I’m excited to report that a week from today, July 26th, I will be participating in a live online chat at the Foundation Center’s Grant Space website, titled “Are You a Social Entrepreneur?“.
Abby Chroman, leader of global community curation for AshokaHub, and I will be fielding questions from the audience about social entrepreneurship, social change, nonprofit innovation, capacity capital, social return on investment and much more.
Some of the questions we’ll be discussing include:
- What qualities do social entrepreneurs possess?
- How is this concept different from traditional corporate structure, even one with a socially-minded mission?
- How do you truly accomplish social change vs. simply doing “good” work?
- How can nonprofits especially incorporate some of this thinking to be successful in fulfilling their missions?
- How do you measure social impact and return?
But the majority of questions are up to the audience. This live chat will happen entirely in the chat window on the Grant Space website. When the chat goes live, you can submit your questions and comments and interact with Abby and me and other readers, but you can also send questions ahead of time.
So join us! Registration is free at the Grant Space web site here. I look forward to your questions!
Photo Credit: Colin_K
We all know the nonprofit sector is really struggling. Particularly in the midst of a deep recession it can be difficult to figure out how to get out of a vicious cycle of increasing demand for services, relentless fundraising, diminishing capacity and so on.
But there is hope. In order to break free of the starvation cycle of trying to do more and more with less and less, nonprofits need to make big change. And in order to do that they need to figure out what is holding their organization back.
Most consultants offer nonprofits what they call an Organizational Assessment. But I hate the term, and I don’t hold much stock in the results. The solutions they offer to what’s holding a nonprofit back tend to be rooted in what the nonprofit sector has been doing wrong for too long. Most Organizational Assessments are not bold enough, they don’t push nonprofits to understand and articulate their own theory of change, look at entirely new revenue streams, get rid of non-performing board members, completely revamp their mission, focus their marketing efforts, create a real strategic plan, and so on.
What nonprofits need is an Organization Building Plan. It can transform a nonprofit, give them an understanding of where they stand currently and what it will take to really strengthen the organization and their ability to make social change. An Organization Building Plan gives a nonprofit a clear, executable road map for making their organization work better, smarter, more effectively, more sustainably. It demonstrates how to integrate better all aspects of the organization (program, funding, marketing, operations, board, etc), make the organization more sustainable, expand the net of supporters (funders, volunteers, board members, friends), deliver programs in a way that increases social impact, and increase the strengths of the organization, while addressing the weaknesses.
If a nonprofit can strengthen their organization, they can deliver more social impact. Indeed, I would love to see every nonprofit organization with a well executed Organization Building Plan. So what does a good one look like?
An outsider (it must be an outsider, because, as we all know, someone close to the organization won’t have the heart or the vision to see what is really wrong and how to fix it) interviews board, staff and funders, reviews organization processes, policies, procedures, documents. They then analyze and create detailed recommendations for improvement in the eight key areas of a nonprofit organization:
- Mission and Vision: How these basic pillars of the nonprofit galvanize internal and external people to create change.
- Strategy: How the organization comes up with and executes on a plan for the work of the organization.
- Program delivery and impact: How the organization delivers social change.
- Governance and leadership: How the board and key staff drives the organization forward.
- Finances and revenue generation: How financially strong and sustainable the organization is.
- External relationships: How strong and effective important collaborations and partnerships are in the work of the organization.
- Marketing and communications: How well the organization gets in front of the right audiences in a compelling way that drives action.
- Operations, systems and infrastructure: How well the organization makes use of resources.
Doing Organization Building Plans is one of my favorite services we offer at Social Velocity. When I deliver the results to a client’s board and staff it is thrilling to look around the room and see the mix of shock, awe, relief, excitement, energy, innovation. Finally someone has taken a hard look inside the organization and come up with a new direction that opens a whole new world to the organization. Ideas start flying around the room “We could do this…”, “What if we did that…” It serves as a rallying cry to begin to build the organization.
At Social Velocity we are all about big, not incremental, change. An Organizational Assessment can make a nonprofit incrementally better. An Organization Building Plan can transform how an organization works, dramatically increasing productivity, sustainability, and ultimately, social impact.
