In today’s Social Velocity interview I’m talking with Pat Lawler. Pat is the CEO of Youth Villages, a national nonprofit dedicated to helping emotionally and behaviorally troubled children and their families live successfully. Youth Villages is often heralded as a model for high performing nonprofit organizations. In 2006, Lawler was recognized as one of “America’s Best Leaders” by U.S. News & World Report.
You can read past interviews in the Social Innovation Interview Series here.
Nell: In 34 years of your tenure at Youth Villages you’ve grown the organization from serving 25 youth to now serving 22,000 families. Very few nonprofits are able to grow to that level, let alone sustain it. What are the factors that make nonprofit growth attainable and what holds more nonprofits back from achieving it?
Pat: First, an organization must have a clear mission and defined values. When we started Youth Villages, we knew who we were. We didn’t just want to respond to RFPs; we wanted to do what was best for kids. No more of the status quo, instead we used our expertise and created best practices. We built our leadership team and our culture around a clear mission and set of values. Our culture is a big part of who we are and what we’ve done over the years. We’ve also been willing to change directions. We’re willing to do different things based on the needs of kids and families. At one time, we only provided residential treatment services, but now residential services comprise only about 35 percent of our work. Don’t anticipate the future, create it.
As an organization, we were also careful not to grow too fast. We were constantly assessing what was best and reevaluating. We also implemented a feedback system to learn what was working and what was not so we could improve our outcomes.
It’s easy for nonprofits, especially those focused on social services, to make decisions with our hearts instead of our heads, but we must still maintain a strong focus on the business aspect of our work. After we got through our first 12-13 years, when we were just trying to survive as an organization, we began thinking about strengthening our financial reserves because we were responsible for more children and families, as well as our staff and their families. So we really started trying to build a stronger financial foundation that would help us successfully transition through turbulent times.
Nell: Often when a nonprofit becomes very large finding on-going sustainable funding sources can be difficult. The majority of your funding comes from state contracts. Is government the ultimate answer to long-term funding for large nonprofits? Or are there other ways?
Pat: It depends, but in general, I think it’s important for organizations to have a diverse set of funders to achieve maximum stability. Having at least three or four funding sources and a relative balance among those sources is a good way to go. If government is a major funding source, you want to make sure that’s diversified among different programs, geographies, etc. and not all one contract.
Nell: Youth Villages is also unusual in that you have a robust performance management system and are considered one of the leading nonprofits in the country in that arena. Why did you make the decision many years back to invest in performance management and what do you think the return on that investment has been?
Pat: Youth Villages’ goal has always been to provide the best services for children and families. That’s one of the reasons why we started collecting data, using measurement, benchmarking and total quality improvement. It was all about getting better outcomes for kids. We didn’t realize how valuable our data could be until the mid-‘90s when some of our state funding was at risk. Using our data, we were able to convince the state to spend money for in-home services and develop a continuum of care — because we had really good data to show them what worked and how much more cost-effective it was. Throughout the years, we started trying to convince other states and funders. A few were pretty enthusiastic about our data and outcomes. When the Edna McConnell Clark Foundation met with us nine years ago, they were very interested in our data and outcomes, and that was the first indication that the private sector was becoming interested in doing what works.
Even today, we’re asking ourselves where is the best place to put our resources, and more often, we’re finding it’s better to serve a larger number of children through community-based services rather than in a residential setting. You can make such a greater impact in the community serving a large number of youth, rather than serving a small number with the greatest needs. We’re trying to do both. But we’re asking ourselves what’s the biggest return on our investment so we can have the greatest impact on our community?
Nell: Funders and nonprofits themselves are often reluctant to invest in nonprofit leadership development. How do we solve this need and how did you grow your leadership skills over the course of your career? What role do you think funders should or could play in leadership development for the sector?
Pat: I read a lot, and I’ve been very fortunate throughout my career to have worked with great boards of directors and mentors to shape my leadership skills. At Youth Villages, we have an outstanding leadership team filled with better leaders than I am. Together, we make a strong team. Any of us independently might not be as good. I know I wouldn’t be at all. At all levels of this organization, we have very bright people and that is what makes the difference here.
If I had to start over at the beginning, rather than asking foundations for money for programs and services, I would have asked for funds to put toward business planning, professional coaches, leadership development and communications to help with the things I didn’t know about. I’d have asked for money to help build a stronger organization, while at the same time maybe a little money for programs and services. I believe it’s a waste of money for governments, foundations or anyone to spend money on an organization that doesn’t have the necessary skills, organizational structure, leadership and business planning to achieve the goals of their program. It just makes no sense.
