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Fundraising

Nonprofit Financial Health and Sustainability: Pillar 4

FLYToday I am continuing my on-going blog series on the 7 Pillars of the Performance Imperative. The Performance Imperative was released last year as a north star for the nonprofit sector by the Leap Ambassadors, of which I am a member. Pillar 4, about sustainable financing, is obviously my favorite since I am arguably obsessed with nonprofit financial sustainability.

You can also read about Pillar 1: Courageous, Adaptive Leadership, and Pillar 2: Disciplined, People-Focused Nonprofit Management, and Pillar 3: Well-Designed and Implemented Programs.

I believe it is absolutely critical that a high-performing nonprofit organization have a smart strategy for attracting and employing money effectively. Because without a sustainable financial model there is nothing else — no mission, no performance, no social change.

You can download the detailed Performance Imperative here, but here are the highlights of Pillar 4: Financial Health and Sustainability. In a nonprofit that exhibits financial health and sustainability, the board and staff:

  • Take charge of their organization’s financial destiny. They articulate the value they deliver and develop overall financing strategies, tightly aligned with their mission, to support and sustain it.
  • Establish strong systems for financial stewardship and accountability throughout their organization.
  • Build and participate in budget processes that are oriented toward achieving results.
  • Share their financial results transparently with key stakeholders regularly.
  • Treat fund development as a strategic function that requires focus, management, capital, and specialized skill sets.
  • Operate with margins that allow them to build their balance sheet.
  • Understand their organization’s cost structure.
  • Use financial models to make clear and transparent the organization’s financial condition and predict how it will end the year.

In other words, high performing nonprofit leaders understand, embrace and use money as a tool to achieve social change. They create a robust financial model that articulates true costs and creates a strategy to attract enough and the right kinds of money, engage board and staff in making that model a reality, is transparent with outsiders about the model, and above all uses money strategically. In short, a high-performing nonprofit finances, instead of fundraises for, the social change they want to create.

I want to be very clear, however, that financial sustainability does not mean, as some people sometimes confuse it, that a nonprofit moves away from philanthropy and toward earned income, which is somehow more sustainable. This is a fallacy in thinking that nonprofits can somehow be market-driven. Because nonprofits exist to remedy a disequilibrium in the market economy they will always have to be at least somewhat subsidized, by government, philanthropy, or both. Therefore, financial sustainability in the nonprofit world means creating and executing on an overall financial strategy that allows a nonprofit to effectively deliver on outcomes.

FLY (Fresh Lifelines for Youth), a nonprofit that works with teens in the juvenile justice system to break the cycle of violence, crime, and incarceration, is an example of Pillar 4.

Here is their story, as Christa Gannon, FLY’s Chief Executive Officer & Founder explained it to me:

 

Three years ago we were extremely fortunate to be a grantee of Edna McConnell Clark Foundation’s PropelNext initiative to help organizations prepare for growth and scale. At the same time as a grantee of our local and sophisticated foundation funder Tipping Point we participated in a comprehensive training on ensuring that our financial and development practices were aligned and consistent with best practices.

Through these two initiatives we had the privilege of learning a great deal and working with outstanding consultants who created the space for us to step back and productively ask ourselves what was working and what could work better for us as we grew. We brought these findings to our board, worked with the consultants to update and refine our practices, created new dashboards, and brought consultants to board meetings and committee meetings to help us elevate our line of sight and institute new ways of being.

We began these efforts with the help of a long-time employee who helped lead our financial efforts for over 7 years (now going on 10 years!). We elevated his role (creating a position for a Director of Finance and Operations), had our consultants provide some coaching and guidance and invested in his capacity to learn, grow, and lead. Additionally, during this time we brought on a new COO with a great deal of financial acumen who helped this process a great deal. It allowed me to take a critical step back from finance to allow new approaches to take hold and grow.

We revamped our monthly financials, our CEO dashboard, and our dashboard for the board. Additionally we created a new budget-building process which includes a multi-year budget (expense and revenue) forecast and straw budgets. We also changed our internal practices for how we managed temporarily restricted net assets. In previous years when we received grants/gifts off fiscal year cycle (and many are) we would hold those funds and spend them down in the latter half of their cycle, which often meant the grants spanned two fiscal years. This created a great deal of extra work and challenges for our team. We modified this process, which has resulted in an increase in net unrestricted assets available to us as we grow and scale.

One challenge we’ve realized in this process is that we have been so extremely cost conscious and frugal that we have unintentionally built a financial model that relies on staffing structures that cannot be maintained as we grow and scale while ensuring the highest quality services that our clients and community deserve.

