impact

The Purpose Economy

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Plenty of for-profit corporations operate with some measure of community benefit, often limited to charitable contributions to offset tax liabilities. However, there is a growing trend toward purpose-driven business. The indirect benefits to corporations who "give back" are hard to measure, but clearly arguable. Employees who work for an engaged company and witness positive impact in their neighborhoods are likely to be happier, more productive and loyal. Potential customers who observe the same actions may be more inclined to purchase the company's products or services.

Socially responsible corporate leadership could argue that an investment in the community beyond the standard 1-2% of pre-tax profits positively impacts the bottom line. But, would their argument hold up in court?

eBay vs. Newmark

Did you know that eBay purchased a decent share of Craigslist in 2004 and owns approximately 25% of the for-profit corporation?

Craig Newmark, the founder and namesake of Craigslist, along with CEO Jim Buckmaster, have been fairly transparent about their desire to simply provide classifieds, rather than maximize shareholder value.

Obviously, this isn't in eBay's best interest as a major shareholder and making a fairly long and complicated story short, eBay sued Craigslist and won on several points.

The bottom line?

For-profit corporations have a law-binding fiduciary duty to maximize profits. Which makes it difficult to divert any significant resources to social impact.

In steps the BCorp

As described in a prior post, benefit corporations are a recent corporate entity breed that maintains the for-profit nature of business, but adds in a mandate to have a “material positive impact” on society and the environment.

As of this post, 27 states have passed benefit corporation laws. In May, local purpose industry organization, P3 Utah, celebrated the addition of Utah to the list of states benefiting from BCorps.

P3 Utah is a nonprofit promoting business for people, planet and profit. Founder and Executive Director, Steve Klass, was interviewed by Utah Business last month and described benefit corporations:

They define success by what is called the ‘triple bottom line,’ or the degree by which they can improve human existence for their employees and communities and the environment, while also making a profit. It’s doing good while doing well.”

Becoming a B-corp doesn’t come with any financial benefits, tax incentives or preferential treatment. However, as a B-corp, the company can expand its fiduciary duty beyond maximizing profits, without fear of investor or shareholder whiplash.

One might also predict that the new breed of consumer will begin looking for the B-Corp designation when making purchase decisions.

A Purpose-Driven Economy? 

Economists and marketing experts have commented on the timing of socially responsible businesses, noting that the millennial generation has much greater expectations of the businesses they patronize, demanding a give back philosophy and tangible results rather than an annual corporate social responsibility report on dollars donated.

Aaron Hurst, author of The Purpose Economy, describes the concept of an economy that caters to our need for something more:

 

Could an increasing consumer demand combined with a highly entrepreneurial generation equate to a major impact to our economy?

Harvard professor and corporate strategist, Michael Porter, thinks so, having launched the Social Progress Index, a global index that measures more than GDP (the US ranks 16th with an overall SPI of 82.77 as of 2014).

There's also been an explosion of mutual funds and investment opportunities for the socially responsible investor, from 50 in 1995 to over 500 "SRI" funds today.

Claim Your Stake

Businesses like TOMS Shoes with it's one for one donation promise and Starbucks with its healthcare coverage for even part-time employees are proof that social impact is highly correlated with profit in light of the changing values of consumers.

Is your business ready for such scrutiny?

P3 Utah's 4th annual conference will provide insights, tools and resources, and a network of role models on September 18th and 19th in Salt Lake City. Session topics include social enterprise, local partnerships, employee engagement, sustainability through LEAN, and more.

Register now to ensure you get a seat at the purpose economy table.

P3 Utah Conference

Capacity Building and the Overhead Myth

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The concept of capacity building seems to be unique to the nonprofit sector, although it's immediate definition could apply to any organization, or anyone for that matter:

Capacity building or development is the process by which individuals, groups, organizations, institutions and societies increase their abilities to: perform core functions, solve problems, define and achieve objectives; and understand and deal with their development needs in a broad context and in a sustainable manner."

Within the nonprofit sector, capacity building has gained substantial attention over the years, primarily because we all created an environment where nonprofits did the opposite: their activities consumed capacity, every bit that they had.

