Nonprofit University Blog

How do I say write this without sounding like an old fuddy duddy?  With great difficulty and a low likelihood of success!

I think it is absolutely marvelous that the Red Cross has collected over $100 million from around the globe for the victims of the Haitian earthquake, predominantly through the texting of pledges.  (Well, actually, I think it is marvelous that $100 million has been raised; I am a little dubious about the Red Cross receiving all of that money as their recent track record of using money collected for major disasters has not had the greatest integrity.

But I hope all of the changes they have made since Katrina have corrected all of that.)  But as Americans—I won’t speak for the rest of the world—we generally respond well to disasters.  And when we make responding to disasters easy—such as texting a donation on our phone, giving money at the cash register, etc.—we do even better.

Texting donations is great, as is dropping money in a bucket that is placed directly in front of us.  And responding to heart-wrenching photos of massive destruction and children bloodied and crying in the streets is a no-brainer.  But what about responding to the daily needs—food, clothing, shelter, education, health care–of people struggling to make it through the day without natural or man-made disasters?  What about responding to the need to preserve our open space, natural resources and cultural richness so that there are places to find solace from the storms all around us?  How are we going to ensure the on-going support our communities need to remain healthy, virbrant and humane?

Texting alone will not do it.  We must teach the value and importance of philanthropy And we must value it wherever and however it is found.  Peter Singer, in The Life You Can Save, makes the statement that Americans have norms against being “too charitable” and that we believe “that caring is in some ways deviant, the exception rather than the rule.” Is that really true?  Does, as he says, “selfless behavior makes us uncomfortable?”

Then let us hope that we get used to a lot of discomfort.  More and more elementary and secondary schools are building into their curricula the teaching of philanthropy.  Service-learning is well entrenched in institutions of higher learning; so now let’s add the teaching of philanthropy.  Civically-minded corporations encourage their employees to volunteer and may even match donations made to charities; some take it a step further and require that their future leaders serve on boards of nonprofits.  And some even take it a gigantic step yet further.  The former Bear Sterns (which would not win my praise in many other areas of performance) required more than a 1,000 of its senior managing directors to give 4% of their salary—and bonus—to charity.  And tax returns had to be produced to prove the giving!  Goldman Sachs recently announced, juxtaposed to the pending payment of large annual bonuses, that it is considering a mandatory charitable giving problem a la Bear Sterns model.

If that were to happen, and Goldman Sachs’ program hovered around the same mandatory 4%, estimates are that this program could produce hundreds of millions of dollars for charities.  (This giving program shouldn’t challenge our comfort level, however, as there is a clear suggestion that this program is being created to try and win public favor.)  Though not a fan of coerced behavior, there is enough literature out there to suggest that coerced behavior can lead, eventually, to similar volunteered behavior, so I’ll take it.

What is at stake here is the future quality of all of our lives.  We cannot rely on catastrophes or ease of giving to lead people to philanthropy.  There simply are too many needs and causes in our everyday lives that require on-going support.  We must engender in all an on-going sense of caring and appreciation for the power of philanthropy.  We need to get very uncomfortable.

Ever since my son got his drivers’ license, anytime he and his best friend from high school want to have a serious conversation, they get in the car and drive.  Long, long drives to no where.  Doesn’t matter what time of day or night, a conversation becomes a road trip.  Every once in a while, however, the road trip becomes the conversation.

I am not often privy to the content of these conversations, but every once in a while, I get lucky and get a text  that sheds some light on the conversation (fortunately the texter is the friend, who is the passenger).

Last Friday night, as they were driving to New York for a 21st birthday party, I got the following text:  did u learn in undergrad or from reading?  I needed to clarify if they were asking whether I had learned as a result of going to classes, hearing the professors’ lectures and the discussions of my professors and peers, or simply from doing the assigned readings.  Neither, was the response.  Did I learn more from my undergraduate education (they are both juniors in college) or from the reading that I have done throughout my life?

That was a much easier question to answer.  As a voracious reader, there is no question that throughout the many decades of my life, I’ve learned far more from reading that I ever could have possibly learned from four years of undergraduate education.  And this is no slight on my undergraduate education, which was superb.  It, unlike so many undergraduate educations, actually fostered learning from reading.

But the learning I’ve gained from reading has been intentional.  While I confess I do not read in every field and every discipline, I have a very varied reading repertoire.  I read that which I know will help me develop in my profession, and am frequently thrilled when something not on that intentional list does the same trick, as well as that which I know will simply give me a deeper and richer pool of examples, analogies and food-for-thought.   It seems that having spent so much time as an academic, however, I do segment my reading, assigning fiction to the summer and holidays, while non-fiction is for year ’round.  I’m trying to work on that.

