you Google “social innovation,” you get 648 million search results. This wasn’t at all the case 10 years ago! We pretty much invented that term.

One of the accomplishments, I think, is that social issues are no longer ghettoized as nonprofit issues. It’s not just a nonprofit problem or a business problem or a technology problem. Social innovation, which was always focused on finding new ways to solve problems, agnostic of the approach of the sector, is broadening our framework and ways that we network to achieve our goals. Now published by the incredibly prolific Stanford Center on Philanthropy and Civil Society, SSIR reaches business people, foundations, technology leaders, and nonprofits. Social innovation is about bringing an open, entrepreneurial outlook to enterprises – start-up and mature organizations alike. We’d also like to think that it helped popularize other concepts such as social entrepreneurship, which has blossomed into an area of study in school, as well as create a new kind of career identity. At the core is a belief in not being complacent, not doing the same old same old, or talking to the same people. It’s really about creating a broad mindset for ideas and different people.

Nell: Much speculation has occurred about what effect millennial donors will have on philanthropy, because of the huge wealth transfer they will enjoy, their large numbers and the new ways they are sharing information about their giving. What are your thoughts on how or if Millennial donors will change philanthropy?

Perla: Millenials are more civic-minded, more public about their giving and more likely to be bifurcated in their giving – give locally and internationally.

They may find the idea of donating to their parents’ alma mater or their parents’ charity as rather stuffy. They are a more connected, shop local, eat local, biking/walk generation – and so they are more drawn to the idea of helping their local community. They are also well-traveled and more connected internationally, so they have a high interest in giving internationally as well.

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10 Great Social Innovation Reads: February

February was another great month in the world of social innovation reading. As I mentioned last month, I’ve started a new monthly series on the Social Velocity blog highlighting my favorite 10 reads in the world of social innovation over the past month. You can read the January list here.

There are many more than 10 great reads out there, but these were the ones that really challenged me and got me thinking. I hope they do for you as well. As always, please add to the list in the comments. I’d love to hear what got you thinking this past month.

  1. Seedbeds for Social Innovation: The Echoing Green blog discusses a new Carnegie Mellon University report that details what it takes for a city to be a seedbed for social innovation.

  2. Nonprofits need to stop begging for scraps From the Chronicle of Philanthropy’s Money and Mission blog, authored by the Nonprofit Finance Fund, comes a great response to the Stanford Social Innovation Review article a couple of years ago about the nonprofit starvation cycle. This post discusses what nonprofits can do to break out of the cycle.

  3. A 10 Year Lesson in How Not To Spend $200 Million The Northwest Area Foundation in Minnesota has declared it’s ten year philanthropic experiment a failure. An interesting study in the less talked about side of innovation (failure) and transparency.

  4. Social Impact Bond Learning Group The Nonprofit Finance Fund has launched a learning and discussion group to explore the feasibility of social impact bonds (government bond funding for social impact organizations tied to outcomes) in the US. The UK has already experimented with similar kinds of bonds. If the US introduced these kinds of bonds it could be a revolutionary new tool for funding social innovation.

  5. Wired and Shrewd, Young Egyptians Guide Revolt A fascinating look from the New York Times into the structure and tactics of the small group of young innovators who brought Egypt’s ruling dictator to his knees. A real study in social innovation.

  6. To Collaborate or Compete? From New Philanthropy Capital comes a report studying when it makes sense for nonprofits to collaborate and when to compete. Such a framework could be a really helpful way to tackle to this burning question.

  7. Q&A With Middle East Entrepreneur Habib Haddad And another view of what happened in Egypt, a fascinating interview with a young entrepreneur who discusses the role of social media in the uprising.

  8. Stop Giving Donors What You Think They Want: Dan Pallotta challenges nonprofits to treat donors like adults and be upfront and honest with them.

  9. Rethinking the State of the Sector: The Deep Social Impact blog encourages the nonprofit and philanthropic sectors to focus on assets instead of challenges.

  10. Governmental “Crowding Out” in Philanthropy: Sean Stannard-Stockton argues that because of the arcane way nonprofit accounting is done, money from government sources might actually cripple the financial sustainability of a nonprofit.

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Asking for Money in a Recession

In difficult economic times like these it can seem impossible and exhausting to raise money.  It may appear that everyone is saying no, and raising enough to keep your nonprofit going is nearly impossible.  You may grow angry at those who have wealth, but are unwilling to part with it because of fear and uncertainty.

In times like these it can be helpful to remember why people give and what motivates and demotivates giving.  It is important to take a bigger picture view of what you are asking for.  You are NOT asking for donors to keep your organization from shutting down.  You are NOT asking them to save a sinking ship.  You are NOT asking them to fix a deficit in your organization.

It has to be a much larger conversation.  You are asking them to seize the opportunity to invest in a solution to a serious problem their community faces.  You are asking them to make another person’s life better and by doing so they will make their own and their community’s lives better.

The Nonprofiteer, a blog on nonprofit issues, responded recently to a nonprofit Executive Director’s frustration at trying to raise money in this climate.  The ED is fed up with the wealthy individuals she is trying to raise money from:

Here’s my problem: whenever I tell donors how desperate we are, I get a sob story about how desperate THEY are.  (The next person who tells me he simply doesn’t read his 401K statement is getting a swift kick in the pants.) It’s obvious these people have money; they just don’t want to share it with us.  What’s your advice?

The Nonprofiteer shows no pity for this ED and in fact demonstrates how wrong her approach is.  Rather than viewing donors as selfish and out of touch with the needs of her organization, the ED needs to change the conversation and convince the donor how her organization is providing solutions.  She needs to demonstrate that an investment from that donor will make a real impact in their community:

People don’t give to agencies they think are desperate; they give to agencies they think are successful…It may be accurate to say, “Without your $100, we won’t be able to house our clients tonight.”  But it’s just as accurate, and twice as effective, to say, “With your $100, tonight Charles and David will have a place to sleep and access first thing tomorrow morning to telephones and computers to continue their search for a job.”

And I would take it even further.  An investment in this organization will work towards getting Charles and David into successful jobs and housing so that they become self-sufficient and are no longer a burden on the community’s safety net.  You as a donor will not just be helping them get a good night’s sleep you will be setting them and people like them on a path towards becoming fully contributing members of our community.  And then their beds will be free for others to start their journey along the same path.  In essence, you are investing in a trajectory where there are fewer burdens on our society, more contributing members and a stronger, healthier community.

The conversation completely changes from one about a narrow, short-sighted mentality, to one about investing in dramatic changes in our community and our society that inspire passion and commitment, energy and enthusiasm.

Sean Stannard-Stockton wrote earlier this year in the Stanford Social Innovation Review about why people give.  He echoes this argument that people give from a desire to connect to and have impact on their communities:

I believe that giving is motivated by humans’ deeply held need to find meaning in life. For most people, meaning is deeply intertwined with community connections (defining community as narrowly as family and as broadly as the full community of life). Humans want to feel a sense of connection and a sense of purpose to life. Giving (time, money, and energy) is a central way that we strive to find meaning.

The more that nonprofit leaders, board members and Development Directors can demonstrate how an investment in their organization creates significant and meaningful change in the world and community around a donor, the more success nonprofits will have.  People need to be excited, engaged, energized, passionate and committed in order to give in a significant way.  To get to that you need to broaden the conversation.

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Monday, January 26th, 2009 Fundraising, Nonprofits 4 Comments