Leap of Reason
I’m really excited to announce today’s launch of the Performance Imperative. The Performance Imperative is a detailed definition, created by a community of nonprofit thought leaders, of a high-performance nonprofit. The hope is with a clear definition of high-performance we can strengthen nonprofit efforts to achieve social change.
As we all know, we are living in a time of growing wealth inequality, crumbling institutions, political divides, and the list of social challenges goes on. The burden of finding solutions to these challenges increasingly falls to the nonprofit sector. So “good work” is no longer enough. We need to understand — through rigor and evidence — which solutions are working and which are not.
The Performance Imperative was created by the Leap Ambassadors Community, a network of 70+ nonprofit thought leaders and practitioners of which I am a member. The group emerged from the 2013 After the Leap conference, which brought nonprofit, philanthropic and government leaders together to create a higher-performing nonprofit sector. The group is determined to lead the fundamental, and critical, shift towards a more effective nonprofit sector.
The Performance Imperative defines nonprofit high performance as “the ability to deliver—over a prolonged period of time—meaningful, measurable, and financially sustainable results for the people or causes the nonprofit is in existence to serve.”
The Performance Imperative further describes seven organizational pillars that lead to high performance:
- Courageous, adaptive executive and board leadership
- Disciplined, people-focused management
- Well-designed and well-implemented programs and strategies
- Financial health and sustainability
- A culture that values learning
- Internal monitoring for continuous improvement
- External evaluation for mission effectiveness.
Each one of these 7 pillars is fully explained in the Performance Imperative.
Over the next several months I will write a blog series that digs into each of these 7 pillars to understand what each one means for a nonprofit organization and to examine case studies of how other nonprofit leaders have approached the pillars. And next week on the blog I’ll interview one of the founders of this movement toward high performance.
Although the Performance Imperative is targeted toward $3M+ nonprofits, it can also be a benchmark upon which any social change nonprofit can measure itself. Nonprofit boards and staffs can use the Performance Imperative as a north star to guide their journey toward higher performance.
The critical necessity of a high performing nonprofit sector is clear. We no longer have the luxury of benevolent good works that sit aside the business of our country. Now is the time to find solutions that really work and develop the leadership and sustainability to spread them far and wide.
As Mario Morino, founder of the Leap Ambassador Community has said, “If we don’t figure out how to build high performing nonprofits, nothing else matters. This is the last mile. Our nation depends on it.”
In today’s Social Velocity interview, I’m talking with Denise San Antonio Zeman. Denise has been President and CEO of Saint Luke’s Foundation of Cleveland, Ohio since 2000. A lifelong Clevelander, Denise’s career has spanned higher education, human services, healthcare and philanthropy. Now in its 17th year of grantmaking, Saint Luke’s provides leadership and support to improve and transform health and well-being of individuals, families and communities of Greater Cleveland.
You can read past interviews in the Social Innovation Interview Series here.
Nell: Saint Luke’s Foundation is different than most foundations in that you have made a conscious commitment to funding the capacity of nonprofit grantees in areas such as leadership development and outcomes measurement. Why did the foundation decide to put an emphasis on capacity funding and what have you learned from those investments?
Denise: Just over two years ago, our Foundation board and staff held a retreat. An important topic was our frustration over the reality that the recent economic downturn had produced tremendous need in our community and volatility in our grant budget. Specifically, this downturn highlighted for us that we were spending more when the economy was good and less when the community needed us most. These concerns were analyzed, and the culprit was determined to be our spending policy, for although we knew we could not control the world economy, we realized that we could control the way we responded to it.
We had employed a traditional 5% payout since our inception in 1997, and decided to investigate spending policies that might provide us a higher, more predictable level of spending going forward. With much trepidation, the board approved a bold new spending policy that provides for a “floor” with certain tolerance limits. We increased our spending by about $4 million and established a spending range between 5 and 7%. For the past two years our spending has been very close to 7%.
With this came a strong commitment to working with our grantees and philanthropic colleagues to move toward funding what works in order to advance a smaller set of priorities. The new priorities more narrowly define our previously broad definition of “health” to focus on three specific strategy areas: Healthy People, Strong Communities and Resilient Families.
The role of our senior program officers also shifted from a focus on managing a set of grants to a commitment to advancing a strategy. We agreed upon long and short-term outcomes that guide our grantmaking decisions, and the program team now manages their portfolios of grants in a more entrepreneurial way. In addition to making grants, their due diligence includes an in-depth analysis of the grantees’ capacity to be successful.
