nonprofit starvation cycle
Preventing Social Change Burnout
Perhaps it is the nature of trying to solve the intractable, but social change leaders are heading for burnout. I see it more often lately. A nonprofit leader gives me a dazed look, rubs her temples with exhaustion, throws her hands up in the air, seriously considers just giving up.
The exhausting, endless hamster wheel nonprofit leaders live on is just not sustainable. At some point they will give out.
But the leaders who are driving social change are the very people we need to persevere. Because if they give up, where does that leave those who so desperately need the solutions they are providing?
Here are some things social change leaders can do to overcome burnout:
- Get Brutally Honest. With your donors, with your board members. Stop telling people what they want to hear and start being honest about the limits of your time, your staff’s capacity, your program’s scope. And stop chasing rabbit holes for your board or donors. You know what the reality is, so stop hiding it.
- Stop Fundraising. The thing that burns executive directors out more than anything is the endless, dysfunctional fundraising cycle. But if you could switch to a more effective strategy for bringing money in the door, and start to engage others (board members, donors, volunteers) to help, you would have a much smaller burden on your shoulders.
- Raise Capacity Capital. Executive directors are tasked with way too much. Most nonprofit staffers are doing the jobs of 2 or 3 people. That’s fine for awhile, but not long term. The only way out of that vicious cycle is to raise some money to hire key staff, or buy effective technology. That’s capacity capital.
- Get Inspired. Social change can be very inspiring. When you hit a wall, read about other leaders and the hurdles they faced, visit your own program and see the change that is happening every day, ask your staff and board why they are involved, ask donors why they give.
- Forgive Yourself. One thing I absolutely love about social change leaders is their undying commitment to the cause. So many of them have a deep calling for the work they do. But that can also have a dark side. They can become so passionate that they think taking a day off would be to let down the cause. They sometimes picture themselves as Superman and deny their human need for rest and regeneration. But the only way to create lasting change is to make it sustainable. You need to know when to say when.
- Get Some Help. You may be born to lead change, but a true leader knows how to engage others. You cannot do it all. Recruit and retain a staff to whom you can confidently delegate. Recruit a board that steps up to take key pieces off your plate. Ask your donors to tap into their networks to do some fundraising for you. This is not a one person show, rather you need to view yourself as a cheerleader, organizer, and leader of a vast army of people who are making social change happen.
When you feel your eyes glaze over, your head start to spin, a yearning for the family you haven’t seen in weeks, it’s time to take a step back. You are engaged in a marathon, not a sprint, and you can’t burnout after the first 5 miles. Long-term change takes time. Pace yourself.
Photo Credit: gb_packards
Why Nonprofit Overhead is Destructive
It’s that time of year when donors make key decisions about their end of year giving. But a recent post on the Social Earth blog advising donors about questions they should ask nonprofits perpetuates thinking that actually hurts, rather than helps the nonprofit sector. The author, Tarini Chandak, asks “How do you know where your charitable dollars are going? Are they going to the cause you want to support or are they going to administrative and fundraising expenses?” In reinforcing old, and destructive binary thinking about program vs. overhead expenses, Tarini is doing nonprofits and their donors a real disservice.
Tarini lists 4 key questions she thinks every donor should ask of the nonprofits they consider donating to:
As various charities vie for your charitable donations, there are many questions you can ask them directly, including:
- How much goes to the cause? How high are their expenses?
- How efficient is their fundraising? What is their cost-per-fundraised-dollar ratio?
- Is the charity run properly? How efficient and effective is their human capital? Management team?
- Do they even need your money? Will your money just be lying around in their reserve?
I think questions #2 and #3 are excellent, but questions #1 and #4 perpetuate thinking that holds the nonprofit sector back.
Let’s start with Question #1: “How much goes to the cause? How high are their expenses?” As I’ve written before, the distinction between program (or “cause”) and administrative expenses is meaningless at best, and destructive at worst. If a nonprofit organization is creating change, then everything they do is in support of that change. How can a program run if there is no financial engine (fundraising) to fund it? If there is no building or space to house it? If there is no financial management or regular audits? If there is no regular evaluation of whether the program is making a difference? How can you possibly separate “program” from “overhead?” We must move beyond this distinction and encourage nonprofits to raise (and donors to give) more capacity capital, or the money that nonprofits so desperately need to create effective and efficient organizations.
