Nonprofit University Blog

More than several times on these pages (wait, do blogs have pages?) I have expressed my concern—no, let’s call it what it is, my fear—that nonprofits are so focused on surviving this economic downturn that they are paying no attention to the future:  in what condition will they arrive at the other end?  Surviving, unlike being pregnant, does come in degrees.  There is the degree of, “Phew!  Just made it!  We’ve got no staff, barely a program, a blind board, but we are still, technically, in existence,” all the way to “We have arrived where we knew we would all along!  We are a scaled down version of our former robust self, with smaller but mission-focused programs, a hard-working, dedicated staff and a board that has kept its eyes on the prize throughout it all.  We are poised to continue in control of our destiny.”

Those organizations in the latter group have been both reactive and proactive, they have understood that it is not business as usual, but rather business without blinders on, business open to new ideas and new realities.  Or, as Andrea Bretting of the Claneil Foundation  said at a recent grantmaker panel of ours, “the new normal.”  This new normal is absolutely one that is going to involve—at least for a good number of years—less money flowing from others to nonprofits.

But at least one group—corporations—are focusing on alternatives, and recognizing that they have resources beyond cash that they can share with nonprofits, and that is their personnel.  I am hearing again and again of corporations that are expanding—if not developing from scratch—their volunteer programs, from enlarging the number of work hours employees may use to volunteer with a nonprofit to starting such a program, or moving from a general volunteer program to adding a skilled-based component to their volunteer programs.  Fortunately, many corporations aren’t saying, “Oh, we don’t have dollars to give so we will no longer be good corporate citizens,” but are figuring out alternative ways to continue to be those good civic partners despite the economic downturn.  With both the expansion of hours available to employees to use work time to volunteer with nonprofits to providing both general and skilled-based volunteerism corporations are recognizing the sustained value-add that their employees can bring to a nonprofit.  There is not extra outlay of dollars by the corporation, but it does cost them, both in terms of employees being paid to do work for others, as well as the quite-often need to made changes to the department/individual which/who is responsible for managing these new and/or expanded programs.

So, corporations are doing their part.  Are nonprofits?  What do I mean?  Of course, nonprofits welcome volunteers with open arms.  But do they welcome them with the right open arms?  This new volunteerism that many corporations are offering is not your once a year clean up the park, paint the hallways of the school or build a house.  This is the offer of a sustained relationship with a volunteer(s) who can take on on-going “job” that will provide support, extra hands, an extra brain, and, perhaps most valuable, an independent perspective.  To welcome this, nonprofits have to be ready to handle the volunteer.  Let me correct that:  they have to be ready to manage the volunteer. 

Again, what do I mean?  I mean are you volunteer ready?  Have you identified meaningful, serious work for a volunteer?  Are there job descriptions for the different jobs that you need/want a volunteer to fill?  Are you prepared to screen the volunteers, much as you would a job applicant, to make sure that you are getting the right fit—regardless of whether this is a skilled-based volunteer or not—between the volunteer and you?  Is there a person responsible for supervising this volunteer, willing to provide the same degree of supervision to the volunteer as to a paid staff member?  Does staff understand how they are to work and interact with this volunteer?  Do you have a system for rewarding (thanking/appreciating) the volunteer?  And I could go on and on.  Employee volunteers are a valuable “donation” that corporations are offering to nonprofits.  We must be sure that we are as good stewards with this resource as we are with their cash.  Is your nonprofit ready to maximize it?

And let’s hope that this practice of truly supporting  employee volunteerism continues even after corporate portfolios rebound is the new normal. 

***The Nonprofit Center

Locally, the news is out:  thanks to Chris Hepp, a The Philadelphia Inquirer reporter, news of our recent economic impact survey of Delaware Valley nonprofits hit the streets this week.  From Philadelphia Mayor Nutter’s office to an astute board president to folks just wanting to know more, it’s getting attention.  I just hope it isn’t too late!

