Leap of Reason
Today 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
This spring I have been trumpeting the Performance Imperative, a detailed definition of a high-performing nonprofit released by the Leap Ambassador community in March. Today I continue the ongoing blog series describing each of the 7 Pillars of the Performance Imperative with Pillar #2: Disciplined, People-Focused Management.
With this second Pillar, the Performance Imperative obviously makes a distinction between “leaders” in Pillar 1, and “managers” in Pillar 2. There is a note in the Performance Imperative that “leaders” and “managers” are typically two separate people in nonprofits with budgets over $1 million. So this distinction, and perhaps this Pillar, applies only to larger nonprofits.
But I think there is actually application to any nonprofit. In any nonprofit there are leadership tasks (creating the vision, being the cheerleader, marshaling resources) and there are management tasks (making sure the trains run on time, putting each resource to its highest and best use). In smaller organizations both sets of tasks fall to the same person, yet they both still need to be performed well. So I think it behooves any size nonprofit to analyze whether they are BOTH leading and managing well.
Effective managers put organization resources to their highest and best use. They recruit, train and retain the right talent, they use data to make good decisions, they manage to performance, and they are accountable.
You can read a larger description of Pillar 2 in the Performance Imperative, but here are some of the characteristics of a nonprofit that exhibits Disciplined, People-Focused Management:
- Managers translate leaders’ drive for excellence into clear workplans and incentives to carry out the work effectively and efficiently.
- Managers…recruit, develop, engage, and retain the talent necessary to deliver on the mission.
- Managers provide opportunities for staff to see…how each person’s work contributes to the desired results.
- Managers establish accountability systems that provide clarity at each level of the organization about the standards for success and yet provide room for staff to be creative about how they achieve these standards.
- Managers acknowledge when staff members are not doing their work well…managers are not afraid to make tough personnel decisions so that the organization can live up to the promises it makes.
The Center for Employment Opportunities (CEO) is an example of how strong management is necessary to create a culture of high-performance. CEO employs people entering parole in New York State in transitional jobs at government facilities while helping them access better paying, unsubsidized employment. CEO Chief Operating Officer, Brad Dudding described to me how CEO management created, over the past 10 years, a culture and system of high performance.
Here is his story:
In the early years, CEO focused program performance on meeting individual contract milestones, not a set of unified organizational outcomes. They were proficient in collecting data and reporting it to funders, but did not use data to track participant progress, to make course corrections, and to manage to short-term outcomes.
In 2004 the Edna McConnell Clark Foundation provided CEO with a multi-year capital investment to:
- Create a theory of change as a blueprint for program intervention and outcomes measurement.
- Develop a performance measurement system to track progress toward those outcomes.
- Nurture a performance culture that uses data to understand program progress, build knowledge and correct performance gaps.
First, CEO management had to agree on a theory of change and the specific outcomes for which the organization would hold itself accountable. Next, management shared the theory of change with staff and demonstrated how each staff member contributed to its achievement through an all staff event, follow-up trainings and consistent messaging that the organization was entering an exciting period of change. CEO then adopted a new performance measurement system to reinforce the theory of change.
But reorienting the organization was not easy. Not everyone was ready to embrace a new culture of performance accountability and data tracking. CEO management was initially surprised by staff resistance and responded impatiently with compliance measures. Looking back, not enough time was invested in staff training and promoting the value proposition of new changes. At times it was an enormous effort to get front line staff to track and use data everyday to ensure participant goals were being met.
But the tipping point came when CEO promoted early adopters of the data system to management positions. These new managers were comfortable operating in a data-driven environment and holding others accountable to use data to track program participants’ progress. Once there was a group of strong managers in place, CEO’s performance culture started to take hold and program outcomes improved.
By 2010, CEO was managing to annual performance targets and short-term outcomes through staff’s real-time documentation and data analysis.
In 2012, the results of a three-year randomized control trial showed that CEO’s program resulted in a reduction in recidivism of 16-22%. But the evaluation also uncovered a need to improve CEO’s strategies for advancing long-term employment and for connecting individuals to the full-time labor market. In response, CEO created a job retention unit and developed innovative job retention strategies, including training programs and financial incentives for participants.
In 2013, CEO entered the New York State Social Impact Bond, the first state-sponsored transaction, through which CEO will serve 2,000 high-risk parolees in New York City and Rochester between 2014 and 2018. If CEO hits benchmarks and reduces the use of prison and jail beds by program participants, investors will be repaid their principal and will receive a return of up to 12.5% by the U.S. Department of Labor and New York state.
