Nonprofit University Blog

The rule “Don’t ask, don’t tell” is, fortunately, defunct.  At least in the military.  I think, however, it is alive and well in the culture of too many nonprofit boards:  if we don’t ask, we don’t know; if we don’t know, we can think everything is still great; if we think everything is still great, we don’t have to do anything.”  And so it goes.

This practice was the subtext running through my mind as I looked at the results of our survey checking in on executive directors’ departure plans.  This survey was prompted, as similar versions have been in the past, by CompassPoint’s release of Daring to Lead 2011.  In 2006, when the last Daring to Lead was released, we checked to see how our local picture compared with the national one; and so, in a much more down and dirty version, we did the same this time.

Though the results of Daring to Lead are interesting—

• 67% of executive directors anticipate leaving their jobs within five years; people’s plans have been delayed by a shrinking job market, loss in retirement savings, no perceived successor;
• only 17% of organizations have a formalized succession plan—and scary, our results are far more troublesome.  Actually worrisome is more correct, not because of the numbers but because of what is causing the numbers and the seemingly disregard by boards of directors for the situation at hand.  The “don’t ask” syndrome at work!
• Of the 80 executive directors who responded to our survey, only 12% said they have given very little thought to leaving their current position.  Yet 18% know they will be leaving by the end of 2012 and another 21% say they don’t have a specific departure date but will definitely be gone by 2016 at the very latest.  Another 36% say they have no time frame for leaving but seriously thinking about it.  Okay; nothing too scary there.  If we lose approximately 40% of our executive directors in the next five years, we will be ahead of the national numbers.

It is, however, the reasons executive directors give for why they will be leaving and are giving more and more serious thought to leaving that should give all of us in the sector great, great pause.  The number one reason given for leaving is retirement:  46% of respondents said it will be time to retire.  Nothing we can do about that except send them off nicely and wish them well.  But the next three cited reasons no one can ignore, not even those with a retiring executive director as I would bet large sums of money that these reasons may have contributed, for some, to a sooner rather than later retirement.

The second and third reasons for why executive directors will leave are separated by a mere percentage point and little difference in content:  40% will leave to achieve better work-life balance, something they do not feel they can do in their current position, and 39% will leave to reduce the amount of pressure they feel from their current position.  There is no surprise here, as these were the number one and two reasons we heard back in 2006.  And while it is no surprise that nothing has been done to alleviate this situation, it is extremely disappointing that nothing has been done to alleviate the situation.  But, if you don’t ask, you can’t know.  (Just like that rule in fundraising:  if you don’t ask, you can’t get!)

The fourth reason given for eventual departure really startled me, but not because of the message and only because the executive directors were willing to deliver the message outside of a private conversation.  The content I’ve heard again and again, but always in that private conversation or in a group of fellow executive directors.  The fourth reason—ranked only a percentage point below the third reason (38%)—is that executive directors are tired of trying to get their boards of directors to do their job!  Among many things that make this confession notable is the fact that fundraising fatigue in this economy ranked fifth with 31%, while overall fundraising fatigue was cited by only 29%.  In other words, board fatigue way outscored fundraising fatigue!  What does that say?

Boards, by their inaction, are pushing their executive directors out the door.  And that is their worst nightmare!  Without an executive director, the board really must step up to the plate!  So, why aren’t boards working on redressing the work-life imbalance?  Why aren’t they working on ways to reduce pressure for the executive director?  Why aren’t they learning what they are supposed to be doing as a board and stepping up to the plate?  That would be far, far easier than having to hire a new executive director that may have far less patience for the onerous conditions in the workplace and be out the door before the board settles back into complacency and has to repeat the cycle!

They aren’t working on it because they don’t know about it.  They don’t know about it because they haven’t asked.  Without the ask, the executive director isn’t telling.  So boards continue on, oblivious to the reality that awaits them when their executive director does eventually leave—which they all do, in case you haven’t figured that out.  They will not be able to simply hire a replacement, but will, instead, need to restructure that top tier of the organization, they will need to raise more money to cover the increased salary costs and they will need to be more board like and work–yup, I said it, work—in partnership with the new executive director.

CompassPoint’s title of Daring to Lead is quite appropriate.  It takes a lot of guts to step up to the plate as an executive director, particularly in these times.  But the challenge extends beyond the paid leader; the glove must be dropped at the feet of boards.  And so, I dare you to ask your executive director about her/his work-life balance? the pressure felt? the level of frustration with the board.  I dare you to give your executive director the space and comfort to answer these questions honestly without fear of reprisal and retaliation.  In other words, I dare you to lead!

Recently, I pulled out an old tried and true “ice breaker” for a group with which I was working.  I am not a big fan of ice breakers, as I am a very private person and not the touchy-feely type.   I don’t want to pull something personal out of my bag and tell you its significance or tell you three things that no one in the room—a room full of either total strangers or vague acquaintances—knows about me, or play some cute game, etc.  You get my point.  So, I have carefully collected about a handful of icebreakers that if asked to “perform” them myself, I’d be very comfortable doing.

This icebreaker is the $6 million dollar question.  Everyone in the room has won $6 million dollars in the lottery.  Two million of that money must go to the nonprofit they are representing that day; how will they use the remaining $4 million.  The answer always reveals something about the respondents.  Inevitably, everyone spends a certain amount of money on ensuring the financial security and future of loved ones.  What comes after that, however, is the telling part.

The revelation I got from this group has profoundly recast my thinking about a key aspect of board recruitment—how you judge the fit of a board candidate.