Why would I say such a thing?  Because I am worried.  One of the most troublesome outcomes of our survey is the revelation that the older, more established organizations (based on age of organization, number of employees, operating budget) are not weathering the current economy as well as the younger, smaller (measured by both number of employees and operating budget) organizations.  They are more likely to be facing deficits at the end of the current fiscal year than younger organizations, more likely to have already seen a loss in individual, government and corporate dollars, already had to freeze salaries, lay off staff and/or dip into a reserve fund.  Look at these figures:

38% of those organizations less than 5 yrs old are in worse financial shape than they were a year ago
50% of those 5-20 years old are in worse shape
65% of orgs 21-50 years old are in worse shape
67% of those older than 50 years are in worse shape

These data are not only quite scary but also quite provocative:  there is a direct relationship between age of an organization and its current fiscal shape (not statistically speaking).   

Surprise?  To some, not at all.  Those folks are of the mind that younger organizations are used to living on the edge, doing with even less than a normal bare bones nonprofit culture and enduring the vagaries of cash flow while simultaneously being more flexible and adaptive.  But to others, the direction of this influence of age is a surprise, because these folks assume that with longevity comes better and more experienced management practices, a solid financial base on which to rest during tough times, an experienced and sagacious board, all of which should provide insulation at times like the present.

So, I am wondering what is going on and what our data might suggest about nonprofits and their  overall practices, regardless of the economic times in which they are operating.  After all, that is what researchers do:  they gather and analyze data and then offer up possible explanations to explain what they found.  My possible explanations aren’t pleasing me.  For example, are more established organizations under-performing younger ones because older ones have gotten complacent in their practices?  Have they fallen into ruts that served them well in the past and, absent the best practice of engaging in on-going impact evaluation, assume those ruts are still serving them well?  Whereas the younger organizations, keenly aware of the need to establish themselves as important and valuable players, do not take anything for granted, regularly assess, feed the results of the assessments back into the organization, learning from and adapting with the new information?  In other words, is it in fact the younger organizations—by which I mean both the boards and staff of these organizations—which are abiding by sound business practices?

Have the established organizations gotten arrogant due to their longevity, the recognition that comes with age, and the resulting dollars that flow toward the magnet of that recognition?  Are they resting on the presumption of laurels that no longer exist, lulled by past glories?  Do they assume that since they have survived this long, whatever they have done in the past must be right, even for the present, and thus do not bother to challenge themselves? 

Arrogance or complacency?  One often masquerades as the other and neither is a helpful trait.

There are other possible explanations, don’t get me wrong.  But I keep coming back to the same place:  established versus needing to establish.  The latter brings with it an edge that in any economic climate may be hard to overcome.   And oddly enough, herein might lie the most important message of our survey, a message that goes well beyond the economic downturn, and should be ringing especially loudly in the ears of older organizations–and the funders who automatically support them.  The strength of an organization lies in the vision and drive of the people who serve it, not merely in its ability to survive. 

Read Chris Hepp’s Inquirer story >
See highlights of the results >

Behind as always in my reading, I just caught an amazing statistic in the March 30 edition of Newsweek. I was scanning the article, as I confess to being quite bored with the debate as to whether Washington or Wall Street is to blame for the current economic situation.

The Newsweek story featured both sides of the debate.  Skimming each short snippet on the writer’s opinion,  I came across one from Jim Chanos,  “In 1998 Business Week put out a survey, after canvassing the chief financial officers [of the S&P 500 companies] anonymously.  They were asked if they were ever asked by their superiors to materially falsify financial results.  And the answer was stunning.  Forty-five percent said they were asked to do so, but didn’t, 12 percent said they were asked, and did, and 33 percent said they were never asked.”  Stunning?    

Given how appalling I found the data to be, my first reaction was:   for real?   Not that I doubted Mr. Chanos, but never having heard of him, I thought it best to make sure that he was reporting accurately a real survey.   And though I never did locate the original survey (I confess, I didn’t dig really, really hard), I found enough additional references to the survey and the exact same data points used by Mr. Chanos, in serious academic—and other—sources, that I’m confident it is the real deal.

