theory of change
There are many things that hold the nonprofit sector back, not the least of which is a lack of money. But perhaps a bigger impediment is the scarcity thinking that may actually contribute to that lack of money.
Most nonprofit leaders, their staffs, board members, and even funders automatically think that resources will always be scarce. It is such a profound psychological impediment because if your assumption is constant deficiency, then you will never try for more.
But shifting this nonprofit mindset from never having enough (scarcity), to endless potential (abundance) could transform the sector.
Scarcity thinking is dangerous because it demonstrates a destructive fixed mindset. Carol Dweck’s pivotal 2006 book, Mindset: The New Psychology of Success, describes two ways that people view their abilities, a fixed and a growth mindset, and I think her approach holds great insight for the nonprofit sector.
A person with a fixed mindset believes “that your qualities are carved in stone,” whereas a person with a growth mindset believes “that your basic qualities are things you can cultivate through your efforts.”
Dweck describes the benefits of the growth mindset:
[In the growth mindset your] traits are not simply a hand you’re dealt and have to live with…In [the growth] mindset, the hand you’re dealt is just the starting point for development…People in a growth mindset don’t just seek challenge, they thrive in it. The bigger the challenge, the more they stretch…Sometimes people with the growth mindset stretch themselves so far that they do the impossible.
Isn’t that exactly what we need more of in the nonprofit sector, more seeing the hand you’re dealt as just a starting point, more doing of the impossible?
The growth mindset ultimately leads to “an ever-higher sense of achievement” and “a greater sense of free will.” Wouldn’t that improved sense of achievement and greater sense of free will be transformative to the nonprofit sector?
Nonprofit leaders can drive this shift by moving their organizations and supporters from a fixed to a growth mindset, in several areas:
- From Charity to Social Change
Instead of operating from the fixed charity mindset of “good work” that is tangential to and less valuable than the “business” of the world, move to a growth mindset that offers board members, funders, volunteers, advocates an opportunity to create meaningful, lasting social change.
- From Fundraising to Financing
Instead of focusing on a fixed ceiling of money you think you can raise, figure out what your nonprofit ultimately exists to accomplish and create a financial growth plan to realize that.
- From a Disengaged to a Productive Board
Instead of bemoaning an unproductive board, seize the opportunity to grow the skills, experience and networks you need on your board to accomplish your goals and build it.
- From a Burned-Out to an Energized Staff
Instead of only paying what you think you can afford for a skeleton staff, figure out what it would cost to hire enough and the best staff you need, then grow your financial model to reach that.
- From Constricting to Allied Funders
Instead of complaining about funders who make restrictive demands, enlist them as partners in the social change you seek, educate them about your true costs, invest them in your theory of change, and then work with them to build the resources you need to get there.
And the list goes on. The point is that there is tremendous opportunity in the simple act of shifting your thinking. By removing the shackles of a fixed mindset you can set your nonprofit, your board, your staff, your funders and ultimately your social change goals on a path toward what you once thought was impossible. That’s powerful.
Photo Credit: astridle
I’ve been leading several strategic planning efforts lately, and I am always amazed at the nonprofit sector’s general fear (borderline hatred) of strategic planning. I get it, strategic planning has traditionally been done so badly that many have just given up on the idea altogether. But that’s a mistake.
Without a long-term strategy for what your nonprofit is trying to accomplish and how you will marshal people and money to reach it, you are just spinning your wheels.
Rather than be a feared and misunderstood exercise, strategic planning can actually be distilled into 7 key questions. Now granted, these are really challenging questions, but they can be the impetus for some thoughtful strategic decision-making among board and staff. These 7 questions must be tackled in the following order because they build on each other.
The 7 questions are:
- What is Our Marketplace Map?
As a nonprofit you will be most successful when your 1)core competencies (what you do better than anyone else) uniquely position you to address 2)a community need, apart from your 3)competitors or collaborators. So the first step in strategic planning is to map those three areas and figure out where your nonprofit lies. But because you cannot create a strategic plan in a vacuum, you need to do market research to see how future trends might impact your place in the market.