As these challenges became apparent to us, we have taken critical steps such as reducing case-load ratios for line staff, adding critical positions to support talent recruitment and development, finance, fundraising, evaluation and learning, etc.. To support this capacity building we are investing in our fundraising ability, engaging our board even more in their role to help garner financial resources, and allocating more of my time to strategy, fundraising, and board development.

We have always felt incredibly grateful for the opportunity to help steward the generosity and strategic thinking of our investors, foundation and corporate supporters, and government partners into the world. As our systems for how we tackle financial management have changed and improved that attitude of gratitude has remained.

What has changed for us, however, is a desire and intention to simplify how we think about and manage our funds such that our processes are clear, straight forward, and understandable by all involved without undue explanation or re-education in meeting after meeting (both board and staff). Our efforts to be cost-conscious, thoughtful, and prudent inadvertently led to systems and processes that made our work more complicated and time consuming than it needed to be. In part this reflected my mindset and efforts as founder. It required me to let go and not white-knuckle our financial approach; trust the team, systems, and consultants; and realize that the approach that got us to this point in the organization’s history would not be the best approach to get us to the next milestone.

We are very mindful that the work we do and the population of young people we serve is not a top priority for many philanthropists. As a result, we take every investment very seriously and are very clear that it means a kid gets a chance to become so much more than their past mistakes.

For us, financial investments are life changing for our clients. We may be the only chance they get, so we want to ensure we deploy each resource to its highest and best use.

Photo Credit: FLY

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Why Nonprofit Boards and Fundraising Must Mix

mixing board and fundraisingI recently received a note from a blog reader who disagreed with my argument that a nonprofit’s board of directors should be charged with raising 10% of their nonprofit’s budget. Not only did this reader disagree with the idea of setting a 10% board fundraising goal, but he disagreed with linking board governance and fundraising at all.

As he wrote:

“I recently resigned from a board of a nonprofit, after a 5-year stint. I was honored to be asked to join the board, until at my first meeting pledge cards were passed around, and I realized it was my money, not my leadership skills, that qualified me for board membership. I have given on numerous occasions, but I refused to pay a “bill” I received for my share of employee Christmas bonuses last year. There have been many instances where the board was expected to give money. Only a tiny fraction of the budget would be raised through these measures, so it seemed like it was a membership test. Governance should be totally separate from fundraising.”

While I appreciate this reader’s frustration as a board member, I would argue that his unfortunate experience had more to do with poor management of a board, and less to do with fundraising being part of a board member’s charge.

I don’t believe board members should ever be “billed” for a contribution. Rather, the board chair and the executive director should sit down with each board member individually on an annual basis and have an open conversation about that board member’s role on the board. This should be a much larger conversation than just what she wants her annual financial commitment to be, but that still must be part of the conversation. So while you absolutely should discuss why the board member has chosen to serve on your board and what she would like her role to be, you also can (and should) discuss how she wants to contribute to the financial model of the organization.

And if you define a board member’s “contribution” much more broadly than just a check she writes, the sum total of all of the contributions each board member makes can be much more significant than “a tiny fraction of the budget.” Every single board member, if truly right for the post, has many ways to contribute to the financial model of a nonprofit (here is just a beginning list of ways). If you ask board members to think strategically about how they can contribute, and if they are well versed in the financial model of the organization they serve, it should be fairly easy to get them involved in a significant way.

And getting each board member engaged and involved in the organization should be the aim. While I agree that the idea of a “membership test” is certainly unappealing, there should be a bar to being a member of the board of a nonprofit organization. If some members are allowed to be members in name only, but not required to have any skin in the game, then what compels any member to invest their time and resources in a significant way? If there is no bar that a board member must clear to be a board member, then what separates a board member from just an interested member of the public?

A board of directors must be a nonprofit’s staunchest supporters, most vocal advocates, and most committed allies. If a nonprofit cannot depend on its board to work tirelessly, not only to ensure achievement of the mission, but also to ensure financial sustainability, how can a nonprofit possibly expect those outside the organization to care? So, yes, being a member of a board must come with some level of commitment, both of time and of resources.

Because at the end of the day, there is no mission without money. By allowing any individual board member, let alone your entire board, to make programmatic and organizational decisions without fully understanding and contributing to the financial model of the organization you are creating an enormous disconnect between mission and money. A person cannot hope to understand something unless they have actually worked within it. So each board member must somehow contribute to the financial model of the nonprofit on which they serve.