A thorough analysis of the literature, conversations with colleagues and focus groups with grantees revealed six strengths that the highest performing nonprofits have in common. These include strong financial management, investment in leadership, a commitment to outcomes and learning, a spirit of collaboration, excellent communications, and advocacy for good public policy.
We support and encourage our grantees to develop these capacities in a variety of ways. In our formal and informal interactions, we encourage them to think about their approach to building these capacities and we provide support to assist them in this process. We ask probing questions such as “What keeps you up at night?” in order to nurture lines of communication, demonstrate our concern for their growth and development, and most importantly, learn. And we work with our regional association, Philanthropy Ohio, to bring national content experts to our region for programs and seminars on relevant topics. We also host meetings ourselves during which we invite thought leaders such as Geoffrey Canada (Harlem Children’s Zone), Dan Heath (Made to Stick and Switch), Fay Twersky (Beneficiary Voice), and Phil Buchanan (Center for Effective Philanthropy) to challenge the status quo and help us focus our efforts to build a stronger nonprofit and philanthropic sector.
In order to be able to deliver on their promise to the community, nonprofits must have a solid financial base. Our scrutiny of financial statements has increased, and with that has come a commitment to working with our grantees to improve their financial planning, monitoring, operations and governance. The Nonprofit Finance Fund and Financial Management Associates, LLC have provided local strategic financial management seminars to increase knowledge and inspire motivation to build financial capacities.
We also know that strong leaders produce great results. We therefore encourage and support comprehensive leadership development for our grantees, and we support efforts to implement leadership development practices that ensure good governance and empower professional staff to be leaders of change.
We are committed to tapping into the power of outcomes measurement as a way to support continuous learning and encourage performance improvement, and we work with our grantees to support their efforts to collect and use data to improve their outcomes for their clients. We have learned first-hand how challenging measuring impact in the social sector can be. But we have also learned that unless we measure and move toward specific, measurable outcomes, we run the risk of spinning our wheels at best, and actually doing harm at worst. The works of Mario Morino (Leap of Reason) and David Hunter (Working Hard and Working Well) provide nonprofit and philanthropic leaders with the rationale and roadmap for making a measurable, meaningful and lasting difference for the people they serve, and we strongly encourage our grantees and colleagues to join us in embracing their approaches.
We have also learned the importance of supporting the capacity of our grantees to work with others. We live in a nonprofit community that was built for a population of over one million people, and yet the last census revealed that our community has contracted by more than half. Our government and philanthropic resources have diminished, yet the need in our community has grown. We therefore work in partnership with our grantees and philanthropic partners to support collaboration in practice and in learning, and we have embraced the concepts of Collective Impact (Foundation Strategy Group) to inform our work.
Communication is also an area of focus for us. Borrowing from what we learned from Chip and Dan Heath in Made to Stick, we support strategic communications that help our grantees leverage outcomes and tell effective stories to advance their missions. This is not storytelling for the sake of storytelling; rather, it is using the power of outcomes to demonstrate effectiveness and impact.
While philanthropic support for health and human services is important, it is miniscule compared to government spending. We therefore support efforts to educate policymakers on relevant issues and influence institutions, systems and community and/or individual behaviors within the funding guidelines for private foundations.
Quite simply, we believe that strong nonprofits produce the strongest results, and as funders of impact, we believe it is our role to support our grantees to be the strongest they can be.
Nell: Leadership development is a particular area of interest for the foundation. What do you think nonprofit leaders need most to become more effective and what role can philanthropists play in that?
Denise: We view strong, resilient leadership as one of the most effective tools for achieving superior results. In our work with grantees, we have learned that organizations that take an intentional, focused approach to leadership development achieve better outcomes for the people they serve. Nonprofit leaders need boards that are uncompromising on quality and results, and these boards must both challenge and support executive leadership to drive innovation and strategic performance.
As noted in Independent Sector’s Leadership Initiative, nonprofit leaders need “time, attention and resources to engage in high-quality leadership development programming that equips them to deliver significant results.” Leaders cannot be so “in the weeds” that they lose sight of their role as keepers of the promise. We encourage our grantees to use some of our general operating support to focus on leadership development, and to extend that focus to developing the “next generation” of leaders as well.
We also provide funds for nonprofit leaders to participate in high quality leadership development programs locally and nationally. Additionally, we support an individual professional development program for each member of our foundation staff to ensure that they continue to develop their own potential as leaders.