The tenets of a performance based culture — supportive leadership, disciplined managers, goal setting, data collection and analysis to track and improve outcomes — are now fully accepted by CEO staff and reinforced by management. CEO now has a highly developed system of tactical performance management, which allows the organization to know on a daily basis if it is delivering on its promise to its participants.
Photo Credit: Australian Paralympic Committee
In today’s Social Velocity interview I’m talking with Mary Kopczynski Winkler, senior research associate with the Center on Nonprofits and Philanthropy at the Urban Institute. Mary is a nationally recognized expert in the field of performance measurement and management. She is a founding member of the Leap of Reason Ambassadors Community, a private community of nonprofit thought leaders and practitioners committed to increasing the expectation and adoption of high performance in the social sector and who released the Performance Imperative earlier this year.
You can read past interviews in the Social Velocity interview series here.
Nell: PerformWell is an effort among Urban Institute, Child Trends and Social Solutions to offer tools and strategies for human services nonprofits to measure their work. How successful has this effort been and what are your plans for continuing to grow the capacity of nonprofits to measure their work?
Mary: PerformWell is a free, interactive, web-based resource designed to help human services nonprofits gain knowledge about performance management, access tools and resources they need to better service clients and meet outcomes, and obtain strategies for effective, efficient service delivery. Launched in March 2012, the demand for PerformWell has exceeded our expectations with more than 400,000 visitors (from all 50 states and more than 200 countries); 25,000 individuals have registered for our webinars; and more than 140,000 assessment tools have been downloaded from our site. Webinar survey results are routinely high, but we are working to put additional systems in place to track how nonprofits are using various aspects of PerformWell and to what end.
In 2013, the PeformWell partners engaged in a business planning process with Root Cause. Market research confirmed our views about a large unmet need for performance measurement knowledge and high interest in the resources offered through PerformWell, but that additional products and services are also desired, such as webinar training series, regional user conferences, and customized engagements with nonprofits. Users wanted a more interactive web-experience.
Our short- to medium-term goals include substantial updates to the website to improve the user experience (we also plan to solicit user feedback during and after these changes are implemented); development of additional products and services better aligned with the feedback obtained from the market research undertaken by Root Cause; and exploration of partnerships and sponsorships with nonprofits, consultants and funders to generate additional revenue and resources to expand the content, reach and use of PerformWell to improve the adoption and application of performance measurement and management practice across the nonprofit sector.
Nell: Some believe that measurement is perhaps more straightforward for human services nonprofits — you can measure change to an individual’s behavior or life circumstances — but measurement is more difficult for arts organizations or advocacy groups. What are your thoughts on that?
Mary: Sometimes I think this argument serves as a convenient excuse for organizations to avoid putting even the most basic systems in place to track progress or otherwise hold themselves accountable to their constituents. In 2007, with support from the Hewlett Foundation, the Urban Institute and the Center for What Works, we published a series of simple frameworks, as part of our Outcome Indicators Project, to help nonprofits in 14 program areas engage in performance measurement. Two of these areas are advocacy and performing arts. The Urban Institute also provided research support to the Performing Arts Research Coalition (PARC) to develop standardized surveys to help performing arts organizations across the country obtain more routine and better data from audience members, subscribers, and the community.
Establishing a causal link between advocacy or arts interventions and impact is, in my view, more challenging than for human service organizations. In the case of advocacy organizations, it can be very difficult to isolate the contributions of a particular campaign or even organization to a policy or legislative outcome.
It is, however, possible to devise strategies for capturing information on earlier stage outcomes, such as increased awareness.
I recently participated on a panel at the annual OPERA America conference – on “internal metrics for civic impact.” As much as measurement activities have evolved from the days of the PARC coalition, I observed that most of the metrics and data points were still very internally focused on measures of participation and attendance and fall well-short of anything approximating community or civic impact. I encouraged those present to consider stepping away from a focus on the impact of an individual opera company’s contribution to civic impact, and recommended instead more of a collective impact approach in collaboration with other arts, civic, and education organizations in a community.
In this case, I even hesitated to use the word “impact,” and suggested the group consider distinguishing between collective contribution toward a modest set of civic outcomes (e.g., performing arts promote understanding of other cultures or are a source of pride for those in the community) and the more traditional causal attribution usually reserved for the term “impact.”
