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7 Things Funders Don’t Get About Fundraising

nonprofit fundraisingIn 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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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

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Does Sexism Hold the Nonprofit Sector Back?

nonprofit sexismThere 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.

Just like the Overhead Myth and other myths that hold the nonprofit sector back, the historic sexism the sector operates under is equally destructive and must be acknowledged so we can move past it.

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

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Making the Case for Nonprofit Leaders: An Interview with Linda Wood

Linda WoodIn today’s Social Velocity interview, I’m talking with Linda Wood, Director of the Haas Leadership Initiative. Over the past decade, the Haas, Jr. Fund has invested over $20 million in strengthening the leadership of more than 75 grantees in its key priority areas– immigrant rights, education equity, and gay and lesbian rights—through the Flexible Leadership Awards program. In that time Linda has become a leading voice on the topic of leadership in the nonprofit and philanthropic sectors. Prior to joining the Fund, she advised senior leaders on strategy, organizational performance and change management at Cap Gemini Ernst & Young.

You can read past Social Velocity interviews here.

Nell: The Evelyn and Walter Haas, Jr. Fund has put a lot of investment behind the development of nonprofit leaders, but you are quite an anomaly in the philanthropic world. Support for leadership development is taken as a given in the for-profit world, but rarely recognized, let alone funded, in the nonprofit world. Why do you think there is that discrepancy in leadership development between the nonprofit and for-profit worlds?

Linda: It really is striking to see how differently the business sector and the nonprofit world view the issue of leadership. I went to business school myself, and spent eight years working as a management consultant in the private sector where it’s basic good practice to invest in the people you’re counting on to move the work forward. Strengthening leadership is seen as part and parcel of what it takes to fuel innovation and success.

On the other hand, in the social sector, a lot of foundations think of leadership development as a luxury–a nice-to-have that’s not linked to impact. That’s reflected in recent estimates that less than 1% of total foundation spending is going to strengthen leadership in the nonprofit sector.

Why? Well, I think we’ve got a lot of myths about leadership in our sector.

One myth is that leadership development is simply not a priority for nonprofit leaders because most don’t ask for it. And, when grantees don’t ask, many foundations assume that there’s no need. But we have not yet created a culture in the nonprofit sector that says it’s ok to invest in yourself and in other senior organizational leaders. We place a high value on self-sacrifice. Given the choice, nonprofit leaders will almost always direct general support to critical services and programs. That’s why actually I think it’s important for foundations to earmark funds for supporting leadership.

Another related myth is that leadership is part of overhead, and overhead should be minimized at all costs. From this perspective, investments in the organization’s leadership are cleaved off from the work and seen as wasteful overhead rather than intrinsic to achieving the organization’s goals.

Nell: You recently curated a blog series on the Stanford Social Innovation Review where funders who have supported nonprofit leadership development articulated its value. How helpful do you think that step was in getting the broader philanthropic community to understand the value of leadership investment? And do you have additional plans to help move leadership development forward among your peers?

Linda: Our goal in putting together the SSIR blog series was to help build momentum around the idea of investing in leadership being a core grantmaking strategy that can catalyze diverse programmatic goals and not just a boutique strategy that only some funders can afford. By featuring perspectives from top-level executives from a half dozen foundations of very different sizes and with very different funding priorities, ranging from the Omidyar Network to the Women’s Foundation of California, we hoped to offer examples that would inspire more foundations to see possibilities for their own work.

To be honest, it’s hard to know whether we are moving the needle. But it does seem like there has been mounting attention to philanthropic underinvestment in leadership lately. Just over the past couple of months GEO and then NCRP have both released major reports making the case for more attention to leadership and talent development. And the Talent Philanthropy Project held a meeting in New York in March that attracted over 60 people including nonprofit leaders, funders, consultants, and intermediaries.

I think the real question is whether increased interest will translate into significant increases in investment—the kinds of sustained, strategic investments in leadership that advance the capacity of organizations, networks and movements to achieve better outcomes. The danger is that we foundations will sprinkle a little leadership development funding here and there, perhaps send a handful of our grantee leaders to a training, and call it a day.

Nell: You recently announced a new initiative to seek solutions to the challenges, which you uncovered in your 2013 UnderDeveloped study with CompassPoint, facing nonprofit fundraising. What are your long-term plans with this initiative and what do you hope to find?

Linda: The UnderDeveloped report caused such a stir across the country. I have heard from so many people—funders, grantees, consultants, board members, etc.—that the report gave voice to concerns they’ve held for a long time. It clearly hit a pain point. And the big question it begs is what to do about it?

