Talking About Rethinking Nonprofit Fundraising

Last Thursday I was a guest on Michael Chatman’s The Giving Show, a weekly radio show about philanthropy. I was delighted to talk with Michael and his listeners about how nonprofits need to rethink the ways they bring money in the door. If you missed the show, you can still listen to the podcast here.

Michael and I talk about:

• How nonprofits need to finance, not fundraise for, their social impact
• The difference between revenue and capital, and why it’s such an important distinction for nonprofits
• When earned income is right for a nonprofit
• The opportunity the recession poses for nonprofits
• Why nonprofits must let go of the status quo
• How to educate donors to be organization builders
• Where innovation is happening in the nonprofit sector
• The convergence of the nonprofit, for-profit and government sectors
• Why overhead is NOT a dirty word

And much more. You can listen here.

Tags: build not buy, Convergence, financing not fundraising, Michael Chatman, nonprofit capacity building, nonprofit earned income, nonprofit fundraising, nonprofit overhead, Philanthropy, The Giving Show

A New Kind of Money for the Arts: An Interview with Rebecca Thomas

In this month’s Social Velocity blog interview, we’re talking with Rebecca Thomas. Rebecca Thomas is Vice President of Strategy & Innovation at the Nonprofit Finance Fund, a national leader in nonprofit, philanthropic and social enterprise finance. She has strategic responsibility for national initiatives, funder partnerships and new online and next-generation services that advance the organization’s profitability, visibility and impact.  Rebecca serves as a spokesperson and advocate for NFF regionally and nationally, and is the co-author of Case for Change Capital in the Arts and Financial Reporting Done Right, part of a larger publication series on capitalization in the arts.

You can read past interviews in our Social Innovation Interview Series here.

Nell: Your “change capital” project works with 10 arts organizations to help them raise capital to transform their organizations. Why did you decide to focus on arts organizations? What is unique about their need for change capital?

Rebecca: Through the Leading for the Future Initiative, NFF is investing $1 million of change capital in each of ten performing arts organizations that are adapting their programs, operations and finances in ways that contribute to long-term health and vibrancy (click here for the list of participating organizations). The source of this capital is the Doris Duke Charitable Foundation, which partnered with us in 2007 to develop the program as a way of responding to the tectonic shifts taking place in the artistic landscape. These shifts (in demographics, technology, and audience expectations, to name a few) were underway in the arts sector well before the economy went south and jeopardized arts philanthropy and public funding. Because business as usual is no longer an option for this sector, the need for change capital to fund creative re-alignment is particularly pronounced.

Arts sector aside, the majority of nonprofit organizations are mis-capitalized, meaning they lack enough of the right kinds of financial resources to adapt to changes taking place in their external and internal environments. The field often focuses on the lack of capital—certainly a reality for many organizations—but capital is equally often misplaced. Consider the organization with an aging facility and permanently restricted endowment but only two weeks of cash. It may not be undercapitalized but it is certainly mis-capitalized!

The arts sector has, more than many other sectors, suffered from an institutional mindset that equates success with the accumulation of fixed assets, often at the expense of liquidity and flexible capital. The result is that too many organizations are in a starvation cycle, unable to fully pay for their current programs and infrastructure, let alone to invest in meaningful and lasting change.

Nell: Do you have plans to expand to other types of nonprofit organizations with this project?

Rebecca: Our program, which runs through 2013, is limited to the 10 current participants, which were chosen through a multi-phased application and selection process. Given the nature of capital, programs like LFF are expensive and require one or more funders who are willing and able to commit sizable sums of money. The field is fortunate that the Doris Duke Charitable Foundation had the resources and vision to create this program with us. The principles of this program certainly apply to every sector, and we aim to do similar innovative initiatives with funders and nonprofits in other fields (for example, healthcare and charter schools) that we think would benefit from an investment of change capital.

We’ve found that education about the relationship among mission, capacity and financial health is often a precursor to the establishment of a capital initiative of this kind. NFF partners frequently with foundation program staff and nonprofit leaders to introduce the concepts of change capital, reliable revenue and liquid, adaptable balance sheets. From efforts like these have arisen deeper partnerships. For example, we have capital-investment programs with the Kresge and Andrew W Mellon Foundations that, respectively, provide financing for cash reserves and working capital. Change capital is just one of several forms of flexible capital that organizations need, for purposes ranging from risk management to rapid scale to stabilization.