From the time an organization is created, I think they have to ask the questions: Do we have the right people in place? Do we have the right business plan and strategy to execute? Do we have the support of the community and board of directors? I firmly believe every foundation should put a significant portion of their funding toward strengthening the organization versus funding some programs and services. If you don’t have the right people in place to execute the strategy then it’s not going to happen. It’s also important for foundations to give organizations time. It takes time for leaders to develop, they get better as they encounter and overcome problems, and it’s important to stick with those organizations for extended periods of time.
Photo Credit: Youth Villages
February witnessed some dissatisfaction with the current state of funding for social change, but also some trailblazers playing with new financial vehicles. I always wonder whether true change to money for social good will come with the next generation. Do Millennials hold the key to fundamental shifts in how we finance social change efforts? We shall see.
Below is my list of the 10 best reads in the world of social innovation in February. But, as usual, please add what I missed in the comments. If you’d like to see an expanded list, follow me on Twitter, Facebook, LinkedIn, or Google+.
You can also find the list of past months’ 10 Great Reads here.
- As we work toward social change, its important to embrace the gray areas. Writing in the New York Times Simon Critchley takes us back to the 1970s BBC documentary series “The Ascent of Man” to make a point about the importance of uncertainty in our search for solutions. As he puts it, “Insisting on certainty…leads ineluctably to arrogance and dogma based on ignorance.” And Fay Twersky seems to agree when it comes to strategic philanthropy, arguing in the Stanford Social Innovation Review that “we need to challenge the certainty creeping into [philanthropy].”
- And speaking of changing philanthropy yet another study of Millennial philanthropists claims that this new generation of donors will be quite different than their predecessors. As Phil DeMuth writing in Forbes puts it, these new donors “are no longer interested in providing an annuity to some tax-deductible charity organization.” They want to see results, and they want to get in and get out.
- But Lucy Bernholz is frustrated by the pace of change, at least in how little the financial vehicles philanthropists use are changing. She argues that in this year’s list of the top 50 philanthropists “the financial vehicles for philanthropy…look not unlike [those] in 1954 or 1914.”
- Tris Lumley from New Philanthropy Capital voices frustration as well, but with the general state of nonprofit finance. He puts forward a new model for the social sector that removes the “funder-centricity” of the “anti-social sector.” Because, as he argues, “the result of this funder-centricity at its worst is that the social sector exists not for those it’s supposed to help, but in fact for those who work in it, volunteer in it, and give money to it.”
- There are some bright spots, at least in the United Kingdom. The country leads the way in the social impact bond trend. Emma Tomkinson provides a map of social impact bond activity in the UK versus the rest of the world and the UK Centre for Social Impact Bonds provides a great site of resources on the new tool.
- And even here at home there are some trend setters, particularly the F.B. Heron Foundation, led by the visionary Clara Miller who also founded and led the trailblazing Nonprofit Finance Fund for 25 years. Clara has announced the F.B. Heron Foundation will account for the mission return of 100% of its assets. Unheard of and definitely interesting to watch.
- There is a constant tension in the nonprofit sector between funding new ideas and funding the growth of proven ideas. Writing in the Chronicle of Philanthropy, Alex Neuhoff, Laura Burkhauser, and Bradley Seeman fall squarely on the side of growing proven solutions, arguing that in order to reach a higher performing nonprofit sector we must “follow the “recipes” that earned proven programs their stellar ratings.”
- There was much for Millennial changemakers to chew on this month. First, there is a growing drumbeat questioning the relevance and value of college. Does the higher education model really work anymore? It’s a fascinating question to contemplate. And Naomi Schaefer Riley does so in the “College Tuition Bubble.“
- I’ve been on a real Steven Pressfield (author of The War of Art) kick lately. His worldview is that each individual was put on earth to create some specific greater good, but Resistance constantly fights to keep us from achieving it. If you need inspiration to overcome Resistance, read his post “How Resistance Proves the Existence of God.” Love it.
- And for those who are pursuing a life of social change despite the lure of a more traditional path, look to Thoreau for inspiration. For as Maureen Corrigan explains in her NPR review of a new biography of the man, “Thoreau’s youth seemed aimless to himself and others because there were no available roadmaps for what he was drawn to be…If Thoreau had committed to a professional career right after Harvard, his parents might have rested easier, but the world would have been poorer.”
