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nonprofit infrastructure

Nonprofit Capacity Building Works: An Interview with Kathy Reich

In this month’s Social Velocity interview, I’m talking with Kathy Reich. Kathy leads the Ford Foundation’s BUILD initiative both in the United States and in 10 global regions. BUILD is an essential part of the foundation’s strategy to reduce inequality, a strategy arising from the conviction that healthy civil society organizations are essential to driving and sustaining just, inclusive societies. To that end, Kathy guides Ford’s efforts to implement sector-leading approaches to supporting the vitality and effectiveness of institutions and networks that serve as pillars of broader social movements.

Before joining Ford in 2016, Kathy was director of organizational effectiveness and philanthropy at the David and Lucile Packard Foundation, where she led a cross-cutting program to help grantees around the world strengthen their strategy, leadership and impact.

Kathy has long been a friend of the Social Velocity blog. You can read my interview with Kathy when she was at the Packard Foundation here and a guest blog post she wrote for the blog here.

You can also read interviews with other social changemakers here.

Nell:  You recently moved from the Packard Foundation to the Ford Foundation in order to launch their BUILD initiative, which is all about strengthening organizations. What are your goals with this new initiative and what successes have you seen so far? And what are you finding in terms of the areas where nonprofits need most help?

Kathy: The Ford Foundation has two big goals in mind for BUILD. First, we want to foster a measurably stronger, more powerful set of civil society organizations and networks working to address inequality around the world. Second, we aim to build understanding within the Ford Foundation, and ultimately throughout the field of philanthropy, about how strengthening key institutions can advance social justice.

The foundation has committed $1 billion over five years to BUILD because we believe that the fight against inequality needs resilient, durable, and fortified civil society institutions. Individuals and ideas also are critical, but the key role of institutions as drivers of sustained social change is a core, and sometimes overlooked, aspect of social justice work.

Each of the BUILD grantee organizations and networks will receive five years of support, at levels higher than what they have historically received from the Ford Foundation. Much of this support will be as flexible as we can legally make it; most grants will include generous general support. The remainder of each BUILD grant will provide support for nonprofit organizations and networks to strengthen their strategies, leadership, management, and finances. Each BUILD grantee will develop and then implement its own institutional strengthening plan. Although Ford Foundation staff will consult on drafts of these plans, the grantee will be “in the driver’s seat” in determining their institutional strengthening priorities and how best to address them.

So far we’ve made about 90 BUILD grants, and honestly it’s a bit early to say how well they are working. We do know where organizations are planning to spend the money. The vast majority of BUILD grantees, 79 percent, are choosing to strengthen their core operations, investing in areas such as financial management, fundraising, communications, evaluation, and HR. About two-thirds also are investing in strengthening capacities critical to social justice work, such as legal, research, network building, and advocacy. Close to half are investing in strengthening their strategic clarity and coherence, 36 percent are investing in leadership development and governance, and 32 percent are choosing to deepen their organizational commitments to diversity, equity, and inclusion.

It’s important to note that BUILD is not the Ford Foundation’s only investment in strengthening nonprofit institutions. BUILD is part of FordForward, the Ford Foundation’s multi-pronged effort to make philanthropy part of the solution to inequality in a deep and lasting sense. In addition to BUILD, two other aspects of FordForward focus on strengthening nonprofits. The foundation is giving more general support grants across all program areas, with a goal of making general support our default type of grant whenever possible. We also are increasing overhead rates on project grants to a minimum of 20 percent, to more adequately address the indirect costs of executing projects and programs.

Nell: This is a pretty innovative approach to capacity building, how do you plan to share what you learn with other funders and with the sector overall?

Kathy: We’re planning a robust evaluation and learning strategy, although we’re really just getting started. Our hope is to share some early findings by year’s end. We’ll be focusing on three sets of key questions throughout the five-year initiative:

  • Do BUILD grants work? Do the organizations and networks that receive this funding become stronger and more durable over time? And if so, what if any impact does that have on the organization’s effectiveness?
  • If the BUILD approach works, what about it works? Is it the general operating support, or a specific kind of organizational strengthening, or something else?
  • Have we changed the way we do business at Ford, moving away from one-year project grants in favor of larger, more flexible grants?