Just because nonprofit leaders sometimes do a poor job of engaging their board in the financial model does not mean that we should separate the governance of a nonprofit from its financial model. All board members must understand, embrace, and actively work toward the financial sustainability of the nonprofit they govern.

Photo Credit: Susana Fernandez

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10 Great Social Innovation Reads: June 2016

social changeWhat is it about June and social change? Last June was the landmark ruling by the Supreme Court legalizing gay marriage, a huge victory after decades of social change work. This June, while perhaps not as pivotal, offered some clear glimpses of impending social change.

The horrible tragedy in Orlando stirred Democrats in the U.S. House and Senate to stage protests calling for votes on gun legislation. And the United Kingdom’s vote to leave the European Union sent shockwaves around the world. Add to that some fascinating data (about civil rights and education, charitable giving, and the refugee crisis), some strong words about tech philanthropists, and a distaste for the term “nonprofit,” and it made for an interesting month in the world of social change.

Below are my picks of the 10 best reads, but if you want a longer list, follow me on Twitter @nedgington.

And if you want to see past months’ great reads lists go here.

  1. In the wake of the brutal killing of 49 people at the Pulse nightclub in Orlando, the U.S. Congress temporarily ground to a halt with a Democratic filibuster in the Senate and then a Democratic sit-in in the House, all in the name of forcing Republicans to take a vote on gun control legislation. While neither effort was successful in passing gun legislation, change may be coming, due in part to a new and growing gun control group.

  2. June also saw the shocking vote by the United Kingdom to leave the European Union (“Brexit”), a move that many argue will have a huge impact on the global economy. Much was written about the implications of the vote, but most interesting (and most related to social change) were Spencer Wells’ fascinating look at the fundamental economic, demographic and political shifts behind the vote, and Jake Hayman’s view on what philanthropy can learn from it. As he put it: “The future of philanthropy and the future of politics have to lie in something beyond the economic. Indeed it will be the ones that invite those they wish to serve into the heart of decision-making and dedicate themselves to reforming systems – rather than propping them up – that will come to thrive.”

  3. One of the reasons some in the United Kingdom voted for Brexit may be fear about the refugee crisis. Ever relevant to the issues of the day, Pew Research offers some key facts about the world’s refugees.

  4. And speaking of votes, in the November U.S. presidential election Millennials (because of their sheer numbers) stand to have a real impact. Derrick Feldmann from Achieve discusses some new research about Millennials’ particular approaches to civic engagement and how they might play out in the presidential election.

  5. Writing in The New York Review of Books, Lewis B. Cullman and Ray Madoff express “grave concern” about a fundamental shift they see in the funding of the nonprofit sector due to the increasing popularity of donor advised funds (DAFs). Donors receive an immediate tax benefit when setting up a DAF, but the donation may not find its way to the nonprofit sector for years to come. As they put it, “Donor-advised funds have been a bad deal for American society. They have produced too many private benefits for the financial services industry, at too great a cost to the taxpaying public, and they have provided too few benefits for society at large. When we consider their overall effect, we see that rather than supporting working charities and the beneficiaries they serve, they have undermined them.”

  6. One of the smartest philanthropic thinkers, by far, is Clara Miller president of the F.B. Heron Foundation. She offers a two part treatise (part 1 and part 2) on what the foundation of the 21st century should look like. She writes that foundations must learn to adapt their approach and business model: “While permanence may be a key mission requirement for some…fossilized thinking cannot be. We simply can’t succeed in a vacuum, especially when the pace and nature of the gaps we are called upon to fill have become larger and more frequent, the problems more intertwined and the needs more urgent.” Amen!

  7. Never one to pull punches, blogger Vu Le has some strong words for a particular type of philanthropist, those coming from tech companies thinking they know how to fix nonprofits. As he tells them, “Don’t think for a moment that just because you’re great at one thing, it means you have the legitimacy to give advice in an area that you have little experience and training in. I don’t go around telling you how to design apps or wifi-enabled smart light switches. If you want to truly partner to solve entrenched issues our community members are facing, then great. But first, get rid of your assumptions and ego. Otherwise, let’s agree to swipe left.”

  8. Another favorite truth teller, Phil Buchanan from the Center for Effective Philanthropy clearly articulates why the term “nonprofit” is critical and necessary: “Sometimes, nonprofits need to be the voice of opposition to those whose motivation is profit.” Yep.

  9. Giving USA released their annual data on giving in the nonprofit sector. And if you are hungry for even more data about the nonprofit sector, thanks to a a federal court order the IRS is now providing machine-readable nonprofit Form 990s from 2011 to the present.