Tarini’s Question #4 “Do they even need your money? Will your money just be lying around in their reserve?” is equally troublesome because it reinforces the backward notion that nonprofits should not have a reserve fund. As I (and others) have written before, we have to get away from the nonprofit taboo that operating reserves are wrong. Nonprofits cannot plan for the future, have a sustainable financial model, experiment with program changes, take risks, or any of the other things that are absolutely necessary to creating social change, without some operating reserves. If nonprofits are continually forced to go month to month without any cushion they will never emerge as strong, sustainable organizations capable of creating lasting change.
We must move away from thinking that encourages nonprofits to scrape by without the tools and infrastructure they desperately need. We must stop measuring nonprofit performance with meaningless financial metrics and instead evaluate nonprofits on their ability to deliver change. If a nonprofit is creating real change, does the minutia of how they spend money really matter?
Photo Credit: just_a_name_thingie
We Should Expect More From Nonprofit Donors
Many of the ills of the nonprofit sector can and should be solved by educating and strengthening nonprofit leaders, staffs and boards, but there is also work to be done with nonprofit donors. Those private individuals, foundations and corporations that support the nonprofit sector also need to change their approach if nonprofits are ever going to emerge from the starvation cycle.
There are some key things nonprofit donors need to do differently in order to make their gifts go farther:
- If you want something, fund it. Over and over again a foundation or individual donor will tell a nonprofit that they want to see a program evaluation, or a strategic plan, or a stronger financial model, but they refuse to fund it. This automatically puts a nonprofit into a catch-22 of needing a key element to get funding, but not having the funding to get the key element. It’s an unwinnable situation and no donor should put a nonprofit in that position.
- Invest in a management team you believe in, then back off. Foundations in particular tend to attach unnecessary strings (endless reporting requirements, benchmarks) to the grants they make. In theory, these strings exist in order to ensure a good investment. But in reality, the only way results will happen is if there is a great plan and a talented team to execute on it. If you are worried about a nonprofit’s ability to execute, then you probably aren’t comfortable with an investment in that team. Either invest elsewhere, or back off and let them perform.
- Don’t expect big things from a little gift. Donors sometimes get a big head about the gifts they make. They expect a nonprofit to expand a $1 million program with a $5,000 gift, or create a brand new program from one donor’s one-year investment. Those are ridiculous, and possibly hubris-filled, expectations. You get what you pay for. Invest accordingly.
- Understand that you hold the power and use it benevolently. Because you are writing the checks, you have the power in this funder/fundee relationship. A nonprofit leader will never be able to be completely open and honest with you for fear that you will take your money elsewhere. Recognize that fact. Don’t put undue pressure on the organization, don’t ask for special favors, and be as hands-off as possible.
- Don’t just buy services, build organizations. It might seem more exciting to have all your gifts go to support direct services, but realize that those services will be stronger and more sustainable if there is a healthy, effective organization behind them. That means a nonprofit needs a capable, well-trained and paid staff; adequate equipment, systems and space; and efficient technology. Occasionally think about supporting those infrastructure items so that your program gifts can go even further.
- Get others to give. If you are a philanthropist, chances are you know other philanthropists. Share your knowledge of the great management teams and infrastructure gifts you make. Don’t invest in a vacuum. Actively recruit your friends and colleagues to build on your investments.
If we really want to change the nonprofit sector we have to change the donors who support it. It is no longer enough just to write a check and be done with it. If you really care about the organizations you support, you’ve got to step up and make more thoughtful, necessary, smarter investments.
Photo Credit: HikingArtist.com
Overcoming the Catch-22 of Nonprofit Capacity
Ask a nonprofit executive director their biggest challenge and most will say securing enough resources. It can seem a vicious cycle: a struggling nonprofit needs to raise money to build their capacity, but they have to have enough capacity in place to raise that money. So they continue to struggle.
A reader of the Social Velocity blog, an executive director of a smaller nonprofit, recently emailed me interested in Social Velocity’s consulting help to grow their ability to bring money in the door. However, the organization is so strapped that they don’t currently have the money to hire Social Velocity. So they are stuck in the vicious cycle: not enough money to raise enough money.