Photo Credit: beggs
Ever since last year’s Letter to the Donors of America from GuideStar, Charity Navigator, and BBB Wise Giving Alliance there has been a growing movement to debunk the “nonprofit overhead myth,” the notion that donors should evaluate nonprofits based on the percent they spend on “overhead” (fundraising and administrative) costs.
More and more articles (a most recent one here) are cropping up explaining the overhead myth and highlighting donors who overcame it. And even fundraising journal Advancing Philanthropy is devoting their entire Spring issue to the topic.
But at the same time we have very obvious examples of the continuing strength of the overhead myth. The latest is nonprofit darling Charity:Water, which is often held up as the gold standard of innovative fundraising and nonprofit strategy, claiming that 100% of their donations go “directly to the field.” And thus the overhead myth lives on.
Will we ever be rid of the idea that nonprofits can somehow achieve a nirvana where very little (or no) money goes to boring things like salaries, technology, infrastructure, fundraising, leadership development, planning, R&D?
I wonder if we could gain more traction by talking less about the negatives of an overhead myth and talking more about the positives of nonprofit organization building.
For example, one of the things that is often considered “overhead” and rarely gets funded is nonprofit leadership development. But in the for-profit sector, leadership development is viewed as an incredibly important and worthy investment. According to a recent article by the Foundation Center, the business sector spent $12 billion on leadership development in 2011, whereas the nonprofit sector spent $400 million, or viewed another way, businesses spent $120 per employee on leadership development, whereas the nonprofit sector spent $29 per employee.
And leadership development can have such a positive return on investment. A stronger nonprofit leader can:
- Recruit, train and manage a more productive and effective staff
- Engage a more invested board of directors
- Use money and other limited resources more strategically
- Open a nonprofit to bigger and better networks
- More effectively manage to outcomes
- Create an overall more highly performing nonprofit
So what if we refocused the overhead myth discussion on the power of nonprofit organization building? Beyond leadership development, investing in nonprofit organization building means money for things like: talented, effective fundraising staff; smart long-term planning; performance management systems; effective technology.
At the core, organization building is about creating a smart, strategic nonprofit that can actually realize the outcomes it was set up to achieve. Organization building can make the difference between a nonprofit that is just getting by and a nonprofit that is actually solving problems.
Photo Credit: liquidnight
“Here’s my problem…It’s obvious these people have money, they just don’t want to share it with us.”
What this executive director fails to realize is that the burden to connect the dots for donors lies squarely on her shoulders. It is up to nonprofit leaders to articulate – in a compelling, inspiring way – how their nonprofit is creating a solution to an important social problem, and why donors should care about and invest in that solution.
A Case for Investment can help you do just that.
Now more than ever, nonprofits are struggling for funding amid growing competition and diminishing available dollars. At the same time, burgeoning interest in performance management and impact investing have focused more donors on the outcomes their investment in a nonprofit will bring.
Donors, especially major donors, are less likely to give to a nonprofit because the organization “does good work” and more likely to give because a nonprofit demonstrates how it creates a solution to a social problem the donor cares about.
Those nonprofits that want to continue to attract and grow philanthropic investment must create a compelling, thoughtful argument for why a donor should give to their organization. This argument is called a “Case for Investment.” Driven by a thoughtful combination of data and emotion, a good Case for Investment can help a nonprofit communicate and connect with their target donors much more effectively.
The Case for Investment Step-by-Step Guide can help you create your nonprofit’s case.
“I am using it as a catalyst to create a branding campaign with my Marketing Committee. Of course, this will be used for fundraising and grant writing as well. We really needed the framework to build value for our donors, volunteers, and clients.”
A good case for investment is the fundamental building block from which all donor communications, marketing materials, grant proposals, website language, and more is born.
The Case for Investment Step-by-Step Guide is broken down into ten sections:
- Why Create a Case for Investment?
- How to Use This Guide
- The Need
- Financial Model
- Strategic Direction
- Resources Required
- Social Return on Investment
- Next Steps
In each section there is a series of questions, which you will answer. Your answers to these questions become the basis for your final Case for Investment. Examples of other nonprofit’s cases for investment are highlighted in each section, allowing you to see how others have made their arguments.