  10. And speaking of fascinating data, the Department of Education released their annual civil rights data, which has been gathered every year since 1968 in order to assess enforcement of civil rights laws. NPR highlights some jaw-dropping findings.

Photo Credit: Kyle Pearce

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10 Great Social Innovation Reads: May 2016

social change

May offered some interesting insights into the world of social change. From a plea by nonprofit infrastructure groups for more funding, to some criticisms of philanthropy’s unwillingness to invest in rural economies or provide a realistic runway to nonprofits, to digital’s impact on journalism, to the evolving sharing economy, to a call for more nonprofit board resignations, to a way to break the nonprofit starvation cycle, there was a lot to read.

Below are my picks of the 10 best reads in the world of social change in May. But you can always follow me on Twitter (@nedgington) for a longer list.

And if you are interested in past months’ 10 Great Reads lists, go here.

  1. Perhaps the biggest news of the month was the letter written by 22 groups, which provide support to the entire sector (like the National Council of Nonprofits, the Nonprofit Finance Fund, and GuideStar), asking foundations to provide more funding for the nonprofit ecosystem. GuideStar CEO Jacob Harold (here) and National Council of Nonprofits CEO Tim Delaney (here and here) explain why this issue is so important.  But Pablo Eisenberg disagrees.

  2. National Committee for Responsive Philanthropy Executive Director Aaron Dorfman takes philanthropy to task for not investing enough in rural communities, where change is needed most. As he puts it: “The philanthropic sector continues to neglect rural communities. A changing national economy, entrenched racial inequity and foundations’ reliance on a strict interpretation of strategic philanthropy has meant philanthropic resources for rural communities are few and far between, just when the opportunities for change are most urgent. This has to change if we want to see progress on the issues we all care about.”

  3. Piling on to the criticism of philanthropy, Laurie Michaels and Maya Winkelstein from Open Road Alliance, encourage their fellow philanthropists to help nonprofits deal with risk and disruption. As they put it: “Most grant budgets are designed with zero cushion even when the nonprofit is working in tough conditions that can turn the simplest obstacle into an unmanageable issue…any unexpected but inevitable change or deviation in the budget is potentially catastrophic. The nonprofit’s inability to fluidly adapt the budget to manage these roadblocks, however minor, can jeopardize even the largest of undertakings…Risks alone are threatening, but when the concept of risk goes unacknowledged, undiscussed, and unaddressed, those risks are more likely to become realities. All this adds up to lower impact, turning manageable events into liabilities.”

  4. Maybe female philanthropists can turn the tide. The Lilly Family School of Philanthropy released some fascinating new research about how women are changing philanthropy. And Megan O’Neil, writing in The Chronicle of Philanthropy, explains how nonprofits must adapt in order to tap into this growing philanthropic force.

  5. Journalism is changing rapidly, due in part to the growth of digital. Research shows that different social media platforms connect people to news in different ways, and long-form journalism is seeing a resurgence thanks to mobile.

  6. And it’s not just journalism that digital is changing. The Nonprofit Tech for Good blog offers 16 Must-Know Stats About Online Fundraising and Social Media and 5 Ways the Internet of Things Will Transform Fundraising.

  7. The growth of the “sharing economy”, where consumers rent or borrow goods and services rather than buy them, has huge implications for the social change sector. Pew Research outlines 8 key findings about how Americans relate to the sharing economy and interviews NYU professor Arun Sundararajan about how the sharing economy is evolving.

  8. Nonprofit Law blogger Gene Takagi pulls no punches in offering 12 Reasons Why You Should Gracefully Resign from a Nonprofit Board. Yes, yes, yes, to more accountability, honest conversations, and clear expectations on nonprofit boards.

  9. Writing in the Stanford Social Innovation Review,  Jeri Eckhart-Queenan, Michael Etzel, and Sridhar Prasad discuss the findings of a new Bridgespan Group study that analyzed the indirect costs of 20 different nonprofit organizations. What they found, not surprisingly, is that indirect rates vary greatly depending on the business model and industry of a given organization (just as it does in the for-profit sector).  The authors argue that if more nonprofits understand and report their true costs, nonprofits could break the starvation cycle: “It’s clear that philanthropy’s prevailing 15 percent indirect cost reimbursement policy does not take into account the wide variation in costs from segment to segment. Doing so would have far-reaching effects on philanthropy and grantees. If nonprofits committed to understanding their true cost of operations and funders shifted to paying grantees what it takes to get the job done, the starvation cycle would end.”

