Category: strategy

board, case for support, communications, fundraising, invaluable, leadership, management, planning, strategy, theory of change

Want big money? Inspire confidence

Over the holidays, I got around to reading Vu Le’s blog entitled “Hey, you want nonprofits to act more like businesses? Then treat us like businesses” in which he points out that while funders demand nonprofits act more like for-profit businesses, they don’t invest in them like they do for-profits.

While I wholeheartedly and passionately agree with Vu’s requests from funders – more money, more overhead, faster decision-making, more risk-taking, less micro-managing – I think he fails to fully consider the funders’ criticism.

His blog begins with the inciting incident – funders once again asking nonprofits to behave like for-profit businesses. Vu’s title states his viewpoint – if you want nonprofits to behave like businesses then you have to treat us that way – but I think that’s confusing the chicken with the egg.

Yes, to a large extent, nonprofits are backed into a very tight corner because of the way funders invest in them. And yes, I personally believe that if change is going to happen on this front, that funders will be the ones to truly make it happen.

However, you don’t treat a child like an adult just because the child says that’s the only way he’ll grow up and act like one.

Let’s first clarify something: Yes, nonprofits are businesses. Like for-profit businesses, they strive to produce enough goods and services to meet demand; they need to advertise and promote their work; they need to raise enough revenues to cover the full cost of doing business; and they need to reinvest in improving the efficiency and effectiveness of their businesses. The differences are that

  1. nonprofits exist for the public good, to better society or the world in some way, and as such
  2. their “customers” (or constituents) usually cannot pay enough to cover the full cost of business, which means nonprofits are dependent on a third-party donor or funder to subsidize their work; and
  3. they do not distribute their profits to their investors (as Vu rightly points out in his blog).

But when people say that nonprofits should behave like for-profit businesses, well, I think they’re right. Some people who say this are misguided and don’t understand how nonprofits operate (the three points above). But what many are talking about is the way nonprofits manage their organization, from leadership and planning to operations and revenue generation. Nonprofits are often started or run by smart, passionate people who identify a societal need and take action, but few of them have any business or management experience. And I’ll be honest: it usually shows.

Take this one client I worked with last year. He fit this description – a university professor with a sharp mind, a keen understanding of his work, a vision of how to solve a problem. But when I asked him what his business is, he responded, “Well, I don’t have a business. I run a nonprofit.” And this kind of thinking is why he had no strategic plan, no fundraising plan… and a fully volunteer-run operation without enough funding to pay for staff or expand his efforts.

Here’s the thing: if you want funders to invest in you like they do for-profit companies, you need to inspire confidence. When you come to a me as a funder with a good idea, I’m interested in hearing more. But when you fail to present a clear, thoughtful plan for executing the plan, financing the work, and producing concrete, measurable results, what makes you think I’m going to just throw a large sum of money at you?

Do you think for-profit businesses just walk up to venture capital firms without a business plan? Without proof of concept? Without projected financials and results? Of course not. Start-ups work hard to put forth a solid, convincing plan based on numbers and hard evidence. (And they are more open and up-front about the risk, which makes it easier for investors to take a risk, because it is known and calculated.)

If you want to be treated like a for-profit company, you need to inspire the same kind of confidence that for-profit businesses do. To do this you should have a handle on basic business principles, including:

  • Planning. Most organizations have a strategic plan, but does that plan provide a convincing picture of how you will create impact? Does it show how you will strengthen and grow your organization to achieve that impact? Does it include concrete measurements and evaluation of progress and success? Do you have a financial plan that illustrates how you will raise enough revenue to cover the full cost of doing business (not just program expenses)? Does it consider what will happen in the event you don’t raise enough funds? Do you have a budget that not only shows how you will allocate your resources but that also reflects your strategic goals? And do you have a thoughtful theory of change (the equivalent of a business plan) that describes the system you work in, what it will realistically take to achieve change, and your organization’s unique role in creating that change?
  • Finance. Do you have a system to properly manage revenues and expenses? Do you conduct thorough financial reporting on a regular basis? Are you allocating your resources to maximize your impact and improve your cost effectiveness? Do you have a diversified revenue portfolio that covers the full cost of doing business? Do your financial reports show that you have learned from the past to improve your financial standing? Are you able to adapt to changing financial circumstances (a big grant you didn’t get, an economic recession, insufficient overhead, etc.)?
  • Management. Does your leadership inspire confidence? Are they organized, thoughtful, compassionate, and focused on the mission? Does your nonprofit have a high turnover rate or high retention rate? Does the organization have a clear and logical structure to achieve its goals? Does the organization have a culture that is positive, cohesive, evidence-driven, and supportive of learning and development? Does the organization have a human resources function, with clear policies and infrastructure to effectively manage staff? Do different people and teams within your organization communicate and collaborate effectively? Has your organization successfully navigated through a period of rapid growth?

