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Real Talk about Real Costs

Creating Honest Conversations Between Nonprofits and Funders: An Interview With Eric Weinheimer

Eric WeinheimerIn today’s Social Velocity blog interview, I’m talking with Eric Weinheimer, President and CEO of Forefront, the only regional association that represents grantmakers, nonprofits, advisors, and social entrepreneurs. With 1,100 members in Illinois, Forefront provides education, advocacy, and research, and mobilizes its members around issues that are important to the nonprofit sector.

Prior to his current role, Eric was the CEO of The Cara Program, a nonprofit that provides comprehensive training, job placement, and support services to individuals who are homeless and struggling in poverty. Eric was selected as a member of the Emerging Leaders Program for the Chicago Council on Global Affairs and as a Chicago Community Trust Fellow. He was also appointed by Illinois Governor Pat Quinn to the Social Innovation, Entrepreneurship, and Enterprise Task Force. He serves on the Advisory Board for the Social Enterprise Initiative at The University of Chicago Booth School of Business and on the Board of Directors for the Oak Park-River Forest Community Foundation.

Nell: Forefront is the only statewide association that has both nonprofit and funder members. How does Forefront deal with the power dynamic that is so often present between grantors and grantees?

Eric: Forefront talks explicitly about the power dynamic in much of our programming and classes, specifically our annual Grantmakers Institute for new program officers. We have candid conversations with these grantmakers and present actual case studies to give them a better understanding of their power and unique position. We also discuss how others perceive them and their roles, and how those perceptions can impact their effectiveness.

Forefront also has a non-solicitation policy that prevents nonprofits and grantmakers from discussing specific requests or proposals with each other when they gather at Forefront. The spirit of that policy also extends to how we bring grantmakers and nonprofits together. When nonprofits and grantmakers meet at Forefront, there is an explicit goal or purpose related to an issue in their fields or in the sector. While the power dynamic still exists, putting the focus on a larger purpose rather than on money helps our members build trust, leading to more genuine and balanced relationships. We also make sure that grantmakers and nonprofits co-chair some of our affinity groups to ensure balanced perspectives.

Nell: One of Forefront’s biggest initiatives is Real Talk about Real Costs, a series of funder and nonprofit convenings (the first in the nation) to talk about funding the full costs of nonprofit organizations. What have you learned through this series both about how to encourage more effective conversations between nonprofits and funders and about how to better support strong nonprofit organizations?

Eric: In the conversation on Real Costs we’ve learned that it’s not about creating another resource or a toolkit. Its not about what grantmakers or nonprofits should or should not do. Rather, it’s about starting an honest conversation. There are so many grantmakers and nonprofits that haven’t had the opportunity to dig in and engage with this work, either independently or with feedback from their counterparts. Our value-add is to catalyze these conversations. Forefront’s role is to create the space for honest dialogue, mobilize our members around this issue, promote best practices, and curate and share the newest research. It’s a slow and gradual process, but it ultimately leads to change in awareness, understanding and behavior.

Nell: How far do you think the national social sector has come in terms of more effectively supporting strong nonprofits and building more transparent and effective funder/nonprofit relationships?

Eric: We’ve certainly made some progress in the last 15 years, but we have a long way to go. It’s encouraging to see more funders express interest in general operating support and capacity building. However, too often, funders’ still feel the need to be in control and prescribe certain solutions rather than engage communities for their feedback and ideas.

Likewise, nonprofits have become more transparent, but they are still too reluctant to admit to challenges or failures because of possible consequences to their funding. Funders could model this practice for the nonprofits much more than they currently do. Funder transparency is only in its infancy.

Nell: Your national counterpart, Independent Sector — a national membership association of nonprofits and funders — had a recent change in leadership with Dan Cardinali taking the helm. What would you like to see Independent Sector doing to move this work forward on the national stage?

Eric: Dan is terrific – smart, experienced, strategic and passionate. He will do a great job. Under his leadership, Independent Sector (IS) has a real opportunity to be the connective tissue for our sector and elevate the good work that is happening around the country. I would encourage Dan to focus on a few of the critical issues facing our sector, both internal and external. Whether it be real costs, transparency, the power dynamic, or policy and advocacy, IS can highlight and amplify where real progress is being achieved and help to transport those examples to other locations. Once new practices take hold in certain geographic locations, other regions will follow suit. Organizations are eager for strong leadership that informs, inspires and mobilizes them to action.

Photo Credit: Forefront

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Debunking the Nonprofit Overhead Myth: An Interview with Laura Zumdahl

Laura ZumdahlIn this month’s Social Velocity blog interview, I’m talking with Laura Zumdahl, Vice President of Nonprofit Services at Donors Forum. Donors Forum provides networking, education, leadership and advocacy for philanthropists and nonprofits in Illinois. Laura provides leadership to Donors Forum’s efforts to strengthen nonprofits. I wanted to talk to Laura and Donors Forum primarily because of their innovative work bringing nonprofits and philanthropists together to talk about the real costs (including administrative costs) of creating social change through their Real Talk about Real Costs effort I highlighted earlier this year.