  10. A nonprofit dashboard is a good way to monitor and report on a nonprofit’s effectiveness and sustainability over time. Hilda Polanco, CEO of FMA, explains how to create a great one.

Photo Credit: Omarfaruquepro

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10 Great Social Innovation Reads: April 2016

social changeI’m a little late on my 10 great reads list this month because the GEO conference kept me busy, but there was lots going on in April. From the most pressing issues facing foundation leaders, to what history can tell us about new philanthropy and combatting xenophobia, to how nonprofits create economic value, to Millennials and social change, to state lawmakers attacking nonprofits, it was not a slow month.

Below are my 10 favorite reads from the month of April.

But if you want a longer list of what caught my eye this month, follow me on Twitter @nedgington. And if you want to see past months’ 10 Great Reads lists go here.

  1. If you read only one thing on this list, let it be Ruth McCambridge’s fascinating interview with media theorist Douglas Rushkoff. He argues that a nonprofit (or benefit corporation) business model is far better at creating value than a corporate model that operates under a “scorched earth policy.” He argues that corporations transfer value only to their shareholders, instead of the economy as a whole. As he puts it:

    “Unlike the for-profit sector, the nonprofit company can’t sell itself, and it doesn’t have shares that go up in value…the way you make money is not by making your share price more valuable and then selling those to other people…the investment that you put in the company stays in the company. You can’t extract that when you leave. So, it’s much more like a family business, and if you look at the data, family businesses do better than shareholder-owned businesses in pretty much every single metric, and they last a whole lot longer. You’re building a company not because you want to take value out of it and then use that money to bequeath an inheritance to your grandchildren, but rather you’re building a company that you hope will still be around when your grandchildren need a job, to circulate wealth when you die. That’s why I’m trying to convince Internet startups to be benefit corporations, multipurpose corporations, or best of all, nonprofits.”


  2. And if you only have time to read two things on this list, let the second thing be Phil Buchanan’s essay on the five most pressing issues facing foundation leaders, “Big Issues, Many Questions.” A thought-provoking read.

  3. Pew Research provides a cool interactive graphic of the ebbs and flows of political polarization over the last 20+ years.

  4. While we are talking about change over time, I have always thought there are great parallels to be drawn between the philanthropists born of today’s digital age and the Gilded Age philanthropists. Nellie Bowles writing in The Guardian seems to agree in her piece about the “Digital Gilded Age.”

  5. And speaking of the history of philanthropy, Alfred Perkins, writing on the HistPhil blog, sees parallels between our current xenophobic political environment and the anti-Japanese sentiment in World War Two. But back then Rockefeller Foundation philanthropist Edwin Embree fought it. And perhaps there is a lesson there for philanthropy today: “By moving boldly beyond the customary boundaries of organized philanthropy, Embree was able to challenge deeply-held prejudices, demand justice for a vulnerable minority, and extend the impact of the monies he disbursed. This pioneer of his profession would not have voiced the idea, but implicit in his words and actions is the notion that foundation executives might on occasion serve as the nation’s conscience. In these less stringent times, his example might provide useful lessons for his contemporary successors—to the benefit of the philanthropic enterprise, and the nation as a whole.”

  6. So what will the future of social change be? All eyes are on Millennials, from how they turn out to vote, to how they donate, to what they think of capitalism, to how they find housing.

  7. A recent conference focusing on “maintainers” rather than the overly popular “innovators” aimed to uncover how critical the role of those maintaining the world in which we live are. As one of the conference organizers, Lee Vinsel (assistant professor of science and technology at the Stevens Institute of Technology) put it, “The vast majority of technologies that surround us and underpin our lives are not innovations. And the vast majority of labor in our culture is not focused on introducing or adopting new things, but on keeping things going.”

  8. Nonprofits have been under fire lately by state lawmakers who are trying to make it even harder for nonprofits to do their work. Tim Delaney from the National Council of Nonprofits provides an overview on what’s happening and what we can do about it. And Erin Bradrick delves into a proposed California bill that didn’t make it out of committee but sets a dangerous precedent on legislating nonprofit overhead rate disclosure in fundraising.

  9. Particularly during an election cycle, the struggle of the modern news media becomes more evident. The Knight Foundation released a troubling report that the news media has grown less able to defend their First Amendment rights in court. And French economist Julia Cage argues in her new book that the news media should embrace a nonprofit business model in order to reflect better its social role of bolstering our democracy.

  10. Hanh Le from Exponent Philanthropy and Rusty Stahl from Talent Philanthropy make a very convincing case about why funders should invest in nonprofit talent. Let’s hope this helps turn the tide.