Nell: One of the arguments some philanthropists make against providing funding for building nonprofit organizations is that it is harder to demonstrate the return from a capacity building investment than a program investment. How do you respond to that argument?
Denise: I agree…it is hard, but we have never been an organization that avoids hard! In our work with the TCC Group last year, we learned more about what it takes to be a learning organization. We made a commitment to learning from everything we do, and we are committed to learning more about how to measure the impact of capacity building investments.
And while we are still learning, we have some specific examples that demonstrate the return on our investments in building capacity. We know, for example, that our support for outcomes and learning has helped some of our grantees build the capacity to reflect their success by implementing outcomes management software and producing results-oriented dashboards. Eight of the organizations we helped form strategic alliances have merged into four, and are serving more people with fewer resources. We also know that some of the communications-related grants we have made have enabled grantees to extend their reach in innovative ways such as electronic case management programs. And we know that policy-focused grants have allowed some of our safety net providers to come together to provide patient-centered medical homes for some of our most vulnerable citizens in advance of Medicaid expansion. While these results might be viewed as anecdotal, we believe they are building our own capacity to make a strong case for capacity building.
Nell: Funders are becoming increasingly interested in nonprofit outcomes measurement, yet few funders are willing to fund evaluations. How do we solve that chicken or the egg scenario?
Denise: I was recently invited to participate on a panel called “Do Funders Get It?” at a national conference called After the Leap. The panel responded to Nancy Roob’s stirring plenary session in which she described the phenomenal work of the Edna McConnell Clark Foundation in supporting youth development organizations across the country to be more effective.
We posed the question “Do funders understand the resources and support nonprofits require to scale impact?” to the audience, and not surprisingly, the response affirmed the reality that most of us do not. The truth that funders want results but are reluctant to fund evaluations has been confirmed by the Center for Effective Philanthropy, Grantmakers for Effective Organizations, and the National Committee for Responsive Philanthropy, to name just a few.
So how do we solve this dichotomy? As with any attempt at true and lasting change, there is no single silver bullet that will suddenly convince funders to change their traditional ways of grantmaking. But I do believe there is a growing receptivity to the concept of funding for impact, and there is a role for philanthropic affinity groups and regional associations to educate their membership with concrete suggestions that funders can use with their boards, professional staffs and grantees.
Government funders are beginning to understand the importance of funding what works, and this will raise the stakes for nonprofits that rely heavily on public support. They will have to demonstrate impact or they will not receive support. This will raise the evaluation imperative to standard operating procedure, and funders that care at all about their grantees will be compelled to support building evidence that their approaches do, in fact, achieve sustainable results.
Nell: Although Saint Luke’s Foundation is a real trail blazer in the philanthropic world, philanthropy overall is rather slow to change, particularly when it comes to funding in new ways. What do you think it will take to get more funders to understand that stronger nonprofit leaders and organizations can equal more impact?
Denise: Thank you for your kind words. Our change in spending policy and approach was largely informed by Mario Morino’s admonition to “rethink, redesign and reinvent the why, what and how of our work in every arena.” He went on to suggest that we “need to be much clearer about our aspirations, more intentional in defining our approaches, more rigorous in gauging our progress, more willing to admit mistakes, more capable of quickly adapting and improving – all with an unrelenting focus and passion for improving lives.” When put that way, who could argue?
Foundations and nonprofits are about the business of improving lives. The Foundation’s role is not to DO the work…our job is to support those who DO. And unless we are willing to provide sufficient support to enable our grantees to build systems to assess the impact of their practice, we will fail. We must be bold in challenging and supporting one another to disrupt the sector in unprecedented ways. We at Saint Luke’s Foundation have changed our approaches from spending to strategy to portfolio management, but we have stayed true to our original mission statement to improve and transform health and well-being in our community. I suppose it is fair to say that our very mission implies that we will fund what improves and transforms…and therefore we see it as being true to our mission to build highly effective provider organizations.
Photo Credit: Saint Luke’s Foundation
This week I attended the After the Leap conference in Washington D.C. and was blown away. As I mentioned in a post earlier this year, the conference was organized by Social Solutions and PerformWell partners Child Trends and Urban Institute and builds on the momentum Mario Morino has created around his book, Leap of Reason, published in 2011, and the companion book Working Hard & Working Well by David Hunter published this year.
This first-ever conference was an attempt to bring the nonprofit, philanthropic and government leaders who are on the cutting edge of the movement to create a higher-performing social sector together to, as Mario put it “grow a critical mass who can mobilize for greater change.”