My second reaction, however, was:  is this that different from nonprofits?  I think nonprofits cook the books a lot more than is publicly admitted.  Not cook as in manufacturer numbers or falsify results.  But cook as in taking some administrative costs and, “Poof!, they are now programmatic costs.”  Phew!  Now that ratio of programmatic costs to administrative costs will pass muster?  Does it matter that passing is a lie?  But if we are honest with ourselves, this happens a lot in nonprofits?  How do I know?  Have I read studies?  No.  But I have too often heard the uncomfortable laughter , seen the squirming in the seat when I bring up this topic, and fielded the question of “What is the right ratio?” not to know that the behavior happens far more than it doesn’t.    Is this any different than what the Business Week survey found more than 10 years ago?

I don’t think so.  Each is done for the same purpose:  to win investors.  For profits want to look healthy and strong so people will continue to invest in their companies.  And nonprofits want to look like they aren’t overly spending on administrative costs—even when the administrative costs are not excessive—but using the bulk of dollars received so for programmatic purposes so that people will continue to invest in their missions.  Both are playing the same game.

To stop this need to lie, the nonprofit sector must start educating others about the real costs of running a sustainable nonprofit business that offers great services.  If we pretend that we can run that business using only 10, 12 or 20 cents of every dollar raised, then investors will accept that as truth.  But if we expose those investors to the true reality of our operations, help them understand that sometimes we can do it on $.12, but at other times, it might cost us $.17—or, oh my, $.25—and that that does not make us a suspect nonprofit, an untrustworthy nonprofit, a wasteful nonprofit, we will be doing everyone a huge service.  Investors will come to understand the reality of nonprofits and let go of the urban myths; and nonprofits will get to stop fudging.  No, let’s be honest:  they will get to stop lying.

It is easy to get caught up in the blame game, as Newsweek’s article epitomized.  Who is to blame:  did Wall Street get too greedy or did Washington fail to regulate sufficiently the appetites?  Do donors and the general public rely on a false expectation or are nonprofits too scared and too eager to please to dispel pie-in-the sky thinking?   Who cares?  If ever there was a time to correct this vicious cycle of false expectations and lying to meet them, it is now.  Now, in these times when boards are laying off executive directors as a cost saving mechanism while still having the organization run programs, is the time to stop fudging the books and live the reality.   

I love Alaska.  It is the one place I’ve always wanted to visit that has so far eluded me.  So, don’t get me wrong when I say this:  finally, something good has come out of Alaska!  In fact, it is so good, I wish I’d thought of it first.  Well, I’d thought of it, and, in fact, even said it; I just didn’t bother to write it down.  What is it?  A warning:  stimulus dollars may not be good for the health of your organization.

What?  Did I just say something blasphemous?  To many, if not all, nonprofits scurrying around seeking a piece of that stimulus action, absolutely, I did.  But let’s stop for a minute and not let the bling of the money blind us:  maybe, just maybe, not every nonprofit should be in hot pursuit.  First, stimulus dollars are time limited:  there are, as of this writing, just over two year’s worth of stimulus dollars available.  Then what are you doing to do?  Rush around for more dollars? Lay off staff?  Eliminate a program?  Not serve your clients as well?  Wait!  Those are all the things folks are doing now to try and make it through this economic nightmare.  So, why, oh why, would a nonprofit elect to put itself—as opposed to having the economy put it there—in that position?

Second, and far more importantly, not every nonprofit is ready for or, quite honestly, deserving of, stimulus dollars.  The Foraker Group, a sister management support group in Anchorage, has directly put the readiness and just desserts cards on the table.  And they should be heeded by all those applying for, as well as those handing out the stimulus dollars.  First, Foraker rightly points out that only those organizations that have a proven (meaning you can actually, duh, prove it!) track record of success and are truly sustainable should apply for and receive stimulus dollars.  What a concept:  let’s not throw somewhat good money after bad organizations. 