Photo Credit: JHall159
In today’s Social Velocity interview I’m talking with Daniel Stid, Senior Fellow at the William and Flora Hewlett Foundation. Daniel serves as an advisor to Foundation president, Larry Kramer, leading the exploration of a potential Foundation initiative to support and improve the health of democracy in the US. Before joining the Foundation, Daniel was a longtime consultant and strategist to governments, nonprofits, and for-profit organizations, including as a partner in The Bridgespan Group’s San Francisco office, where he co-led the organization’s performance measurement practice.
You can read past interviews in the Social Innovation Interview Series here.
Nell: You moderated a panel at the recent After the Leap conference about government and performance management. Government has a long history in the outcomes space, but there was some controversy at the conference about whether government can really lead this new movement. What role should government play in this new push toward nonprofit performance management?
Daniel: Yes, my Twitter feed was blowing up during that session with people adamantly saying that government couldn’t lead this push, it had to be nonprofits! To my mind this controversy misses the point. It presumes a hierarchy – that leadership is lodged in one place, and that it is exercised in one direction. The fact is that if we are going to make this “leap” happen, we need distributed leadership in multiple places: in government agencies, in operating nonprofits, in foundations, among researchers and program developers.
A great example is the Teen Pregnancy Prevention program administered by the Office of Adolescent Health in the federal department of Health and Human Services, the implementation of which I recently wrote about with some former colleagues at The Bridgespan Group. The Office of Adolescent Health administrators demonstrated leadership in conceiving and developing a bold and thoughtful program; the researchers and purveyors involved demonstrated leadership in creating evidence-based solutions and effectively supporting their implementation; and front line agencies demonstrated leadership in implementing these interventions with fidelity. What makes this program so compelling is that it has been animated by multiple forms of leadership that are networked and reinforcing each other across sector lines. I believe this same pattern occurs in most other situations where social change is happening at a large scale.
Nell: Your charge as a senior fellow at the Hewlett Foundation is to help explore how the foundation can “support and improve the health of democracy in the United States.” There have been some criticisms lately that philanthropy has moved away from supporting democracy and instead sometimes enhances wealth inequality. What are your thoughts?
Daniel: Insofar as this occurs, I believe this an inadvertent effect from the standpoint of individual donors. Most people want to give to something they can point to and/or that they can have affiliation with – hence the contributions of many donors to hospitals and arts organizations and universities, or to the schools that their children attend. This is straightforward and understandable. You can readily see and appreciate and be associated with what you are getting for your contributions. And it is philanthropy. We shouldn’t presume that all philanthropy can or should be geared toward reducing inequality. That is not the point of philanthropy in a free society. (Now whether all philanthropy needs to be and should be subsidized by the tax code is another question; I am on the record as saying it is high time to revisit the charitable deduction.)
The kinds of interventions that stand a chance of alleviating inequality – e.g., support for high quality early education, or effective teen pregnancy prevention – entail large-scale systems change and diffuse and uncertain impact for people typically living in very different communities from the philanthropists who are in a financial position to support them. They are for that reason a riskier philanthropic proposition. But many individual donors and foundations are making these investments anyway, and I bet we will see more of them do so as the evidence-base supporting solutions to inequality continues to be solidified.
Nell: Moving nonprofits to a performance management system will be costly. Do you think government can and should foot that bill, or can philanthropy? How do we create and fund the infrastructure necessary for this movement to truly succeed?
Daniel: Really good question! I don’t think that we can count on government to do it – for all of government’s resources relative to those of philanthropy, it is extremely rare that a government program will have the political and policy degrees of freedom, let alone the budget, to invest in nonprofit capacity in any sustained way. And the age of austerity we are in will only worsen this shortfall. To me this is a critical role for philanthropy to play. Just a portion of the billions that philanthropy puts to work in the service of education, health and human services, youth development, etc. could help assess and put to much better use the hundreds of billions that federal, state and local governments do across these areas.
Typically foundations see their role as scaling up initiatives that government can then “take out” and fund directly, freeing up the foundations to move on and fund their next ventures. Foundations should stay engaged rather than moving on and, by investing in the infrastructure and measurement capacity that government cannot pay for, help society get the most out of the far greater levels of government spending. Rather than seeking to “leverage” other foundations, to use some jargon, foundations should in effect be seeking to “leverage” government funding by increasing its impact.
Nell: Should every nonprofit work towards articulating and measuring outcomes, or does it primarily apply only to social service and education nonprofits? Is there a way for arts and cultural organizations, for example, to move toward outcomes management?
Daniel: I think every enterprise – whether it be a profit-seeking business, a government agency, or a nonprofit, whether it is producing cars and trucks, health and human services, or arts and culture — should seek to get better at what it does. I found Jim Collins very persuasive on this point in his “Good to Great in the Social Sector.”