Photo Credit: Stepan Lianozyan via Wikimedia Commons

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When Individual Donor Fundraising Goes Well

Fundraising Bright SpotsThis week the Evelyn and Walter Haas, Jr. Fund released the second in their series of reports about fundraising.  Their Fundraising Bright Spots report, by Kim Klein from Klein & Roth Consulting and Jeanne Bell from CompassPoint, joins their Beyond Fundraising report, released last month.

These two reports are part of the Haas, Jr. Fund’s larger “Resetting Development” effort “to ‘learn out loud’ about how to…help put the sector on a surer path to sustainability and long-term success.” Given my concerns about their Beyond Fundraising report, the Haas, Jr. Fund very graciously asked me to review this latest report.

This new report analyzes 16 social change organizations that have been successful at individual fundraising to determine what the sector can learn from them.

I am always a huge fan of case studies. I think there is much to be gained by looking at others who have done things well, so I applaud the Haas, Jr. Fund for moving from theory into practice to see what is working in individual fundraising.

But first, we have to understand this report for what it is. This report only looks at nonprofits that have been successful with individual donor fundraising, which is just one of several ways that nonprofits bring money in the door. And the report only looks at “progressive organizations with limited budgets and small staffs.” So I would argue that this report and the case studies contained within it will only be applicable to similar types of nonprofits that have individual fundraising as part of their financial model.

Nevertheless, the report finds four themes present in these 16 social change organizations, which are that fundraising:

  1. Is core to the organization’s identity
  2. Is distributed broadly across staff, board and volunteers
  3. Succeeds because of authentic relationships with donors
  4. Is characterized by persistence, discipline, and intentionality

Many, if not all, of these themes make up the “culture of philanthropy” that the Beyond Fundraising report described.

There were several things I liked about the Bright Spots report.

First, I love the report’s focus on making fundraising part of the job of an entire organization’s board and staff. Two case studies in particular, Jewish Voice for Peace and Mujeres Unidas y Activas, demonstrate how major donor fundraising should be shared among senior staff and board members. For example Jewish Voice for Peace “has 57 portfolio managers from across the staff, board, and volunteers who together manage 600 major donor relationships in addition to other roles they play within the organization.”

Indeed the report points out that in these 16 organizations the head fundraiser’s role is to marshal staff, board and other organization resources toward fundraising, which I love: “Time and again, we heard from the development directors at these organizations that their job is to coordinate, to teach, to coach, and to inspire. The individuals in this role are highly relational and they take deep satisfaction in enabling staff, board, volunteers, and members to be successful fundraisers.”

Second, I really appreciate the Breast Cancer Action case study, which emphasizes creating a give/get fundraising requirement for the entire board:

At Karuna [Jaggar]’s first in-person board meeting as the new executive director, she laid out her desire to establish a board give-and-get policy to her board members, each of whom had been told explicitly upon recruitment that they did not have to participate in fundraising…After an in-depth discussion, they set a give-and-get policy of $10,000 per board member. “Maybe we lost some potential board members who felt they couldn’t do it,” said [board chair] Tracy [Weitz], “but only in the first year. Now, our veteran board members can share their fundraising stories with prospective members and say, ‘I’ve been fine, and you’re going to be fine.’” It’s important to note that BCAction does not prioritize personal wealth now more than it did before this policy change, but rather invests the time to support board members’ success, regardless of personal financial capacity, in the fundraising program.”

Yes! That’s exactly the way to get every board member involved in fundraising, of which I am a huge proponent.

Third, the Bright Spots report points out the need to fully integrate marketing and fundraising in a nonprofit: “A critical aspect of building and refining an individual donor program is tending to the intersection of communications and fundraising…development and communications are inextricably linked and staff driving these efforts work extremely collaboratively.” Agreed, fundraising can not sit on the sidelines of anything an organization does, but must be fully integrated throughout the organization.

Now, let’s get to where I think the report falls short.

First, I would have liked to understand better how these 16 organizations were selected as “bright spots.” I think in holding up organizations as exemplars it is critical to understand in what ways they are exemplars. While the beginning of the report describes what these organizations have in common: “a deep commitment to and strong track record with raising money from individuals,” and “individual support is a consistent part of their overall revenue strategy,” and the report highlights some of their individual donor fundraising successes, it is unclear why these 16 organizations in particular are held out as bright spots.