What’s Government’s Role in Nonprofit Performance?
Day 1 focused on government’s role in driving social sector performance management. A fascinating panel of government agency leaders, moderated by Daniel Stid from the Hewlett Foundation, discussed various efforts at the federal, state and local government levels to drive evidence-based policy and practice. But some in the audience and Twitter-verse wondered whether government could really be the impetus for a greater push towards measuring and managing outcomes in the nonprofit sector.
How Do You Get Buy-In For Change?
From the big, systemic view, the day quickly shifted for me to the organization-level with the fantastic panel on “Getting Buy-In” from staff, board and funders for a shift towards performance management. Isaac Castillo from DC Promise Neighborhood Initiative, Bridget Laird from Wings for Kids, and Sotun Krouch from Roca explained how they had moved their nonprofits toward articulating and measuring outcomes. The most effective approach seemed to be to ask “Don’t you want to know whether the work we are doing is helping rather than hurting?” Isaac made the urgency to move toward performance management clear, “If you haven’t started doing performance management yet, in 12-18 months you will start losing funding to those who are.”
Can We Convince Funders to Invest?
Day 2 of the conference kicked off with an inspiring keynote address by Nancy Roob from the Edna McConnell Clark Foundation that really served as a call to action for the foundation world. Nancy painted a pretty stark picture of the disconnect she saw between how much money we’ve spent on solving social problems in the last decades and how much actual progress we’ve made. She blamed this disconnect on “our piecemeal approach to solutions.” As she bluntly put it, “We are woefully under-invested in what we already know works.” She laid out 5 steps funders can take to move away from piecemeal and toward transformational social change:
- Make bigger, multi-year investments
- Provide more upfront, unrestricted, flexible capital
- Invest in nonprofit evidence building
- Scale what works with innovation, and
- Adopt an investor mindset
But for Nancy, it’s not just up to funders, nonprofits also need to change. She urged nonprofits to:
- Shed the charity mindset
- Focus on the larger context
- Create a performance management culture, and
- Ask for help to achieve performance
From there, Phil Buchanan from the Center for Effective Philanthropy led a panel with Carol Thompson Cole from Venture Philanthropy Partners and Denise Zeman from Saint Luke’s Foundation asking “Do Funders Get it?” While a few funders are willing to invest in helping nonprofits articulate, measure and manage to outcomes, most are not. The panel suggested that some of this reluctance stems from funder’s lack of humility and fear of what they might find. Audience members suggested that it might also be funders’ lack of performance expertise. (You can read Phil Buchanan’s blog post giving more detail on this panel here.)
From there I attended a breakout session “Funder Investment Strategies to Strengthen Nonprofit Performance Management Capacity” where Victoria Vrana from the Gates Foundation and Lissette Rodriguez from the Edna McConnell Clark Foundation and two of their grantees discussed how they worked together to fund and create performance management systems.
The final panel of the day brought an impressive group of nonprofit CEOs together (Mindy Tarlow from Center for Employment Opportunities, Sam Cobbs from First Place for Youth, Cynthia Figueroa from Congreso de Latinos Unidos, Bill McCarthy from Catholic Charities of Baltimore, and Thomas Jenkins from Nurse-Family Partnership) to talk about how they each had built a performance management system at their organizations, the hurdles they encountered, how they funded it, and where they are now.
Where Do We Go From Here?
Mario Morino rounded out the conference with an inspiring call for us to build momentum. He outlined some new ideas coming out of the conference that he’d like to see developed by 2020, including:
- A “Manhattan Project” of social sector evidence
- A National Commission on Nonprofit High Performance
- An Aggregated Growth Capital Fund to deploy billions to solve entrenched national problems
- A Performance Academy for Social Impact
- Presidential Performance-to-Impact Awards
- Social Sector Center for Quality Improvement
- A Solutions Journalism Network to “lift up the hope spots” in the country
- Leap Learning Communities in local settings connected in a national web
This was one of the best conferences I’ve been to in years. The caliber of the presenters and audience was amazing. It felt like I was witnessing the birth of the next generation of the social sector. Buoyed by the ability to see the writing on the wall, this group is determined to lead the fundamental, and critical, shift towards a more effective sector.
The urgency of this movement became increasingly clear through the course of the two days. Our country is witnessing mounting disparity and crippling social challenges. It is increasingly up to the social sector to turn the tide. And the time is now. As Mario charged at the end of the conference “If we don’t figure out how to build high performing nonprofits, nothing else matters. This is the last mile. Our nation depends on it.”