And I read everything, from serious tomes to headlines to the inside of bottle caps; from the two page essay to the 52 chapter book.  And from all of it, I learn.  I get Google’s daily nonprofit alerts – must reads. .  Sometimes it is just the headline; other times, the full article.  And from there, I’ve gotten fodder for blogs and ideas for developing new classes for The Nonprofit Center.   I read and re-read books to see what I glean at time one that is different—because I’m different—at time two.  (I even date and color code my notes with each reading.  (Did I hear someone say nerd?)

When I first read Jim Collins’ seminal works, Good to Great and Built to Last, I read them as an academic, teaching traditional academic classes.  Years later when I reread them, I was the executive director of a nonprofit and part-time consultant, and I saw very different messages that needed to be conveyed.  I’ve told executive directors and board presidents who bemoan the state of their boards to buy every board member a copy of The Source:  Twelve Principles of Governance That Power Exceptional Boards, and have everyone read one principle in preparation for each board meeting and then discuss it.  A mini book club that can move a board—and therefore—an organization forward!

While reading should not be the sole source of professional development used by an individual or an organization, its power and value should not be undervalued, particularly in these tight financial times.

For a variety of reasons, many of us are happy 2009 is over. But that doesn’t mean 2010 will be our knight in shining armor.   As I’ve said before in this space, the economic fat lady hasn’t sung for any of us yet, least of all the nonprofit sector.  She’ll be singing for us years after she’s sung for others.

So, what’s a nonprofit to do?  Ask the tough question.

I don’t believe in this thing called “human nature.”  There are just too many discrepancies.  Let’s take survival, for instance.  People who believe in human nature will tell you that it is human nature to want to survive.  We hear of people going to great lengths—even intentionally inflicting harm to a portion of their bodies in order to save the whole—in order to survive.  And yet, at the same time, we hear of others who choose not to survive—those who choose suicide, ask that life-sustaining measures be stopped, engage in activities where the odds of not surviving—short or long term—are great.  The desire to survive is not wired into our nature; it is determined by the situation in which we find ourselves at a given point in time in our lives.  Thus, sometimes the right choice is survival, while sometimes it is not.

The same is true of organizations.   Sometimes, survival—particularly when it is mere survival—is not the right or best option.  Sometimes the best option is to close down.

That, I understand, is not a popular option.  But that doesn’t make it the wrong option.  I recently received questionnaires I’d sent to eight executive directors of venerable organizations, each of which was also doing good and important work in their communities.  But in answer to the question what are the five top issues facing your organization, funding came back loud and clear—sometimes repeated five times.  And it was said with exhaustion by battle-worn leaders.  Underlying these statements was the unspoken question of how long can I—this organization—continue to fight for every penny in a landscape where the pennies are fewer and further between?

So, in 2010, do yourself and your organization a favor and ask and answer that tough question:  should we survive?  At all?  in some version of our former self?  as we are?  And don’t do it in a half-assed way, based solely on emotion and history.  But do it based on data and reality, the needs of the community you serve, the competition, the ability to deliver quality services, the long-term availability of funds, etc.  Regardless of the outcome of your discussion, your clients, organization, staff, and board will be served better.

I know this goes against the tide of up-beat new year’s resolutions and I will accept any accusations of being a killjoy.  But if ever there were a time to be honest and look ourselves squarely in the eye, 2010 is it.

Trust.  It is such a huge word for the nonprofit sector yet one we spend little time talking about.  Our whole currency, if you will, is based on trust:  our clients, donors, collaborators, and others trust that we will do a good job, deliver a valuable product, protect and steward our dollars, fulfill our mission promises, etc.  If these stakeholders stop trusting us, we are doomed.

Yet, when was the last time the staff and board of your organization talked about trust? What does it means to be a trustworthy organization? How do we execute and demonstrate that trust to all of our various stakeholders, from ourselves to donors to clients to competitors?