Nell: As part of this project you are demonstrating how nonprofits can adjust their financial reporting to allow for a very necessary distinction between revenue and capital. Do you see nonprofits adopting this fairly significant change? What will it take to change accounting standards to recognize this distinction across the sector?

Rebecca: One of the things we learned early on in this work is that changing the financial reporting—to separate capital flows from recurring revenue—would not be an easy sell, for understandable reasons. Executive directors are reluctant to take a chance presenting new formats to donors who don’t understand the technique, and many board members aren’t inclined to re-learn nonprofit accounting principles. Moreover, NFF’s suggested methodology is not required by the Financial Accounting Standards Board, and auditors don’t always feel comfortable suggesting novel formats, even when they provide heightened clarity.

Notwithstanding these challenges, nonprofits that periodically raise and deploy capital—whether for investing in fixed assets, building a reserve, or implementing a change strategy—should take the straightforward step of separating capital from ongoing operating revenue and expenses, at least in managerial reporting. Financial Reporting Done Right explains in greater detail how this is done, but suffice it to say that when capital and revenue are conflated, an organization’s reports do not present a realistic view of operating performance. Unintentionally misleading information can lead to poor planning and decision making by nonprofit leaders, boards and funders.

Longer term, it will take aggressive education and advocacy efforts to convince nonprofit executives, board members and funders of the value of producing transparent financial reports and audits that reveal business model economics separate from capital infusions. Nonprofits will need to be convinced that they won’t be penalized for producing statements that may, at times, show temporary weakness in operating results during a change or growth period.

Nell: What can and should funders do to make change capital a reality for more nonprofit organizations?

Rebecca: Funders can start by encouraging their grantees’ efforts to adapt in the face of shifting environmental and internal realities. Nonprofits need to know that their supporters view these efforts as important, recognize the risks involved in attempting change, and are willing to provide flexible funding without judgment.

Also, funders can provide support for the development of a rigorous strategy and financial roadmap for change, both of which should be in place before a sizable investment of change capital is made. This planning should include the preparation of financial projections for the period of change and program and financial metrics (identified by the grantee!) to measure progress and guide course corrections. Because change takes time and can be costly, funders should consider aggregating their resources to support a grantees’ change strategy – and any funder “pool” should embrace one standard of reporting.

I want to stress that not every organization is a good candidate for change capital. Many are too financially fragile to invest in transformative efforts and first need capital to recover from previous setbacks. Some characteristics of “change capital-ready” organizations include: an enterprise perspective that sees the organization as more than the sum of its programs; a strong, stable and collaborative management team and board; a commitment to strategic planning, self-reflection, and continued learning; a culture of risk-taking and adaptation in the face of obstacles and new information; a track record of surplus performance and adequate liquidity; and a continuous focus on results and the use of data to inform decision making.

Nell: How open do you think philanthropists are to the idea of building versus buying services? Is the idea catching on for funders? What will it take to make the idea widespread?

Rebecca: The importance of role clarity can’t be understated. Both individual donors and institutional funders need to be clearer about whether they are investors in nonprofit enterprise health (“builders”), annual supporters of nonprofit services (“buyers”), or both. Among venture philanthropists and their ilk, this concept has gained much momentum in recent years. NFF Capital Partners collaborates with such investors in their efforts to scale high-performing nonprofit organizations. Through NFF’s grantmaker training programs, which reach a broader audience, we are also seeing a deeper understanding of this concept, although its application remains uneven. Ben Cameron, Program Director of the Arts at the Doris Duke Charitable Foundation also deserves a lot of credit for understanding and embracing this concept, and then stepping forward to be the learning example for an entire sector.

Time, education, and openness to change will be required for field-wide change. More stories about how nonprofits are successfully (and not so successfully) deploying capital to scale, change or restructure their operations would also help.

But let’s remember that not every philanthropist can or should be a builder. The field would benefit greatly from more buyers who provide (or partner with others to provide) unrestricted support that covers the full costs of program delivery, rather than limited program support or expansion at the margins.

