Constraint or Opportunity?

One of my favorite organizations and a critical player in the creation of a well-capitalized nonprofit sector, the Nonprofit Finance Fund, is seeking feedback.  NFF is a community-development fund that makes millions of dollars in loans to nonprofits and pushes for fundamental improvement in how money is given and used in the sector. Last March they published the results of a survey about how the recession is affecting the nonprofit sector.  They plan to conduct a similar survey this spring, and, in a bow to crowd-sourcing and transparency, are soliciting feedback on questions to ask in this year’s survey.  They are soliciting this feedback through comments left at the Tactical Philanthropy blog.

Last year’s survey was a good one, but a key element was missing.  The survey focused solely on the challenges that the  recession brought. Question after question had a similar pessimistic, constraint-filled theme. For example the only options available to a survey respondent in the question “To successfully weather the current economy, please check all actions below that you have taken in the last 12 months or are planning to take in the next 12 months” were negative.  The options assumed that the recession provided only challenges, not opportunities, to nonprofits. The possible responses were:

• Develop a ‘worst case scenario’ contingency budget
• Reduce staff or salaries
• Freeze all hires and current staff salaries
• Reduce staff hours (short weeks, furloughs, etc.)
• Reduce staff benefits
• Reduce or eliminate programs
• Collaborate with another organization to provide programs
• Collaborate with another organization to reduce administrative expenses
• Merge with another organization
• Reduce or refinance occupancy costs
• Sell assets such as a building or securities
• Use reserve funds
• Delay payments to vendors
• Speed up the collection of receivables
• Engage more closely with your board through more frequent reports and meetings when necessary
• Hold conversations with funders to explain your situation and projections and/or to discuss the use of currently restricted grants

19% of respondents said “none of these” or “other.”  I’m curious about those respondents.  Is anything innovative going on there?  Maybe, maybe not, but is anybody asking?

In the business world, examples abound of companies that capitalized on a recession to gain market share, snap up talented employees from their competitors, create a new product or service, and so on.  Are there really no examples of innovation in the face of adversity in the nonprofit sector?  Or are we so mired in the charity mindset to think that innovation in the nonprofit world is not possible, particularly when economic times are tough.

I understand that this survey was primarily intended to uncover the financial situation of the nonprofit sector, but was there really no room to understand any potential opportunities the recession afforded and how nonprofits might be  capitalizing on those opportunities?  I don’t mean to be a Pollyanna in the midst of a dire situation, but if we continually throw pessimism and constraint at the nonprofit sector doesn’t it make sense that they will continue to feel constrained and pessimistic?  Is there a possibility that some innovation exists out there?  Perhaps there are examples of nonprofits who bucked the trend and took the recession head on, revamping their approach to the social problem they are working on, or the funding of their operations, or the delivery of their services, or their response to competitors.

Let’s uncover the Southwest Airlines (creator of the “Grab Your Bag, It’s On” anti-recession ad campaign) of the nonprofit world who are taking the recession by the throat, making some bold moves, and innovating amid constraint.

We’ve seen it here at Social Velocity.  One of our clients, Heart House, an after-school program for at-risk children, decided last year to kick their vision for growth into gear, despite the recession.  The program, currently serving 500 kids in Austin and Dallas, knows they have a great, scalable model, so they put together a growth plan to go statewide.  Social Velocity helped them refine the plan and create an investor pitch around it, and they went out to raise $1.5 million in growth funding, recession be damned.  A few months into their campaign they’ve already raised a third of the money.  They don’t sit around talking about constraint and the horrible economy, yet they are feeling the pinch just like the rest of us.  They seized the opportunity:  when funders have nonprofit after nonprofit coming to them begging for money to get by, Heart House talks about something completely different.  They are talking about big plans, a grand vision, results and a way to scale those results, a way to solve Texas’ afterschool problem.  And funders are intrigued.

Let’s uncover those stories. Let’s hold them up as an example of how constraint can breed innovation.  That’s inspiring.  That’s encouraging.  That’s bold.

Tags: Heart House, Nonprofit Finance Fund, recession, Social Velocity, Southwest Airlines, Tactical Philanthropy

Messaging Impact

There is a missing link, I think, in how many nonprofit fundraisers approach their work. And that missing link is effective messaging.  Fundraising often uses the messaging of need.  “We need $100 to provide our programs.” “We need $1,000 to meet our goals.”  And many who counsel fundraisers continue to stress the messaging of need, for example Mal Warwick’s most recent article in the Stanford Social Innovation Review. Mal encourages fundraisers to strengthen their case for giving, but, for Mal, this case for giving is about the organization’s need: “be certain your donors understand both the more urgent need for your services during tough times and the many concrete steps you’re taking to increase your efficiency and effectiveness.”