Contrary to any of the dozens of times I have asked this question, this time, not a single board member spent any of her/his $4 million dollars on a charitable cause.  Not even a penny!  I was struck by this factor at the time, and waited to see if anyone noticed it.  No one did—not at the moment, not later in the day.  To me, this was such a striking outcome that if someone had paid attention and realized it, s/he would have had to say something.  After all, this was the icebreaker for a day focused on improving the board’s performance in fundraising. Giving was on everyone’s mind.  And yet, no one—not publicly or in private—said a word.

The reality is that in every previous use of this exercise, someone not using some of her/his $4 million for philanthropic purposes was always the very small exception rather than the rule.  Naturally, I began thinking about what made this group different.  They were clearly philanthropic with their time, serving on this board, several for many years.   A good number had either previously volunteered with the organization or had/have family members who did.  Several served or had served on other boards.  So, the question kept thundering through my head, what was so different with this group?

Ultimately, I could find only one answer—and it is not the current economic times in which we live.  This wasn’t real money we were talking about; this was play money.  We can all afford to be generous with play money—if doing so is part of our world!  And therein lays the only answer I can fathom:  these particular board members must not come from a culture of philanthropy!

I was talking about this with my family one night at dinner, after sharing an Alexander Soros (son of the George Soros) quote I’d recently read about his own philosophy of philanthropy.  He said, “[m]y Jewish identity is intrinsically linked to philanthropy, whether to Jewish organizations or not.  We have an affinity with other minorities. That means a sense of responsibility, especially in light of the Holocaust.”

My husband said that two of the most philanthropic people he knows are my sister and her husband.  My son, however, noted that his uncle/my brother-in-law is not Jewish, to which my husband said (as a Catholic married to a Jew), “When you are married to a Jew, you are Jewish!”  He was not contradicting Jewish law, but merely noting that in the context of philanthropy, the Jewish culture of philanthropy is so strong that a non-Jew cannot help but be caught up in that tidal wave!

My point is not to suggest that you seek out Jewish board members but rather that you seek out board members who have been raised in and continue to participate in a culture of philanthropy.  Who understand that sense of responsibility to help those less fortunate, to give back, to make the world a better place.  And who understand that philanthropy is a complex weave of giving not just of time, energy and good will, but also of money.

Several years ago, Detroitwas ranked the most philanthropic city in the United States.  Why? Because its majority African American population has grown up in a culture of philanthropy taught by the church and reinforced in the home.  A recent phone survey by Opinion Research Corporation of just over 1,000 Americans found that people who give to religious organizations are three times more likely than those who don’t give to religious causes to support other nonprofits as well.

But that doesn’t mean that those who don’t give to religious organizations aren’t philanthropic:  seven out of 10 who don’t support a religious group give to other kinds of charities, slightly lower than the nine out of 10 of those who give to a religious group and also give to other charities.

But, just to be crystal clear:  religion in and of itself doesn’t make the kind of philanthropic people who give money.  What does seem to make philanthropic people who give money, as well as time, is  being raised in a philanthropic culture, where giving money, regardless of the amount, to help others gain access to things such as health care, food, shelter, art and culture, education, etc., is understood as a responsibility of everyone.  These are the people, regardless of how they learned it, who understand that giving of our time, energy, expertise, advise, etc., to help a good cause makes is only part of philanthropy, and that without money, all the time and energy in the world won’t matter to that good cause.  These are the people we want on our boards!

But you can’t simply ask on a questionnaire or in an interview, “Are you philanthropic?” No, this requires a conversation that truly explores a person’s take on philanthropy, not as an abstract concept but in living one’s life.  This is something that is not measured in numbers–how many boards a person has been on or how many causes  they support—but in the total package of living life philanthropically.

It is time that nonprofits lost their sense of entitlement.  Listen up:  you aren’t owed anything just because you are a nonprofit.

Sense of entitlement you are asking? How’s that work?  Let me count the ways!

• Frequently, I will hear expressions of anger when a nonprofit doesn’t get the funding it had sought.  The anger isn’t at the organization, perhaps for writing a poor proposal or not following funding guidelines or having that prerequisite meeting with the program officer.  Rather, the anger is towards the funder with an undertone of “how dare they?”

I think of all the organizations that either have gone under or struggled mightily because they never diversified their funding base, despite repeated pleas to do so.  I think of all of the organizations shocked because a long-time funder finally says, “No, not again this year.”  The idea of counting on a funder in perpetuity—or even year after year–is beyond my ken.  Yet, when that key funder changed its way of doing business, shifts its priorities, decides it’s not getting the bang for the buck that it wants, the anger directed at that funder is frequently immense.  Little, however, is spewed in the direction of the nonprofit for failing to let go of its sense of “this is our due.”

No funder owes us funding simply because it has funded us in the past—regardless of how long a past it is.  We deserve funding because we are a sound organization with a solid business model doing really good, documented work to serve our clients.

• An announcement goes out for a free event.  The event looks interesting and helpful for your organization.  One or more staff sign up to attend.  Time passes and the event takes on less of a priority, other things come up, staff leaves the organization–the explanations are endless.  But the reason why doesn’t matter.  Does anyone bother to cancel that registration?  Rarely.

Though that event may have been free to attend, that event was not free to present; somewhere, someone(s) is paying for that event.  And because of arrogance—entitlement—no one bothers to cancel and let another person attend.  It isn’t all about you!