Nell: What challenges are your change capital clients finding during this journey? Are they successfully raising change capital across the board, or are some faring better than others? Why?

Rebecca: Several of our clients have sought to raise change capital outside of this program as they seek to fully realize ambitions that carry a price tag larger than $1 million. A few have raised funds that serve a similar purpose without calling these dollars “change capital.” What we’ve heard from many of our clients is that foundations and boards either don’t have the resources to provide capital at this scale or don’t fully understand the concept. While grantmakers are increasingly embracing other improvements in practice –such as supporting reserve-building efforts, encouraging surplus management, and providing general operating support – few are yet providing flexible capital to be invested in implementing and sustaining enterprise-level change.

I want to make one last point. We set up the Leading for the Future program to enable our 10 participants to embrace innovation and experimentation as they adapt their business models in response to new challenges and opportunities. But programs like this one are not about change for change’s sake. Change capital is not the same as an “innovation grant.” The capital is meant to be deployed in ways that lead to more reliable net revenue (read: surpluses) to sustain each change strategy once the capital is fully spent.

And, at the end of the day, it’s worth remembering that financial stability is only a means to the end of greater nonprofit effectiveness and impact.

Tags: Andrew W Mellon Foundation, builders vs. buyers, Doris Duke Charitable Foundation, FASB, Kresge Foundation, nonprofit arts, nonprofit capacity building, nonprofit change capital, Nonprofit Finance Fund, nonprofit financial reporting, nonprofit fundraising, Rebecca Thomas

Raising Money to Grow On: Creating The Plan

In May I launched a new ongoing blog series that profiles Social Velocity’s work with Charlotte Chamber Music, a small performing arts organization that has a big vision, but lacks the capital to get there. Charlotte Chamber Music enlisted Social Velocity’s help last Spring to create a strategic plan and a capacity capital pitch to raise the money to execute on that plan. You can read the first post in this series that details what gave Charlotte Chamber Music the desire to raise capacity capital.

Today I describe how we developed a strategic plan for Charlotte Chamber Music, which is the very necessary first step in raising capacity capital.

But first, let’s review. Capacity capital (or “philanthropic equity”) is the money so many nonprofits desperately need. Capacity capital is dramatically different from the day-to-day operating revenue that nonprofits are always fundraising for. Capacity capital doesn’t fund delivery of nonprofit services (beds for a homeless shelter, new productions in an opera house, books for an after-school program). Rather, capacity capital builds the organizational infrastructure of the nonprofit (technology, system, administrative or fundraising staff, materials) that allows the organization to become more effective or grow. The vast majority of nonprofit organizations don’t have access to this kind of money because:

1. Funders are hesitant to fund “overhead,” and
2. Nonprofits don’t know how to make the case for why this kind of money is so critical to their ability to deliver impact.

But you cannot simply go out and ask for capacity capital. First, you must develop a compelling, inspiring, actionable and measurable plan for what you would do with the capacity capital. And this is where we started with Charlotte Chamber Music.

Over a period of almost 6 months, Elaine Spallone, the Charlotte Chamber Music Executive Director, and I went through the strategic planning process:

Analyze the Internal Situation: We developed SWOT (Strengths, Weaknesses, Opportunities, Threats)  and core competency analyses. We also created an organization logic model, which helps the organization articulate how they take community resources ($, people, artists) and turn them into social change. Then Elaine took those 3 elements and “shopped them around” to board members, funders, staff, and other constituents to refine what we had developed.

Analyze the External Environment: Elaine and her board and staff then researched their competitors (those providing similar services in the community) and consumers (funders and clients) in order to understand trends, how their core competencies related to community needs, and the competing forces working to address those needs.

Refine Vision and Mission: Several month prior to working with Social Velocity CM had created a new vision and mission statements. But they were very internally focused.  Now, with all of the above data, analysis and feedback in hand, Elaine, her staff and board reviewed their current vision and mission and refined them to better reflect their new understanding of the value CCM brings the Charlotte community. As Elaine observed:

Working with Nell on the mission and vision was critical. We as an organization had in fact addressed them several months earlier and created something we felt good about. But Nell helped us understand that we created something that talked about us as an organization, and not about the way we were going to change our community. It is a critical distinction. It made all the difference and paved the way for our “aha” moment.