That’s not how to raise money effectively.  To raise significant money you need to focus on impact. The messaging of impact is very different from the messaging of organizational need.  The messaging of need gets you donations.  The messaging of impact gets you investments.  And the two are very different:

Donations:

• Focus on organizational needs
• Tend to be smaller in size and shorter in length
• Are a response to an apologetic ask (the “tin cup” mentality)

Investments

• Focus on the impact (the change in outcomes) that an organization makes in the community
• Tend to be larger and longer
• Are presented as an opportunity

To raise significant, sustainable revenue, nonprofits have to move towards developing investors.  Here is how raising investments differs from raising donations:

A successful fundraiser looks for investors who share the organization’s values and theory of change, and then  demonstrates to them how the nonprofit creates that change in the community.  The organization is merely a conduit for investing in change in the community. For example, an afterschool program for at-risk children is translating dollars into positive outcomes for the children in their charge (increased student achievement, fewer high-school drop outs, lower crime rates, etc.).  If the organization were to fundraise around the organization’s needs, “Help us  reach our goal of raising $100,000 for our program,” they would raise far less than if they were to fundraise around impact, “Invest in our organization so that we can improve opportunities for children, which creates fewer burdens on our community, more contributing members, and a healthier overall community.”  The first message is about strengthening an organization, the second message is about strengthening a community.  Which is more compelling?  Which would make someone give more and continue to give if the promised impact is actually delivered?

The recession is, no doubt, a difficult time to raise money. But within this structural constraint there lies an opportunity.  By moving an organization’s messaging from need to impact, from donation to investment, there is the opportunity to raise much more money and in so doing, to deliver much more impact.

Tags: donation, Fundraising, impact, investment, Mal Warwick, messaging, nonprofit, recession, Stanford Social Innovation Review

Asking for Money in a Recession

In difficult economic times like these it can seem impossible and exhausting to raise money.  It may appear that everyone is saying no, and raising enough to keep your nonprofit going is nearly impossible.  You may grow angry at those who have wealth, but are unwilling to part with it because of fear and uncertainty.

In times like these it can be helpful to remember why people give and what motivates and demotivates giving.  It is important to take a bigger picture view of what you are asking for.  You are NOT asking for donors to keep your organization from shutting down.  You are NOT asking them to save a sinking ship.  You are NOT asking them to fix a deficit in your organization.

It has to be a much larger conversation.  You are asking them to seize the opportunity to invest in a solution to a serious problem their community faces.  You are asking them to make another person’s life better and by doing so they will make their own and their community’s lives better.

The Nonprofiteer, a blog on nonprofit issues, responded recently to a nonprofit Executive Director’s frustration at trying to raise money in this climate.  The ED is fed up with the wealthy individuals she is trying to raise money from:

Here’s my problem: whenever I tell donors how desperate we are, I get a sob story about how desperate THEY are.  (The next person who tells me he simply doesn’t read his 401K statement is getting a swift kick in the pants.) It’s obvious these people have money; they just don’t want to share it with us.  What’s your advice?

The Nonprofiteer shows no pity for this ED and in fact demonstrates how wrong her approach is.  Rather than viewing donors as selfish and out of touch with the needs of her organization, the ED needs to change the conversation and convince the donor how her organization is providing solutions.  She needs to demonstrate that an investment from that donor will make a real impact in their community:

People don’t give to agencies they think are desperate; they give to agencies they think are successful…It may be accurate to say, “Without your $100, we won’t be able to house our clients tonight.”  But it’s just as accurate, and twice as effective, to say, “With your $100, tonight Charles and David will have a place to sleep and access first thing tomorrow morning to telephones and computers to continue their search for a job.”

And I would take it even further.  An investment in this organization will work towards getting Charles and David into successful jobs and housing so that they become self-sufficient and are no longer a burden on the community’s safety net.  You as a donor will not just be helping them get a good night’s sleep you will be setting them and people like them on a path towards becoming fully contributing members of our community.  And then their beds will be free for others to start their journey along the same path.  In essence, you are investing in a trajectory where there are fewer burdens on our society, more contributing members and a stronger, healthier community.

The conversation completely changes from one about a narrow, short-sighted mentality, to one about investing in dramatic changes in our community and our society that inspire passion and commitment, energy and enthusiasm.

Sean Stannard-Stockton wrote earlier this year in the Stanford Social Innovation Review about why people give.  He echoes this argument that people give from a desire to connect to and have impact on their communities:

I believe that giving is motivated by humans’ deeply held need to find meaning in life. For most people, meaning is deeply intertwined with community connections (defining community as narrowly as family and as broadly as the full community of life). Humans want to feel a sense of connection and a sense of purpose to life. Giving (time, money, and energy) is a central way that we strive to find meaning.

The more that nonprofit leaders, board members and Development Directors can demonstrate how an investment in their organization creates significant and meaningful change in the world and community around a donor, the more success nonprofits will have.  People need to be excited, engaged, energized, passionate and committed in order to give in a significant way.  To get to that you need to broaden the conversation.

Tags: donors, Fundraising, Nonprofiteer, recession