In my mind, I would select case study organizations that achieved: individual giving growth year over year, and/or higher than average donor retention rates, and/or more profitable than average fundraising activities, and/or demonstrated long-term financial viability. While some of the 16 organizations had significant individual donor growth, not all of them did, so I’m not sure what selection metrics were used. I would like to understand how the Bright Spot organizations’ fundraising metrics compare to their most fundraising-successful peers.

It is particularly important to understand what makes these organizations bright spots when the report points out that some of the 16 social change organizations are struggling with scaling or making sustainable their individual fundraising efforts:

“We heard from the Bright Spot leaders who want to grow their organizations that they are grappling with how to scale this organizational highly relational approach to fundraising. And many of them acknowledge how dependent their success is on long-time leaders, despite their distributed approach to fundraising…Many of the Bright Spots will soon have to adapt to very long-time leaders moving on.”

Second, the report does not make a clear distinction between small donor fundraising (one-to-many cultivation and solicitation of donors) versus major donor fundraising (one-to-one cultivation and solicitation). I wonder if the four themes that the report uncovers differ, and if so how, between fundraising activities targeting many small donors versus fundraising activities targeting a few large donors.

Third, the report touches briefly on the 16 organizations’ fundraising systems and use of data and metrics, but not in a robust way. I would have loved to understand better the kinds of systems these bright spot organizations use and what metrics they are tracking and trends they are seeing. While I understand the report’s overall emphasis on some of the “soft” skills of fundraising (“authentic relationships with donors,” “culture of philanthropy”) I also think that understanding the “hard” skills (systems, metrics) is key to replicating fundraising success (and overall financial sustainability).

Fourth, just as the Beyond Fundraising report did, the Bright Spots report continues to leave the problems (and in this case, the successes) with fundraising largely in the hands of individual nonprofits and their leaders. I am still hungry for case studies and research about how nonprofits (and their funders) can overcome the more systemic financial flaws inherent in our social change sector.

In the end, I would say that the Bright Spots report gives us a glimpse into a piece of what works to bring money in the door. For social movement, individual donor fundraising at small nonprofits, the Bright Spots report provides some important and useful insights. But for more broadly understanding what contributes to overall financial sustainability in the nonprofit sector, this report falls short.

But as I have said before, I don’t fault the Haas, Jr. Fund for exploring these issues. Indeed, they are one of very few funders contributing to the knowledge base about what creates a more financially sustainable nonprofit sector. We just need more of them.

Photo Credit: Evelyn and Walter Haas, Jr. Fund

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Building Better Nonprofits: A Podcast

podcastLast month I was asked by Ted Bilich, CEO of Risk Alternatives — a Washington, DC firm helping nonprofits manage their organizational and financial risks —  to participate in a podcast. This is part of their ongoing podcast series “About Risk” which talks to thought leaders about risk management and process improvement for nonprofits, small businesses, and startups.

In the podcast Ted and I talk about:

  • How the nonprofit landscape has become more competitive
  • Why nonprofits need a theory of change
  • How and when to engage in strategic planning
  • How nonprofits can determine if they are applying best practices
  • The benefits of a financial model assessment
  • How to address common risks involving a board of directors
  • And much more

You can listen to the podcast below, or click here.

And you can see all episodes in the “About Risk” series here. And if you want to listen to more podcasts about the evolving nonprofit sector, go here, here or here.

Photo Credit: Patrick Breitenbach

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10 Great Social Innovation Reads: March 2016

spring readingMarch was a whirlwind in the world of social change. From successful nonprofit advocacy efforts, to new ways to measure fundraising effectiveness, to finding inspiration in small American cities, to a disconnect between civic engagement funders and activists, to new technology to serve the homeless, and a lot more in between, there was much to read.

Below are the top 10 things that caught my eye in the world of social change in March. If you want to see the longer list, follow me on Twitter @nedgington. And if you want to see past months’ 10 Great Reads go here.

  1. SeaChange Capital Partners put out a stunning report about the depressing state of financial risk management in health and human services nonprofits in New York, but their insights could really be applied sector-wide. As the report cautions: “Trustees must strive to maximize the good that their organization does while managing its risks. Balancing these can be challenging because of the passion they feel for the organization and its mission. Nonprofits lack the indicators of organizational health that reach the directors of for-profit businesses, such as stock prices or credit spreads…In this context, nonprofit trustees in leadership positions must ensure that well thought through risk management processes are in place. In a challenging operating environment, the status quo is no longer acceptable.”