Photo Credit: tableatny
There is a new conference in the social innovation space that I’m pretty excited about. After the Leap is the brainchild of Social Solutions CEO Steve Butz and his PerformWell partners, Child Trends and Urban Institute. The conference builds upon the momentum Mario Morino has created around his book, Leap of Reason, published in 2011.
Since writing Leap of Reason Mario has been on a crusade of sorts to the get the nonprofit sector to acknowledge that our new Era of Scarcity requires nonprofits to “literally reinvent themselves…[and] respond with greater discipline, unity, and focus on making a quantum change in the effectiveness and impact of our entire sector.” In essence he is encouraging nonprofits to determine what they exist to change and whether they are actually creating those changes.
As part of this movement, Mario and others have organized the After the Leap conference that will allow you to learn from experts in the field about how executives, practitioners and funders are advancing outcomes measurement and performance management, and what you can do in your own organizations and communities. The After the Leap conference will be held in Washington, D.C. on December 3rd and 4th.
Some of the keynote speakers include:
- Melody Barners, Former Director of the White House Domestic Policy Council
- Nancy Roob, President of the Edna McConnell Clark Foundation
- Daniel Cardinali, President of Communities in Schools, and
- Mario Morino
And the breakout sessions will cover everything from the Social Innovation Fund, to finding money for evaluation, to nonprofit case studies, to how to implement performance management systems, to effective leadership and much more.
Breakout session speakers are coming from the Gates Foundation, the Urban Institute, the Center for Effective Philanthropy, the Promise Neighborhood Initiative, and other foundations, nonprofits and agencies at the leading edge of the outcomes movement.
I’m so excited about the conference that I’ve already registered. And I’ll be blogging and Tweeting from the conference as well.
If you are a nonprofit leader, board member, or funder interested in pushing your nonprofit towards measuring outcomes, this conference is for you. You can register here.
I hope to see you there!
When Mario Morino’s book Leap of Reason came out in 2011 I called it a Call to Arms for the Nonprofit Sector, because I believe Mario was challenging the nonprofit sector to undergo a complete shift from “doing good work” to becoming a performance management sector. And in recent year we are witnessing an ever-increasing effort to get nonprofits to demonstrate the results of their work. The companion to Leap of Reason, Working Hard and Working Well by David Hunter was released last week, and it makes an interesting follow up.
David has the same no-nonsense, tell it like it is, style that I love about Mario. David writes that his book “is a response to my perception that the social sector has failed, so far, to live up to its promise.” But he doesn’t just blame the nonprofits, he also finds fault with their funders and says his book is also “an admonishment to those funders who demand performance in which they don’t invest, results for which they don’t pay, and accountability from which they exempt themselves.” Ah, how true!
As David explains it, performance management has been given a bad rap in the nonprofit sector because it has so often been “compliance management,” something that was shoved down nonprofit throats by government or private funders seeking to limit the risk of their investments, rather than something that nonprofits themselves designed in order to create more effective social change.
David provides numerous nonprofit case studies that illustrate this new performance management mindset. My favorite was the Our Piece of the Pie case study, a broad social services nonprofit in Connecticut that had a watershed moment when they decided to focus their services just on youth. From that difficult and courageous decision, the nonprofit eventually transferred 600 clients, 30 employees and $1million to 3 local nonprofits that were a better fit for those outlier programs. As David explained, “It is rare for an organization to reach such strategic clarity…and even rarer to have the courage to challenge the continued relevance of its legacy programs and services.” Absolutely! When a nonprofit focuses their efforts on what they do best, instead of what they have always done, it can transform the organization and ultimately result in better outcomes.
The aim of David’s book is to leave a detailed model for nonprofits and consultants to use to create performance-based organizations. My favorite part of his model is “result-focused budgeting” where he takes nonprofits and funders to task for using “a shoestring budget that is inadequate to support the capacity building needed for high performance.” Amen to that! You simply CANNOT create high quality outcomes when you lack organizational capacity. The two will not coexist.
David spends the bulk of the book describing in detail the 4-day theory of change workshop he uses with nonprofits. While I applaud the probing nature of his model and its focus on creating clarity and metrics, I have some problems with the approach. His model assumes an organization can determine mission, vision, strategic direction and performance metrics in an isolated room over 4 days. But the reality is that nonprofits can no longer create their value proposition in a vacuum. A nonprofit must get outside the organization and understand the external marketplace of changing demographics, community needs, and competing solutions in order to then chart their course.