The issue of trust is one that I think about a lot, but particularly this time of year when every nonprofit is asking for those end of year gifts and so many individuals are thinking about where to give their precious dollars.  But two events coincided with the time of year to raise this question even higher on my list of “internal dialogues.”  First, I recently had to visit the nuclear medicine department at my local hospital for a test.  I trusted that this injection of nuclear compound into my system was safe; I trusted the nurse’s response to my question of how long the compound would remain in my system.  Why?  Not simply because the hospital is ranked as one of the top 100 in the country (and has been there for a good number of years), but because I can look up the research that demonstrates the overall risk and addresses the ratio of risk of the injection to benefit of medical diagnoses and any consequent needed corrective action.  In other words, I can read for myself—the basis for the ranking, the research—and determine if the trust is warranted.  I am not taking anyone’s word, no slick advertisements, no leaps of faith.

Second, I receive daily Google alerts for nonprofits, which can include links to anywhere between five  and 25 headlines.  On an alert last week, 1/3 of the headlines had to do with an employee—executive director or chief financial officer—or board member “misappropriating” funds.  Not a behavior that instills trust in people, but a behavior that is, unfortunately, increasingly all too common in the sector.   Hope those organizations are talking about trust now!

But the time to talk about being a trustworthy organization, like so many other things, is not when the negative spotlight is focused on you.  The time to talk and, more importantly, the reason to talk about being a trustworthy organization is so that the negative light never shines on you.’

The new year is right around the corner.  People will make personal new year resolutions, most of which, statistics show, are short-lived.   You would serve your nonprofit well, however, if you make a new year resolution to make being a trustworthy organization front and center—and stick to it.  Have those discussions at the board and staff level of what it looks like for your organization to be trustworthy. Where is our evidence of that trustworthiness, from our own impact evaluation data to our testimonials to our board-developed policies that protect our money to our Form 990 that paints a truthful and positive picture?  What do we do to ensure that all individuals associated with us understand and value integrity? How do we demonstrate our commitment to honesty?

Trust is not something to which any nonprofit can afford to give lip service.  We must embrace it and demonstrate our constant commitment to it.

Last month, Newsweek printed excerpts of an interview with William Powers, current President of the University of Texas.

And while not belittling either the title or responsibilities of a president of a large university (as both are huge), what is important about Mr. Powers in the context of this blog is that prior to becoming university president, he was asked by the Board of Enron to head a special investigation into the company’s collapse in order to uncover what went wrong—and why.

The focus of Newsweek’s excerpted conversation is those “lasting lessons” that Powers believes we should take from the Enron collapse.  Enron was—or at least it should have been—a learning opportunity for every nonprofit, as well as every for-profit.

Nonprofits had the opportunity, especially with the passage of Sarbanes-Oxley that, with the exception of two provisions applied only to for-profits, to affirm what it was already doing very well and to take note of areas where they, too, needed to ensure independent oversight.  (And, as an aside, and kudos for the nonprofit sector, a good number of for-profits looked to the nonprofit sector to learn its best practices of board governance.)  And reading Powers’ conclusions, Enron’s collapse should continue to teach the nonprofit sector.  His identified lessons, eight years later, are equally applicable to nonprofits as they are for for-profits.

Here are some of his lessons that are equally applicable to nonprofits.

1. “The good times do end.”  Thus, nonprofits, instead of relaxing in those good times, we need to enjoy the good while simultaneously preparing for the bad times that are coming.
2. “You need to surround yourself with good people who are competent, honest—and are not going to take shortcuts.”  Which means that we must hire good, qualified, honest people and not hesitate to release those who are not.  And this applies equally to board members as it does to staff and other volunteers.  Powers adds that we must evaluate “…the people, not just their talent, but their culture—including how they conduct the rest of their lives.  Are they honest?  Are they trustworthy?”
3. He has several pertinent observations for boards.  In responding to the question of how he would be a different board member today than pre-Enron, he says that he would not succumb to the fear of making “…a fool of myself by asking a stupid question.”  He would ask that question and push to understand.  He observes that at Enron many of the board members has been there “for a long time.  They had grown up with the company; they had come to trust the company and had disengaged a bit.”
4. “…it is likely that each generation is going to forget its values.”
5. We must instill “in young people the idea that they should do honest, hard work for a fair return, whether that’s a financial return or the other kinds of returns we get.  ….  We can teach students that earning rewards fairly is the way to live your life, rather than a get-rich-quick mentality.”

The sad part about these lessons to which Mr. Powers rightfully points is that none is earth shattering; all seem to be basic common sense.  But apparently these days, we need to remind people just what common sense entails.

News Alert:  An estimated 111 million people plan to use the web to donate to nonprofits this holiday season (Nonprofit Times).

A Minnesota nonprofit fundraising campaign, GiveMN, raised a remarkable $14 million via the Internet with its 24-hour “Give to the Max Day” event on November 17. The money, donated by 39,000 people, will support 3,400 Minnesota nonprofits, reports the Foundation Center.

