Nonprofit Board Crisis

Nonprofit Scaling 8

Two types of money are out there for those who would like to scale:

Build money and Buy money.  As it's name suggests, build money is the money from donors who desire new programming, innovation, or institutions that will pursue the solving of a problem.  Build money is what I believe to be the classic foundations who use the paradigm of their purpose as either to identify the depth/breadth of a problem; identify a solution to a problem; and/or test the solution.  Buy money builds and maybe sustains the capacity to roll-out the solution -- what effectively becomes sustainability.

New paradigm -- not really; helpful reminder -- sure for those struggling to understand both what they are offering and how to "pitch" their offer.  From my perspective this is all a reminder that those who seek funds should do so only after they fully understand the interests of their "target" donor.  This is one of the foundations to an effective marketing strategy.

A follow-up panel (from which I can't say there were huge aha's for me) went more in-depth on this topic.  The essential message I believe is pretty much a standard for sound sustainability/business planning: know your needs, know what you have, understand what's available and then plan accordingly.

The Finance Project has a five prong strategy I can't say this is a particularly new model): use current resources better; maximize fed & state revenue; leverage; partnerships; dedicated new revenue streams

CWV (Community Wealth Ventures) uses 5 factors that affect sustainability and are the basis for sustainability planning: social impact; focused business strategy tied to this impact; economic viability; capacity to deliver; adaptability.

 Self-sufficiency is an important foundation for achieving sustainability.  Self-suffiency recongizes that there is only so much capital in the market place.  Affecting achievement of this is in-house talent and time.

NFF reminded us that there are a limited number of funders who have a very large role in determining who gets what support.  If this funder doesn't measure the "right" thing, sustainability is affectd.

Again, bottom line --  sustainability strategy must match market interests.  Some panelists suggested that the business model for achieving sustainability has just not been developed.  I would not concur.

 

 

 

Nonprofit Scaling 7

According to Seth Merrin (Liquidnet.com), there are 1.6 million nonprofits in the US.  These are raising $289 billion.  74% have budgets of less than $500,000.

According to Mr. Merrin, the less than $500,000 are not efficient (they at minium all have to support infrastructure) and may not be effective.  So....what to do?

Mr. Merrin maintains that a more efficient marketplace is essential to creating efficiencies and ultimately ensuring better and maximum outcomes which in turn creates more donors.

Toward this end Mr. Merrin offers that three solutions will solve creating an efficient nonprofit market (place):

a) standardized metrics

b) feedback mechanism

c) common reporting system

From what he tells, Mr. Merrin has been successful in attracting funders to wanting to address the efficiency issues.  He and his cohorts will be working through liquidnet.com on getting to this outcome: economies of scale, more money to "best performing organizations"; and increased donor funding.

So, Mr. Merrin is essentially organizing the marketplace so that donors in particular will be in a better position to determine where their investment will produce their most desirable return.  This kind-of happens today but not easily for donors.  From the surface, this seems like a good effort particularly for a capitalist system.  The downside?  those who are squeaking by trying to make a difference in their own communities are at risk of not looking very appealing to donors.  Mr. Merrin refers to this as the reality of a Darwinian world -- only the strong will survive. 

I trust that liquidnet.com and its funders will create a system that focuses on metrics which do not add to the Darwinian-like challenges community-based organizations inherently face.

Nonprofit Scaling 6

churches and colleges are the primary recipients of donor checks because these are the institutions donor fully trust

Nonprofit Scaling 5

A thought about nonprofits and system change:

building alternative systems to substitue for the main stream will never achieve scale

and

systems are not designed to be changed

Nonprofit Scaling 4

Here's some trends Vanesa Kirsch sees in the field of social impact investing:

1. an interest and growing commitment to collective impact

2. agregated giving and reducing the costs of giving as is best illustrated through the Giving Pledge

3. impact investing

4. role of government as a participant in the philanthropic world which includes collaboration between philanthropists, nonprofit and government, and, evidence-based budgeting.