Nell: Caroline Fiennes, among others, has argued that individual nonprofits should actually do less evaluation and rather rely on larger research studies to prove their theories of change. What do you make of that argument and the difference between evaluation and measurement?
Mary: I agree with some of what Caroline puts forth here – particularly her observations about “withholding (unflattering research) and publication bias” – an issue that University of Wisconsin-Madison professor Donald Moynihan has termed “performance perversity.” I also agree both with her suggestion that evaluations be done by a third-party to reduce any tendencies toward subjective reporting or bias and her endorsement of a greater consideration of shared metrics.
I am troubled, however, by the fact that only 7% of UK social-purpose organizations are interested in improving services, and her somewhat cavalier suggestion that monitoring and evaluation “wastes time and money.” Although she is not alone in this second argument (see for example Bill Shambra’s “take-down” of Charity Navigator’s efforts to encourage greater use of performance metrics in “Charity Navigator 3.0: The Empirical Empire’s Death Star?”), such sweeping generalizations undermine the legitimate and courageous attempts of many nonprofits to use data for program improvement efforts.
I agree with Phil Buchanan in that there is a “moral imperative” to make an honest attempt to understand if resources are being used effectively and certainly to guard against the possibility that programs could be doing more harm than good as organizations like Latin American Youth Center and Harlem Children’s Zone have discovered and since corrected.
I see measurement as a necessary practice for every nonprofit. But measurement is different from evaluation. Nonprofits need to start by developing a measurement infrastructure that makes sense for their organization – one that supports their mission and commitment to serve and improve the lives of their clients or constituents – not one that is reactionary and responsive to funders. It is precisely this kind of infrastructure that can lay the groundwork for a more rigorous evaluation, at a time that is right and appropriate for the organization’s stage in development.
I see measurement and evaluation along a continuum of inquiry that should be designed to support the learning objectives of an organization. Measurement helps organizations to take the day-to-day or month-to-month pulse of various activities and program results – these snapshots in time or scorecards help managers and service providers understand trends and provide an opportunity to correct, modify or otherwise adapt operations.
Evaluation is, by definition, more rigorous, more expensive, and takes considerably more time to see results. Evaluation serves a very important role as organizations make decisions about whether to continue, grow, scale or otherwise expand services, but it needs to occur at the right time – and certainly not as an organization is just getting off the ground.
Nell: It is difficult for most nonprofits to find funding for measurement work. For example, in the most recent Nonprofit Finance Fund State of the Sector survey, 69% of nonprofit respondents said their funders rarely or never cover the costs of measurement. How do we change that, or can we?
Mary: Although I am sympathetic to this argument and argue frequently that foundations have a unique and critical role to play in helping to build the capacity of nonprofits to better engage in measurement and evaluation, I think we need to change the conversation to one that focuses on the shared responsibility between nonprofits and funders for making the necessary investments in measurement and evaluation.
If nonprofits are truly ready to embrace a culture of measurement and high performance, then they need to reorganize operations in ways that embed measurement practice at every level of the organization, and change expectations from front-line workers all the way to the board of directors.
This means things like: defining expectations about data collection in job descriptions; setting aside a small percentage of funding for evaluation as a line-item in every grant request; and using data in meaningful ways in everyday discourse. Likewise, funders need to work more collaboratively with grantees to understand the data needs and capacity of nonprofits, consider funding longer-term grants that build in support for measurement and evaluation, and stop asking for data or reports that aren’t part of the conversation about continuous improvement and learning. Funders, too, can support field-building efforts to develop additional tools and resources in support of the measurement work nonprofits seek to accomplish.
There are a number of exemplary efforts already underway including Edna McConnell Clark Foundation’s Propel Next and the World Bank Group’s support of Measure4Change and the East of the River Initiative. Each of these efforts feature: targeted grants to build measurement and evaluation capacity of participating nonprofits; access to technical assistance resources; and a community of practice to help grantees learn from each other, share successes or failures, and reduce what is all too often a sense of isolation among measurement and evaluation practitioners.
Photo Credit: Urban Institute
As I mentioned last month, the Leap Ambassadors (of which I am a member) recently released the Performance Imperative, a detailed definition of a high-performing nonprofit. Because I think the Performance Imperative is so important and every nonprofit leader should understand it and begin to use it, today I am kicking off a series to describe, one-by-one, each of the seven pillars of the Performance Imperative.