At the Haas, Jr. Fund, we’ve decided our next step is to try and refine concrete strategies that will help our grantees, and hopefully others, achieve breakthroughs in their fundraising.

One of our goals is to help organizations be more strategic about their approach to fund development. There’s so much out there. The nonprofit fundraising industry is full of consultants, speakers, large trade associations and technology providers. They offer costly, sometimes contradictory advice, patented approaches, one-off success stories, and a dizzying array of technology tools and platforms for raising money. As a result, our work in fundraising may be less about innovating and more about separating the wheat from the chaff, helping grantees chart a coherent, fruitful course through the thicket of possibilities.

Right now, we’re in the R & D phase. Here are some of the questions we’re exploring:

  • What fundraising success stories can be replicated by our grantees? To answer this question, we will conduct “bright spots” research focused on small- to medium-sized organizations who have had sustained success with individual fundraising.
  • How can we address the fundraising talent gap? To answer this question, we are conducting a scan of fundraising training and exploring the feasibility of a “fundraising fellowship.”
  • One fund development approach that’s attracting attention is developing a “culture of philanthropy.” But what does that mean? And what difference does it make?
  • Are there ways to help an entire field of grantees? To identify potential investments that might help a field of grantees, we are testing whether and how donor research can help LGBT grantees with fundraising.

As we tackle these questions, we are sharing what we’re learning along the way through a series of blogs on our website. And we’d love to hear from other people. What questions are missing? What can a foundation’s role be in supporting fundraising capacity?

Ultimately, this isn’t just an intellectual exercise. Our goal is to get better at supporting grantees around fund development, and to that end, we anticipate beginning to pilot some new strategies starting in 2016.

You asked what we hope to achieve with this work over the long term. I think if I could fast forward a couple of years, I would hope we will have made a dent in strengthening the talent pipeline for development directors, and that we are helping organizations bring more skill, focus and success to their fundraising, especially in tapping individual donors.

Nell: Philanthropy has traditionally been less interested in funding capacity building (like leadership development and fundraising). Do you think that’s changing? And/or do you think we will have more hope of changing that as generational shifts take hold in philanthropy?

Linda: Yes, I often feel like there’s a real divide between the folks in philanthropy who are focused on the what and those who are focused on the how.

Obviously, we’re all in this work for the what—to help create a more just and sustainable world. But often in philanthropy, conversations about things like capacity and leadership are disconnected from the conversations about the content of the work. We hold separate conferences; we belong to different affinity groups; we read different articles…

So, as someone who’s a member of the how club (as we sometimes jokingly refer to it among ourselves) I think we need to keep strengthening the connection between building leadership and capacity and delivering programmatic wins. No matter what a given foundation seeks to achieve programmatically–whether that’s community health, environmental justice or education equity–it’s important to ask how they will get from where they are today to where they want to be. What is our responsibility as funders to support the people and organizations who are advancing this work? What kind of staff, board and community leadership will be needed to get where we all want to go? And how can we transmit in words and in concrete actions that we are in this together and that we want to provide them with the resources to do their best work.

Photo Credit: Evelyn & Walter Haas Jr. Fund

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10 Great Social Innovation Reads: April 2015

social changeApril was another busy month in the world of social change writing. From Google’s shift to mobile, to the Baltimore protests, to using sitcoms to change public opinion, to the pace of social change, to teens and social media, to a new way to measure a country’s performance, there was much to read and digest.

Below are my 10 picks of the best in the world of social change in April, but please add to the list in the comments. And to see what else I found beyond these 10, follow me on Twitter, Facebook, Google+, or LinkedIn.

And you can read past months’ 10 Great Reads lists here.

  1. There was much analysis about what went wrong in Baltimore, but I found the most insightful to be Dan Diamond’s Forbes piece about how it is fundamentally a “tale of two cities” and the persistent inequality between two very different Baltimores.

  2. As is Google’s way, they made a huge change to their search algorithm in late April that will affect us all. Google is now favoring websites that are mobile friendly. But fear not, Beth Kanter offers some advice for upgrading your nonprofit’s website.

  3. For those in the trenches, the pace of social change can seem glacial. But this great graphic from Bloomberg demonstrates that for many issues (prohibition, interracial marriage, women’s suffrage, same-sex marriage) there was a tipping point at which America very quickly changed its mind. Fascinating.