So, their new and improved vision and mission statements became:

• New Vision: Charlotte becomes the cultural center of the Southeast through the vibrant engagement of its citizens, connected to their humanity, history and each other.
• New Mission: To stimulate, animate and connect Carolinians to each other and their region through the presentation of curated chamber music performances.

Develop Goals and Objectives: With their new vision and mission statements as the guiding elements and filters of the strategic plan, CCM developed a strategic direction. What was really interesting about defining their strategic direction is that the final direction was much different than what they had thought it would be. Before our strategic planning process started, Elaine and her board thought their ultimate goal was “to become a top tier arts organization,” in essence to mirror the largest, most successful, most well-funded performing arts organizations in the city.

However, what they realized in a key “a-ha” moment was that that direction didn’t fit with their core competencies or their place in the external environment. There are countless arts organizations vying to be “top tier.” But CCM’s strength is it’s scrappiness–it’s ability to easily adapt to the changing environment and experiment because they don’t have an expensive staff or infrastructure that needs to be slowly moved. Thus, CCM came up with this strategic direction:

By 2020, through an expansion of venues and channels, Charlotte Chamber Music becomes a new model for engaging people in broader and deeper ways with the cultural arts community

CCM made a very strategic decision: they want to be a new, innovative model that connects people in their community through the cultural arts. They want to draw on their assets of ingenuity, flexibility, innovation and the inherent qualities in chamber music that are so good at connecting people to each other in its intimacy, engagement and accessibility. With their new strategic direction in place, they developed 5 broad goals, and the objectives to get to each of them, for the next 3 years.

With this exciting new strategic plan in hand, Elaine remarked:

A year ago, before we met Social Velocity, we held an informal board and staff retreat. At one point, the board chair called on each board member to share what they felt was the most critical issue we faced as an organization. Overwhelmingly the response was: “What are the measurements for our mission and vision, what are the goals?” and “No clear understanding of where we are going”. I am excited a year later to know all these questions have been answered, and we have a completely new  trajectory in which we have set ourselves upon!

CCM’s new strategic plan has begun to dramatically shift the culture of the organization. CCM now has an exciting, compelling long-term vision (and a detailed plan to execute toward that vision) that is getting staff, board and funders excited for the future.

In the next post in this series, we’ll talk about how we created the day-to-day operational plan to execute on this strategic direction, the 3-year budget to get there, and a system for monitoring the plan going forward.

Photo Credit: laura padgett

Tags: Charlotte Chamber Music, nonprofit capacity building, nonprofit case study, nonprofit growth capital, nonprofit strategic plan, nonprofit vision and mission, philanthropic equity

Financing Not Fundraising: Find Money for Building Capacity

Part 6 of our ongoing blog series, Financing Not Fundraising, demonstrates the critical importance of money for building nonprofit capacity and describes how to find it.

There must be a recognition in the nonprofit sector, and among the philanthropy that funds it, that nonprofits need money to support not only their direct services, but also the infrastructure (technology, systems, evaluation, training, fundraising) of the organization. Nonprofits will only get better at creating social change if they have a strong and effective organization behind their work.

In case you’re new to this series, our Financing Not Fundraising blog series seeks to address the reality that fundraising in the nonprofit sector is broken.  In fact, traditional fundraising is holding the sector back by keeping nonprofits in the starvation cycle of trying to do more and more with less and less. The nonprofit sector needs a financing strategy, not a fundraising one.  That means that nonprofits have to break out of the narrow view that traditional FUNDRAISING (individual donor appeals, events, foundation grants) will completely fund all of their activities.  Instead, nonprofits must work to create a broader approach to securing the overall FINANCING necessary to create social change. You can read the entire series here.

George Overholser, from the Nonprofit Finance Fund, is the pioneer of this critical distinction in the nonprofit sector between money to BUY services and money to BUILD organizations.  The idea is simple. There are two types of dollars in the nonprofit sector. Those that BUY nonprofit direct services (dollars for more beds for the homeless, more hours of ESL instruction) and those that BUILD a stronger nonprofit organization (dollars for technology, systems, fundraising staff, etc).