At the end of the day, though, I think David’s book adds tremendous value to the sector. He demands that nonprofits start asking hard questions and making difficult decisions. Ultimately David is encouraging nonprofits to move from “compliance management” to true performance management where they chart their own course and determine what it is they exist to do and whether they are doing that, not in order to garner more funding, but in order to ensure that they are actually making a difference for their clients.
In this month’s Social Velocity blog interview, I’m talking with Phil Buchanan. Phil is president of The Center for Effective Philanthropy (CEP) and was the first chief executive of the organization. Under his leadership, the organization has grown into the leading provider of comparative performance data to large foundations and other grantmaking institutions. Phil also serves on the board of Great Nonprofits and is a columnist for The Chronicle of Philanthropy.
You can read past interviews in our Social Innovation Interview Series here.
Nell: At the Center for Effective Philanthropy you work to make philanthropists more effective at creating social change, but a large part of philanthropy is driven by emotion and passion as opposed to results and data. How do you reconcile a push towards more reasoned philanthropy with the emotional aspect that will always be present?
Phil: I understand that some people feel this tension, but to me, it’s hard to understand because I think emotion and passion and results and data can – and should – cohabitate very happily. The passionate, emotional desire to make change is what inspires the commitment to get results. If you believe deeply in helping people in need, but do it in a way that doesn’t help, what kind of emotional satisfaction do you get from that?
Fay Twersky of the Hewlett Foundation articulated this very well in an essay in Alliance Magazine. She says impact should be pursued with “a warm heart and a hard head.” I like this way of thinking about it.
Nell: One of the the things you promote at CEP is a move from evaluating nonprofits based on overhead spending to evaluating them based on achievement of results. But sadly most funders haven’t yet embraced this distinction. What will it take for funders and the general public to recognize that overhead percentages are meaningless and destructive to the nonprofit sector?
Phil: I think the adoption of better nonprofit performance assessment practices is part of the answer. The more data nonprofits can point to that can show what they achieved with their total budgets, the less relevant how that budget was divided will feel to donors.
Look, I think people tend to gravitate toward that which is available, quantifiable, and comparative. Overhead percentages are all of those things, so they become the default performance measure even those they don’t tell you anything about performance. Caroline Fiennes of the U.K. has a great new book called It Ain’t What You Give, It’s the Way You Give It, and one of the best parts is that she really slays the argument for looking at administrative costs, while also providing guidance on how to approach performance measurement.
The rub is that the only way we’ll get better overall nonprofit performance assessment practices is if funders support that work. In our research, we have seen that, contrary to the stereotypes, nonprofits care about assessment and are working on it. But they want and need much more support – financial and non-financial – from their funders. I hope that funders embrace this and support better assessment practices in service of better outcomes.
I think Mario Morino has been a powerful voice on this topic and I recommend his book, Leap of Reason, to everyone I can. I hope people are listening to Mario because measuring effectiveness isn’t some academic issue. People who work at nonprofits deeply want to be effective. Foundations want to be effective. The people we help desperately need us to be effective. So we should – and we must – figure it out and get beyond empty measures. And many have. There are some fantastic exemplars when it comes to nonprofit performance assessment. But there are not enough.
Nell: In addition to leading CEP, you also serve on the board of GreatNonprofits, which allows individuals (clients, donors, volunteers) to review nonprofits. How does the idea of individual consumer reviews of nonprofits fit into the larger movement to evaluate nonprofits based on outcomes when the average person doesn’t yet understand or embrace the idea of nonprofit performance measurement?
Phil: In some ways I think it’s very easy for anyone to grasp. You’re trying to help someone; shouldn’t you ask whether they feel they have been helped? GreatNonprofits can provide that read on whether individuals served by a nonprofit feel they’ve been helped. I think GreatNonprofits, which Perla Ni founded and leads, is really important and I also think we need other kinds of efforts to collect and analyze beneficiary perception data. We need both the kind of open, web-based opportunity GreatNonprofits offers as well as rigorous, survey-based efforts such as the Center for Effective Philanthropy’s YouthTruth initiative, which helps schools, districts, and funders hear from middle school and high school students. We’re debating school reform in this country yet many of those with power and resources don’t understand the students’ experiences. We know that those experiences correlate to outcomes, so this kind of perceptual data could be a vitally important “leading indicator” of progress.
Nell: Philanthropy tends to be fairly risk averse and focused on program funding, as opposed to the organization-building capital investments (money to build organizations rather than buy services) the nonprofit sector so desperately needs. What do you think it will take to get more philanthropists to make riskier, longer-term, organization-building investments?