Along with our evaluation and learning plan, we’re also developing a communications strategy to share what we learn with the field and engage in dialogue with others. We’ll be publishing evaluation results, speaking at conferences, and making active use of social media.

Nell: Both the Ford Foundation and the Packard Foundation are rare funders in that they are very committed to creating strong nonprofit organizations through heavy investment in capacity building. Do you think philanthropic and government funders are starting to follow your lead? Or what will it take to make that happen?

Kathy: Well, we certainly hope they are! It’s important to acknowledge that capacity building grantmaking is not new; in launching BUILD, we’ve learned from and appreciate the work of leaders in this field like the David and Lucile Packard Foundation, as well as the William and Flora Hewlett Foundation and the Evelyn and Walter Haas Jr. Foundation.

Over time, we hope that the ranks of capacity building funders will grow. We hope that BUILD will influence other donors by contributing to the evidence base that nonprofit capacity building works—that stronger, more durable, and more resilient organizations and networks are more effective at achieving their missions.

We also hope to contribute to the evidence base about what kinds of capacity building work best for organizations and networks of different types and sizes, working on different issues in diverse geographies. That’s a tall order, but one of the great things about being a global funder and being able to invest significant resources in BUILD is that we’re able to try this grantmaking approach with a broad range of institutions.

Nell: The Ford Foundation made a very public move two years ago to focus their efforts on fighting inequality. But that goal has arguably become harder given the political winds. How does a foundation like Ford navigate achievement of their desired impact in a potentially more difficult external environment?

Kathy: The Ford Foundation has worked in the U.S. and around the world for more than 70 years, and we’ve seen a lot of upheaval during that time. We’re acutely aware of the challenges facing our work, but we’re moving ahead with optimism and with what my boss Darren Walker calls “radical hope.”

BUILD is a big part of that hope. I believe strongly that in uncertain times, a BUILD approach to grantmaking is one of the smartest choices a foundation can make. By giving our grantees multi-year general operating support, we are giving them the resources and the flexibility to pivot their work quickly in the face of new realities. By also giving them thoughtful and flexible institutional strengthening support, we are enabling them to invest in their own leadership, strategy, management and operations at a time when they have to be at the top of their games.

Photo Credit: Ford Foundation

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The Role of the Independent Sector: An Interview with Dan Cardinali

Dan CardinaliIn this month’s Social Velocity interview I’m talking with Dan Cardinali, the new president and CEO of Independent Sector, a national membership organization that brings together nonprofits, foundations, and corporations to advance the common good.

Prior to leading Independent Sector, Dan was the president of Communities In Schools, the nation’s largest dropout prevention organization, with operations in 26 states and the District of Columbia. While there he led efforts to develop and advance an evidence-based model of integrated student service provision and launched a national growth strategy to increase the organization’s impact on improving public education. He is a 2007 Annie E. Casey Children and Families Fellow, serves as a trustee for America’s Promise, and is on the board of Child Trends. In May 2011 he was appointed by President Barack Obama to the Presidential Advisory Commission on Educational Excellence for Hispanics. He is also a member of the Leap Ambassador Community of nonprofit and philanthropic leaders.

You can read interviews with other social change leaders in the Social Velocity interview series here.

Nell: You have just become the new head of Independent Sector (IS). In a diverse and growing nonprofit sector that includes many ecosystem organizations like Independent Sector, what do you think the value proposition is for IS? What is the unique role that IS can and should be playing?

Dan: We were founded by John Gardner who was of the sector and believed deeply in the importance of the sector. It was distinct from government and the for-profit sector and uniquely positioned to support the American project. It played a unique and critical role to sustain American democracy and was also a source of profound community co-creation, rising up to provide really good solutions where there were problems and innovating to help communities evolve and grow, and supporting culture and defending the environment. At a time when civil society is shrinking around the world, the independent sector has an even more important role to play.