- What is Our Theory of Change?
A Theory of Change is an argument for why your nonprofit exists. It helps you articulate who your target populations are and how you employ your core competencies to change outcomes for them. It is a fundamental building block to any strategic plan because if you don’t know what you are ultimately trying to accomplish and for whom, how can you possibly chart a future course?
- What Are Our Vision and Mission?
These two statements are NOT feel-good rallying cries. Rather they are instrumental elements of your future direction. Your nonprofit’s Vision relates to the “Outcomes” section of your Theory of Change and describes how you want the world to be different because of your work. And the Mission relates to the “Activities” section of your Theory of Change and describes your day-to-day work to move toward that Vision. Any good strategic plan takes a hard look at the two statements and revises them as necessary.
- What is Our Mission and Money Mix?
Once you’ve articulated your Theory of Change you need to analyze your current programs to understand how well each one contributes to 1) your Theory of Change, and 2) the financial viability of your organization. This allows you to understand where to grow, cut, or restructure programs to align with your strategy.
- What Are Our 3-Year Goals?
Given your long-term Theory of Change, you then need to determine what 3-5 broad things (goals) you want to accomplish in the next 3-years. A strategic plan is too limited if it only charts 1-2 years out, and 4+ years is so far ahead that it’s probably meaningless. Typically those 3-5 goals break down like this: 1-3 program-related goals, 1 money goal, and 1 infrastructure (board, staff, systems) goal.
- How Will We Finance The Plan?
A strategic plan is not effective without an attached financing plan because there is no action without money. So as part of the “money goal” of your strategic plan you must project how revenue and expenses (and capital investments if necessary) will flow to your nonprofit over the timeframe of the plan. This becomes your financing plan.
- How Will We Operationalize It?
So many strategic plans have started out strong but withered on the vine because they had no implementation or monitoring plans attached. You have to include a way both to track the tactics necessary to achieve your goals and to monitor regularly whether the strategic plan is coming to fruition. Do not overlook this most critical (and often forgotten) piece.
There is a smart way to create nonprofit strategy. But it requires hard questions and the time and effort necessary to thoughtfully answer them.
If you’d like to learn more about the strategic planning process I take my clients through, visit the Social Velocity Strategic Planning page.
Photo Credit: pixabay
I so often hear from nonprofit leaders about how difficult it is to convince a donor to give to their organization. They will complain that it seems almost any other cause has an easier time attracting support. For example, the head of an arts organizations once told me how hard he found fundraising because he isn’t “selling cute puppies and kittens.”
But the fact is not that some causes are inherently easier to sell, but rather that some nonprofits are savvier about articulating why someone should give. A nonprofit leader will be most successful at generating support (money, ambassadors, board members, advocates) when she finds donors who share her organization’s specific values and makes a compelling case to them for investment.
So the first step in creating your nonprofit’s message of impact is a Theory of Change — an argument for why your nonprofit exists. A Theory of Change forces a nonprofit’s board and staff to articulate what work they do and what they hope the result of that work will be. In a Theory of Change you answer questions like:
- Who is your target population of clients?
- What core mission-related activities are you engaged it?
- What outcomes are you hoping to achieve from those activities?
You must articulate what social change you are seeking if you want to attract partners in that work.
The second step in your message of impact is to create a Case for Investment that lays out a logical argument for why you need support for that change work. A case for investment includes an articulation of:
- The community need that you are trying to address
- Your nonprofit’s unique solution to that need
- The impact (or results) you are achieving
- Your financial model
- The strategic direction of your organization, and
- The resources required to bring your plans to fruition
And the third step is making sure that you are talking to the right potential donors. You must find people (individual donors, foundation officers, corporate heads) who recognize and are passionate about solving the same community need which your nonprofit is uniquely positioned, because of your core competencies, to solve. Like this:
In other words, your fundraising target is NOT anyone and everyone, but rather a very specific group of people who share your nonprofit’s view of a community problem.