There are other aspects of an organization that can inspire confidence – a strong brand, solid partnerships, compelling communications, an honest risk assessment and a realistic risk mitigation plan, a history of success or proof of concept, etc. – but the three listed above are critical aspects of an organization that funders will question when making decisions about whether to fund your work or not.

And sure, you can say, “Well, if funders only invest in our program work, how will we ever have the time and money to invest in all this other stuff?” To which my response is: ask for it. If you can demonstrate a need for these things, and the benefits they’ll bring to your organization, it’s not a hard case to make. Most funders know the importance of supporting the nonprofit enterprise and will at least add some funding to a project grant to help you build out those competencies. Program Officers are real people with real feelings, and they genuinely care about helping your organization succeed (even if their bosses and the decision-makers are more interested in a return on investment). Especially if you have solid relationships with existing funders, ask for what you need.

I am passionate about nonprofits and I admit I am as frustrated as anyone with the way the sector is held back and inhibited by current funding practices. And again, it’s a chicken-and-egg scenario: if we want funding practices to change, we need to inspire more confidence, which might mean asking for funding to do it.

In the end, though, it does no good to play the whiny child, complaining that we won’t grow up until we’re treated like grown ups. Demonstrate that you deserve to be treated like one, and it will be much easier to get the respect and support you deserve.

leadership, logic model, planning, rationale, strategy, theory of change

6 lessons nonprofits can learn from the Avengers

It’s no secret that I’m a fan of superheroes. And why wouldn’t I be? They’re all about people doing extraordinary things to tackle problems for the greater good.

This year saw the second team up of Earth’s Mightiest Heroes in Marvel’s Avengers: Age of Ultron, bringing Iron Man, Captain America, Thor, Black Widow, Hulk, Hawkeye, and others together to take down a global threat. While the movie had its ups and downs, I realized that nonprofits can learn a lot from this group of do-gooders. After all, they too face seemingly insurmountable problems and have to overcome internal and external obstacles to achieve their goals.

So here are six lessons nonprofits can learn from the Avengers:

  1. You can’t do it alone. The Avengers are a group of superheroes who do plenty of good on their own. They each have their enemies and problems that they tackle in their own corners of the world (and universe). So what would force these different heroes to come together? A problem that none of them could overcome by themselves. Yes, they had differences to work through (see below) but they knew they needed each other because none of them could do it alone. Nonprofits are often like Iron Man or Thor, thinking they are mighty enough to do it all without help. Others are like Captain America, rallying others to work together, some are like Black Widow or Hawkeye, ready to work with others as needed, and others are like Hulk, afraid of working with others at all. The bottom line is that if nonprofits want to tackle big problems at scale – solving systemic, root causes – they need to come together. This is how the buzzword “collective action” came about: the idea that we need to work together to achieve real, lasting change. Each organization has its own goals and niche but we come together around a common vision and collectively succeed.
  2. Teamwork is most successful when each member gets to apply their unique skill set. Yes, they’re all pretty fit and strong, but the Avengers are a hodgepodge of heroes, each with their own talents. They clash when there is ego and competition – who’s strongest, smartest, fastest? – but they succeed when they each respect one another’s unique talents and divide the work accordingly. The same is true for nonprofits, whether it’s within an organization or different organizations working together. Instead of one person or organization taking charge of all the work, it’s important to recognize the point above – you can’t do it alone – and divide the work such that each member gets to apply a unique set of skills. Be respectful of each other’s contributions and be humble enough to let others have ownership over something.
  3. Disagreements can be healthy discussion for growth. Because they’re big personalities, each with their own experiences and perspectives, the Avengers don’t always see eye to eye. Captain America and Iron Man/Tony Stark notoriously butt heads, eventually leading to a Civil War among heroes (to be featured in a film next year). In the latest Avengers film, Tony ends up disagreeing with not only Captain America, but Thor and Bruce Banner too, as he pursues his own agenda for creating a security system for the planet. But in the end, these disagreements are how Tony learns to set aside his personal goals and be a better teammate. Sometimes in the nonprofit world, we’re so consumed with our perspective that we don’t want to hear others’ opposing viewpoints. But being open to others’ views and ideas can help strengthen our own by showing us our weaknesses or by offering new questions, thoughts, and insights that help us develop and expand our own thinking. Smart organizations seek out new ideas, rather than dismissing them.
  4. The best intentions can have unintended consequences. In his attempt to protect the planet from another alien invasion, Tony works on the Ultron Project: an artificial intelligence system designed to act as a first line of defense. Of course, what he didn’t foresee was that the system would be so intelligent it would consider humans a threat to themselves, and therefore attempt to eliminate humankind. Similarly, nonprofits set out to solve problems but don’t always consider all the possible effects their actions may have. Taking a simplistic or myopic view of your work and its outcomes may leave you unprepared when things change or the unexpected happens. Organizations should invest in scenario planning – considering different possible futures you may encounter – and in risk assessments that lay out mitigation plans. The best way to ensure you are successful is to plan ahead and be prepared to adapt.
  5. Tackling problems means going after root causes. The Avengers track down Ultron with the aim of destroying him before he destroys humanity. As they attempt to stop their enemy, they also make sure to take care of all the people in danger’s way. But while the Avengers save innocent bystanders, they ultimately they go straight after the root of the problem. Nonprofits don’t always do the same, sometimes dealing with the immediate without ever tackling the root cause. While it’s important to handle the effects of the problem until the problem is solved, it’s far more important to go after the source of the problem, staving off any further negative effects. Effective organizations go after root causes to ensure a lasting solution to the problem they’re facing.
  6. Solving problems means following through to the end. Because Ultron was an artificial intelligence, it wasn’t enough to just destroy his physical form. In order to ensure that Ultron was eliminated for good, the Avengers had to destroy every last robot he built and controlled, so that there was no remaining piece of the program that could survive and rebuild itself. Nonprofits should work towards doing the same – going after the problem with the aim of eliminating it. Not reducing it and not just treating the symptoms of it but pursuing the eradication of the source of the problem. It isn’t going to be easy, but hey, neither is anything worth doing. Organizations should be making progress towards reducing the problem, not just keeping it at bay.