The desire to improve, to get better at things, is woven into the human psyche, and when this desire is given full expression, by individuals and the organizations they work in, so is our humanity. Whether this quest involves “outcomes” and “measurement” as we conventionally define them depends on context. It may well involve tracking audience surveys and visitor numbers and assessments by informed critics. But it may also involve a troupe rehearsing until it feels it finally has its performance nailed, or a museum director continuing to refine interpretive material that she thinks visitors are struggling to understand. Those behaviors reflect a relentless quest for outcomes in their own right. At the end of the day, performance measures are merely proxies to help us assess our progress toward what we are working towards: an underlying excellence. The excellence itself is really the point.
Photo Credit: Hewlett Foundation
January was all about wealth inequality, all the time. The 50th anniversary of President Johnson’s War on Poverty was an appropriate backdrop to growing unease about the fact that the rich are getting exceedingly richer.
But there is much debate about what the solution is and even how to frame the problem. And where do nonprofits fit in, and what does it all mean for the future? It is an enormous, far-reaching and complex problem.
Below are my picks of the 10 best reads in the world of social innovation in January. But please add to the list in the comments. And if you want more, follow me on Twitter, Facebook, LinkedIn, or Google+.
You can also find the list of past months’ 10 Great Reads here.
- This year marks the 50th anniversary of the launch of President Johnson’s War on Poverty. Despite the long attack, wealth inequality is getting worse, not better, and is becoming a very hot topic. But Mark Schmitt, writing in New Republic, takes issue with how the inequality conversation is being framed. He argues that “we need a way to talk and think about inequality that presents it as a system, and then finds the points of intervention that might actually change the system.”
- Thomas Piketty’s new book, Capital in the Twenty-First Century, due out in March and reviewed this month by Thomas Edsall in the New York Times, takes reframing the inequality conversation even further. Piketty makes a rather depressing argument that when viewed over history wealth inequality is the rule rather than an anomaly and without huge systemic change (like a global wealth tax) will only get worse.
- And where does the nonprofit sector fit in? Mark Rosenman argues that nonprofits should play a pivotal role in advocating for change: “If the United States is again to be a nation where upward mobility applies to more than those already near the top, nonprofits must exercise their moral authority and advocate for economic policies that give a hand up to the poor and advance a vision of the common good that includes all Americans.”
- The often employed method to combat poverty – education – may not be the answer anymore. Clay Shirky takes higher education to task for “preserving an arrangement that works well for elites—tenured professors, rich students, endowed institutions—but increasingly badly for everyone else.”
- But for David Bornstein, appropriately from the world of solutions journalism, there are still some bright spots to point to in the War on Poverty.
- Maybe part of the solution lies in changing our measures of success. This video suggests we move from Gross Domestic Product to a Social Progress Index to measure a country’s success.
- They say long-form journalism is coming back and let’s hope so if Drew Philp’s piece “Why I Bought A House In Detroit For $500” is an example of the trend. He beautifully describes the process of investing his heart and soul in a house and neighborhood in crumbling Detroit.
- And, on a related note, it turns out that “gentrification” may not be a dirty word anymore, according to NPR.
- In other news, writing in the Nonprofit Quarterly Eileen Cunniffe provides some interesting examples of how arts nonprofits are reinventing themselves and their relationship to money.
- Finally, the Nonprofit Tech For Good blog rounds up 19 really interesting social media and fundraising infographics for nonprofits.
Photo Credit: University of Iowa Libraries, 1960
In my eyes, December was about three main things: the After the Leap conference about moving nonprofits to manage to outcomes, predictions about how the social sector will evolve in 2014, and the impact of the second annual Giving Tuesday. Added to the mix were some demonstrations of the growing wealth inequality (a prediction for 2014 from many) and a dash of controversy about the beloved TED Talks. It all made for a very interesting month.
Below are my picks of the 10 best reads in the world of social innovation in December. But please add to the list in the comments.And if you want to see more of what catches my eye, follow me on Twitter, Facebook, LinkedIn, or Google+.
You can also find the list of past months’ 10 Great Reads here.
- I already linked to several people’s great 2014 prediction pieces in my 5 Nonprofit Trends to Watch in 2014 post, but Tom Watson’s Trends and Collisions That Will Challenge the Social Sector in 2014 in Forbes is particularly thought-provoking. He takes what he calls a “meta approach” by analyzing themes from big social sector thinkers and “adding a few morsels to the stew.”