Once you create a Theory of Change and a Case for Investment and identify the prospects who might be predisposed to support your work, you are sufficiently armed to present your pitch. With a clear argument and a target list of prospects you can more effectively gather partners.
If you want to learn more about creating a message of impact for your nonprofit, download the Design a Theory of Change and the Craft a Case for Investment guides. And if you want to learn how to find the right donors, download the Attract Major Donors guide. Good luck!
Photo Credit: Settergren
Although the definition of a “startup” is an organization that has been around for only a few years, there are many nonprofits that are still in startup mode despite their 20+ years of existence.
But the good news is that you don’t have to wait around for a knight in shining armor to save you from the endless startup existence, which is the topic of today’s installment in the ongoing Financing Not Fundraising series.
The power to begin scaling the startup wall is actually in your hands. Here are the steps to begin:
- Create Your Business Plan
Probably a big part of the reason that you are still struggling as a startup (more than) several years in is that you haven’t strategically connected operations and financing to your mission. A business plan that answers questions like “How will you finance the business?” and “Who are your target customers (clients AND funders)?” and “What’s the right staffing structure?” and “What are the goals of the business?” and much more. Just because the profits from your business enterprise go back into the organization (nonprofit) instead of into the pockets of the owner or stakeholders (for-profit) doesn’t mean you don’t need a business plan. Figuring out how to align money, mission and operations is the first step to a stronger future.
- Grow Your List of Champions
If your nonprofit’s inner circle consists of a founder and a few friends you will never grow. You have to convince people beyond those who already love you to internalize the work of the organization and become actively involved as board members, advisors, fundraisers. But you cannot target anyone and everyone. You have to identify people whose values connect with your work and your mission. And they have to have some specific skills, experience and networks that will help your organization move forward. But if you’ve only ever had your friends behind you, how do you convince outsiders to become champions and board members? Keep reading…
- Develop a Value Proposition
If you are unable to articulate among internal board and staff what your nonprofit is hoping to accomplish and the value it provides the community, how can you possibly convince others to become involved? The first step in really taking things to the next level is to develop that value position, or a Theory of Change. A Theory of Change is basically an argument for why your nonprofit exists — how you take community resources (inputs) and create changes to program participants’ lives (outcomes). To move from merely getting by to really making strides, you must create this argument.
- Convince Others to Give
Once you have your Theory of Change in place you need to make a compelling argument for how more inputs (funding) will help you create more outcomes. A case for investment is a logical, reasoned argument that helps you to make this case convincingly. Once completed, pieces of your case for investment can be used in fundraising appeals, on your website, in thank you letters, in marketing campaigns and much more. It is the fundamental building block to attracting more dollars to your nonprofit.
It doesn’t have to be a rule that the vast majority of nonprofits subsist in an endless startup mode. If you need some help finding your way out of startup mode, download the Nonprofit Startup Tool Bundle.
Photo Credit: Chad K
This week I attended the After the Leap conference in Washington D.C. and was blown away. As I mentioned in a post earlier this year, the conference was organized by Social Solutions and PerformWell partners Child Trends and Urban Institute and builds on the momentum Mario Morino has created around his book, Leap of Reason, published in 2011, and the companion book Working Hard & Working Well by David Hunter published this year.
This first-ever conference was an attempt to bring the nonprofit, philanthropic and government leaders who are on the cutting edge of the movement to create a higher-performing social sector together to, as Mario put it “grow a critical mass who can mobilize for greater change.”
What’s Government’s Role in Nonprofit Performance?
Day 1 focused on government’s role in driving social sector performance management. A fascinating panel of government agency leaders, moderated by Daniel Stid from the Hewlett Foundation, discussed various efforts at the federal, state and local government levels to drive evidence-based policy and practice. But some in the audience and Twitter-verse wondered whether government could really be the impetus for a greater push towards measuring and managing outcomes in the nonprofit sector.
How Do You Get Buy-In For Change?