  4. Civic Tech, or using technology to make citizens more engaged and government more effective, is a huge investment opportunity, says Stacy Donohue from the Omidyar Network. With venture capitalists, the federal government and nonprofit and for-profit solutions all poised to make change, Donohue sees civic tech as a “very real, very now investment opportunity.” Let’s hope that new ideas and (most importantly) lots of new money can turn our struggling democracy around.

  5. Social change can happen in many different ways, including by altering popular culture. Former Daily Show correspondent Aasif Mandvi is attempting this kind of shift with his new web sitcom that takes a “Cosby Show” approach to portraying American Muslims in order to combat Islamophobia.

  6. Writing in Slate, Krista Langlois takes a hard look at her fellow environmental journalists and whether they have failed to adequately describe the environmental challenges facing our planet since American concern about climate change has actually declined in the last 20 years.

  7. One of the most common hurdles to nonprofits raising capacity dollars is the challenge of articulating to funders the potential impact of a capacity investment. Grantmakers for Effective Organizations (GEO) have put together some tools to help funders understand the importance of and return on capacity investments. Share these with your funders.

  8. In April, MIT and the Social Progress Imperative launched the Social Progress Index, an effort to create a complement to the Gross Domestic Product that measures a nation’s social and environmental performance. The Social Progress Index looks at 52 indicators of a country’s social and environmental performance (like child mortality rate, adult literacy rate, greenhouse gas emissions). As Michael Porter, one of the chief architects behind it puts it, “Measuring social progress offers citizens and leaders a more complete picture of how their country is developing. And that will help societies make better choices, create stronger communities, and enable people to lead more fulfilling lives.”

  9. Writing on the Huffington Post Politics blog, Robert Reich describes a worrying trend where nonprofits are silencing themselves for fear of losing their big donors. As he writes, “Our democracy is directly threatened when the rich buy off politicians. But no less dangerous is the quieter and more insidious buy-off of institutions democracy depends on to research, investigate, expose, and mobilize action against what is occurring.”

  10. And finally, if you want to understand where social media is going, Pew Research Center released their most recent findings about teens use of social media and technology.

Photo Credit: Patrick Neil

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10 Great Social Innovation Reads: February 2015

reading by fire ipadFebruary was a pretty cold month around the country, but on the positive side that made it a great month to stay inside and read. I really struggled to cull the list of great reads to 10 this month because there was so much thought-provoking stuff out there. But below is my valiant effort.

From Afghan women, to political engagement, to nonprofit burnout and capacity building, to economic development and net neutrality, there was lots to read and think about.

Here is my view of the 10 best reads in the world of social change in February. But as always, add to the list in the comments. And if you want my unedited list of picks, follow me on Twitter, Facebook, LinkedIn, or Google+.

You can see past 10 Great Reads lists here.

  1. February saw the end of Andrew Sullivan’s long-time blog, The Dish. But before he left, he wrote this beautiful piece about how quickly the state-by-state legalization of gay marriage happened, and more broadly, how social change happens: “[The legalization of gay marriage] is a sign and a proof that the deepest darkness can be turned to light. And that reason and love and argument and the truth will win … in the end.”

  2. In a fascinating interview, NPR Morning Edition host Renee Montagne talks with Afghanistan’s First Lady, Rula Ghani about her role as the first politically active first lady and the plight of Afghan women.

  3. Writing in the Washingtonian, Andrew Beaujon describes how 2015 may be the “Year of Quality” in political reporting since Politico and Gawker, among others, are moving their measure of success from number of clicks to quality of reader engagement. Let’s hope this is part of a larger trend away from click-bait and toward thoughtful political journalism.

  4. And speaking of better informed politics, the Knight Foundation joins with other democracy funders to issue a $3 million challenge to identify ideas that can “better inform voters and increase civic participation before, during, and after elections.” Entries to the challenge will be accepted until March 19th.

  5. An anonymous former nonprofit staffer writing in The Guardian (which, by the way, launched an interesting new blog focused on the nonprofit sector called Nonprofit Chronicles in February) describes why she suffered burnout and why the nonprofit sector needs more support: “Burnout [doesn’t]  just occur in a vacuum. My experiences were intensified by the increasing frustration of carrying out support work in the context of austerity measures.” Amen!

  6. But perhaps help is on the way. Beth Kanter reviews two new reports (one from the Foundation Center and one from Grantmakers for Effective Organizations) about funder efforts to build the capacity of the nonprofit sector. And Paul Shoemaker from Seattle Social Venture Partners makes the case for funders making 100% of their funding unrestricted.