- One of the predictions on both my and Tom’s list was that the growing wealth inequality will become increasingly obvious. Robert Reich helps this trend by providing a scathing critique of modern philanthropy, arguing that it is becoming less about solving wealth inequality and more about reinforcing it: “Fancy museums and elite schools…aren’t really charities…They’re often investments in the life-styles the wealthy already enjoy and want their children to have as well.” And Peter Capelli, writing on the Harvard Business Review blog, seems to agree, but on the corporate side. He takes issue with “companies that pay poverty-level wages or thereabouts to their employees [while] spend[ing] a good deal of effort to be good corporate citizens in other areas.”
- Some people claim the second annual Giving Tuesday was a great success with a 90% increase in day-of online donations over last year, but others, like Michael Rosen, argue that Giving Tuesday is not actually channeling new money to the sector.
- The first-ever After the Leap conference in December promoted nonprofit performance management. Perhaps the high point of the conference was Nancy Roob’s (head of the Edna McConnell Clark Foundation) stirring keynote pushing both foundations to fund outcomes management and nonprofits to demand it. The Stanford Social Innovation Review did a great interview with her where she makes many of the same points, and an interview with Mario Morino, the main organizer of the conference.
- Writing in The Guardian, Paula Goldman from Omidyar Network discusses how, with impact investing, the blending of social and profit motives is really starting to take hold: “Fifteen years from now…We’ll look back on a host of innovations benefitting millions of disadvantaged people – in education, in healthcare,…in solar lighting—and will have a hard time remembering the day when people viewed charity and business as working towards opposite goals.”
- Leon Neyfakh writes a fascinating expose in the Boston Globe about donor advised funds, which he claims is “where charity goes to wait.” $45 billion—more than the endowment of the Bill and Melinda Gates Foundation – currently sits idle in donor advised funds and that amount is growing fast. A huge financial opportunity for the sector.
- The Center for Effective Philanthropy released a new study about how much impact foundation CEOs think their philanthropy has had. Philanthropy heavyweights Paul Brest and Lucy Bernholz each give their take on the study’s findings.
- I have loved writer Steven Pressfield since I read his fabulous The War of Art last summer. His blog about the creative process is a fount of knowledge and inspiration. His post in December about envisioning and embracing the future in your industry applies to nonprofits too.
- The idea of networked approaches to social change has been around for several years and is gaining momentum. Writing in the Nonprofit Quarterly, Mark Leach and Laurie Mazur describe “the power and promise of networked approaches to social change…creat[ing] a force larger than the sum of their parts.” Definitely a trend to watch.
- And finally, I love it when someone steps back and asks some hard questions about something that everyone else assumes is amazing. Benjamin Bratton does just that about the beloved TED Talks, which he claims “dumb-down the future.”
Photo Credit: Imperial War Museums
In today’s Social Velocity interview, I’m talking with Denise San Antonio Zeman. Denise has been President and CEO of Saint Luke’s Foundation of Cleveland, Ohio since 2000. A lifelong Clevelander, Denise’s career has spanned higher education, human services, healthcare and philanthropy. Now in its 17th year of grantmaking, Saint Luke’s provides leadership and support to improve and transform health and well-being of individuals, families and communities of Greater Cleveland.
You can read past interviews in the Social Innovation Interview Series here.
Nell: Saint Luke’s Foundation is different than most foundations in that you have made a conscious commitment to funding the capacity of nonprofit grantees in areas such as leadership development and outcomes measurement. Why did the foundation decide to put an emphasis on capacity funding and what have you learned from those investments?
Denise: Just over two years ago, our Foundation board and staff held a retreat. An important topic was our frustration over the reality that the recent economic downturn had produced tremendous need in our community and volatility in our grant budget. Specifically, this downturn highlighted for us that we were spending more when the economy was good and less when the community needed us most. These concerns were analyzed, and the culprit was determined to be our spending policy, for although we knew we could not control the world economy, we realized that we could control the way we responded to it.
We had employed a traditional 5% payout since our inception in 1997, and decided to investigate spending policies that might provide us a higher, more predictable level of spending going forward. With much trepidation, the board approved a bold new spending policy that provides for a “floor” with certain tolerance limits. We increased our spending by about $4 million and established a spending range between 5 and 7%. For the past two years our spending has been very close to 7%.