Nonprofit Scaling 3

What's it take to have a successful collaboration?  Here's some lessons from Ben Hecht from Living Cities:

1. Executive Governance matters (senior most folks need to get and stay involved but they have to have their needs met)

2. There needs to be a clarity of purpose between the collaborators and more, the perceptiona and belief in a differential impact -- that there is an outcome that can be achieved together

3. The ambition needs to be bold

4. The work needs to be informed by the best data available to ensure adoption

5. Thought about having an impact on the field must be foundational and ongoing -- in essence, serve as a rapid protype of data -- solving a problem

6. Staffing matters a lot -- the members all have full time jobs and staffing ensures that whatever the members agree to together will get pursued

side ahas -- collaboration is often messy with members having unique ways to make decisions and different cultures so at minimum, members need to build trust and this means, they need to be in relationship for the long term.

 

Nonprofit Scaling 2

From Patrick McCarthy (Annie E Casey Foundation): Bad systems will always trump a good program.  Scaling depends on changing the way systems work. 

Casey lessons about scaling:

1. look for leverage point(s) in the gears that drive systems

2. reimagine how we use our (public) resources understanding in particular how core budget processes work and how decisions are made -- are they based on evidence

3. Invest in infrastructure including linking similar agenda groups together

4. invest in policy advocay

5. practice patience -- systems change takes time

Successful scaling depends on combining what we know about system reform and evidence (what we know works)

Makes sense to me and these folks have spent the money to learn these lessons.

Nonprofit Scaling

I'm attending the Social Impact Exchange's conference on scaling.  Today is the main event but yesterday I attended a pre-session which had one conversation about leadership and talent development, aka human resource development.  Whatever you call it, the takeaway was that it is a bad habit of nonprofits to not pay much attention to their human resources or their humans as resources.  Many invest in serving more and better but that investment generally focuses on adding people, not necessarily on adding prospective leaders.  As Jim Collins says, we need first to get the "right" people on the bus and then, cultivate to result in a strong, sustainable organization. 

A side note, panelists noted that many nonprofits increase their staff but do not increase their HR people proportionately -- an indicator at minimum of what folks think about the HR function.

Oh, and check-out the Independent Sector's Initiative for Nonprofit Talent and Leadership.  They are seeking input about their work on this topic.

 

Nonprofits Market Oriented

Being nonprofit and market oriented/responsive should not be mutually exclusive concepts.  Still, many nonprofit boards and their execs march possibly pursuing old missions while prospective customers are going off looking for new solutions to address their needs and donors and funders support other organizations and activities.

According to the Wall Street Journal, some law schools are being market responsive and lowering their class size.  These schools are seeing the writing on the wall noting that the demand for lawyers has indeed diminished.  Reducing class size does not mean changing mission (at least overtly) but given that these Schools recognize they can reduce the number of student but must maintain their quality if they are going to stay in the game.

So, thanks Law Schools -- you teach an important message to the rest of the nonprofit community.  Demand matters in the pursuit of mission.

Nonprofits: Nobody's Watching Out for the Public?

In a Huffington Post editorial, Pablo Eisenberg sums up his thoughts on a nonprofit executive's malfeasance and trustee's negligence by saying that state and federal regulators aren't given the resources to monitor misdeeds and that strong news organizations are one of the few mechanisms that support public accountability. 

Agreeably the University of Texas Southwestern Medical Center is outrageous and the behaviors of both the exec and trustees are not excusable (although I propose that the behavior of the trustees for permitting the situation and failing in their duty of care to be more unforgivable than that of the exec).  But I can't agree wih Mr. Eisenberg about his summary.  I honestly believe that it is the exception of nonprofit boards who fail to exercise their duty of care and at least attempt to develop and monitor sound fiscal policies and practices and not permit such behaviors as the UofT exec has demonstrated.

And, I don't believe that the public is solely reliant on investigative journalists as their watchdogs while appreciating their interventions when trustees fail.  No, I believe that nonprofit trustees are, for the most part, doing their job as watchdogs with good intent and conscientiousness.  They may not always get it right and have to work hard just to understand how to do so, but in the end, they care about their nonprofits and they care that the nonprofit achieves mission and they will work to see this happen.