A nonprofit that wants to get out of the vicious fundraising cycle needs to make a commitment to building their organization and finding, and convincing, donors to fund that building effort.

Let’s take fundraising infrastructure for example. Most nonprofit organizations lack sufficient infrastructure to bring enough money in the door.  They don’t have enough money to hire experienced fundraisers, buy efficient and effective technology to track donors, create compelling messaging and collateral, train their board in fundraising, and so on.  But with dollars to invest in staff, technology, planning and expertise, the organization could transform their fundraising function into one that raises many more times the amount of money that they currently do.

So how does a nonprofit organization find money to build their organization? Here are the steps:

1. Create a Plan. Develop a road map for the future that includes a budget for the real costs of the real infrastructure and capacity you need to get there.




2. Determine the Ask. Split the overall cost for these infrastructure elements into reasonable ask amounts given the relative capacity of your donors.




3. Create the Pitch. Create a compelling capacity funding pitch that connects these infrastructure elements to an increase in your ability to create impact in the community.  A more seasoned development director means that you can raise more money, more effectively, more quickly. With that additional revenue, your services can reach more people.




4. Analyze your Donors. Look for the individuals, foundations, and corporations who love what your organization does, have the ability to give at the ask levels you determined in #2, and could be made to understand the argument that money to build can allow your organization to do so much more.




5. Explore Alternative Funding. Find new ways to fund capacity building. For example, PRIs, or program-related investments, (essentially loans to nonprofits) could be used to build fundraising  infrastructure because once a nonprofit’s capacity to raise money has been increased, the loan could be paid back out of the additional revenue. Explore creative options like this with funders.




6. Make the Ask. Present your plan and pitch to the donors you have identified and educate them about the critical importance of capacity capital.

Money to build nonprofit organizations isn’t just lying around. Indeed, most donors claim that they aren’t interested in funding anything beyond direct services. But with a compelling argument for how money to build an organization can result in much greater impact, many more donors can become builders.

If you want to learn more about how to apply the concepts of Financing Not Fundraising to your nonprofit, check out our Financing Not Fundraising Webinar Series.

To download the 27-page Financing Not Fundraising e-book, click here.

Photo Credit: y_katsuuu

Tags: buy vs. build nonprofits, financing not fundraising, fundraising infrastructure, George Overholser, increasing fundraising, making the ask, nonprofit capacity building, Nonprofit Finance Fund, nonprofit fundraising, PRIs

A More Transformative Corporate Philanthropy

Deloitte, the consulting firm, just released a new series of documentaries about the nonprofits they support. Two years ago they made a three-year commitment of $50 million in pro bono nonprofit work. They’ve already completed 200 projects, with many more in the pipeline. Their focus is taking the specific skills their employees have and applying them to capacity and efficiency constraints in the nonprofit sector. This approach is not new. New Profit, the nonprofit venture philanthropy fund, has enjoyed a 10+ year partnership with Monitor Group, who provides signficant pro bono consulting to the nonprofits in New Profit’s portfolio, which will total a $50 million commitment by 2012.

To promote their work, but also to encourage other companies to think about how they could do similar skills-based volunteering, Deloitte has made a series of short documentaries about their nonprofit projects. As Evan Hochberg, national director of community involvement for Deloitte said:

We made these films primarily to help our own people recognize just how much they have to offer, and to encourage others in the business community to embrace skills-based volunteerism. [We are] committed to helping advance the field of community involvement by focusing on volunteerism that achieves very tangible outcomes, and this film series is an opportunity for us to spark dialogue that makes people think about the value of their professional skills in a different way.

Sure it’s a public relations campaign, but I also think there is something interesting in the philanthropic commitment Deloitte has made and in the films they have created. The film below is about College Summit, a great organization that encourages high school students, who never viewed themselves as college material, to apply, attend and graduate from college. Deloitte has done a number of pro bono projects with them and has made a significant commitment to this organization. Take a look at the video that showcases a really great nonprofit and an interesting way for a corporation to make a much deeper, and more transformative commitment, than just writing a check.