But there is a way out.
The clients we work with are all small and medium nonprofits that are at some sort of inflection point. They too have realized they need to do something different in order to grow their impact and/or become more financially sustainable. Yet, the trouble is they can’t make that change without some outside help.
So they have gotten smart. They have embarked on a series of steps to secure enough investments to hire Social Velocity to help them create a stronger, more effective nonprofit. These are the steps they went through:
- Gather Champions: The executive director identifies a few board members who believe as strongly as they do in the desire for some sort of change to the organization and the need for help to get there.
- Create a Vision for Change: Together these few leaders agree on their vision for change, for example: stronger financial footing for the organization, expanded programs, a more effective board. They may have no idea how to get there, but they all agree on a desired change.
- Make a Roadmap: They meet with Social Velocity to get more clarity around the kind of change they want and what it would take to get there. Once I have a clear sense of where the organization is and what it would take to get them to their vision for change, I put together a detailed proposal listing activities, deliverables, timeline and cost so that they have a very clear roadmap for the investment required to make change happen.
- Find Prospects: The small group identifies 3-5 people (board members, current major donors, volunteers or other friends of the organization) as potential investors in securing Social Velocity’s assistance. These people possess 3 key criteria that make them likely prospects to fund this capacity-building effort:
- Connection: They are already close to the organization, whether as a current donor, volunteer, board member or friend. They know the organization well.
- Concern: They strongly believe in the organization and the work it is doing and want to see the organization do more and better.
- Capacity: They have the capacity to make at least a $3-5,000, one-time investment in the organization so that it can get to the next level.
- Secure Investments: Once the nonprofit identifies this list of prospects, they go out and start meeting with prospects to discuss:
- The nonprofit’s vision for change
- The plan (Social Velocity proposal) for getting to that vision for change
- The investment required
- Whether they would like to make an investment
The end result has been nonprofit organizations, that had for years been stuck in the vicious cycle of never having enough money to do enough, finally breaking free with a plan and the investment to make some significant changes to their organizations. You can read our ongoing blog series, Raising Money to Grow On, about one of these clients who did exactly what I’ve outlined above. And you can also read a past blog post about how you can make your donors organization builders.
Nonprofits must break free from the idea that they just have to hobble along with dwindling resources, continuing to squeeze another drop out of a completely dry rock. If you have a core group of people who love your work and want to see you do more, you possess the key to building your own capacity.
Photo Credit: HikingArtist.com
A Case Study in Raising Money to Grow On
Last fall I wrote a blog post arguing that small nonprofits need access to philanthropic equity (money to build their organizations) just as much as larger, more sophisticated nonprofits do. My post was in response to George Overholser’s Social Velocity blog interview where he argued that philanthropic equity (or growth capital) campaigns, where a nonprofit is raising money to build the infrastructure of the organization, are not feasible for small nonprofits. George’s argument and my subsequent post set off a chain of events that led Social Velocity to work with Charlotte Chamber Music to plan and prepare for a philanthropic equity campaign. Over the course of the next several months I will give you an insider’s view of our work with CCM in order (I hope!) to prove my argument that philanthropic equity campaigns can and should be accessible to any nonprofit that has a vision for something bigger and the determination to put that vision to action. Today is the first post in this Raising Money to Grow On series.
In George Overholser’s September 2010 Social Velocity interview he argued that philanthropic equity campaigns just aren’t feasible for small nonprofits:
What about the small organizations that DO aspire to undergo a big transformation?…I believe that it is absolutely vital that we come up with a way to better capitalize these smaller organizations. Sadly, though, at this stage of capital market evolution, it is still quite expensive to prepare for a successful nonprofit equity campaign. Unless several million is being raised [the costs are] prohibitively high. This constrains us to campaigns of $5 million or more, which, in turn, constrains us to organizations that are already pretty large.
A Social Velocity blog reader, Elaine Spallone, Executive Director of Charlotte Chamber Music took issue with George’s argument and responded in the comments:
As the ED for a very small nonprofit (<$300K) I am greatly disheartened to essentially read “yes, we can cure the large guys, but for the rest of you -80% – well good luck! No answers for you yet.” WOW…Really is education and awareness for buyers to support the whole organization vs. its programs enough? (Although I agree wholeheartedly, a needed step.) I believe there has to be a way to “create compelling ‘asks’ for equity capital” that is less expensive. There has to be way to finance a small organization’s desire to meet the needs of the community, which could mean doubling their impact. We are asked to relearn, redo, change our practices to support (finance) the organization’s mission to change the world, but is no one considering the relearning, redoing or changing the expensive processes/methods so all nonprofits can benefit?