Phil: I think there needs to be a greater recognition that we count on organizations to get the work done. Sounds obvious, I know, but I think funders sometimes forget.
It is stunning, and sobering, that despite the valiant advocacy of Paul Brest, Paul Shoemaker, GEO, NCRP, and others, there has been no increase in the provision of general operating support over recent years. But we also need to be careful not to pretend operating support alone is the answer. Our research demonstrates that what really matters to grantees is operating support that is multi-year and a decent chunk of change – six figures or up in annual support, ideally. So the problem isn’t just one of grant type, it’s also one of grant size.
This comes back to assessment, too, in my view. If, as a funder, you know what you’re going after, and there is an organization that is focused on the same goal and can show that it’s delivering results, why would you not provide significant, long-term, unrestricted support? And, if you can’t find organizations delivering results toward your shared goal, why wouldn’t you fund in a way that would allow them to build that capacity?
Nell: You recently wrote a fairly scathing critique of Dan Pallotta’s new book, Charity Case because you thought his approach to advocating for the nonprofit sector was misguided. Yet the nonprofit sector is largely underfunded, undervalued, and dismissed in the broader regulatory and political environment. What do you think it will take to change that reality?
Phil: Pallotta’s book doesn’t advocate for the nonprofit sector that I know – or for one that I would ever hope to see. He wants the sector to become something entirely different, something a lot more like business, something that ultimately might not be discernible at all as a distinct sector. His take on the sector is both ahistorical (he demonstrates almost no understanding of the sector’s past contributions) and ideological (he has written that “the free market is a self-correcting system” that supports our “natural desire to help each other” and “only stops working when it is interfered with”). He is infatuated with free market analogies, believes financial incentives are the key to motivating people despite research demonstrating that they are not, insists that public trust in charities is lower than in other sectors when all credible research shows the opposite, and does not seem to understand that many nonprofits work to address the problems that exist as a result of market failures. His book is a disservice to the nonprofit sector.
So, then, what do we need to do to increase the appreciation of public and government officials for the nonprofit sector?
We need to start by standing up and asserting our value as a sector separate and distinct from business and government. We need to stop buying into the fiction that being effective means being “like a business,” whatever that even means. We need to stop praising the “blurring of the boundaries” and start articulating why we need organizations that pursue mission alone rather than profit for their shareholders. We need to explain why the sector is good for our society, good for business, good for government, good for citizens: we all need the nonprofit sector to be its best for us to be our best. And we need to re-learn our history – Olivier Zunz’s recent book on U.S. philanthropy would be a good place to start.
Yes, of course there is much work to do to improve the sector, but that doesn’t mean we need to tear it down. I wrote a series of blog posts for Duke University’s Center for Strategic Philanthropy and Civil Society a few years ago and argued that just as it is possible to walk and chew gum at the same time, it is possible to believe both that the nonprofit sector is and has been a defining strength of this country and that it must dramatically improve its effectiveness. It is possible to both celebrate the diversity of the sector and its various organizations and push for greater clarity of organizational goals, strategies, and performance indicators. It is possible both to applaud initiatives fostering “social innovation” and the government’s embrace of this push and also recognize what has worked in the past.
We need not tear down the sector to improve it. We need not disparage all that has come before in order to chart a better future.
It seems that October had two primary themes: moving nonprofits to measure outcomes and the evolution of philanthropy. The drum beat that nonprofits must find a way to measure what change they are creating has been growing louder, and every nonprofit leader would be wise to listen and understand this new trend. But in order to get to a place where most or all nonprofits are measuring outcomes, philanthropists must start paying for measurement. It is interesting to watch this all evolve.
Below are my top 10 picks for what was worth reading in October in the world of social innovation. And as always, please add what I missed to the comments. And if you want to see an expanded list, follow me on Twitter, Facebook, LinkedIn, Pinterest or my newest social media network, ScoopIt.
You can see the 10 Great Reads lists from past months here.
- There were several great articles about the need for nonprofits to prove the change they are creating. Steve Boland at Nonprofits Assistance Fund kicked if off by encouraging nonprofits to compare their resources to the outcomes they achieve. The New Philanthropy Capital blog encouraged nonprofits to approach measurement with theory, courage and creativity. And on the Center for Effective Philanthropy’s blog, Lauren Gilbert provided a case study of BELL and how they measured outcomes.