Does this sound personal?  You bet.  Every time The Nonprofit Center offers a free event, we always over enroll by 20% because we know that many people won’t show and won’t bother to cancel.  Recently, we did a free, half-day event on relationship fundraising that “sold out” in 24 hours:  200 people registered, and the waiting list was closing in on triple digits (where it did, eventually, reside by the time the event came along).  We repeatedly sent emails out reminding people of the popularity of the event and pleading with them to let us know if they couldn’t attend so that others could attend in their stead.  Many did let us know; 17%, however, just didn’t bother to show.  People for whom we, a nonprofit, paid a per-head cost.

There is an expectation that I see and hear all too frequently:  we are a nonprofit and therefore everyone should be willing to help us and help us for free.  Sorry; it doesn’t work that way.  There are approximately 1.4 million nonprofits in this country alone.  How is helping all of them for free going to work?  Even if you don’t have a sound business model, respect the fact that others do.  And I can guarantee you that no business ever stayed in business by giving everything away for free.

We at The Nonprofit Center give an awful lot away for free:  staff is constantly giving away free consulting, suggestions of where to look for jobs and/or information on specific jobs, connecting nonprofits with a variety of resources, helping for-profits and nonprofits alike get the word out about their work and activities.  And yes, giving a certain amount of free “stuff” is part of our modus operandi.  But so is reaching that point where free must stop and fee for services must kick in.  If not, the next time a nonprofit picks up the phone to call us or sends us an email query, there will be no one here to respond.

As a nonprofit, I would never presume to ask someone for something for free.  I respect the hard work that others do.  And no matter how nice I might be and no matter how much someone might “like” me, I know that others are running a business on which they depend for paying bills, supporting family, paying other employees, etc.  Am I more important than all of that that I should presume upon their time and business model?  And do so simply because I am a nonprofit? Hardly!  If someone wants to give us something useful for free, that is another story.  And that I won’t turn down!

Our staff has repeatedly encountered rather irate people who don’t understand why we won’t help them for free.  What is wrong with us, they ask, directly or indirectly?  Why won’t we help them?  Truth is, by this point, we’ve more often than not already given them hundreds of dollars of free consulting.  Funders have told me of applicants yelling at them if they don’t like the answers they are getting from the funder, are turned down for money, and more.  What is wrong with these pictures?

The truly disturbing part of this sense of entitlement is that more often than not it leads to nonprofits trying to take advantage of other nonprofits, imposing on other nonprofits or those whose career it is to help nonprofits.    These organizations and individuals are also working to survive but doing so with a sound business model that will drive long-term viability.  Constantly giving your work away for free has never constituted a formula for that viability.

As a capacity-building organization, The Nonprofit Center, and all of our sister organizations, wants to help all nonprofits identify and implement a business model that will sustain an organization long-term.  But if all you can afford is nothing to reach that goal, perhaps the handwriting is on the wall.

I’ve no idea whether funders read this blog or not, but I think I might be about to find out!

It is time for nonprofits—and I’m speaking of those nonprofits that seek funding, not the nonprofits that give out the money—to “take back the night,” so to speak.  These direct service nonprofits that seek funds and in return provide a service or an opportunity– need to drive what the sector and their organizations need instead of funders deciding what needs to be done.

I’d been thinking about this for some time, mulling over the shifting strategic priorities of funders and how well—or not–those match up with the shifting priorities and needs of communities and, therefore, the shifting needs of the nonprofits serving those communities.  Thus, when I read the Monitor Institute’s report, “What’s Next for Philanthropy: Executive Summary,” it came as no surprise that the following statement jumped out at me:    “Funders give on their own timelines, often more closely correlated with arbitrary deadlines and periodic board meetings than with the realities of community needs and the shifting context of a problem.”

Their timelines, not ours.  Their needs, not ours.  Who is this all about, anyway? It is about our clients.  Those who need help with finding a job or health care or food.  Those who want to improve their language skills, reading level, appreciation of different cultures.  Those who want to bask in front of a beautiful piece of art, a clean river, a restored historic site.  We should be allowed to tell funders what it is that our research has uncovered as necessary and important to serve best our clients rather than trying to fit square pegs into round holes, something funders absolutely hate seeing applicants do.

We need to provide food for our students before we can help them get their GEDs, as it is tough to concentrate  when you’re worried about if your kids have enough to eat.  Mergers aren’t the silver bullet for all struggling organizations.  We should be allowed to determine where our organizations really need help in order to address the root(s) of our organizational challenges and problems and not merely their symptoms.  A marketing plan isn’t really going to help us if we’ve lost sight of our mission; a strategic plan right now is of no value if we don’t have sufficient funds to make payroll beyond next month.

The reality is that there comes a time when the distance between foundations/ corporate giving staff and the nonprofits on the ground becomes immense.  A time when the faint memories, for those who ever worked the “other side,” of what it was like no longer match the realities of what it is like.  And no time in my memory was this ever more true than today.  Decades ago, I heard a younger man who at the time was working for a corporate foundation say that he never allowed himself to get too far away from the other half of the philanthropic equation.  Thus, he would work for a few years in a funding organization and then he would leave and go work in a nonprofit for a few years.  And he would continually repeat that cycle.  Not too long ago, I lost track of him, but up until that time, he had stayed true to his word.  And I know he was a more effective—spending his organization’s money well and wisely—program officer as a result.