From the big, systemic view, the day quickly shifted for me to the organization-level with the fantastic panel on “Getting Buy-In” from staff, board and funders for a shift towards performance management. Isaac Castillo from DC Promise Neighborhood Initiative, Bridget Laird from Wings for Kids, and Sotun Krouch from Roca explained how they had moved their nonprofits toward articulating and measuring outcomes. The most effective approach seemed to be to ask “Don’t you want to know whether the work we are doing is helping rather than hurting?” Isaac made the urgency to move toward performance management clear, “If you haven’t started doing performance management yet, in 12-18 months you will start losing funding to those who are.”
Can We Convince Funders to Invest?
Day 2 of the conference kicked off with an inspiring keynote address by Nancy Roob from the Edna McConnell Clark Foundation that really served as a call to action for the foundation world. Nancy painted a pretty stark picture of the disconnect she saw between how much money we’ve spent on solving social problems in the last decades and how much actual progress we’ve made. She blamed this disconnect on “our piecemeal approach to solutions.” As she bluntly put it, “We are woefully under-invested in what we already know works.” She laid out 5 steps funders can take to move away from piecemeal and toward transformational social change:
- Make bigger, multi-year investments
- Provide more upfront, unrestricted, flexible capital
- Invest in nonprofit evidence building
- Scale what works with innovation, and
- Adopt an investor mindset
But for Nancy, it’s not just up to funders, nonprofits also need to change. She urged nonprofits to:
- Shed the charity mindset
- Focus on the larger context
- Create a performance management culture, and
- Ask for help to achieve performance
From there, Phil Buchanan from the Center for Effective Philanthropy led a panel with Carol Thompson Cole from Venture Philanthropy Partners and Denise Zeman from Saint Luke’s Foundation asking “Do Funders Get it?” While a few funders are willing to invest in helping nonprofits articulate, measure and manage to outcomes, most are not. The panel suggested that some of this reluctance stems from funder’s lack of humility and fear of what they might find. Audience members suggested that it might also be funders’ lack of performance expertise. (You can read Phil Buchanan’s blog post giving more detail on this panel here.)
From there I attended a breakout session “Funder Investment Strategies to Strengthen Nonprofit Performance Management Capacity” where Victoria Vrana from the Gates Foundation and Lissette Rodriguez from the Edna McConnell Clark Foundation and two of their grantees discussed how they worked together to fund and create performance management systems.
The final panel of the day brought an impressive group of nonprofit CEOs together (Mindy Tarlow from Center for Employment Opportunities, Sam Cobbs from First Place for Youth, Cynthia Figueroa from Congreso de Latinos Unidos, Bill McCarthy from Catholic Charities of Baltimore, and Thomas Jenkins from Nurse-Family Partnership) to talk about how they each had built a performance management system at their organizations, the hurdles they encountered, how they funded it, and where they are now.
Where Do We Go From Here?
Mario Morino rounded out the conference with an inspiring call for us to build momentum. He outlined some new ideas coming out of the conference that he’d like to see developed by 2020, including:
- A “Manhattan Project” of social sector evidence
- A National Commission on Nonprofit High Performance
- An Aggregated Growth Capital Fund to deploy billions to solve entrenched national problems
- A Performance Academy for Social Impact
- Presidential Performance-to-Impact Awards
- Social Sector Center for Quality Improvement
- A Solutions Journalism Network to “lift up the hope spots” in the country
- Leap Learning Communities in local settings connected in a national web
This was one of the best conferences I’ve been to in years. The caliber of the presenters and audience was amazing. It felt like I was witnessing the birth of the next generation of the social sector. Buoyed by the ability to see the writing on the wall, this group is determined to lead the fundamental, and critical, shift towards a more effective sector.
The urgency of this movement became increasingly clear through the course of the two days. Our country is witnessing mounting disparity and crippling social challenges. It is increasingly up to the social sector to turn the tide. And the time is now. As Mario charged at the end of the conference “If we don’t figure out how to build high performing nonprofits, nothing else matters. This is the last mile. Our nation depends on it.”
Photo Credit: tableatny
A couple of years ago I recognized that there was a real need in the nonprofit sector for tools to help nonprofit staffs, board members and donors make their organizations more strategic and sustainable.
