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nonprofit sector

Why Social Entrepreneurship Shouldn’t Abandon the Nonprofit Sector

socent-bubble1Note: I was asked by UnSectored, a community platform for rethinking social change, to write a post as part of their month-long conversation leading up to the William James Foundation’s Annual Gathering about how we sustain social enterprise. Below is that post. It originally appeared on the UnSectored blog where you can see the other posts in the conversation.

 

There is an awful lot of hype around the social entrepreneurship movement. Don’t get me wrong, I’m excited about the growing focus and energy around social change. But I think we need to take a step back and recognize that nonprofits have been working on social change for a really long time.

Often nonprofits get less airtime in the social innovation movement than their for-profit, social change counterparts. Perhaps that’s because the for-profit form of social change is new, so it seems more interesting, sexier, apt to create more change. And, of course, the idea that business can be reworked to address public goods is incredibly compelling.

But among the glorified world of social entrepreneurship, some are beginning to question the hype. Like Liam Black (“Letter to a Young Social Entrepreneur”) and Daniel Ben-Horin (“Between the Quick Exit and the Long Sojurn”)

Real social change is hard, long, exhausting work. As Daniel Ben-Horin says “This ‘making a difference’ stuff can be a real grind, as it turns out.”

And amid the hype around social entrepreneurship there is a tendency to dismiss those who were working on the long haul of social change before it was cool: the nonprofit sector.

The current hype around for-profit social entrepreneurship sometimes reminds me of the dot.com bubble, or the sub-prime mortgage speculation. We have to be careful of the hubris that accompanies new trends.

The nonprofit sector is an enormous part of our economy and has a long history of working towards social change. If we were to cast it aside completely, we’d lose the tremendous resources (money, people, mind-share) that are being invested in that sector every day. Without its oldest component, the broader movement to solve social problems is doomed. So instead of tossing it aside, let’s remake it, re-envision, restructure and reinvent it.

What does that mean? It means that the best and the brightest in the social innovation field need to figure out how to innovate in the nonprofit as well as for-profit sector. It means that the emerging social capital market creating financial vehicles for budding social businesses should also support social entrepreneurs in the nonprofit space. It means philanthropists should share investor prospects with impact investors, and vice-versa.

What’s more, innovation requires that investors interested in a social return own portfolios that include not only social businesses, but also nonprofit deals. Many more foundations should explore mission-related investing so that their money can go to both nonprofit and for-profit social change efforts. Nonprofits interested in growth should have access to capital and management expertise to scale. And a nonprofit that’s solving social problems should get just as many resources, respect and mind-share as a social business that’s doing the same.

In essence, we need an “unsectored” approach to social change.

Which means a shift in attitudes, laws, accounting standards so that social entrepreneurs are not restricted by outdated structures and incentives.

There’s no magic bullet for social change. But by focusing all of our energy on only one piece of the social innovation puzzle, we run the risk of less change — or none at all.

Photo Credit: unsectored.net

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10 Great Social Innovation Reads: February 2013

Child_reading_at_Brookline_BooksmithThe gloves came off in February. There was enough criticism to go around from foundation decision making and use of evaluations, to Millennial social entrepreneurs, to American charity, to nonprofit versus for-profit, to the overwhelming politeness of the nonprofit sector, it seems everything was up for debate. But that’s okay with me — I think controversy can be an incredible aid for pushing thinking forward.

Below are my top 10 picks for what was worth reading in February in social innovation. But, as always, let me know in the comments what caught your eye over the past month. And if you want to see my expanded list, follow me on Twitter, Facebook, LinkedIn, Pinterest or ScoopIt.

You can see the 10 Great Reads lists from past months here.

  1. The Center for Effective Philanthropy released a report on nonprofit performance assessment that criticized funders for 1) not being willing to pay for evaluations and 2) being more interested in data that is helpful to the foundation, not the nonprofit. Beth Kanter chimes in with some tools for becoming a “data informed” nonprofit.