I will say of funders what I hear time and time again from executive directors in describing their boards:  they mean well.  And then the very long list of “buts” follows.  I firmly believe that funders—from program officers to grants committees to boards of directors—absolutely want to help, do “good” and contribute to making the world a better place.  But trust me, the world looks very different on the street than it does from the 52^nd floor.

As the fourth anniversary of my mother’s death approached, I thought about all of the things that have transpired in that short span:  too many deaths in the family and too many diagnosed with life-threatening illnesses; a nice number of graduations, mostly happily employed grandchildren and a pending wedding.

A lot of momentous stuff, and absolutely none of it—unless you put graduations in this category—planned.  Oh, if we could only engage in strategic planning for our lives!  We could know what to do and what would be the result.  And we would know that the only thing between us and success was our willingness to follow the plan and do the work.  It would make life so easy!

That’s what strategic plans do:  they actually simplify our lives.  I didn’t say the planning process was simply; I’m not that naïve or deceitful.  The process can be a real bear.  But the end result?  That is what makes things so, so much better.

Our organizational strategic plan is coming to its natural end and we are about to create our next iteration.  And I could not be happier!  I am so, so desperate for it, I cannot put it into words.  For one thing, the process of creating that plan allows you to question all that you have been doing, both the what and the why.  In so doing, it is a huge organizational refresher, allowing you to get rid of the old that is no longer working, refresh what still is and, perhaps, add on more.

For another, a strategic plan reigns me in—and that is important for me and, more importantly, for the rest of the staff and The Nonprofit Center.  I’m great at coming up with ideas as to how we can deliver on our mission promises in ways that are even better than what we are currently doing.  I could shoot out a new idea a day if left to my own devices.  But that would drive staff members crazy.  Fortunately, when I fail to control myself and shoot an idea out there, they are very, very skilled at saying what a great idea but not for right now.  What a gift!  But it is a gift that I’d much rather need not accept because my idea generating can focus solely on helping us get where our plan wants us to go.

I wish everyone saw strategic planning as a gift—a gift they were giving themselves, staff, board, potential funders.  Then maybe everyone wouldn’t fight it so hard, run from it, and treat it as the plague instead of the cure.  Yet giving an organization and all of the people involved in making that organization successful a roadmap for the course of evolution of that organization over the next three is a huge gift—one of focus, design, efficiency, and effectiveness.  This is truly a gift that keeps on giving, as it makes everything—from what you should do today, next week, next month, next year–so clear.  It helps identify who you need where doing what and when.  It is almost the breadcrumbs that lead to funders’ doors and then, once there, takes them to the picture in which to invest.  It helps give everyone—even those who are not themselves big picture thinkers—a big picture in which to believe.  Powerful!

And, despite what I said above, the process of getting to a plan can be fun—or at least creative.  I often say that if you asked 10 consultants who do strategic planning with nonprofits how to do strategic planning, you would get 10 different ways.  And none of them is right or wrong, as long as the process contains some key components:

• tapping the voices of your stakeholders, from clients to collaborators to competitors to funders;
• doing an honest and thorough S(trengths)W(eaknesses)O(pportunities)T(hreats) analysis;
• engaging all staff (though, depending upon organizational size, some staff may be engaged consistently and throughout while others may be engaged through surveys, focus groups, interviews;
• pulling everything together into an actual plan so there is a document to follow;
• and ensuring a budget that will provide for income to cover the cost of plan implementation.

Over the years, we’ve experimented with several different approaches and outcomes;  some were more enjoyable than others.  My least favorite, I confess, is the traditional course that leads to very well defined—for they must be measurable—goals.  My favorite—but I think the rest of staff’s least favorite—was the creation of BHAGs—those big, hairy audacious goals.  Not down to earth, granted; but totally, totally inspiring.  Not for everyone, clearly.  In the end, all methods lead to the same outcomes:  the group learns a lot about itself and its individual members and a common path for all to follow emerges.  What’s bad about that?

We shouldn’t avoid doing strategic planning; it is, after all, what is best for our organization and all of its people.  We should, however, not be constrained by the dictates of others and do it in a manner that fits the personality and culture of our organization.  Clara Barton said, “It irritates me to be told how things have always been done.  I defy the tyranny of precedent.  I go for anything new that might improve the past.”

Does the nonprofit sector have a mind of its own; or a backbone? Consider the 9/22/11 issue  of The Chronicle of Philanthropy.  This issue was consumed with exposing—and it did feel like a tabloid expose–the data on high salaries for nonprofit leaders.

In so doing, it helped do the homework for those attorneys general around the country who want to “do something about exorbitant salaries” for nonprofit executive directors.  In so doing, it pandered to the concerns of these attorneys general, the media and the donors who are easily swayed by scare headlines on excessive pay.  In so doing, it focused on the for-profit way of assessing everything:  dollars.  And in so doing, it buried on the back pages—page 21, to be specific– almost as a story after-thought, the far more disturbing revelation of the various studies of nonprofit salaries.

Dollars and cents are an important part of a nonprofit; but dollars and cents without knowing the social value and contributions of a nonprofit are totally meaningless.  Yet, with one exception, I didn’t see any of that; I just saw numbers.  There was, for example, the front page headline that read “Modest Raises Ahead Seen for Many CEO’s (sic) as Economy Staggers.”  Ironically, though, it was juxtaposed to a picture of the CEO of the American Red Cross, with a caption indicating that her salary hadn’t moved since she took the job in 2008–$500,000.  And, it noted in the same caption, she had turned down bonuses in both 2009 and 2010.  Good for you, Gail McGovern!  A box blared the median (meaning half are above and half below) salary+bonus combination for nonprofit CEOs was $387,000 in 2010.