So I began developing e-books, guides and webinars to explain new concepts (like Financing Not Fundraising), demonstrate how to use new models (like a theory of change) and guide nonprofit leaders to a better way (like better engaging their board).
Today, I am really excited to announce, as promised, the launch of the expanded and streamlined Tools store at Social Velocity.
I have spent the last several months revising and expanding many of the e-books, step-by-step guides and on-demand webinars available for download at the Social Velocity Tools page. And we’ve completely revamped the shopping cart experience to make it easier to find the tools you need and to offer additional payment options.
There are four categories of Tools available to you.
- On-Demand Webinars
These can be viewed whenever and however many times you’d like. Some of the webinar topics include:
- Step-by-Step Guides
These take a complex concept (like a theory of change) and show you step-by-step how to create one for your organization and how to use it to garner more support, chart a strategic direction, and much more. Some of the Step-by-Step Guides include:
These explain new approaches, the theory behind them, and how to start implementing a changed approach in your nonprofit. Like the:
- Tool Bundles
I’m most excited about these bundles where I’ve grouped e-books, webinars and guides around a particular goal a nonprofit leader wants to achieve, saving you 15% off the individual tool prices. For example:
But there are many more e-books, guides, webinars, and bundles available on the Tools page, so I invite you to check it out.
I hope these Tools are helpful to you as you work to move your nonprofit forward. Please let me know if you have questions as you explore.
And as always, please let me know what other tools would be helpful to you.
Fall is here (at least by my calendar!) and that means new opportunities to spark conversation about how the nonprofit sector is changing and how nonprofit leaders, board members and donors need to as well.
In recent months I’ve spoken in Phoenix, New York, Washington DC, Atlanta, and Australia (via Google). And what all of these events had in common is that the audience was hungry for a new way forward.
What I love most about speaking is that it’s a chance to really open eyes to new ways of thinking. And I love, love, love engaging with the audience to challenge their assumptions and former ways of operating.
For example, at an event last month a board member and I got into a lively debate about whether board members should really be bothering with the money raising aspects of their nonprofit. His argument was that it’s the job of the board to focus on big picture mission and programs, not the day-to-day dollar concerns of the organization. My argument, no surprise, is that you cannot separate mission from money and every board member should play a role in the financial engine of the nonprofit.
As we continued to debate, the board member admitted that he actually had helped to open a door to a significant (tens of thousands of dollars) contract for the nonprofit. So in essence he was arguing against what he’d actually helped bring about. Through the discussion he came to realize that if every board member were asked to tap into their skills, experience and networks to accelerate the financial health of the nonprofit (as he himself had already done) it could be transformational.
I love those light bulb moments.
The reality is that often nonprofits exist in a series of catch-22s where board members don’t know how to help, nonprofit leaders don’t know how to get board members moving, funders don’t know the questions to ask, and nonprofits don’t know how to identify their constraints. So we keep having the same conversations over and over again with little change.
Which is why I love to speak to groups and shake up these stale conversations.
Here are some of the most popular topics people invite me to speak about:
Financing not Fundraising
Based on the popular blog series, Financing Not Fundraising, I show nonprofits a new, more effective way to fund their work. I explain concrete ways to move efforts to raise money in a totally new direction, resulting in more money flowing through the doors, a more engaged and effective board, a more energized and integrated staff and ultimately more achievement of mission.
The Future of the Nonprofit Sector
The nonprofit sector and the philanthropy that fund it are changing dramatically. A growing convergence between the nonprofit, for-profit and government sectors is altering how social change happens and increasing competition is forcing nonprofits to shift the way they have always done business. Nonprofit leaders must understand trends and embrace change to emerge stronger and more effective.
The Power of a Theory of Change
A theory of change is an argument for why a nonprofit exists. It is the fundamental building block to creating a strategic direction, measuring your work, garnering more support and ultimately creating more impact in your community. Funders, regulators and others are increasingly demanding that nonprofits demonstrate how their work creates community change. I show nonprofits how to create a theory of change and then use it to drive greater support, engagement and success.