As for our capital I, capital S organization’s value proposition, we are unique in the country in spanning the sector. We hold the entirety of the grant seeking and grant making organizations and that purview we want to steward very carefully and thoughtfully. We want to be hyper disciplined in a world where there are a number of infrastructure organizations doing really good work, not to duplicate but align and leverage through collaboration. But there are still holes in our estimation in the landscape of what the sector needs. So we are going to remain disciplined in our role as an organization that is sector spanning and national in scope, grounded deeply in community, to determine what we do to add value to the original vision for a more robust social sector.

Nell: Independent Sector can potentially play a unique role because it stands at the intersection between nonprofits and those who fund nonprofits. Is there a bigger role for IS to play in bringing those two sides closer together, breaking down the power dynamic and helping more money to flow to effective organizations? If so what does that look like?

Dan: We are playing a role and part of it is modeling that these are two sides of the same coin – grant seekers can’t exist without grant makers and grant makers can’t get along without grant seekers. It would be naïve to pretend that those with financial resources don’t have an advantage, yet I equally think in the social sector that grant seekers at times abdicate the power that comes with knowing what they know to be effective and owning that. The opportunity exists to partner with grant makers, not just in the transactional sense, but in the co-creation of solutions to ensure that culture flourishes and that the environment is protected and flourishes, and that problems are solved.

In the Threads conversations IS convened with more than 80 partners across the U.S., concerns about the power dynamic were voiced at every stop. In response, IS and member organizations and experts are cooperating to model the best strategies for working together. We need to refocus the relationship on bringing the needed human, financial, and intellectual resources to bear, calling all people of good will to a higher purpose, rather than organizational sustainability.

Nell: Recently 22 nonprofit infrastructure organizations (like GuideStar, Grantmakers for Effective Organizations, etc.) wrote a public letter urging foundations to invest more in infrastructure organizations. Independent Sector was not one of the 22 organizations, but what are your thoughts on their argument and how does, or should, Independent Sector fit in?

Dan: What was encouraging about that letter from very reputable organizations is that it opened up a conversation. The philanthropic community has a role, an obligation, to support effective infrastructure organizations, and we have a responsibility to be effective. But IS will not be in a position to request that support without a discussion of what needs doing, how well we all are doing it, and how can we better leverage each other’s work. I am passionate about this topic, and I appreciate that this letter advanced the conversation. I expect IS will partner closely in the future conversations.

Nell: You come to IS after many years at the helm of Communities In Schools, which moved during your tenure to a very evidence-based approach. Do you see IS moving itself and/or helping the sector as a whole to move toward a more evidenced-based approach?

Dan: What we did at CIS was to create a virtuous circle between our programs and practice and our data and research to continually generate insights, make course corrections as needed, and build on success. This is how we roll. IS has been applying this approach for a long time. In the Threads conversations, we engaged practitioners using a credible analytic process. We listened to them, without presupposing what they would say, and we applied social science to produce a document, the Threads report. We then co-created a strategic framework that engages members and develops our partnership, just as we do with the IS conference coming up in November.

So the evidence-based approach is alive and well. Going forward we can look for ways to accelerate its use across the organization, through a thoughtful integration of technology and 21st century methods of engagement.

Photo Credit: Independent Sector

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10 Great Social Innovation Reads: May 2016

social change

May offered some interesting insights into the world of social change. From a plea by nonprofit infrastructure groups for more funding, to some criticisms of philanthropy’s unwillingness to invest in rural economies or provide a realistic runway to nonprofits, to digital’s impact on journalism, to the evolving sharing economy, to a call for more nonprofit board resignations, to a way to break the nonprofit starvation cycle, there was a lot to read.

Below are my picks of the 10 best reads in the world of social change in May. But you can always follow me on Twitter (@nedgington) for a longer list.

And if you are interested in past months’ 10 Great Reads lists, go here.

  1. Perhaps the biggest news of the month was the letter written by 22 groups, which provide support to the entire sector (like the National Council of Nonprofits, the Nonprofit Finance Fund, and GuideStar), asking foundations to provide more funding for the nonprofit ecosystem. GuideStar CEO Jacob Harold (here) and National Council of Nonprofits CEO Tim Delaney (here and here) explain why this issue is so important.  But Pablo Eisenberg disagrees.