  7. February saw a decisive victory in the effort to preserve an open Internet (“Net Neutrality”) when the FCC ruled that “America’s broadband networks must be fast, free, and open.” Lucy Bernholz breaks down what the ruling means for digital civil society.

  8. Aaron Hurst writes a compelling piece about how investing in businesses that create jobs is not true social change: “If we want to see more Americans gainfully employed—not in jobs, but with living-wage careers—we need to invest more in the nonprofit sector and in government programs. While these investments don’t create the short-term gains that business leaders have been trained to seek, they are what will matter at the end of the day. They will create the supply of talent needed for our economy and society to thrive.”

  9. Nonprofit With Balls blogger Vu Le argues that nonprofits should drop “accountability” as an organizational value and instead embrace values “Where people act not out of fear of punishment but out of a drive to build a strong and just community.”

  10. Finally, the Philantopic blog offers 5 Ways to Improve Your Digital Strategy for Older Donors.

Photo Credit: Lois Le Meur

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Wednesday, March 4th, 2015 Innovators No Comments

5 Myths The Nonprofit Sector Must Overcome

nonprofit mythsAlmost two years ago three nonprofit rating organizations launched the Overhead Myth campaign aimed at eradicating “the false conception that financial ratios are the sole indicator of nonprofit performance.” Call me an optimist, but I think it might be working. I see more nonprofit leaders and funders discussing the radical idea that overhead might not be a bad thing. We still have a long way to go, but perhaps there is progress.

The bad news, however, is that the Overhead Myth is only one of many (way too many) destructive nonprofit myths. So in this new year, let’s look at those additional myths that hold the nonprofit sector back.

As we all know, a myth is a story that everyone believes, but is actually not true. Here are the 5 most egregious myths I see in the nonprofit sector:

  1. Good Nonprofits Don’t Make a Profit
    For some reason it is unseemly for a nonprofit to have more money than they immediately need. The best a nonprofit should hope for is to break even, and if they do run a profit, they should not be fundraising. To the contrary, a nonprofit with operating reserves can invest in a more sustainable organization, conduct evaluations to make sure their solution is the best one, recruit a highly competent staff, and weather economic fluctuations. For a donor it is far better to invest in an organization with the people and systems necessary to effectively tackle a social problem than an organization that is barely getting by. The best nonprofits are those that create a financial model that allows them the money mix (revenue, capital, reserves) necessary to make the best decisions and invest where and when they must.

  2. There Are Too Many Nonprofits
    I’m so tired of the refrain (mostly by funders) that there are “too many” nonprofits. Does anyone complain about how many tech startups there are? This myth comes from the fact that the sector is undercapitalized which causes organizations to compete for scarce resources. So let’s fix that problem instead. To be sure, there are times when it makes sense to bring two nonprofits that address similar needs together in order to save costs, but that’s usually the exception not the rule. The process of merging two organizations is itself incredibly time-intensive and costly, and, honestly, rarely do funders invest the amount of resources required to ensure a successful merger. Every nonprofit should regularly assess their Theory of Change and how they fit into the external market place of social problems and competitors working on similar problems. If a nonprofit finds that they are no longer adding unique value to that marketplace, then they should reorganize, merge, or disband, whichever makes most strategic sense.

  3. Nonprofits, Unlike Businesses, Are Inefficient
    This myth takes many forms: “nonprofits are too slow,” “nonprofits should sell more products or services”, “nonprofits should run more like a startup,” and the list goes on. The underlying assumption is that the for-profit world is inherently smarter, more strategic, more nimble and more effective. But the truth is that all three sectors (business, government, and nonprofit) have their stars (like Apple), their screwups (like Lehman Brothers) and the multitude in between. Inefficiency in the nonprofit sector is merely a symptom of a larger problem, which is the persistent lack of adequate capital to fund enough of the right staff, technology, systems, evaluation, marketing required to address the intractable problems nonprofits are trying to solve. Let’s talk about that instead.

  4. Nonprofits Are Outside the Economy
    This is the myth that nonprofits are “nice to have” and make everyone feel good, but are not a critical component of our lives or our economic system. But the fact is that the nonprofit sector employs 10% of the U.S. workforce and accounts for 5% of GDP. And the number of nonprofits grew 25% from 2001-2011, while the number of businesses only grew by 0.5%. As government continues to slough off services to nonprofits, those numbers will only continue to grow.  The nonprofit sector is not tangential to the economy, but rather an instrumental part of it.