Tags: College Summit, corporate giving, corporate philanthropy, Deloitte, Monitor Group, New Profit, nonprofit capacity building, pro bono consulting, skills-based volunteering, Venture Philanthropy

5 Nonprofit Trends to Watch in 2011

The end of 2010 is upon us and perhaps this difficult economy is waning as well. It appears that the nonprofit sector may have brighter times ahead. Indeed, the philanthropy that funds it is arguably on the rebound. I’m excited to see what the new year will bring for a sector that has had a very difficult couple of years, but has adapted and innovated despite the challenges.

Here is what I think (hope?) we will see more of in the nonprofit sector in the coming year:

1. More Confident Funding Strategies: A more confident nonprofit sector will emerge that stops chasing funding, any funding. Instead nonprofits will strive to pick a path and raise money around that path. In so doing nonprofits will increasingly learn to “fire bad donors”, as David Henderson encouraged, and instead strategically go after the funding that integrates well with their long term vision and business model.




2. Diversified Funding Sources: Along with more confident funding strategies will come more diversification of funding. This diversification will not be just for diversity sake, but because of a growing realization that putting the majority of your funding eggs in one basket (foundation grants, for example) is unwise and terribly risky, particularly given this economic climate. Nonprofits will increasingly become more strategic and savvy about their overall financing structure and in so doing will strengthen and diversify accordingly.




3. Greater Investment in Organizations: Nonprofit boards, staff and donors will increasingly recognize that “overhead,” or administrative costs, are absolutely necessary to successful program execution. They will increasingly invest in their organizations (staff, technology, training, systems, space) in order to strengthen and grow their impact. The revamp of nonprofit rating systems, like Charity Navigator, that are moving away from penalizing organizations that spend on “overhead” will help move this process along.




4. Larger Focus on Impact: Nonprofits will increasingly focus on the social change they are working towards, as opposed to the service they are providing. Although it is true that many nonprofits exist to simply provide services to our most needy fellow human beings, there will be an growing demand from funders to articulate how even those services fit into a larger theory of change. It will no longer be enough to be a charity for charity sake, but rather nonprofits must analyze and articulate how their services fit into a larger solution to the problems they exist to address.




5. More Strategic Use of Social Media: More nonprofits will make bigger, better, more strategic forays into the world of social media, not just because everyone is telling them to do it, but rather because of a realization that in order to get more change done, nonprofits must build support, partnerships, alliances, advocates from outside their own walls. Social media is a cheap, effective and available way for organizations to exponentially expand their force, resources, ability to make change happen. If used effectively, social media can be a tremendous gift to the nonprofit sector.

I think we will start to turn a corner in 2011. The recession has been a wake up call for the nonprofit sector. Those organizations that have recognized the game-changing nature of this economic downturn will emerge stronger, more confident, more capable of creating change.

Photo Credit: ChazWags

Tags: nonprofit capacity building, nonprofit fundraising, nonprofit social media, nonprofit trends 2011, philanthropy 2011, recession and nonprofits

The Controversy: Small Nonprofits and Growth Capital

The issue of whether small and medium size nonprofits can or should raise growth capital seems to be a controversial one. Steve Goldberg, author of Billions of Drops in Millions of Buckets: Why Philanthropy Doesn’t Advance Social Progress, speaker, and consultant to Charity Navigator, New Profit and other leading entities in the nonprofit and philanthropic sectors, took issue with my post Can’t Small Nonprofits Raise Capital Too? He believes that capacity capital, not growth capital, is right for smaller nonprofits. I, however, believe that capacity capital isn’t enough.

Steve argued:

Small nonprofits are no less deserving than larger ones, but only the larger ones can undertake the kinds of planning and demonstrate the capacity to make effective use of funding designed to enable organizations to grow by factors of 2, 3 or more over the course of several years.