Jump Starting Your Board
A nonprofit’s board is often not doing as much as they could to bring money in the door. I take the fear and inaction out of raising money. I show board and staff how money works in the nonprofit sector, where the board can be most effective, how to get the board excited and engaged in fundraising, and the concrete steps to get them moving.
You can see a more complete list of my speaking topics, past speaking events, and videos on the Speaking page of the website.
If you want to start having new, transformational conversations, invite me to come speak. I’d love it!
Note: I was asked by Markets for Good to write a post as part of their ongoing online conversation about improving how money flows to social change. Markets for Good is an effort by the Bill & Melinda Gates Foundation, the William & Flora Hewlett Foundation, and the financial firm Liquidnet to improve the system for generating, sharing, and acting upon data and information in the social sector.
Over the past several years, Markets for Good has been a forum for discussion and collaboration among online giving platforms, nonprofit information providers, nonprofit evaluators, philanthropic advisors, and other entities working to improve the global philanthropic system and social sector. Below is the post I wrote. You can see this post and the others in their series and contribute to the ongoing conversation at the Markets for Good blog.
As we talk about creating a space “where capital flows efficiently to the organizations that are having the greatest impact” we must address the elephant in the room: how nonprofits are funded.
Currently that’s a pretty broken model. And if we are ever to direct more money to more social change, we must fix it.
In an ideal world, a social change organization would create a potential solution to a social problem, prove that the solution actual resulted in change, and then attract sustainable funding to grow that solution.
But that’s not currently happening because the way nonprofits are funded is broken in three key ways:
Nonprofits don’t articulate a theory of change. 10 years ago it was enough for “charities” to “do good work.” In an ever-increasing drumbeat nonprofits are being asked to demonstrate outcomes and impact. And for good reason. If we are truly interested in social change then we must understand which organizations are actually creating it and thus deserve our investment.
But you cannot demonstrate outcomes and impact if you have not first articulated what outcomes and impact you think your solution provides. Those nonprofits that truly want to solve a social problem (as opposed to simply provide social services) must articulate a theory of change. A theory of change is an argument for how a nonprofit turns community resources (money, volunteers, clients, staff) into positive change to a social problem. It seems simple, yet most nonprofits working toward social change have not done this.
We need to change that. This simple argument is the first step in creating real, lasting social change and attracting money to be able to do it in a financially sustainable way.
Nonprofits struggle to prove impact. Once a theory of change is in place, nonprofits need to prove whether that theory is actually becoming a reality. Nonprofits have struggled for years to figure out how to measure whether they are actually achieving results. But they cannot figure it out on their own.
Philanthropy needs to step up to help fund the work, or on a much larger scale, social science could prove the impact of overall interventions that nonprofits can then implement.
Either way, the burden of proof can no longer rest solely on the shoulders of individual nonprofits.
Fundraising isn’t sustainable. Once social change is actually happening, we want to grow that effective solution in a sustainable way. But that necessitates a real financial model.
Most nonprofits chase low-return fundraising efforts that lock them into a band-aid approach that is far from financial sustainability. Few nonprofits create and execute on an overall strategic financial model that aligns with the impact they want to achieve and their organizational assets.
We have to stop the madness.
We must help nonprofits create an overall financial engine that strategically and effectively supports the social change they are working toward.
Philanthropists must provide nonprofits the runway necessary to find the right financial model for their organizations. Capacity capital funding could do this, allowing nonprofits the space to analyze their current money-raising activities and create and execute on a plan for transforming those into a sustainable financial model. The end result would be nonprofits with a great solution to offer suddenly have the ability to grow the solution in a sustainable way.
If we are really serious about directing more money to more social change, we need to reinvent how money flows to nonprofits. Instead of relying on a broken fundraising model, we need to take a big step back and get strategic. With articulated theories of change, systems for effectively proving impact and the runway to create real financial models, nonprofits will be able to bring social change to sustainable fruition.
Photo Credit: Markets for Good
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