I’m back from Spring break, which came right as the flurry of discussion about my blog post The Critical Alignment of Mission, Money and Competence was winding down. I really appreciate the great comments and discussion from Sean Stannard-Stockton (of the Tactical Philanthropy blog), Nathaniel Whittemore (of Change.org’s Social Entrepreneurship blog), Kjerstin Erickson (founder of FORGE) and Sasha Dichter (Director of Business Development for Acumen Fund), among others.
The great discussion happened and was then picked up by others (such as the Social Capital Markets blog, and the Nonprofit Assistance Fund blog) and taken further by others (Sasha kept going) because of our good friend, Twitter. For all the jokes and rolled eyes, Twitter has a tremendous amount of value. The discussion itself didn’t happen on Twitter, 140 characters can only do so much. But rather, it created a space for a thoughtful discussion about a topic that seems to be of interest to many in the social innovation space, among people who otherwise would not have connected, let alone been able to have a conversation of such depth.
I’m a fairly recent convert to Twitter (aren’t we all?) and at times it can feel like an albatross (one more thing on my very long list of things to keep up with), but if you can keep up with it, even just marginally, it can hold tremendous value. (You can follow me on Twitter @nedgington).
But what came out of this great discussion? What were the takeaways? I’m sure the battle rages on, but for me, the key points were:
- Although mission, money and core competencies must be in equal alignment in a nonprofit organization, funding must mold to mission, not vice versa.
- A sustainable revenue stream is one that is sustainable not because it is based on sale of goods or services (“earned income” is often used interchangeably with “sustainable revenue stream”, which I, like Sasha, really disagree with) but because it is based on a funding mix (whatever that may be) that can be counted on for years down the road.
- Finding a sustainable revenue engine is often about creating a context or a “market” for your work.
- Nonprofits have to be more analytical about their funding sources and how sustainable, and aligned with their mission and core competencies, they are and will continue to be.
- The funding community is best positioned to help with revenue misalignments.
I’m sure nothing was changed by this discussion. But the more that these kinds of discussions happen and the more that some of the assumptions of nonprofit operation and finance are challenged the more apt we are to restructure how nonprofits work so that great missions with great delivery can become sustainable.
The struggles and challenges nonprofits face all come down to one key problem: a misalignment of mission, money and core competencies.
For any organization three things must be aligned: 1) their mission, or reason for existing 2) their core competencies–what they do better than anyone else in the world, and 3) their resource engine–all the ways in which they sustain themselves financially. So that an organization, at equilibrium looks like this:
The mission is supported by the organization’s core competencies which both feed into how it generates money.
Jim Collins calls this the “Hedgehog Concept,” Mark Moore, a professor at the JFK School of Government at Harvard, calls it “The Strategic Triangle.” It’s such a simple and powerful concept, but it seems to be one that is often left on the bookshelf, a better theory than practice.
But how transformative would it be if this concept were dusted off and applied to the challenges a nonprofit faces? When one or two of these three elements are out of alignment, chaos can ensue.
Mission is misaligned: A nonprofit that can generate money and operates great programs, but can’t bring it all together in a coherent single purpose, this is otherwise known as “mission creep.”
Core competencies are misaligned: A nonprofit that has a great, clear idea of what they want to do (mission) and can raise money around it, but can’t deliver. This is reminiscent of the dot com era when there were countless businesses with fabulous ideas that successfully raised VC and angel money, but didn’t really have a core competency or product to deliver and eventually went bust.
Resource engine is misaligned: This final misalignment is probably the one nonprofits are most familiar with. A nonprofit has a great mission and can produce great results, but they can’t find a way to make the organization financially sustainable. FORGE, a nonprofit working with African refugee camps, which I wrote about before, is a great example of this misalignment. Their mission and programs are solid, but they struggled with the right financial engine (switching from individual fundraising to web-based fundraising without having the core competencies to make the switch). The end result was a $100K deficit.
And there are various other combinations of misalignment where two, or all three, areas are out of sync. But often it is the financial piece that causes the most problems. Financial misalignment is so difficult for nonprofits to overcome because the sector is undercapitalized. It can seem impossible to nonprofit leaders, who tend to be focused on the program and mission they are trying to deliver, to connect a sustainable financial engine to their work. And indeed, many foundations and government funders will pay for programs and mission, but not a sustainable overall organization. The incentives do not reward an organization in alignment.