Steve goes on to argue that capacity capital, not growth capital, is the way to go for smaller nonprofit organizations and that we need to expand the availability of capacity capital in the nonprofit market. While I definitely agree with that last statement, I still believe that small and medium nonprofits that have a great solution and a vision for growth should have access to growth capital to get them there, as I responded:

If there is a small organization that is providing a powerful and unique solution, shouldn’t they be able to expand that solution, not through incremental growth, which is the nonprofit norm, but by factoral growth, which growth capital allows?…Small nonprofits who have a great solution and a vision for growth don’t have the luxury of sitting around waiting for the nonprofit capital market to evolve to a place where the bottom 80% of nonprofits have access to growth capital. Second, creating a growth capital campaign doesn’t have to be prohibitively expensive for smaller nonprofits. Sure they can’t afford the larger fees that Nonprofit Finance Fund might charge, but they also don’t need that kind of money to be able to grow.

You can read the whole debate here, or on Steve’s blog here.

I believe this debate is really important because it is not enough to help the largest, most successful nonprofits to reach scale. There are countless smaller nonprofit organizations whose solutions are just as critical, but lack the expertise and capital to bring them to scale. We can’t just have a top down approach. To truly transform the nonprofit capital market we have to create access to growth and capacity capital throughout the sector, wherever great ideas and strong leaders exist. Because, really, do we have time for the trickle down approach?

Photo Credit: Michael

Tags: Billions of Drops in Millions of Buckets, Charity Navigator, New Profit, nonprofit capacity building, nonprofit capital market, nonprofit growth capital, Philanthropy, Steve Goldberg

Bringing Small Nonprofits to Scale

English at Work could be a poster child for social innovation in the nonprofit sector. An Echoing Green fellow, founder Maile Broccoli-Hickey is a social entrepreneur, but like most of them, she doesn’t even know it. Her tireless work to build an organization that can effectively and efficiently transform the English language skills of hotel and restaurant workers is a model to other nonprofits who have a great solution, but lack the capacity and strategy to grow it.

Maile started English at Work in 2004 when she was a waitress in an Austin, Texas restaurant. She realized that her co-workers needed customized English language instruction to ensure their and their employers’ success. Why not bring customized English classes to the workplace in a focused and systematic way? These courses, paid for largely by restaurant and hotel owners who see the value in having a more fluent workforce, get dramatic results. English at Work creates greater proficiency and fluency gains in a shorter amount than their closest ESL instruction rivals. The program works so well because it is a win-win. Students become more fluent and successful at work, paving the way for promotions and a way out of poverty. Employers get more productive, loyal and customer-service oriented employees.

But like most nonprofit organizations hit hard by the recession, a year ago English at Work was struggling to make ends meet. Although employers paid for the classes, those fees didn’t cover all organization costs. The additional necessary revenue came from individual donations and foundation grants, both hit hard by the recession. At the same time Maile knew that the program had the potential to transform the lives of so many more people. Despite financial troubles, she had big visions for growth.

With funding from a couple of key donors who understood the value of investing in infrastructure, capacity and planning, Maile enlisted Social Velocity to determine what was holding the organization back and to create a comprehensive revenue plan to get the organization on firm financial footing. Over the first two months of the engagement we interviewed board and staff members and reviewed all organization policies, by-laws, finances, collateral, plans and documents. We then created a detailed analysis of each area of the organization (strategy, program, finances, marketing, staffing, board, etc.) with recommendations in each area for how the organization could be more effective. Once completed, we worked closely with Maile over the next 3 months to create a detailed plan for increasing how money flowed to the organization from individuals, foundations, corporations and earned revenue. Finally, we trained English at Work staff and board on raising money.

Now that English at Work is on much firmer financial ground, they are ready to plan for growth, and so we are in the midst of creating a strategic plan for significant growth of the program. The hope is to take this great solution and bring it to scale.

English at Work is a great example of the many little-known nonprofit organizations that toil away under the radar. They may have a fabulous model for creating real change, but lack the infrastructure, capacity and strategy to grow their impact to scale. Although the Social Innovation Fund and other venture philanthropy funds that exist to bring solutions to scale are great, no ecosystem exists for the smaller nonprofits that may have equally important solutions. But there is a way. By combining a few key donors who understand the bigger picture, a smart strategy for growth and sustainability, and a determination to execute effectively, even the smallest nonprofits with a great solution and a vision for growth can get there.

Photo Credit: English at Work

Tags: Echoing Green, English at Work, Maile Broccoli-Hickey, nonprofit capacity building, nonprofit growth strategy, Social Innovation Fund, venture philanthropy funds