With this came a strong commitment to working with our grantees and philanthropic colleagues to move toward funding what works in order to advance a smaller set of priorities. The new priorities more narrowly define our previously broad definition of “health” to focus on three specific strategy areas: Healthy People, Strong Communities and Resilient Families.
The role of our senior program officers also shifted from a focus on managing a set of grants to a commitment to advancing a strategy. We agreed upon long and short-term outcomes that guide our grantmaking decisions, and the program team now manages their portfolios of grants in a more entrepreneurial way. In addition to making grants, their due diligence includes an in-depth analysis of the grantees’ capacity to be successful.
A thorough analysis of the literature, conversations with colleagues and focus groups with grantees revealed six strengths that the highest performing nonprofits have in common. These include strong financial management, investment in leadership, a commitment to outcomes and learning, a spirit of collaboration, excellent communications, and advocacy for good public policy.
We support and encourage our grantees to develop these capacities in a variety of ways. In our formal and informal interactions, we encourage them to think about their approach to building these capacities and we provide support to assist them in this process. We ask probing questions such as “What keeps you up at night?” in order to nurture lines of communication, demonstrate our concern for their growth and development, and most importantly, learn. And we work with our regional association, Philanthropy Ohio, to bring national content experts to our region for programs and seminars on relevant topics. We also host meetings ourselves during which we invite thought leaders such as Geoffrey Canada (Harlem Children’s Zone), Dan Heath (Made to Stick and Switch), Fay Twersky (Beneficiary Voice), and Phil Buchanan (Center for Effective Philanthropy) to challenge the status quo and help us focus our efforts to build a stronger nonprofit and philanthropic sector.
In order to be able to deliver on their promise to the community, nonprofits must have a solid financial base. Our scrutiny of financial statements has increased, and with that has come a commitment to working with our grantees to improve their financial planning, monitoring, operations and governance. The Nonprofit Finance Fund and Financial Management Associates, LLC have provided local strategic financial management seminars to increase knowledge and inspire motivation to build financial capacities.
We also know that strong leaders produce great results. We therefore encourage and support comprehensive leadership development for our grantees, and we support efforts to implement leadership development practices that ensure good governance and empower professional staff to be leaders of change.
We are committed to tapping into the power of outcomes measurement as a way to support continuous learning and encourage performance improvement, and we work with our grantees to support their efforts to collect and use data to improve their outcomes for their clients. We have learned first-hand how challenging measuring impact in the social sector can be. But we have also learned that unless we measure and move toward specific, measurable outcomes, we run the risk of spinning our wheels at best, and actually doing harm at worst. The works of Mario Morino (Leap of Reason) and David Hunter (Working Hard and Working Well) provide nonprofit and philanthropic leaders with the rationale and roadmap for making a measurable, meaningful and lasting difference for the people they serve, and we strongly encourage our grantees and colleagues to join us in embracing their approaches.
We have also learned the importance of supporting the capacity of our grantees to work with others. We live in a nonprofit community that was built for a population of over one million people, and yet the last census revealed that our community has contracted by more than half. Our government and philanthropic resources have diminished, yet the need in our community has grown. We therefore work in partnership with our grantees and philanthropic partners to support collaboration in practice and in learning, and we have embraced the concepts of Collective Impact (Foundation Strategy Group) to inform our work.
Communication is also an area of focus for us. Borrowing from what we learned from Chip and Dan Heath in Made to Stick, we support strategic communications that help our grantees leverage outcomes and tell effective stories to advance their missions. This is not storytelling for the sake of storytelling; rather, it is using the power of outcomes to demonstrate effectiveness and impact.
While philanthropic support for health and human services is important, it is miniscule compared to government spending. We therefore support efforts to educate policymakers on relevant issues and influence institutions, systems and community and/or individual behaviors within the funding guidelines for private foundations.
Quite simply, we believe that strong nonprofits produce the strongest results, and as funders of impact, we believe it is our role to support our grantees to be the strongest they can be.
Nell: Leadership development is a particular area of interest for the foundation. What do you think nonprofit leaders need most to become more effective and what role can philanthropists play in that?
Denise: We view strong, resilient leadership as one of the most effective tools for achieving superior results. In our work with grantees, we have learned that organizations that take an intentional, focused approach to leadership development achieve better outcomes for the people they serve. Nonprofit leaders need boards that are uncompromising on quality and results, and these boards must both challenge and support executive leadership to drive innovation and strategic performance.