You can read past interviews in the Social Innovation Interview Series here.

Nell: What was the impetus for Real Talk about Real Costs and what is your ultimate goal with the project?

Laura: We’ve long known “overhead” has been a challenge in the nonprofit sector. Over the past few years, we’ve been engaged in some conversations and education about overhead and the “starvation cycle” that encumbers nonprofits, but it had been in fits and spurts.

In 2012 Donors Forum decided we needed to do more to directly address the issue with our membership and see what kind of change we could make locally on this tough issue. So we launched a “Community of Practice” focused on bringing together a group of dedicated funders and nonprofit leaders to tackle the issue over the course of a year through education, sharing of stories, and collective action to move the needle on funding nonprofit overhead.

Ultimately, we want to see change in the sector related to funding the full cost of service delivery. We want nonprofits to be able to understand and articulate their true costs of delivering their missions, and we want funders to understand those costs and fund organizations accordingly. We want funders to invest in the impact they can have with their dollars, not just a limited portion of a program that doesn’t include the real costs. For nonprofits to have a greater impact, they need to have their mission fully-funded.

Nell: The underlying assumption behind Real Talk about Real Costs is that it is possible to get nonprofits and funders to talk openly and honestly with each other. But that is something that rarely occurs in the sector because of the power imbalance between grantor and grantee. How do you overcome that imbalance and get to open, honest, productive conversation?

Laura: The power dynamic you articulated is often a huge barrier for authentic, productive conversations between grantors and grantees. We recognize that as part of the challenge of this work and know that we are only going to make change by helping people to shift that in their own work and experience so they can understand the perspective of the “other”.

When we first started this effort we formed a community of practice comprised of about 30 leaders – half grantors and half grantees. This community spent a year coming together every six weeks or so to learn more about overhead cost issues, hear each others’ stories about the challenges related to their work, and develop relationships. We intentionally focused on helping them to create a trusting and safe space where they could understand and learn from each other. It’s not easy to get to open and honest conversation when power dynamics are at play, but we saw this happen when we were deliberate about getting a commitment from participants to engage in this way and create a space for them to develop relationships and trust to allow these conversations to take place.

Nell: What are your plans, or do you have any plans, to take these conversations to a national level? How do we encourage these conversations beyond Illinois?

Laura: We do! We are continuing to work with our national partner, The Bridgespan Group, on the ongoing conversations at the local level in Illinois. We plan to launch another community of practice later this year, which will continue this work that has evolved over the past few years. We also are working with other great national partners, such as Guidestar and Grantmakers for Effective Organizations (GEO), to take the conversations to a national level and encourage change in other locations, not just Illinois.

We need to encourage these conversations across the country – and that happens when people take the risk to build relationships that enable authentic conversations so stories can be shared and nonprofits and funders can work together to make change on how we address the issue of overhead costs in the sector.

Nell: What do you make of Guidestar, Charity Navigator and BBB Wise Giving Alliance’s recent Pledge Against the Overhead Myth? How do you think their efforts will affect donor actions?

Laura: We were thrilled to see Guidestar, Charity Navigator, and BBB Wise Giving Alliance make such a strong statement to the donors of America. Their recognition of how overhead rates can be wrongly used as a measure of effectiveness helps to raise awareness about this misconception and the importance of donors investing in impact.

Their leadership on this issue and the pledge that they’ve asked donors to commit to is an important step in helping to clarify the myths that have long surrounded overhead costs. They are looked to by many donors for signs of what to consider when selecting nonprofits to invest in, and their plea to donors to consider the real cost of outcomes and impact of an organization – not just a ratio that doesn’t tell the whole story – is a clear directive that we hope will affect both individual and institutional donors substantially.

Nell: What do you think it will take to really move the needle and get a majority of donors to recognize and invest in real nonprofit costs?

Laura: Change is hard when you are trying to affect behavior in a whole sector, so it’s not going to happen overnight. It’s a long process of affecting change in some areas that can build and eventually influence others to reconsider how they invest in real costs. We believe that if we can take the lead on making change in Illinois and share that experience with others, it’ll eventually help to influence behavior in other geographic areas across the country – hopefully leading to a wide-spread sector shift somewhere.

Several years ago nonprofits and funders weren’t talking about this issue together – and now, in some small pockets – they are. That’s a step in the right direction. And those of us in the sector need to support this work by making a personal commitment to address the myths around overhead whenever we can so we are part of making change happen.

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