  2. While we’re on the topic of foundations, “transparency” is becoming a real buzzword for them lately, and Lucy Bernholz digs deeper into recent examples, while James Irvine Foundation president Jim Canales (who will be the subject of this blog’s March interview) practices some real transparency by reacting to recent controversy about the foundation’s new arts strategy.

  3. And what about the flood of Millennials wanting to be the next great social entrepreneur? Writing on the Harvard Business Review blog, Mike McGlade provides a cautionary (and potentially controversial) tale to Millennials seeking to become a social entrepreneur. As he says “Before you don the social entrepreneur title and dive into building your enterprise consider if you need more experience to realize your idea. If you do, set down your entrepreneur ego and find a job. You need to get smart to make a difference.”

  4. Does America, one of the most charitable countries, have a hard time accepting charity itself? The controversy surrounding a United Arab Emirates gift to Joplin, MO after it was devastated by a May 2011 tornado makes Jacqueline Pfeffer Merrill wonder if America is no longer the self-sufficient, munificent benefactor it once was.

  5. In the Chronicle of Philanthropy, Caroline Preston describes how politeness is holding the nonprofit sector back. (It reminds me of this blog post a couple of years back).

  6. The Dowser blog interviews Munro Richardson c0-founder of startup MyEDMatch, an innovative website that matches teachers with opportunities across the country, to address the problem of teacher turnover.

  7. In keeping with the growing drumbeat to connect the disparate nonprofit sector, Beth Simone Novack calls for digitizing nonprofit 990 data in order to “help the neediest among us access better services, nonprofit providers to become more effective and efficient, and everyone to understand the role of the nonprofit sector in our economy better.”

  8. The Nonprofit Finance Fund created a great graphic that demonstrates the core issues facing small nonprofits and what they and funders can do about them.

  9. Writing on the Idealistics blog, David Henderson suggests a process, based on how businesses maximize profits, for how nonprofits can use data to maximize outcomes.

  10. If you really want to change the world is it better to work in the nonprofit sector, or make money in the for-profit sector and give it away? William MacAskill and Brooke Allen provide a thought-provoking (and sometimes maddening) debate on the issue. MacAskill says don’t get a job at a nonprofit, and Brooke Allen argues Wall Street is not the answer.

Photo Credit: Tim Pierce

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Is Your Nonprofit Ready for Change?

I believe very strongly that in order to fix a broken nonprofit sector we must change how things are done. But it is not enough to change only the larger structures of the nonprofit sector (IRS regulations, public perceptions about “overhead expenses,” funder requirements). Individual nonprofit organizations must also change how they operate in order to survive in this dramatically changing environment.

At Social Velocity, the nonprofits I provide consulting to have all reached some sort of inflection point. They have realized, for whatever reason, that they can no longer continue on the way that they always have. They have decided they must revamp their financial model, restructure their board, dramatically grow their services, or chart a new strategic direction in order to stay relevant and achieve their missions.

But it’s not enough to want change, or for just a couple of people within a nonprofit organization to want it. Over the many years I have been working with nonprofits, I have realized that in order for change to really happen, there must be some key building blocks in place:

  • A Champion. There must be someone in a leadership position in a nonprofit who is a cheerleader for change. It could be the executive director, the board chair, or a board member. And that person must have the respect and trust of a majority of the organization. If the champion for change is a sidelined board member, an executive director on their way out, or a disgruntled staff member, the effort for change will go nowhere.

  • A Need for Change. The champion for change must be able to describe the need for change. There has to be some urgency and a described end goal in order to rally others to the cause for change. It may be that a major funding source is going away, or board members are resigning, or client need is dramatically increasing. The champion for change must make a case to the rest of the organization about why change must happen, and why now.

  • Critical Mass. Once a key champion starts pushing for change they must rally enough board and staff members behind the idea. There must be enough people who also want to see significant change in the organization in order to force it out of inertia.