  2. Perhaps help is on the way. A fascinating conversation happened between the head of the Nonprofit Finance Fund, Antony Bugg-Levine and Fred Ali, head of the Weingart Foundation and champion of the movement to cover full costs and give nonprofits unrestricted flexible funding. Ali is a huge proponent of investing in nonprofit capacity, as he describes: “The incessant [funder] focus on restricted programmatic grants has come at a huge cost to our sector. When we were considering a shift to unrestricted grants, we took a look back and found that many times the organizations we were supporting were not producing the outcomes we were looking for because they didn’t have the ability to invest in the kind of infrastructure that is necessary to produce those outcomes. So when I hear foundations object to our approach, I have to ask, ‘What are you trying to accomplish? Does your grantmaking approach help or hinder the development of capacity and sustainability?’ It is pretty clear that we have a lot of nonprofit organizations that are doing incredible work, being asked to do even more work, and they are not getting the kinds of support they need to that work effectively.” Yep.

  3. Pew Research is really knocking it out of the park lately. Every day they come out with fascinating data slices that are relevant and topical. Like their infographic on the 10 demographic trends that are shaping the U.S. and the world, which blew my mind. And if you want to dig into data just on the nonprofit sector, check out this in-depth report from The Bureau of Labor Statistics, which The Nonprofit Quarterly calls “required reading for leaders and board members of nonprofits and philanthropy.”

  4. On Monday, the governors of both California and New York signed legislation raising the minimum wage in their states to $15 per hour. Apparently we have the advocacy efforts of nonprofits to thank for this social change.

  5. But economics professor Mark Hendrickson doesn’t see a lot of value in the nonprofit sector. If you feel like getting justifiably incensed, take a look at his eye-popping read in Forbes where he is responding to what he calls the “turf war” between philanthropy and capitalism. Hendrickson provides many stunning quotes about the nonprofit sector, including this whopper: “Many non-profits do good work (albeit without the efficiencies imposed by the profit-loss calculus). However, they have no moral standing to criticize or condemn those who create the wealth that the non-profits spend. Non-profits essentially are professional mendicants trying to do good with other people’s money. It’s time for the non-profits to abandon their petty turf war and to muster enough grace at least to keep silent if they can’t bring themselves to express gratitude for the dominant, indispensable role of the profit-makers in advancing human welfare.” Wow.

  6. So now that you’re mad, let writer James Fallows inspire you. He and his wife Deb have been on a three-year journey across the country visiting small cities to understand what contributes to their cultural and economic resilience. What they found is that despite political dysfunction at the national level, there is some very inspiring progress happening at the local level: from urban renewal, to bipartisan compromise, to educational reform, to state-of-the-art job training and much more. As Phillip Zelikow, a professor at the University of Virginia and quoted in Fallows piece put it: “In scores of ways, Americans are figuring out how to take advantage of the opportunities of this era, often through bypassing or ignoring the dismal national conversation. There are a lot of more positive narratives out there—but they’re lonely, and disconnected. It would make a difference to join them together, as a chorus that has a melody.”

  7. And speaking of innovation, some nonprofits have developed apps to better serve the homeless, to varying degrees of success.

  8. Writing about civic engagement in The Nonprofit Quarterly Austin Belali bemoans the disconnect between those who are leading a new surge in civic movements (like Black Lives Matter) and the philanthropists funding civic engagement efforts, noting: “While the leaders of what could be described as a twenty-first-century movement for inclusive democracy are largely women and people of color, civic engagement philanthropy and the organizational leadership it supports is stubbornly the opposite.” And looking at a specific kind of civic engagement (voter turnout among young people), Abby Kiesa and Peter Levine might agree when they argue in the Stanford Social Innovation Review: “We must ask whether society supports youth engagement, and, if it does, how that support can be made equal for all youth, regardless of education, race, and income. We believe that encouraging youth to engage and to contribute their skills and values can help improve the political culture, but major institutions—educational, governmental, political, and civic—must actually want that to happen.”

  9. Adding to what has been a scarce (but hopefully growing) body of research on fundraising effectiveness, The Bridgespan Group released a new study about calculating the fundraising effectiveness of each affiliate within a national nonprofit network (like Big Brothers Big Sisters or the YMCA). They created a calculation they call “share of wallet,” which they define as “current fundraising performance compared to fundraising potential as gauged by the pool of donor dollars you draw from.” This fairly simple calculation of how much each site raises vs. what is possible to be raised can help a national nonprofit uncover which sites are more successful and why, and then hopefully help lower performing sites raise more.

  10. And finally, social media maven Beth Kanter urges us all to take a digital detox day. Sounds fantastic…how about a week instead?

Photo Credit: David McSpadden

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