So go ahead. Mock me for liking comic books and superheroes. But don’t dismiss these important lessons for anyone aspiring to tackle societal problems and creating lasting change….

fundraising, planning, strategy

5 things most fundraising plans are missing

A fundraising plan is a critical document for any organization. After all, it states how the organization will generate enough revenue to cover its costs, and if it can’t cover its costs, it can’t make progress towards its mission.

While an organization can do without a formal plan written on paper, the benefits of having a detailed plan are manifold – being strategic can focus one’s efforts, ease decision-making, create efficiencies, and improve effectiveness.

I’ve seen many fundraising plans, ranging from a few ideas jotted down on the back of a napkin to lengthy, sophisticated plans. Yet I repeatedly find some components missing that are often the most useful aspects of a successful fundraising plan:

  • Situation analysis. Development teams often design a plan looking forward, setting goals based on what they achieved the previous year, but they don’t go far enough to look at what else worked and didn’t in their prior efforts, nor how circumstances have changed. The best plans incorporate lessons learned from previous years, consider the current conditions, and avoid repeating mistakes made in the past.
  • Diversified revenue sources. Most plans think about the two common funding sources – individual donors and institutional funders – and that’s it. But if you can diversify your portfolio, you’ll have greater financial stability and resilience in the long run. Think about different way for your organization to generate revenues and earn income, and be sure to consider sources of both restricted and unrestricted funding.
  • Resource assessment. Fundraising plans are organizational, and so they often focus on what the organization needs to earn. They don’t always focus on what the organization will need to be successful at fundraising. What resources do you currently have to execute the plan? What resources will you need at a minimum and what resources would you want to have to expand your efforts? Taking stock will help ensure that your plan is practical and that your development team is set up to succeed.
  • Detailed work plan. More sophisticated organizations know that having a list of how much you want to raise from different sources is just the start. If you want to actually achieve your fundraising goals, you need to know how you will execute. This includes what your timeline and benchmarks are, what your priorities are, what your activities will be, and who will be responsible for what tasks. Having a detailed work plan makes the execution far more efficient and effective, especially if you’re working on a team.
  • Contingency plans. No fundraising plan is foolproof. There is always risk involved, with some revenue sources more likely than others. So what happens if you fail? What’s the backup plan? While most fundraisers can tell you about the probability of receiving funds from different sources, many cannot say what will happen if they don’t meet their goals. If you want to increase your chances of success, do a bit of scenario planning to account for different possible outcomes. It will improve your organization’s financial sustainability in the long term.

If the planning is done right, it should be easier to meet your goals. And if it’s easier to meet your goals, you’re more likely to raise enough funds for your organization. Now who doesn’t want that?

For more on how to develop a strong fundraising plan, check out this upcoming workshop – Smart Planning for Financial Sustainability – at the Foundation Center in San Francisco on Tuesday, June 2nd. Register today!