Foraker has a four pronged understanding of what a sustainable organization looks like.  Such an organization knows what it is about—it knows its core competencies.  It has a “competent” board that understands its function.  (I’m not a big fan of competence, as it sounds so average, so mediocre.  But I understand the point.)   It has a healthy stream of unrestricted dollars and reserves, and it has strategic partnerships.    If your organization passes this screen, Foraker still has two more screens to go:  that which an organization should have and that which it should not.

Do apply for stimulus money if the organization meets the first screen AND this second:  the stimulus money will support a mission-based function and allow the organization to stay true to its strategic plan.  (Which means, of course, that organizations without a strategic plan should not consider applying for stimulus dollars.  Why?  I’d suggest that a strategic plan is another indicator of a sustainable organization.) 

Finally, do NOT apply for stimulus dollars, regardless of how well the organization meets the first and second screens, if the dollars would:  take the organization off course from its mission, require the organization to start a new program, be a band-aid, and/or stretch the organization beyond its capacity.

In other words, if the board, staff and organization have not done their homework, stimulus dollars are not the solution.  They will only allow an organization to delay the inevitable; they will not allow the organization to fix that which the board and staff won’t do the hard work to fix themselves.  So, nine quarters later, the organization will be in the exact same spot it is now, and it is unlikely there will be a pot of gold waiting for it. 

Last Friday, The Nonprofit Center was fortunate enough to have Billy Shore, founder of Share our Strength, Community Wealth Ventures and author of numerous bookshttp://www.lasallenonprofitcenter.org/educational/shore_articles.php, articles, contemplations, etc., be the keynote speaker at our annual Nonprofit Strategies Forum.  An entertaining public speaker, he intermingles the right amounts of humor and seriousness to keep his audience entertained and cerebral, both at the same time.  And his messages are ones that need to be heard, regardless of the economic times. 

For example, he asked the question, “What are you doing to make your organization built to last?”  Well, right now, far too many nonprofits aren’t thinking about “built to last” but “survival”.  And that will be their downfall.  Obviously, you cannot be built to last if you do not survive; but mere survival neither guarantees nor necessarily leads to being built to last.  Rather, clarity of mission and core values, imbued throughout the organizational culture and people, and that provides the focus and direction and the guide for how to operate, what to do and what not to do, etc., during both good and bad times are what allow for survival and bring sustainability.

He presented his analogy of the cathedral builder and the work of those of us in the nonprofit sector who toil in the realm of change, who are trying to fix society’s social problems—big and small.  Shore’s point is that cathedrals are not built in a day, a year or even a lifetime.  They take centuries, if there is even a finite end point to the “building.”  The problems that so many nonprofits address—from poverty to hunger to abuse to illnesses to addiction to education—are not redressed in a lifetime.  This requires great tolerance for delayed gratification.  And I worry.  Do the next generations from which our future nonprofit leaders and employees will come understand this concept?  Or in this age of cell phones, the web and Twitter, are we raising future cathedral builders?

And finally, there is what Shore calls the “compassion paradox.”  I love having a name to put on this all-too common restrictor of nonprofit performance:  they don’t get investing for the future and the concept of return on investment (ROI).  Shore writes, “The solutions to the problems nonprofits address are long-term, but the culture of nonprofit organizations discourages investments beyond those that pay off in the short-term.”  This has long been one of my greatest frustrations in dealing with nonprofits—the inability of so many to understand that commitment to the mission isn’t measured simply by looking at how many hours are spent working directly with or for clients.  We also prove our commitment to the mission by investing in our future ability to continue to serve that mission, by taking time—and other resources—and invest in creating a strategic plan and a diversified fund development strategy, staff development, succession planning, building maintenance and, if necessary, improvements, and the list goes on and on.  And this we must do, not in fits and starts, when the feeling moves us, but as a constant part of the work that we do every day.

So, what are you doing to be a built to last organization?

Read more about Bill Shore and the 2009 Nonprofit Strategies Forum on The Nonprofit Center’s website .