- And then to the ultimate question, “Will funders pay for measurement?”. Beth Kanter asks the question What is the Funder’s Role in Supporting Good Measurement? and Mario Morino (author of Leap of Reason) weighs in. And Phil Buchanan, CEO of the Center for Effective Philanthropy, argues “Foundations must step up and support robust nonprofit performance management systems.” Oh yes, please.
- Writing in the New York Times Paul Sullivan explores how the advent of impact investing is pushing philanthropists to measure the impact of their dollars.
- Even though the premier social entrepreneurship conference, Social Capital Markets, was in September, there were two great round-up blog posts about how SoCap moved the conversation about investing in social entrepreneurship forward. First was Jeff Raderstrong’s argument that we need to beware of the hype around impact investing and focus on solutions to social problems. And Christine Egger wrote a fabulous post on the Idealist blog about new ways to think about, fund & inform social change.
- There were a couple of great posts about (the really sexy topic of) nonprofit budgeting. It may sound dry, but a nonprofit’s budget is an incredibly powerful tool for creating social change, so the more organizations that can harness that tool, the better. On the Nonprofit Finance Fund blog, Peter Kramer demonstrates how to connect your budget to your overall organization strategy. And Kate Barr argues that breakeven budgeting is the “biggest barrier to nonprofit financial health.” Amen to that!
- Two great pieces this month from Lucy Bernholz who always makes us think, especially about the future. First is her piece on libraries and the future and then her laundry list of things we can no longer assume about the world around us.
- I always love a well done infographic and PhilanTopic offers one with their Nonprofits’ Impact on the Economy.
- Writing on the Social Earth blog Ashok Kamal reminds us that the work of social change is an exhausting roller coaster and we all need some “inspiration capital” to keep us going.
- Nancy Lublin, CEO of DoSomething.org, describes that for the millennial generation, innovation is the status quo and they are “poised to bring the social and business worlds closer together – tying profit to social change, and strong local communities to a new global society.” Let’s hope!
- It looks like the old is becoming new again as cities revive the idea of public, inner city markets.
Photo Credit: x1klima
There is an increasing drumbeat in the world of social change that nonprofits must start measuring their work. Thought leaders like Mario Morino with Leap of Reason, Bill Shore’s recent blog post “What Does Success Look Like?” and David Henderson’s (recently interviewed on the Social Velocity blog here) ongoing Full Contact Philanthropy blog, to name a few, are adding to the chorus.
The argument among thought leaders, funders, raters and others in the social change sector is increasingly that nonprofits MUST:
- Figure out what they exist to do (a theory of change)
- Create a disciplined operational model for creating that change
- Measure whether the change is actually happening
- Articulate that change in order to garner more support
But all of this is fairly new to the nonprofit sector and not yet widely practiced (by a long shot). In fact, some of these ideas are still quite controversial. Let’s take #2 for example, “Creating a disciplined operational model.” David Henderson analyzes this well in his post last week. Although David gets a little bogged down in jargon, his idea is a really great, but probably touchy, one.
He argues that nonprofits must become more discerning and disciplined about who they provide service to. Because nonprofits have limited resources, they cannot serve everyone. Therefore instead of serving people on a first come first served basis (which is the norm), they should instead serve those who they can best help. In other words, they should determine and then serve those populations of people who will benefit the most from their intervention:
In the case of the youth workforce development program, while all low-income youth would qualify for services, we might have a preference for placing people into the program who are likely to complete the internship. In this case, one could use historical data to fit a predictive model that provides some insight into what characteristics made an individual more or less likely to have completed the program in the past. Under this framework, social welfare maximization would involve not only placing people into the program, but maximizing the number of people in the program who complete the internship.
The idea is that instead of filling up the program with any youth who have a need, the nonprofit would create more social change by thoughtfully selecting types of children on whom they could have the most impact.
To the nonprofit world, which is very much focused on trying to help as many people as possible, this is a potentially radical idea. But if smartly employed, nonprofits could actually provide more social change through this disciplined method. And in an increasingly resource-constrained environment, it makes sense for nonprofits to want to get the highest return on their program resources.
In order to take this approach, however, nonprofits must have a theory of change. You cannot create social change if you don’t:
- Know what you want that change to be, and
- Measure whether that change is happening
In an increasingly competitive marketplace, it is getting harder and harder for nonprofits to attract support. The harsh reality is that those nonprofits that develop a smart theory of change, measure whether that change is happening, and then articulate the change to supporters will increasingly be the ones that survive. Not to mention that they will be the ones that actually create social change.
Photo Credit: Colin Smith
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