Since that is exactly why I launched Social Velocity, to help smaller nonprofits benefit from new ideas like philanthropic equity, Elaine and I began to talk about the challenges that Charlotte Chamber Music was facing.
Elaine felt that CCM was stuck. As a small, but beloved arts organization they had a great product, but they couldn’t get beyond the vicious cycle of never having enough money, never being able to expand their presence and impact. They had a solid board, and a great vision for the future, but lacked philanthropic equity to build the organization to achieve that vision. They had been talking to consultants about conducting a capital campaign to raise money for a permanent artistic director and a new or refurbished building. As Elaine recalls:
At first, we thought we had to launch a major campaign to raise funds for an Artistic Director- that was our major missing piece, and we seemed lost as to how to make that leap in securing significant funds. That is where we were stuck — for over a year.
But I counseled Elaine that they couldn’t get unstuck until they created a strategic direction and plan to get there that included the various infrastructure elements they needed to get to the next step. Again, Elaine recounts:
What Nell helped to clarify in the beginning is that investing in infrastructure will change our picture. It’s not just about one person [an artistic director]. We were a step ahead of ourselves. To get there, we needed to create the compelling plan for philanthropic equity…we were missing a huge step by not having a detailed plan for our future.
I suggested that they launch a philanthropic equity campaign, to raise money for an artistic director, fundraising infrastructure, technology, systems, all the things they needed to build a more effective, sustainable organization. But, before they think about a philanthropic equity campaign, they needed a compelling strategic direction and a plan for getting there. Because people don’t invest significant money in an idea, they invest in a coherent, compelling, executable, exciting, measurable plan for the future.
We put together a proposal for how Social Velocity could help Charlotte Chamber Music create
- A compelling, investable strategic plan, and
- A pitch and prospect strategy to raise the philanthropic equity needed to execute on that plan.
Elaine then went to her board and a few key major donors to make the case that in order to get out of the vicious starvation cycle, expand their impact, and become the top-tier arts organization they knew they could be, they had to invest in an organization-building process. A couple of key donors stepped up to make the investment to hire Social Velocity.
In the next post in this series, I’ll discuss how we went about creating a compelling, investable strategic plan and the pivotal moment when Charlotte Chamber Music realized that they had a tremendous opportunity to develop a new model for the 21st century arts organization.
Photo Credit: naitokz
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Tools to Build Smaller Nonprofits
I started Social Velocity because I saw a real hole in the nonprofit sector. Small and medium nonprofits working on social change lacked access to expertise and resources to strengthen and grow their solutions. The Teach for Americas of the world were building impressive organizations and replicating their solution far and wide. But they were doing so with the help of venture philanthropy funds, national consulting firms and broad and deep networks of experts and money. They were the lucky ones.
But there are some equally impressive solutions housed in much smaller, less resourced nonprofit organizations that aren’t really seeing the light of day. Because these organizations don’t know how to put a growth plan together, figure out how to finance the impact they want to have, or create a compelling ask for money to build, their solutions are not reaching as far as they could.
Social Velocity exists to help those small and medium-size nonprofits who want to be entrepreneurial, who want to grow their programs, who want to get their board engaged and invested, who want to raise money to build their organization, who want to break out of the starvation cycle. I’m very passionate (and opinionated) about the fact that the bottom 80% of nonprofits need help to become stronger, better, more effective and sustainable at creating social impact.
So in order to reach more nonprofits, Social Velocity has a growth plan ourselves. And that growth plan involves creating tools, trainings, e-books, guides, worksheets, templates and other things that nonprofits can download in order to start thinking and doing things differently.