As noted in Independent Sector’s Leadership Initiative, nonprofit leaders need “time, attention and resources to engage in high-quality leadership development programming that equips them to deliver significant results.” Leaders cannot be so “in the weeds” that they lose sight of their role as keepers of the promise. We encourage our grantees to use some of our general operating support to focus on leadership development, and to extend that focus to developing the “next generation” of leaders as well.
We also provide funds for nonprofit leaders to participate in high quality leadership development programs locally and nationally. Additionally, we support an individual professional development program for each member of our foundation staff to ensure that they continue to develop their own potential as leaders.
Nell: One of the arguments some philanthropists make against providing funding for building nonprofit organizations is that it is harder to demonstrate the return from a capacity building investment than a program investment. How do you respond to that argument?
Denise: I agree…it is hard, but we have never been an organization that avoids hard! In our work with the TCC Group last year, we learned more about what it takes to be a learning organization. We made a commitment to learning from everything we do, and we are committed to learning more about how to measure the impact of capacity building investments.
And while we are still learning, we have some specific examples that demonstrate the return on our investments in building capacity. We know, for example, that our support for outcomes and learning has helped some of our grantees build the capacity to reflect their success by implementing outcomes management software and producing results-oriented dashboards. Eight of the organizations we helped form strategic alliances have merged into four, and are serving more people with fewer resources. We also know that some of the communications-related grants we have made have enabled grantees to extend their reach in innovative ways such as electronic case management programs. And we know that policy-focused grants have allowed some of our safety net providers to come together to provide patient-centered medical homes for some of our most vulnerable citizens in advance of Medicaid expansion. While these results might be viewed as anecdotal, we believe they are building our own capacity to make a strong case for capacity building.
Nell: Funders are becoming increasingly interested in nonprofit outcomes measurement, yet few funders are willing to fund evaluations. How do we solve that chicken or the egg scenario?
Denise: I was recently invited to participate on a panel called “Do Funders Get It?” at a national conference called After the Leap. The panel responded to Nancy Roob’s stirring plenary session in which she described the phenomenal work of the Edna McConnell Clark Foundation in supporting youth development organizations across the country to be more effective.
We posed the question “Do funders understand the resources and support nonprofits require to scale impact?” to the audience, and not surprisingly, the response affirmed the reality that most of us do not. The truth that funders want results but are reluctant to fund evaluations has been confirmed by the Center for Effective Philanthropy, Grantmakers for Effective Organizations, and the National Committee for Responsive Philanthropy, to name just a few.
So how do we solve this dichotomy? As with any attempt at true and lasting change, there is no single silver bullet that will suddenly convince funders to change their traditional ways of grantmaking. But I do believe there is a growing receptivity to the concept of funding for impact, and there is a role for philanthropic affinity groups and regional associations to educate their membership with concrete suggestions that funders can use with their boards, professional staffs and grantees.
Government funders are beginning to understand the importance of funding what works, and this will raise the stakes for nonprofits that rely heavily on public support. They will have to demonstrate impact or they will not receive support. This will raise the evaluation imperative to standard operating procedure, and funders that care at all about their grantees will be compelled to support building evidence that their approaches do, in fact, achieve sustainable results.
Nell: Although Saint Luke’s Foundation is a real trail blazer in the philanthropic world, philanthropy overall is rather slow to change, particularly when it comes to funding in new ways. What do you think it will take to get more funders to understand that stronger nonprofit leaders and organizations can equal more impact?
Denise: Thank you for your kind words. Our change in spending policy and approach was largely informed by Mario Morino’s admonition to “rethink, redesign and reinvent the why, what and how of our work in every arena.” He went on to suggest that we “need to be much clearer about our aspirations, more intentional in defining our approaches, more rigorous in gauging our progress, more willing to admit mistakes, more capable of quickly adapting and improving – all with an unrelenting focus and passion for improving lives.” When put that way, who could argue?
Foundations and nonprofits are about the business of improving lives. The Foundation’s role is not to DO the work…our job is to support those who DO. And unless we are willing to provide sufficient support to enable our grantees to build systems to assess the impact of their practice, we will fail. We must be bold in challenging and supporting one another to disrupt the sector in unprecedented ways. We at Saint Luke’s Foundation have changed our approaches from spending to strategy to portfolio management, but we have stayed true to our original mission statement to improve and transform health and well-being in our community. I suppose it is fair to say that our very mission implies that we will fund what improves and transforms…and therefore we see it as being true to our mission to build highly effective provider organizations.
Photo Credit: Saint Luke’s Foundation
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