  5. Nonprofits Have No Role In Politics
    501(c) 3 organizations have long been told to stay out of politics. The myth is that charity is too noble to be mired in the mess of pushing for political change (Robert Egger has written extensively on this). But the fact is that simply providing services is no longer enough to solve the underlying problems. Nonprofits are increasingly recognizing that they can no longer sit by and watch their client load increase while disequilibrium grows. Nonprofits must (and already are) advocate for changes to the ineffective systems that produce the need for their existence.

Being mired in the demoralizing and debilitating cloak of these myths wears the nonprofit sector down. We must follow the Overhead Myth’s example and start uncovering the other myths that hold the sector back. Because the power of a myth is greatly diminished when we openly admit that the myth is only that — a myth.

Photo Credit: We Shall Overcome, Rowland Scherman, National Archives

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Is The Nonprofit Sector Really Broken?

There was a bit of a dust up in the (social change) Twitterverse yesterday. Ryan Seashore from CodeNow wrote a post on TechCrunch arguing that the majority of nonprofits are “broken,” and should act more like for-profit startups in order to create impact. The post follows a similar line of other arguments over the years (most recently Carrie Rich’s argument that nonprofits should all become social enterprises) that the nonprofit form is so dysfunctional that it should be tossed out. But there is a real danger to this idea of abandoning the nonprofit sector.

As he often does so well, Phil Buchanan, from the Center for Effective Philanthropy, shot back against Ryan’s post, Tweeting (among other things):

Twitter

Debates like these are crucial not because of the entertainment value (although I do love good drama), but because they force us to uncover and analyze our underlying assumptions. Yesterday’s debate, and others like it, which take the nonprofit sector to task for being inefficient, broken, unbusinesslike, lay bare some false and destructive assumptions about nonprofits and about social change in general.

Ryan sees nonprofits as aging dinosaurs with “too much overhead, too much bureaucracy, and a lack of focus on impact. Everything feels slow.” But for real change to happen you have to integrate the institutions that already exist with the networks, or “startups,” that want change, as I discussed in an earlier post. The two (institutions and networks) must work together. Ryan’s argument that nonprofits need to be more like startups is fundamentally flawed because if everything were a startup, change wouldn’t happen.

To quote David Brooks from a recent The New York Times piece, “Post-Internet, many people assume that big problems can be solved by swarms of small, loosely networked…social entrepreneurs. Big hierarchical organizations are dinosaurs…[but] this is misguided…Public and nonprofit management, the stuff that gets derided as ‘overhead,’ really matters. It’s as important to attract talent to health ministries as it is to spend money on specific medicines.”

To be sure, in his blog post Ryan outlines some areas where many nonprofits could improve (becoming more focused, continually innovating, diversifying revenue sources, thinking big), but these are best practices that any organization (startup or established institution, for-profit or nonprofit) should embrace. It is simplistic and misguided to think, as Ryan writes, that “the nonprofit world must embrace the nimble ways of successful startups to become more effective, and do better.” I know its not sexy, but real social change is much more complex than startup versus institution.

So let’s move on from this either/or mentality. Effective social change requires institutions AND networks, it requires Millennials AND Boomers, it requires startups AND established organizations, it requires public AND private money (and lots of it), and it requires for-profit and nonprofit solutions. We are wasting our time (and our keystrokes) by creating false dichotomies. Let’s work together toward strategic, sustainable social change.

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10 Most Popular Posts of 2014

typewriterThe year is winding down, and I will be taking some time off to enjoy friends and family (as I hope you are too). But before I go, I want to leave you with a list of the 10 most popular posts on the blog this year, in case you missed any of them.

And if you want to see the 10 most popular posts from 2011, 2012, or 2013 you can do that as well.

I feel incredibly lucky to be able to work with you amazing social change leaders. I am grateful for the amazing work you are doing to create a better world. And I appreciate you being part of the Social Velocity community.

I wish you all a happy, relaxing holiday season, and a wonderful new year. I’ll see you in 2015!

  1. Can We Move Beyond the Nonprofit Overhead Myth?

  2. 7 Rules For Brilliant Nonprofit Leaders

  3. How to Move Your Nonprofit Board From Fundraising to Financing

  4. Why Nonprofits Must Stop Being So Grateful

  5. 5 Questions Every Nonprofit Leader Should Ask

  6. Why Do Nonprofit Leaders Get In Their Own Way?

  7. 3 Questions to Get Your Nonprofit Board Engaged

  8. 5 Ways Great Strategy Can Transform a Nonprofit

  9. Does Your Nonprofit Know How To Attract Big Donors?

  10. It’s Time to Reinvent the Nonprofit Leader

Photo Credit: Steven Depolo

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