Between now and the end of the year, we will be asked by every charity we know—and many we don’t—for our gifts—or investments, as I prefer to think of them.  (After all, there is no quid pro quo with gifts; we send a thank you and nothing more is expected to the giver.  But with an investment, the giver expects to see a return and the charities should be expected to demonstrate that return.)

According to Convio, preliminary results from their research on people’s plans for holiday giving show that “61% of online consumers plan to give online this year, up from 51% last year—that’s more than 106 million Americans giving online in the last 4 weeks of the year.”  (Connection Café, Posted by Tad Druart)  To many nonprofits, this will sound like good news.  So, to put some parameters on that potential good news, Convio’s 2008 eNonprofits Benchmarks Study found that the average online donation in 2007 was $57.

I know this all sounds wonderful—and it is.  But I wonder and I worry about the influence of technology on what has always been a high-touch task for nonprofits.  Will technology advance philanthropy the way it has politics (think of the role texting, tweeting and photo sharing played in the days after the most recent Iranian election;  the Dean and Obama presidential campaigns;  and the most recent Afghan election where a candidate had James Carville as his political consultant and created an “Obama-like” website)?  And despite the proliferation of sites like boardnet.org and volunteermatch.org, being successful at finding and keeping good board members and other volunteers remains, in the end, a high-touch, face-to-face activity.  Technology can definitely make the introductions, but it cannot make the assessment of the match and it should not make the ask.

At this juncture, the same must be said of technology’s role in philanthropy:  it can make the introductions—as Give to the Max Day surely did for many—but it cannot do the cultivation, the relationship building or the big ask.  Nor should it.

So, let’s get excited about what the end-of-the year flurry of giving—on-line and off—might bring for many nonprofits.  But when the new year starts, let’s return to the basics and build those relationships that will perpetuate and sustain continued—and we would hope growing—investments in the important work of our nonprofits.

We’ll be back on 12/4/09.  (Guess we could have tweeted that. )

My intent was to write about L3Cs—low-profit limited liability companies.    Five states already allow them, several more have legislation pending, and many are encouraging the congress to create such legislation.  Ever heard of them?

So I went looking for a simple, yet clear, definition of just what an L3C is.  In the process, I got sidetracked by a table comparing an LLC, an L3C and a nonprofit.

According to the design and intent of an L3C, it is a cross between a for-profit and nonprofit organization:  it is supposed to work for social good, but it can make a small profit, provide a return to investors AND apply for philanthropic dollars.  Funny, it sounds like a nonprofit!  You’ll get my drift in a minute, if you don’t already.

Take a look at this chart, provided by the Americans for Community Development, an L3C created to work “working with legislators across the country to enact the legal framework necessary to permit the formation of the L³C.”

If you are smart  (a given with my blog readers), then you see the slight of hand these self-promoters have used to create this new organization that will compete with nonprofits.  Too bad they, as so many others do, like to spin things on an ignorant public, preferring slight of hand to truth and honestly. Too bad that these self-promoters didn’t understand, as so many people don’t, what a nonprofit is and how it operates.  If they had, they would have understood that there is no need for L3Cs, as nonprofits already are a better model for achieving the same ends.

Let’s begin with the second column of the chart:  organizational purpose.  I’m going to ignore the row for LLCs, because we get them:  they are all about making money, the more the merrier, for most.  But looking at the stated difference in that box for an L3C and a nonprofit, there really is no difference.  Every executive director, other staff member and board member of a nonprofit that wishes to survive knows that if the nonprofit is going to be able to deliver its mission purpose, it has to have a financial purpose.  Thus, nonprofits are financial and mission driven.  We know that we have to pay attention to our bottom line, run like that LLC, while always making sure that that bottom line allows us to fulfill our mission promises.  If not, how and why should we exist?  So, you tell me:  how do an L3C and a nonprofit differ?

Column three:  potential rate of financial return.  This is what really caused my ire.  For the L3C, it has 0%-5% ROI; for the nonprofit, it has “0% to negative 100%.”  Excuse me?  Those who believe enough in a social mission to invest in it—not make a gift, not a donation, but invest in an organization’s ability to deliver on its mission—understand that returns on investment are not always monetary, and that intrinsic rewards are just as valuable, if not more so, than financial returns.  And where does this minus 100% come from.  Do these managers of an L3C not understand the basics of operating a business?  If a company cannot provide a good enough product—be it a pair of sneakers, a washing machine, moving the homeless to homeownership, improving literacy in children, etc.—then that business will fail?  Because then, truly, the investor will see no return and will not continue to invest.