In nothing I read was there a mention as to what is happening to the compensation for the rest of the workers at these nonprofits, the ones who make the CEOs look good.  They, I guess, are truly just chopped liver.  Infuriating!

The one exception that I mentioned above was in reference to the compensation of Steven Altschuler, CEO of Children’s Hospital of Philadelphia, who, in 2009, earned $948,293 in salary and the exact same amount as a bonus.  On top of that, he earned $2 million in benefits, including some “deferred compensation” (are you kidding me?) that had accrued over five years.  The Board cited Dr. Altschuler’s exceptional performance as reason for his compensation and the growth the hospital has experienced under his leadership.  And let’s be honest:  CHOP is one of the best children’s hospitals in the country, ranked as either number one or two in eight out of the 10 specialty areas according to US News’ report, Best Children’s Hospitals 2011-2012.  In addition, I’m told it is one of the two most sought-after locations for a pediatric residency.

Do you think there is a connection between the salaries these people receive and the fact that almost to a person their titles are CEO or President?  Very few with the title Executive Director made it on the high salary rolls.  I guess those who have a corporate culture title think it entitles them to corporate culture salaries, despite the fact that regardless of what you call it, a rose is a rose is a rose.  The top of the paid portion of the organizational chart must do the same work for the organization to remain successful and sustainable, regardless of title.

As to the truly scandalous, yet buried story in the Chronicle, is the fact that according to a 2009 Guidestar study of over 130,000 individual jobs at more than 87,000, female CEOs’ salaries still fell far below those of male CEOs.  The last round of the women’s movement launched almost 50 years (1963) ago;  Ms. magazine will celebrate its 40^th anniversary next year.  What is going on?  The sector that is supposed to be the voice of social justice, the source of caring and nurturing for those less fortunate (a relative term) and charged with enriching the lives of individuals and communities sill is not paying equal wage for equal work.  What gives with that?

In 2009, female heads of nonprofits with annual budgets in excess of $50 million was 26.4% LOWER than those of their male peers.  So, to all of you who were ready to pounce and say size was the differential—more males head the largest nonprofits, so of course there is going to be a salary difference—find another argument.  At organizations with budgets of $250,000-$500,000, females “only” earned 13.4% less than their male peers.  The study points out that these differentials improved since 1999:  back then, female heads of nonprofits earned a whopping 55% less than males, while the heads of the small organizations received 18% less.  Somehow, I just am not mollified.  That there is any differentiation of the current magnitude, one that cannot be explained solely by differences in education, past experience or overall qualifications, is a disgrace and one that should be rectified immediately by any nonprofit that truly works on behalf of the public good.

And as much as all of this absolutely infuriates me, there is a far more important story on nonprofit wages that is never covered, never talked about in public, never highlighted:  the story of the pitiful salaries of those at the bottom of the organizational chart.  The salaries of those players without whom the highly compensated executive—male or female–could not possibly be successful.  Who is monitoring that?  Who is agitating to redress that?

Recently, I’ve felt a lot like I am watching a great tennis match, say one between Novak Djokovic and Rafael Nadal: he’s up, he’s down; he slammed it, he lobbed it.  Except the “he” is nonprofits and the up and down, slammed and lobbed are coming and going:  that nonprofit is closing its doors, this nonprofit is expanding to Philadelphia.  Unlike a tennis match, though, I’m not sure there are always winners.

On top of that, a few weeks ago, I got into a very public, and thankfully very short-lived, debate with a funder over the need for more nonprofits.  I am, as those of you who read this blog with any regularity know, a firm believer that we have enough nonprofits in this region.  (And, with few exceptions, I would say that is true of most geographic areas of this country.)  And yet, The Nonprofit Center is still regularly getting calls asking how to start a nonprofit, Google headlines still tell tales from across the country of newly-started nonprofits and people proudly tell me, when they find out what I do for a living, that they want to start a nonprofit as soon as they can.

What is going on? Is no one paying attention?  It is never easy sustaining a nonprofit, but these times are especially difficult.  And with uncertainty as to the end of this economic fiasco, the start of recovery for nonprofits is at least 12-18 months down the road.  Venerable nonprofits are closing their doors or barely keeping heads above water.  Mega nonprofits—the kind with many multiples of millions of dollar budgets—are closing doors.  The grande dames of different sections of the sector are disappearing.  And others want to open up?  Is everyone else chopped liver?  Do these folks have a magic potion?

I simply don’t get it!  Last week, I got an email from an organization well-established elsewhere in the country.  They are looking to expand and Philadelphia is on their radar; they want to talk about the Philadelphia landscape.  (This is the second such request in almost as many weeks.)  Kudos to them for doing some market scanning, if it isn’t full-blown market research.  But I’m baffled as to why they think they should come here as we already have a number of  programs that do what they do, one of which is chapter of a national organization and another a home-grown version created by some enterprising souls, and still then some more.  Upon receiving the email request—and agreeing to it—I contacted one of those enterprising souls and asked, “What do you think?”

The response I got was exactly what I had immediately thought when I read the original email:  how dare this organization think about encroaching?  We already have enough.  And giving them the benefit of the doubt, maybe that is the kind of response they will be receptive to hearing, and will then go seek to put down roots somewhere it is truly needed, where it will be new and of greater benefit.