  2. National Committee for Responsive Philanthropy Executive Director Aaron Dorfman takes philanthropy to task for not investing enough in rural communities, where change is needed most. As he puts it: “The philanthropic sector continues to neglect rural communities. A changing national economy, entrenched racial inequity and foundations’ reliance on a strict interpretation of strategic philanthropy has meant philanthropic resources for rural communities are few and far between, just when the opportunities for change are most urgent. This has to change if we want to see progress on the issues we all care about.”

  3. Piling on to the criticism of philanthropy, Laurie Michaels and Maya Winkelstein from Open Road Alliance, encourage their fellow philanthropists to help nonprofits deal with risk and disruption. As they put it: “Most grant budgets are designed with zero cushion even when the nonprofit is working in tough conditions that can turn the simplest obstacle into an unmanageable issue…any unexpected but inevitable change or deviation in the budget is potentially catastrophic. The nonprofit’s inability to fluidly adapt the budget to manage these roadblocks, however minor, can jeopardize even the largest of undertakings…Risks alone are threatening, but when the concept of risk goes unacknowledged, undiscussed, and unaddressed, those risks are more likely to become realities. All this adds up to lower impact, turning manageable events into liabilities.”

  4. Maybe female philanthropists can turn the tide. The Lilly Family School of Philanthropy released some fascinating new research about how women are changing philanthropy. And Megan O’Neil, writing in The Chronicle of Philanthropy, explains how nonprofits must adapt in order to tap into this growing philanthropic force.

  5. Journalism is changing rapidly, due in part to the growth of digital. Research shows that different social media platforms connect people to news in different ways, and long-form journalism is seeing a resurgence thanks to mobile.

  6. And it’s not just journalism that digital is changing. The Nonprofit Tech for Good blog offers 16 Must-Know Stats About Online Fundraising and Social Media and 5 Ways the Internet of Things Will Transform Fundraising.

  7. The growth of the “sharing economy”, where consumers rent or borrow goods and services rather than buy them, has huge implications for the social change sector. Pew Research outlines 8 key findings about how Americans relate to the sharing economy and interviews NYU professor Arun Sundararajan about how the sharing economy is evolving.

  8. Nonprofit Law blogger Gene Takagi pulls no punches in offering 12 Reasons Why You Should Gracefully Resign from a Nonprofit Board. Yes, yes, yes, to more accountability, honest conversations, and clear expectations on nonprofit boards.

  9. Writing in the Stanford Social Innovation Review,  Jeri Eckhart-Queenan, Michael Etzel, and Sridhar Prasad discuss the findings of a new Bridgespan Group study that analyzed the indirect costs of 20 different nonprofit organizations. What they found, not surprisingly, is that indirect rates vary greatly depending on the business model and industry of a given organization (just as it does in the for-profit sector).  The authors argue that if more nonprofits understand and report their true costs, nonprofits could break the starvation cycle: “It’s clear that philanthropy’s prevailing 15 percent indirect cost reimbursement policy does not take into account the wide variation in costs from segment to segment. Doing so would have far-reaching effects on philanthropy and grantees. If nonprofits committed to understanding their true cost of operations and funders shifted to paying grantees what it takes to get the job done, the starvation cycle would end.”

  10. A nonprofit dashboard is a good way to monitor and report on a nonprofit’s effectiveness and sustainability over time. Hilda Polanco, CEO of FMA, explains how to create a great one.

Photo Credit: Omarfaruquepro

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New Guide: Creating a Capacity Capital Campaign

Capacity CapitalThere is a new kind of money that every nonprofit leader should understand and many should go out and raise. Capacity capital is the money that nonprofits so desperately need to build strong, effective, sustainable organizations that can create more social change. It is a one-time investment of money to add new technology, an evaluation system, a new revenue function – ultimately money to grow or strengthen the organization.

