nonprofit financial challenges
There was a really interesting article in the Chronicle of Philanthropy recently about a Los Angeles nonprofit for aging Hollywood actors that was in danger of closing its doors but is now raising hundreds of millions of dollars. It’s a rags to riches story that demonstrates how nonprofit leaders who embrace change when change is necessary can completely transform an organization.
Arguably the Motion Picture & Television Fund (MPTF) is not your average nonprofit organization. Set up in the 1920s by Charlie Chaplin, Douglas Fairbanks Sr., and Mary Pickford it asked actors to donate spare change to help fellow actors down on their luck. MPTF later expanded to become a $100 million organization that serves 150,000 needy actors with healthcare, housing, and retirement services. And although MPTF enjoys a budget with a few more zeros than the average nonprofit, their approach to change can serve as a model for other nonprofits.
In the early 2000s MPTF lost its way. Financial hardship forced the organization to consider closing one of its retirement centers which drew the ire of celebrities like George Clooney. But unlike other nonprofits that lose their way and have to eventually close, Hull House being the most recent and troubling example, MPTF turned things around.
Here’s what the MPTF story teaches nonprofits about embracing the challenge of change:
- Remove What Stands In Your Way
In order to survive it’s critical that nonprofits do something not easy for the sector: recognize and address the obstacle. Whether it’s an unmovable executive director, a deficient board, a broken financial model, or a distracting funder, a nonprofit must face the challenge head on. MPTF realized that they needed new leadership and replaced the fund’s president in 2010. Hull House’s board, however, refused to address changing the organization’s financial model despite seeing glaring financial issues for several years.
- Force Honest Conversations
When George Clooney voiced his dismay at MPTF’s decisions, new MPTF president Bob Beitcher approached Clooney and listened to his concerns. Beitcher explained that they were facing closure of the center because of financial dire straits. Over time he turned Clooney’s concerns into passion for the organization and eventually convinced him to c0-chair MPTF’s capital campaign. Hull House board and staff, on the other hand, kept conversation light. The staff sugar-coated financial reports and the board failed to ask hard questions. It is essential that nonprofits tackle difficult conversations in order to emerge stronger.
- Create a Financial Runway
MPTF had a practice of keeping several months of operating reserves on hand. Hull House, by contrast, lived on the edge — to the point of holding negative $2.3 million in net assets in June of 2007, long before the recession really hit. So when it did, they were in big trouble. Nonprofits (and funders!) must get over the taboo against operating reserves. You simply cannot survive, let alone create social change, if you don’t have the financial runway to do so.
- Connect Mission to Money
MPTF now enjoys a large donor base, but that wasn’t always the case. In order to get there they articulated to specific potential donors why their work was so critical and why they should get involved. They are currently raising millions of dollars because they have connected the dots for a specific target audience between their need for investment and the impact they are creating. Nonprofits need to articulate what they are trying to change and then find donors for whom that change is attractive.
The closure of such a stalwart and venerated nonprofit institution like Hull House should have been a wake up call for the nonprofit sector. If it could happen to Hull House, it could happen to any organization. But it doesn’t have to. Instead of blaming the recession, the board, fundraising, or anything else, nonprofits need to embrace the challenge of change.
If you need help addressing a challenge facing your nonprofit, let me know.
Photo Credit: Mary Pickford, 1924 from fotopedia