My immediate thought—how dare they—was quickly replaced by a much more serious thought:  it wasn’t that they would be encroaching on service turf that bothered me; it was that they would be encroaching on funding turf that worried me.  Some of the “news” (in quotes because, truth be told, it isn’t really new) out of our grantmaker panel earlier this month is that a number of funders are still in recession mode, focusing on the life’s basic necessities or only supporting nonprofits of a certain size or focusing on their core funding priorities (which is what ever nonprofit should be doing—focusing on its core competencies).  And while individuals are still giving, we know we lost a quarter of individual donors last year (from 2009), and we know that most who are still giving are giving less.  So, all around, the monies just aren’t as plentiful as they used to be.

Do we need more competition for fewer dollars?  I’m thinking not.  I’m thinking let’s let those that have already existed and been doing the work, demonstrate their worthiness:  are they having the impact promised? are they running efficient and effective organizations? are their boards doing their share of the work? do they deserve funding?  Let’s give them the opportunity to flourish.  We don’t need to worry about the thinking that competition is good; it keeps everyone sharp and on his or her toes.  There is plenty of competition—tens of thousands of competition in the region alone, to be exact.  It is sufficient to separate the wheat from the chaff.

Which brings me to the chaff—those nonprofits that aren’t making it.  And these numbers are growing as the recession lingers, of all different shapes and sizes, as noted above.  And why aren’t they making it?  Did their mission lose its power or did the organization lose its way?  The latter.

I’ve yet to read or hear of an organization that is closing its doors whose mission isn’t still needed.  More often than not, when I read or hear these stories, I find it is the organization that was the source of its own demise.  During the good times, many got ahead of themselves, chasing dollars rather than chasing money.  When the good times turn to bad, funders want to fund the experts, not the watered-down-we-can-do-it-all organizations.  With the chasing of dollars comes the expansion of infrastructure to a point that core competency dollars alone can’t sustain.

Yet, during flush times too many nonprofits forget about the importance of diversified funding, preferring to take the easy money and forgetting to continue to nurture access to the difficult.  And during the good times, we let boards get away with murder—murdering their responsibilities as a board.  They aren’t holding organizations to strategic plans; they aren’t forecasting; they aren’t raising money; and the “they aren’t” list just goes on and on.  Correcting this takes time. And one thing there isn’t when the boat is sinking is time.

When this is all over, whenever that will be, will the sector be stronger, better?  I fear not.  The lessons simply aren’t being learned.

I recently facilitated a board discussion in an effort to help the group reach consensus on a very divisive issue that had been consuming their time, energy and good will. far longer than it.  The clock was ticking down to the allotted time of reckoning, and despite my greatest attempts, I did not see the group getting any closer to resolution.  Literally, at the 11^th hour, a thought came to me and I proposed it as a third option for them to consider.

The room went silent (and there were 25 in the room, so not an easy thing to achieve) and then the smiles started appearing on faces, the heads started nodding and a collective breath of relief was expelled by all.  Then one board member, “accused” me of holding out on them, suggesting that I had that solution in my hip pocket all along.  We all laughed and I assured them that it did not come to me until I spoke it.  As we find so often, we need the process, the circumstances, the head in the right place, to connect the dots for the light bulb to go off.

So it was with these two ideas that I stumbled across in very quick succession.  A week or month before, I might have skipped right over them; but last week, they spoke to me.

It is alleged that General Omar Bradley said, “Amateurs study strategy, professionals study logistics.”  While the attribution is tenuous, the prevalence of this statement in military tomes on war is not at all.  In speaking about strategic planning, I often start with the concept’s military origins, as it provides valuable context to understand the purpose, value and process for creating a strategic plan.  I never thought, though, that I’d be quoting General Bradley in talking about the differences between boards and professional staff.

Yet, when I came across this statement, I thought, “That’s it!”  That is the tension that so frequently frustrates both board and staff:  the board—the amateurs, if you will, and meant with absolutely no disrespect, when it comes to doing the mission work of the nonprofit —are supposed to be operating at the strategic level. The professionals, the staff of the nonprofit, are supposed to be taking the strategic direction, bringing it down from the stratosphere and implementing it—in other words, handling the logistics.  Too often, however, we run into problems with this division of labor.

There is an old phase, origins of which I do not know:  “nose in, fingers out.”  It says it all:  boards need to keep their nose in and stay informed about what is going on (i.e., executive director reports, other means of getting information about the organization’s operations and accomplishments to the board) but keep their fingers out and leave the doing, the logistics, to the executive director and the staff.  Another problem with this division of labor is that the amateurs don’t always listen to the experts.  Not every great idea a board has can—or should–be put into practice immediately; the reality of the organization’s situation may simply not allow it.  The staff is there to take the dream down to scale.  When the board ignores the words and warnings of its professionals, it is asking for defeat.

Nonprofits ask for defeat in so many ways of which they are not even conscious that we certainly don’t need to do it intentionally.  One way that frustrates me to no end is the perception that far too many in the nonprofit sector hold that “business” and “for-profit” are dirty words.  Too many bristle at the thought of needing to be “business-like” or the suggestion that, in fact, a nonprofit is a business—with a twist.  I have seen nonprofit employees totally balk at the changing of the title of the highest paid person on the organizational chart from “executive director” to “CEO” saying that makes them a business and they are a nonprofit.