I think the Performance Imperative is so exciting because it can serve as a north star to the nonprofit sector, helping organizations analyze their own performance and create a clear roadmap for improvement.
As Lowell Weiss, one of the leading architects of the Performance Imperative, explained in my interview with him last month:
High performance is all too rare in our sector today. In fact, we don’t even have a commonly accepted definition of the term “high performance.” The Performance Imperative is our attempt to create that common definition and then start the process of creating guideposts to help nonprofits who are motivated to improve their performance for the clients and causes they serve.
So, first up in this series on the Performance Imperative is Pillar #1: Courageous, Adaptive Executive and Board Leadership.
Without true leadership, at both the board and staff level, you will achieve little as a nonprofit. This pillar is about asking hard questions, pushing the organization toward excellence, continuously improving and taking nothing for granted.
You can read the full description of Pillar #1 in the Performance Imperative, but here are a few key elements present in nonprofits that exhibit this pillar:
- Boards “ask probing questions about whether the organization is living up to its promises and acknowledge when course correction is needed.”
- Executives and boards “know that great talent is a huge differentiator between organizations that are high performing and those that aren’t.”
- Executives and boards “know that they haven’t figured it all out and acknowledge that they still have a lot of work to do.”
- Executives and boards “are constantly assessing not only what the organization should be doing but also what it should stop doing…redirecting scarce resources to the highest opportunity areas.”
In other words, nonprofit leaders who embody Pillar 1 of the Performance Imperative, ask hard questions, build a stellar staff, seek continuous improvement, and put resources to their highest and best use.
There is no doubt that there are many examples of this courageous, adaptive leadership in the nonprofit sector. One of those, I believe, is Molly Baldwin, founder and CEO of Roca.
Molly founded Roca in 1988, and by 2004 it was a multi-million dollar teenage pregnancy and violence prevention program. But that year, Molly began asking some hard questions about the results Roca was achieving. She forced board and staff to take a huge step back and examine what they were doing and the ultimate effect that work had. She led her board and staff through a rigorous refocusing and pruning effort to limit their target populations and use data to drive their interventions. Instead of continuing a laundry list of services to many different populations that had limited effect, she helped her organization refocus resources on where they could create real change — transforming the lives of young men in the criminal justice system.
It was a challenging transition to lead, but the results are impressive. An internal study overseen by Harvard’s Kennedy School of Government in 2013 found that Roca reduced recidivism 65% and increased employment by 100% for the men in the program. And Roca was chosen as the lead provider in Masschusetts’ first pay for success effort.
Ten years ago Molly could have continued on Roca’s then current path, continuing to do “good work,” but failing to ask hard questions about whether that work was really resulting in change. But instead, Molly brought everything to a halt and forced board and staff to grapple with some fundamental and incredibly risky questions. In the end Molly’s leadership transformed Roca into an organization that is truly delivering solutions.
That’s the kind of social change leadership we need.
If you want to learn more, download the Performance Imperative and read additional case studies here.
Photo Credit: William B. T. Trego painting depicting George Washington’s army at Valley Forge.
In today’s Social Velocity interview, I’m talking with Lowell Weiss, President of Cascade Philanthropy Advisors, which provides personalized guidance to foundations and individual donors seeking to deepen their impact. Previously, he served in leadership roles at the Bill & Melinda Gates Foundation, the Morino Institute, and in the Clinton White House.
You can read past Social Velocity interviews here.
Nell: Why do the Leap Ambassadors believe now is the right time to introduce the Performance Imperative (PI) to the nonprofit sector? There have been past attempts to move the sector toward outcomes and performance. What makes this effort and this timing different?
Lowell: We don’t know if we’ll break through with this effort. But the 70+ members of the Ambassadors Community are committed to giving it our all, because we believe that performance matters more than ever. The social and public sectors are increasingly steering resources toward efforts that are based on a sound analysis of the problem, grounded assumptions about how an organization’s activities can lead to the desired change, and leadership that embraces continuous improvement.
High performance is all too rare in our sector today. In fact, we don’t even have a commonly accepted definition of the term “high performance.” The PI is our attempt to create that common definition and then start the process of creating guideposts to help nonprofits who are motivated to improve their performance for the clients and causes they serve.