Today I’m excited to release our newest step-by-step guide Launch a Capacity Capital Campaign which shows how to take the ideas in the Power of Capacity Capital book to create your own capacity capital campaign. This new guide shows you step-by-step how to plan for and launch a campaign to raise organization-building dollars. (You can see the other step-by-step guides, e-books, and other tools on the tools page of the website here).

A nonprofit could use capacity capital in many ways, for example to:

  • Plan and execute a program evaluation
  • Plan and launch an earned income stream
  • Create a strategic financing plan
  • Hire a seasoned Development Director, or other revenue-generating staff
  • Purchase a new donor database
  • Improve program service delivery
  • Upgrade website, email marketing, and/or social media efforts
  • Launch a major gifts campaign

If those organization-building elements were in place, a nonprofit could start:

  • Doing a better job of delivering their program
  • Raising more revenue annually through a more effective fundraising function
  • Securing more external support because they can prove program results

But raising capacity capital is not like traditional fundraising. It involves determining how much capacity capital you need, creating a compelling pitch, deciding which prospective funders to approach, and educating those prospects about the power of capacity capital.

The Launch a Capacity Capital Step-by-Step Guide will show you how.

This guide is organized into sections. Each section will require you to do some thinking, writing and planning. As you work your way through this guide you will be creating your capacity capital campaign.

Sections:

  1. Create a Capacity Building Plan
  2. Determine a Capacity Capital Dollar Goal
  3. Break the Goal into Investment Levels
  4. Develop a Capacity Capital Ask
  5. Create a Prospect List
  6. Demonstrate the Return On Investment

You can download the guide here.

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Raising Money to Grow On: Putting the Strategic Plan in Place

Last 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 their big plan. You can read the whole series here.

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 for which nonprofits are always fundraising. 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, systems, administrative or fundraising staff, materials) that allows the organization to become more effective or grow. 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.

After several months of working with Charlotte Chamber Music we had a strategic plan that staff and board were excited about and invested in. But it’s not enough to have a great strategic direction and goals and objectives to get there. You have to make the plan operational. That means you have to tie the big plan to the day-to-day activity of the organization and the price tag need to get there.

The next step in the process was to develop:

  1. An annual operational plan built from the strategic plan, and
  2. A budget

To do this, Executive Director Elaine Spallone needed to create milestones for each year of the plan. She needed to articulate what had to be accomplished in each year of the plan. This allowed her to start to break the big 3-year plan into annual chunks. Once she was happy with those milestones, she created a laundry list of activities that had to be accomplished in the first year in order to hit the first milestone. Once she was happy with that comprehensive list of activities, she tied each activity to a deliverable, a deadline and a person responsible.

As Elaine said:

Creating the operational plan was intense in the time investment and level of detail required, but worth every minute spent in its creation. It is especially gratifying to check off items and see the progress made. To be fair, it can also be frustrating to realize what is not moving forward. But the good news there is that those issues are clear, and can be articulated, shared and modified.

At the same time, she needed to project revenue and expenses over the period of the strategic plan. It’s not enough to have big goals, you need to understand the price tag associated with those goals (expenses) and how the money (revenue) will flow into the organization to meet those expenses. So Elaine created a 3-year revenue and expense projection that was tied to the goals and objectives of the plan.

Once she had these two key pieces in place (annual operational plan and 3-year budget) she could begin to put some key monitoring pieces in place to ensure that the strategic plan was being executed on. These monitoring pieces are:

  • Each monthly staff meeting is tied to the deliverables of the operational plan that are due that month
  • Each monthly board meeting includes a dashboard report on the status of the goals of the plan
  • At the end of each fiscal year, Elaine will create the next year’s annual operational plan tied to the strategic plan
  • Annual employee evaluations will be tied to an employee’s performance on their part of the operational plan
  • Each annual budget will be tied to the costs of the annual operational plan

So now that Charlotte Chamber Music had an inspiring, investable strategic plan and a budget and operational plan to ensure that the plan would actually come to fruition, they were ready to go out and raise the capacity capital they needed.

In the next post in this series, we’ll talk about how we created a capacity capital pitch and a strategy for going after prospective funders.

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