The flip side of that is I have run across nonprofits that think simply by using the title of CEO they are businesses.  Folks:  it is symantics and, ultimately, doesn’t matter.  A title at the top of an organizational chart doesn’t make an organization what it is or define the organization; how the work is carried out, how organizational performance is evaluated, how the public perceives the organization is what defines an organization.  That is what makes an organization “good” or “bad”.

Given that this is such a central frustration for me, and I continually struggle with how I can help nonprofits break through the misperception that being a business is an opposition to being a nonprofit, I was thrilled to hear about Tom Watson, Jr., the second president of IBM.  Apparently, Mr. Watson was known for regularly sending up pithy missives to IBM staff, things that would inspire, define IBM, encourage, etc.  And some of these concepts went beyond IBM walls.  In 1967, at a speech to the Pace College Advisory Council, Mr. Watson advised the following:  “Corporations prosper only to the extent that they satisfy human needs. Profit is only the scoring system. The end is better living for us all.”

Exchange “corporation” in that sentence with “nonprofit” and “scoring system” with the “means to the end” and you have a good understanding of a nonprofit.  Nonprofits prosper only to the extent that they satisfy human needs.  Profit is only the means to the end.  The end is better living for us all.”

Who says nonprofits and businesses have nothing in common?

I’m frequently asked if I think the fundraising horizon is looking better.   Depending upon whether you believe the economy is in recovery, is doing a double dip recession, is spiraling out of control, nonprofits most likely have at least one—or several–more tough years.

So, as harsh as this sounds, now would be a good time for funders—from individuals to foundations—to review their giving goals and make sure their strategies align with those goals.  And it would be a good time for nonprofits to honestly assess their need to exist.  I’ve been thinking about this a lot of late, as I come across nonprofit after nonprofit that really shouldn’t exist for a variety of reasons, from lack of or ineffective leadership to poor delivery of services to a non-existent or dwindling customer base,  yet continue to do so because a funder continues to give money or an executive director or board isn’t willing to face the facts.  Throwing good money after bad is a phrase I hear myself using far too often these days, and to a degree never heard before.

In 2009, many foundations and corporations reassessed their giving priorities, not through a strategic process, but in reaction to the economic reality, and targeted their giving to nonprofits that addressed the needs of food, shelter and jobs.  But while the what to fund may have changed, I did not see or hear of a change to the how to fund.   Funders were not suddenly scrutinizing the fiscal health and well-being of organizations more closely, assessing their long-term viability, looking more closely at rates of success and demonstration of impact, or delving into the nature of the board-executive director relationship.

Here is an opportunity lost.  At the start of the economic collapse, Paul Light predicted that 100,000 nonprofits would close their doors, victims of the economy.  It is the trickle down effect:   foundations, corporations, governments, and individuals had less money to share with others so nonprofits got less money.  But what I didn’t hear from any of the funders with whom/which I have spoken over the last several years is that their criteria for funding have become more rigorous or selective in judging the “giving-worthiness” of the organization—which is vastly different than the giving-worthiness of the mission.  Thus, to the extent that there has been a reduction in the size of the nonprofit sector, it is the result, in part, of indirect action on the part of funders, not their direct action.

But that change may be coming, and it is more than time.  When I think of change in the philanthropic sector, generation to generation, I often think of a local philanthropic family, where the patriarch has a foundation and so do several other members of his immediate family.  The founding generation has a very different approach to grant giving than does the next generation:  the former relies on relationships to guide where to give while at least some in the latter only support organizations with documented outcomes, regardless of relationships.

Howard Warren Buffet, the 27-year-old grandson of Warren and recently appointed executive director of his father’s foundation, the Howard G. Buffet Foundation, is focused on changing that old-guard approach.  Buffet wants to take the principles that his grandfather used to become so successful and in leading the company (Berkshire Hathaway) that has the highest price per share of stock ever (almost $104,000/share, as of this writing) and apply them to giving out money.  IF, and that is the operative word here, he can retain the best of the nonprofit sector and combine it with what he perceives to be the best of the for-profit world, he might just develop a model that others should readily adopt.

Whether this can be done and he will do it, however, remains to be seen.  But he is proposing to try.  First, he is taking on the issue of food security and seeking to fund an integrated network of experts working on different aspects of this issue.  He won’t fund independent organizations that “tug at your heartstrings” but only organizations that are collaborating together to create a systemic approach to resolving food insecurity.

Second, he wishes to eradicate redundancy.  You know the drill:  Organization 1 that does a, b and c right around the corner from Organization 2 that does a, b and c, which is two blocks over from Organization 3 that, surprise, surprise!, does a, b and c.  Been around the nonprofit sector for not that long, and you’ve seen this scenario again and again.  Unfortunately, in the nonprofit sector, survival of the fittest doesn’t always work because funders have their pet leaders, pet projects, pet organizations and don’t look beyond the pet part.  The thought of not funding these organizations is more horrific than the reality that these organizations are not delivering on their promises to the community and providing a good “return” on the donor’s investment.  But he also sees takeovers and mergers, absolutely done as in the corporate world, as another means for taking care of nonprofit sector redundancy.

Third, he wants to completely remove emotion out of grant-making decisions and have it be totally rationally based.  Thus, he has created what he refers to as an “issue agnostic” tool—it can work regardless of organizational mission–that assesses a proposal’s scope, relevancy, risk, and cost-efficiency—and impact.  In part, he is defining impact and scope by the number of people served, with a project proposing to reach more than one million people receiving three points, while serving less than 100,000 gets you only one point.