  • Funders of Change. A nonprofit could have an entire board and staff ready and willing to change, but without at least a few funders who also believe in that change and are willing to invest in a process for making it a reality (a new financial plan, a growth plan, a board recruitment process) they won’t get very far. You need to identify a few funders who love what your nonprofit does and can be made to understand the need for change now.

  • A Navigator. I’m probably biased, but I believe that you need someone to guide the organization through significant change so that it doesn’t collapse in the middle. Without an outsider who understands the change that needs to happen and how to lead the organization there, a nonprofit can easily fall back into their normal ways of doing things. If a nonprofit is really committed to making a serious change, then they need to invest in a competent guide to get them there.

The convergence of the public, private and nonprofit sectors, an economic restructuring, and increasing competition for dollars, among other things, have combined to make change in the nonprofit sector a necessity. Those nonprofits that realize that business as usual just won’t cut it anymore and begin the work of changing their organizations to meet these new challenges are the ones that will survive and thrive.

To find out more about how I help nonprofits navigate change, check out my consulting services.

Photo Credit: Best and Worst Ever

 

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5 Things Nonprofit Donors Can Do to Transform the Sector

Nonprofit donors, particularly foundations and wealthy individuals, have an enormous amount of power in the sector. Sometimes they use that power for good and sometimes (often unknowingly) they use it for ill. And because of the power imbalance between funder and fundee, it is unusual that anyone ever tells nonprofit donors what they could do to really help the sector and the organizations they love.

So here are the five things I would LOVE to see more nonprofit donors do. And if they did, it might just transform the sector.

  1. Take Risks
    The higher the risk, the higher the potential payoff. A nonprofit organization may not be able to guarantee the outcomes or numbers that they are projecting, but you can’t realize big numbers and outcomes without taking risks. What if instead of always taking the safe route of investing in well-proven programs, you took a chance every once in awhile and funded a new innovative solution? What if you set aside a portion of your giving to invest in those crazy, bold, awesome new ideas? Because the complex problems we are facing require completely new solutions, and those require risk.

  2. Provide Capital
    I know I sound like a broken record sometimes but a nonprofit can not survive on revenue alone. Every once in awhile a nonprofit organization needs money to build or strengthen their organization. Money for technology, systems, staffing, evaluation. You may not think these things are sexy, but they are incredibly necessary. Because how in the world can you have an effective, efficient program if you have no mechanism for tracking data, or evaluating results, or streamlining systems?

  3. Provide Patient Capital
    If you make an investment in something risky or in building an organization, that investment takes time to pay off. You cannot expect a nonprofit to execute on a change plan in a couple of weeks or months. The bigger the investment and change you seek, the longer it takes to see results. Take a deep breath and let your investments pay off, over time.

  4. Leave Your Ego at the Door
    Oh please, please, please don’t assume that just because you have money you have all the answers. Most nonprofit leaders are program experts who have been working on their particular social problem for some time. They may not have all the answers, but they probably know more than you do. They live in the trenches. That’s not to say they shouldn’t be open to new ideas, questions and insights, they absolutely should. But at the end of the day, invest in them and get out of the way so that they can do what they do best.

  5. Support the Sales Function
    We all understand that in the for-profit world a business can’t exist if it doesn’t have a process for selling the products it creates. And that process takes money. Whether you hire a sales team, or do advertising, or shout from a megaphone you must have a way to encourage people to buy your product. The same is true in the nonprofit sector. The only difference is that “sales” is called “fundraising.” Nonprofits must have a process for bringing money in the door in order to keep providing programs. And that process has costs–a Development Director, a donor database, materials. Don’t thumb your nose at the sales function. It is absolutely critical to the success of the organization. So help fund it once in awhile.

God love them, but sometimes nonprofit donors drive me nuts. Their hearts are in the right place, there is no doubt. But if we could encourage them to provide more risky, patient, self-less capital it could transform the sector.