But there are solutions. If an organization can take a step back and look at all three elements and how they fit together they can start to make strides toward better integrating all three activities:
- A nonprofit’s mission needs to be one that they can generate financial support around, but it also needs to be something that they can deliver on better than anyone else.
- The financial support a nonprofit generates needs to complement, not detract from, their mission and core competencies, and
- The nonprofit must integrate what they do really well with their mission and financial model.
You can no longer leave the fundraising staff alone and hope for the best. You can no longer let the board say fundraising is not their role. You can no longer create a strategic plan without a corresponding financial plan. Money, mission and competence must all be at the table finding a way forward together.
If you want to learn more about creating a sustainable financial engine for your nonprofit, download the Develop a Financial Model Tool Bundle.
One of the things I’m really excited about is the potential for the financial crisis and restructuring we’re experiencing to completely transform how nonprofits are financed. I’ve written before about how we need to move away from the notion that “overhead” funding is bad, and how we need to restructure nonprofit accounting principles in order to allow equity capital (or money that allows us to build organizations rather than just buy services) into the equation. We also need to make government funding easier to come by and with less strings attached. And philanthropy needs to begin to emphasize equity and growth capital as opposed to program-only funding. The entire way that we fund the nonprofit sector has got to change.
Which brings me to an interesting letter that Hildy Gottlieb’s “Creating the Future” blog received recently. A fundraiser argues that focusing on a donor’s interests keeps a nonprofit from working on the larger problem they are trying to solve:
I work in fundraising, and I feel like we’re not only merely addressing the symptoms, but we’re actually exploiting the symptoms…To me, my organization exists to address the needs of the population we serve, not the needs of donors…we miss the big picture, the opportunity to solve core problems, when our primary focus is on making the donors feel good about giving…we neglect the big picture, the real solutions when we fundraise to the donors’ fears and egos…our community suffers when we fragment it by each individual’s personal motivation to give rather than unifying it to address the whole picture, and to perhaps finally solve those greater problems…the way we (and most other non-profits) fundraise might be counterproductive to actually creating solutions. So what can I do? How can I advocate for real, big-picture change when our fundraising is entrenched so deeply in its individualized, donor-centric philosophy?
This fundraiser doesn’t understand that nonprofit organizations exist within a market economy. A nonprofit’s work, their mission, must be in alignment with their core competencies and their revenue engine. A nonprofit cannot merely “exist to to address the needs of the population we serve, not the needs of donors.” A nonprofit organization exists to create change in the world, hopefully rectify a disequilibrium, by channeling resources (money, talent, expertise) into a proven theory of change. The resource piece is critical. Some in the nonprofit sector would, I think, argue that they should just be left alone to do their “good work” and not have to worry about fundraising (see my previous post about another fundraiser who complained about her self-interested donors) . But fundraising is an integral and critical element to the work nonprofits are doing. A nonprofit connects a community to its needs and harnesses the resources of that community to address, and hopefully solve, those needs. A nonprofit is part of its community and is funded by donors who make up that community.
Fundraising is not a dirty word. Fundraising, when done right, is about connecting those with resources to the results and impact an organization is creating. The impact should generate the revenue. When the mission of the organization is operationalized through the organization’s core competencies, revenue should follow. Mission, core competencies and revenue are in alignment.
That is not to say, however, that the system works perfectly. Far from it. As I’ve said many times, the nonprofit sector is sorely undercapitalized. We have got to find ways to get more and better capital into the sector, capital that follows results and impact and encourages smart replication of proven solutions. Philanthropy has to recognize this and change how they invest, accounting standards have to change in order to allow better capital to flow, IRS requirements have to change, many of the systems have to change. But in order for those structures to change the nonprofit sector has to understand that fundraising is absolutely critical to their work. It is not dirty, and it does not detract (if raised effectively) from a mission, but rather is part of the mission. We have got to start being smarter about how we finance the nonprofit sector. And to do that we have to recognize how critical aligning revenue with the mission and core competencies of an organization is.