Fourth, he wants to get charities to understand their “comparative advantage” and to move away from selling heart-wrenching stories and start selling their solutions.  Though a bit more than semantics, it is about identifying your product—the solution—marketing it and selling it.

Funding collaborations to address systemically an issue:  great idea, hard to execute.  Having everyone work happily together is far easier said than done.  Reducing redundancy:  absolutely good, much needed, important.  Go for it.  Assessing scope and impact based on the number of people served to determine funding-worthiness:  stupid.  But assessing true impact and change to determine funding-worthiness:  absolutely necessary.  Let’s go for this, too.

Truth be told, there is nothing novel in anything that the young Buffet is proposing.  Perhaps his couching it explicitly in for-profit terminology and saying they are the business lessons he’s learned from his most revered grandfather will make it resonate more with other funders and accepted by nonprofits.  There is an opportunity to be had in the ashes of the economy and it would be a waste to let it pass.  The winnowing has begun, the pain and suffering already experienced.  It is up to nonprofits and funders to do everything that we can—including saying no and let’s merge/close down—to come out on the other side a stronger, more vibrant sector.

It seems that New York Governor Andrew Cuomo has painted a bulls-eye on his state’s nonprofits. He  recently announced the creation of a task force to audit nonprofits that receive state funds.  Not a bad idea in and of itself.  But these audits won’t be assessing the general financial health and well-being of the nonprofits; they won’t be looking for misappropriated tax dollars.

They will solely be about determining whether the salaries of the executive directors/CEOs is “appropriate.”  See, Cuomo thinks that heads of nonprofits are using taxpayer dollars to “line their own pockets” rather than helping New Yorkers.

The New York Post agrees, calling salaries of nonprofit leaders “to-die-for salaries?”  To die for?  Really?  Well, given the salaries the paper cites, maybe:  the head of the 25-acres New York Botanical Gardens earned almost $1 million for leading his $61 million organization.  Unreasonable? Unwarranted given the company he manages?  The Metropolitan Museum of Art, a $279 million organization provides almost $900,000 to its leader.  Exorbitant?  Really? And the head of the Lincoln Center, with an income over $205 million, pays its leader almost $2 million.  Out of line?  Cause for finger pointing and suggestions of lining pockets or, as the Post claims, deceiving “donors by letting staff make off with hefty profits disguised as salaries” and nonprofit staff “feasting at the public trough?”

Did anyone bother to calculate how many dollars, tax dollars and otherwise, any one of these organizations brings into the state coffers?  Each of these organizations is an icon in its own right; each draws in hundreds of thousands to millions of local, national and international visitors—and their attendant dollars—each year.  Feasting at public troughs or filling those public troughs?  Lining their own pockets or helping fellow New Yorkers?

It is just so damn easy, as I’ve said time and time again, to point the finger at nonprofits.  Just because they raise some of their dollars rather than earning all of their dollars by selling a product or service, doesn’t mean they aren’t businesses.  They have to run like a business to survive and they have to compensate their employees like a business if they want the best, brightest and most capable employees.  And who in her/his right mind doesn’t want that?

And yet, I have not seen the editorials, blog posts and social media going berserk, fanning the flames of the non-existent public ire over the data in the Institute for Policy Studies’ recently released 18^th   annual report on for-profit executive compensation:  “Executive Excess 2011.”   

Hard to know where to start with the most alarming—no, I’ll call it what it is, most disgusting—data points in the report.  How about the fact that 25 of this country’s most profitable companies pay their CEOs more than what the companies pay in taxes?   Verizon, the very same company whose workers recently were out on strike, got a $705 million dollar tax refund (that is NOT a typo) and paid their CEO $18.1 million.  Governor Cuomo and editors of the New YorkPost, where is your outrage?  Customers of Verizon, where are your angry tweets?   For that is absolutely a to die for salary—die of embarrassment!

But matters get worse.  Remember, 2010 was supposed to have been a bad year vis-à-vis the economy:  businesses were closing, unemployment was horrendous, people were losing their homes right and left; folks everywhere were finding it difficult to meet their basic needs.  Thank goodness, though, that there were plenty of nonprofits working hard to help their pre-existing and newly created clients.  All this while the corporate fat cats were getting fatter, truly on the backs of others, sometimes with returned tax dollars!  According to “Executive Excess 2011,” CEO salaries increased 27.8% between 2009 and 2010, while the average employee’s salary rose only 3.3%.   During this same time, the gap between a CEO’s compensation and that of the average, company employee went from a ratio of 263:1 to 325:1.  You do the math.  By my math, a hypothetical company could have hired 62 more average salaried employees with the greed money of its CEO.

And this is what infuriates me about excessive salaries for heads of organizations, be they nonprofits or for-profits, and what governors and attorneys general should be auditing:  far too often excessiveness is only applied to the highest leader, and sometimes the other senior leaders, rather than reasonableness being applied to all employees.  There is nothing reasonable, fair or equitable in having a CEO make 325 times more than an average employee.  Should the chief leader make more? I don’t have a problem there.  But to suggest that the contributions to the success of the organization—be it an organization that defines success by the size of its profit or the delivery of its mission promises—disproportionately rest on the work of the chief leader or the senior leadership time is ludicrous.   If the widgets aren’t made and the programs don’t happen, the organization fails, no matter how brilliant the head person.

Cuomo and his fellow travelers have missed the boat here.  This isn’t about to-die-for salaries and misuse of tax dollars.  This is about a misguided world view that overlooks the greed and inequities of the for-profit world while devaluing the contributions of nonprofit leaders.