Photo Credit: yellowmeansgo

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The Rapid Evolution of the Nonprofit Sector: A Podcast

I’m delighted to announce that I was interviewed last week for Georgetown University’s Social Strategist series. The Social Strategist: A Conversation on Cause Based Communication is an audio project of Georgetown University’s Center for Social Impact Communication that aims to create a dialogue on effective cause based communication while showcasing best practices of the most successful organizations, companies and people working in the field today. The series aims to ultimately answer the question: what are the traits of an effective social strategist? Past interviewees include Jane Goodall, Beth Kanter, Katya Andreson, to name a few.

I am honored to be part of this exciting series. In my podcast, John Trybus (series curator) and I discuss the current state of the nonprofit sector, what social innovation really means, financing social change, the future of social impact and much more.

Here’s John’s preview of our podcast discussion:

  • The rapid evolution of the nonprofit sector is happening now. “Our economy is going under a fundamental restructuring and that’s affecting nonprofits as well,” Nell explains. “If [nonprofits] don’t dramatically change the way they do business they’re not going to be able to survive and thrive.” The status quo where nonprofits can hide behind the benevolent shield of charity no longer exists. Nonprofits “have to make some significant changes if they want to survive in this new reality,” she adds.
  • A new type of ROI is fundamental to prove value. Forget the traditional ROI and think about a social return on investment. Says Nell: “It’s not enough to say we are doing good work and we’re helping people. You now need to start to prove that. That’s a real movement in the sector and I think that’s exciting.”
  • Financing and not fundraising is necessary to ensure sustainability. The hamster wheel of galas, dinners and other traditional forms of raising money for good causes no longer works. “The system is broken,” Nell proclaims. To truly create sustainable sources of funding “it starts with taking a much bigger picture view and creating an overall financing strategy,” she adds. “So it’s starting with ‘what do we want to accomplish in the world?’ and how do we create a financial model to do that?” 

So what does the future hold for social innovation?

“I think we are at a critical point where so many people want to see social change and they’re willing to change structures and systems [to make that happen],” Nell says. “This kind of momentum is really exciting. It remains to be seen where it’s going to take us but it’s going to be an exciting ride.”

You can listen to the podcast here.

Photo Credit: faungg

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Where Nonprofits Fit in the Social Innovation Movement

Nell EdgingtonI recently did an interview with Kellogg Venture Community‘s KVCcast host David Nosnik about where nonprofits fit in the social innovation movement. It’s a 20 minute conversation in which we discuss how nonprofits can:

  • Recruit and manage a much more effective board of directors
  • Raise growth capital
  • Become more entrepreneurial to achieve more social impact
  • Finance the social impact they seek to achieve
  • And much more…

My argument in this interview, throughout the Social Velocity blog, and in everything we do here is that the social innovation movement has the potential to abandon the nonprofit sector.

Nonprofits have been working on social change since long before it was cool. But because they have been around for awhile, there is a danger that they could be left behind if they don’t understand, embrace and adapt to some of the new models that the social innovation movement brings forward. Losing the charity mindset, articulating and raising money for the true and complete costs of creating social impact, figuring out their theory of change, developing an overall financing strategy for their work are all things that nonprofits can do to accelerate their ability to create social change.

You can listen to the podcast interview here.

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Can Reactive Clark Kent Become Strategic Superman?

For the nonprofit sector to truly climb aboard the social innovation train, as opposed to being abandoned by it, nonprofit leaders need to move past the reactive toward the strategic.

But is that possible? Have nonprofits been stuck in a resource-constrained, charity mindset for too long to be made strategic, bold, big thinkers? It’s been a vicious cycle. Nonprofits lack adequate resources so they become very protective of what they have and wary of any actions which might threaten those resources. Therefore they become exceedingly risk averse and fearful of innovation. They focus more often than not on keeping the doors open as opposed to investing time, energy and resources in long-term strategy.

But that’ s just not going to cut it anymore. These times demand a radically different mindset and approach. The nonprofit sector must move from the reactive to the strategic. So how does a reactive approach differ from a strategic one? It looks like this…

This is an excerpt from my latest post at the Change.org blog. You can read the entire post here.

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