The return nonprofits offer is enormous.  Ask anyone why they volunteer with a nonprofit in helping to deliver the service or on the board, and the first thing out of their mouths will be something to the equivalent of “to give back” or “to help others.”  The return on this investment means more to them than a %5 financial return.  As anyone why they make a financial investment in a nonprofit, and one of the last things out of their mouth will be “to make money.”  They aren’t doing it for a financial return; most aren’t even looking for the tax deduction, though for some that doesn’t hurt, and may effect how much they invest.  Nonprofits are about helping—others, ourselves, our communities.  Not about making money for ourselves.

Why must this society sully things by seeing good only happening if it comes with a financial reward?  Nonprofits do a more than admirable jobs at serving the social good.  Why dilute that work by feeding America’s greed and creating an entity where mission takes a back seat to financial reward?  Haven’t we had enough lessons already what greed does to America’s economic system?

There is so much chatter these days about what needs to be done for nonprofits do to get the resources to survive these tough economic times, from what organizations should organizations do; to what should funders do; to what individuals should do.  But from what I’ve seen, with the only exception possibly being social networking, nothing is new.  But that’s not necessarily bad.

Pablo Eisenberg, who I have always deeply respected, but do so even more when he plays the role of “irascible critic,” had an article in the November 9 Wall Street Journal in which he identifies nine ways to “fix” charitable giving.  His suggestions range from increasing the mandatory foundation minimum distribution percentage to increasing general operating support and funding the government watchdog agencies to simplifying the application and reporting processes.  You won’t get any argument from me on any of these.  And yet, with the possible exception of funding the watchdog agencies, none of his nine points is new.

One of the old mantras of tough economic is “the board needs to step up and fulfill its fundraising responsibilities.”  And yet, apparently many are not.  Our economic impact survey done in May, 2009, found only 25% of responding organizations had individual board members stepping up the fundraising plate, making larger gifts, bringing in more donors, selling more tickets.  Six months later, and lots of layoffs and cutbacks later, our follow-up survey, still in the collection stage, shows that has only inched up to 28%.

So, I tell you a tale of one, albeit very cautiously.  As a lapsed statistician, I know how skewed one can be and the dangers of generalizing from one.  So, do not take this story and generalize, but take it as a demonstration of how old advice still works today.

We just held the third annual meeting of the organization on whose board I sit.    This is NOT and never was intended to be a fundraising event; it is, totally and completely, a friend-raiser.  This year, I, stupidly, agreed to chair this event.  Last year, we had 350 people register for the event.  That means they bought or were given a ticket to attend.  That was before everyone realized just how much the economy had really tanked.  Notwithstanding the economy, our goal this year was to match that goal, despite having raised ticket prices by $10.  Well, we saw it and raised it by more than 25 additional attendees.

Why? How? Bulldogs!  The board president, vice president/board of advisors chair and I constantly hounded our fellow board members to send out invitations, buy tickets to give to the right people (nonprofit leaders and people with money), follow-up with individuals, etc.  All members of the board and board of advisors had to buy and give away 10 tickets; many bought twice that many, gave them away, and continued to send invitations.  Two members of the board of advisors approached every chapter in our geographic region of a particular service organization, even making visits to meetings, encouraging members to attend.

As for my own tickets, I did what fundraising experts always tell us to do.  I began cultivating relationships—though perhaps with a little twist.  I can claim all of the same things that board members trying to duck out of their fundraising responsibilities always throw at me:

• I don’t know people with money
• don’t know people in high places
• don’t belong to the posh country clubs, etc.

But I do know how to read.  I’d been collecting names of people I’d read about that I thought should know about this organization.  I wrote each a personal note (not in my usual illegible scribble either), and invited these eight people I’ve never met to attend this event as my guest.  Six responded positively!  I can’t wait to meet them, put a face to a name, a description to the causes that matter to them.

What this board did truly should not be considered exceptional, but the mandatory minimum of what boards of directors and the other supporting boards of a nonprofit should do.  Forgot the cutesy slogans that people like to throw at you:  board members should bring time, treasure and talent; no, they should bring work, wealth, wallop (as in clout), and wisdom.

Regardless of the economic times, board members need to bring to their board service expertise of use to the organization, a willingness to do the work and go the extra mile and an evangelical fervor for the mission.  That’s how you get to push 400 guests, even in tough economic times.