We’ve already made our whitepapers available for download, and our blog often has tips and tools to get started, but we want to do more. Some of our initial ideas for tools include:
- A sample pitch for growth capital
- An earned income analysis worksheet
- A step-by-step tip sheet to get your board fundraising
- A revenue plan outline
- An exercise to understand your nonprofit’s place in the external market
- Sample language to start messaging around impact
- Questions to guide your case for support creation
- An investment range chart to break down a growth capital fundraising goal
But I want your input. How can we help you take social innovation ideas and put them into action? What kinds of tools would help you go from wanting to grow your programs to starting to put the plan in place? What guides would allow you to move from being intrigued by the idea of philanthropic equity to putting together your own fundraising campaign to raise money to hire more staff, buy more computers, etc.? What’s holding you back from being able to do things differently and move out of the starvation cycle?
Let me know what tools you’d like to see, either below in the comments, or on our Facebook site. Thanks for your help!
We Need an Ecosystem for The Bottom 80%
In response to my post last week on the Change.org blog about the Social Innovation Fund, Sean Stannard-Stockton, of the Tactical Philanthropy blog, wrote a comment that really got me thinking.
My post argued that the $50 million federal Social Innovation Fund is only one small piece of the capital the nonprofit sector needs. The fund will help the top nonprofit organizations, but will not remedy the lack of capital available to the smaller, less sophisticated nonprofits that make up the majority (80%) of the sector. Sean rightly pointed out that like the business sector, the vast majority of nonprofits are small, and as we have done with businesses, we need to create different expectations for different kinds of nonprofits. I would take Sean’s comments even further and argue that we actually need to create a similar ecosystem of funding and expertise for the nonprofit sector, as we have done for businesses.
Sean writes:
One thing I think that people need to keep in mind when they point to how many nonprofits are small is that the same is true in business. While good revenue numbers are hard to find, did you know that 73% of for-profits have less than 10 employees and 54% have less than 4 employees? It seems to me that as a field we need to do a better job of segmenting the nonprofit market and having very different expectations for nonprofits which are “small businesses” vs those that are “public companies.”
Sean makes a critical point. The vast nonprofit sector is often lumped together as one. When in reality, the sector is incredibly diverse. And although over the past 10 years there have been some innovative strides made in providing capital, expertise, and other resources to the top 20% of the nonprofit sector (such as venture philanthropy funds like New Profit and Venture Philanthropy Partners and management expertise from consulting companies like Monitor and Bridgespan) the fact remains that the “bottom” 80% of the nonprofit sector is still very much alone.
This is one of the reasons I started Social Velocity. I saw a real hole in the marketplace in terms of capital and management expertise to the bottom 80% of the nonprofit market. A $500,000 nonprofit organization can’t engage a Monitor or Bridgespan group, and a venture philanthropy fund wouldn’t be interested in scaling them since no one will fund evaluation to prove their results. These organizations are stuck within the vicious starvation cycle and cannot get out.
We need to do a better job, as Sean says, of segmenting the nonprofit sector and creating appropriate expectations for those different segments, but we need to go much further. We have to create an ecosystem of expertise and funding for the smaller, less sophisticated segments of the sector, which includes:
- Educating smaller, less sophisticated philanthropists that creating solutions requires funding for less sexy things like capacity, organization building, evaluation
- Providing significant capacity capital to build out revenue functions, attract and retain top talent, articulate a value add, message effectively
- Supplying growth capital to nonprofits who have a great solution and the desire to scale
- Creating realistic and cost-effective evaluation tools so that smaller organizations can prove their impact along with the big guys
- Securing management expertise to help smaller nonprofits create strategic and growth plans, articulate their impact and value add to potential investors, develop comprehensive financial strategies, etc.
I think it’s fabulous that there is a growing understanding that nonprofits can’t do it alone anymore. And I’m so pleased to see new funding vehicles like the Social Innovation Fund that are helping to take social innovation to the next level. But let’s not forget that there are many other innovative nonprofit organizations that will never catch the eye of the Social Innovation Fund, or their funding and consulting counterparts.
Over the past 200+ years America has established a fairly advanced ecosystem that supports (albeit not perfectly) the growth and success of entrepreneurs at every stage of the game. We are starting to recognize the need for a similar ecosystem in the nonprofit sector. But there is still much work to be done. Let’s not forget the smaller, less sophisticated nonprofits that may have tremendous solutions to contribute, but who just can’t get past the many hurdles in their way.
Building a Stronger Organization
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.
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