We’re not aware of any other effort devoted to this mission-critical topic that has engaged so many top nonprofit executives, funders, and thought leaders as co-creators. Perhaps even more important, the PI goes beyond the typical focus on helping nonprofit leaders do things right. When leaders do things right, they can achieve strong operational performance but not necessarily meaningful results for beneficiaries. To achieve the results embodied in their mission statements, leaders must go the extra mile, through diligent internal monitoring and external evaluation, to ensure they’re also doing the right things.
Nell: Does the PI apply to any and all nonprofit organizations? Is it a measuring stick that any size and domain area nonprofit should use, or are there certain types of nonprofits for which this really works?
Lowell: We believe the insights in this document are most immediately applicable to nonprofit organizations with budgets of $3 million or more. But many of the basic management principles apply to organizations of any size, just in less-intensive ways. Some of the details have a special focus on organizations that provide direct services. We believe the overarching framework is relevant for organizations of almost any type.
Nell: What will keep the Performance Imperative from becoming a dusty document rather than a movement? What does success look like for this movement and how will you measure whether that happens?
Lowell: Let’s face it: The topic of high performance is not a lightning-fast meme that will spread like a left shark or right-wing conspiracy theory. It’s a slow, complex idea that will require patient, methodical work to advance. Hence the importance of the Leap Ambassadors Community, a group of leaders who care deeply about high performance and are willing to share the gospel with trusted colleagues and peers.
We believe that when leaders with strong beliefs and passion coalesce around a common purpose, they can build a collective power and influence to drive positive change. They can create an infectious enthusiasm to pull other like-minded players into a growing community of action. That can only happen when you take the time to build relationships, trust, quality work, and collective pride in that work. Overall, we’ll judge our success based on a) to what extent the PI becomes an established framework for increasing the understanding and expectation of high performance as a critical pathway to greater societal impact; and b) to what extent the Leap Ambassadors Community demonstrates itself as a thoughtful, knowledgeable, aligned community of leaders and earns respect, collaboration, and support from prominent players in the field.
To be more concrete about how we will know if we’re on the right track, we’ve established metrics for the growth and engagement of the Ambassadors Community as well as for the value of the PI itself. Here a few of the milestones we hope to achieve over the next year:
- 100‐150 ambassadors have jelled as a community and are truly aligned with the community’s purpose.
- At least 25 nonprofits commit to using the PI to assess their strengths and needs; increase the board’s focus on mission effectiveness; improve their professional-development and organization-building efforts; or otherwise use the PI as a North Star to guide their journey toward high performance.
- Three to five foundations adopt the PI for themselves and their grantees, and they begin to apply the PI in their grant decisions and grantee support.
- Three charity ratings or information providers build the PI into their offerings.
- At least two vendors prominently use the PI in their suites of products and services.
- At least two prominent nonprofit management and leadership programs incorporate the PI as a core staple in their products and services.
- At least one institution creates a prominent award aligned with the PI or adapts an existing award.
Nell: Where do funders and regulators fit into this push for higher performance in the sector? One of the things that holds nonprofits back from high performance is an inability to spend the money it takes to achieve high performance (money for infrastructure, evaluation, staff, etc.). How do we fix that and where does fixing that fit into the movement’s plans?
Lowell: Funders and regulators can and must play a role. Right now, I’m helping a multiservice agency transition from providing compassionate care to ensuring that its clients achieve meaningful, measurable, sustainable life outcomes. The agency is trying to live the PI. But here’s the sad reality: The journey toward high performance is making the organization’s development challenges harder, on net. That’s because there are so few funders who understand the value of high performance—and even fewer who reward it.
To make the leap to high performance, nonprofits need creative funders willing to think big with them—not just ask for more information on results. They need funders who understand that making the leap requires more than program funding and more than the typical “capacity-building” grant. They need funders who make multi-year investments in helping nonprofit leaders strengthen their management muscle and rigor.
That’s why we’re so supportive of the work of Results for America and the Coalition for Evidence-Based Policy, organizations that are helping governments to base funding decisions on evidence and results. And that’s why the Ambassadors Community is developing the case for high performance that we can start bringing directly to funders. Bridgespan Group Co-Founder and former Social Innovation Fund Director Paul Carttar and Center for Effective Philanthropy President Phil Buchanan are co-leading a working group of ambassadors to build the case for funders. They are planning to convene a dozen+ foundation leaders to help flesh out the most effective arguments and evidence we can assemble to persuade funders that they have a better chance of accomplishing their missions if they support their grantees’ pursuit of performance.
Photo Credit: Cascade Philanthropy Advisors
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