Why do nonprofits eat away at their capacity rather than use it to build more?

1. Nonprofits are mission-driven, to the core.

There are always more mouths to feed, babies to save, and water to clean. The job is never done and the leaders we attract to serve within nonprofits are motivated by the mission, lacking the long-term perspective of a seasoned executive.

2. Funders and donors demand it.

The unfortunate truth is that private foundations, corporate funders, and many major donors are still part of the problem: they want warm fuzzies in exchange for their cash, so they only award it to nonprofits who promise to use it for direct services.

3. Government and industry organizations made capacity building a black mark of doom.

This is the holy "overhead" percentage myth. Here in Utah, as in many states, it is printed with pride, or shame, directly on your charitable solicitations permit, supposedly as a way to protect the donor.

Industry organizations, like Guidestar, the Better Business Bureau Wise Giving Alliance, and Charity Navigator, touted the overhead percentage as the single biggest determinant of whether a charity was worthy of a donation. Luckily, they have since removed the thorn that demanded service over capacity to serve and are trying to undo the damage.

The overhead percentage, if you're unfamiliar, is simply this: all of your spending on anything besides programs and services as a percentage of your total spending.

Charities have attempted to live up to superhuman standards: to perform their charitable services while spending as little as possible on leadership, marketing, fundraising, talent development, research, and organizational development.

The result is a nonprofit organization you should never want to invest in.

An ill-equipped executive team with zero experience leading an organization or managing its finances. The inability to attract any talent to it's employee pool. Poorly delivered services as employees receive zero development or mentoring. High turnover since employees are asked to perform miracles in a crappy office with no supplies or support.

Even more critical is that a nonprofit where 90%+ of funding is eaten up by services is extremely inefficient.

They cannot deliver their mission effectively because every dollar donated is just a dollar. It does not get multiplied by investing in marketing or fundraising where it could turn into 5, 10, or even 100 dollars. It cannot be invested in the salary to recruit a talented Executive Director with the experience and abilities required to do more and better.

Capacity building is the inverse of this mess. It is a purposeful investment of resources in increasing efficiency, engaging in strategic growth, and refining internal mechanisms for service delivery to become more effective.

Nonprofits have an obligation to seek new and even more effective ways of making tangible progress towards their missions, and this requires building organizational capacity.

All too many nonprofits, however, focus on creating new programs and keeping administrative costs low instead of building the organizational capacity necessary to achieve their aspirations effectively and efficiently…This must change: both nonprofit managers and those that fund them must recognize that excellence in programmatic innovation and implementation are insufficient for nonprofits to achieve lasting results.

Great programs need great organizations behind them.”

Effective Capacity Building in Nonprofit Organizations, Report for Venture Philanthropy Partners by McKinsey & Company (2001)

Which is your organization engaging in? Fear or hope?

Community First, Then Marketing

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I think it's safe to say that the vast majority of mission founders or directors are lacking marketing experience. It's just not a typical precursor to starting an organization to feed the hungry or distribute clean water. But we can all agree that sharing our message is paramount to fulfilling our mission. The more people who care about our cause, and associate us with the solution, the more donors, volunteers, and talented team members available to scale our impact. Marketing is a bit of an intimidating word. It's often associated with advertising, events, radio and television interviews, published articles, and slimy people who launch a lot at bad jokes and drive black BMWs.

It's also easy to pigeon-hole ourselves in comparison to bigger, well-funded players. When you're relying on word-of-mouth or a few hundred printed brochures from Vistaprint, those tear-jerking American Cancer Society ads can make anyone feel inadequate.

How do you stay grounded in what you do best, while effectively spreading your message, so that you can grow your impact?

You may be surprised to learn that many small nonprofits are making waves on social media. A Nonprofit Technology Network article by Susan Gordon highlighted a interesting comparison:

Following the major earthquake in Japan in 2011, quite a large number of diverse nonprofits put out fundraising campaigns. In looking at those on the crowdfunding platform, Causes, the Japanese Cultural and Community Center of Northern California, a relatively small organization with just over a million in annual revenue, had raised more than $400,000. Comparatively, the American Red Cross, an organization with more than $3 Billion in annual revenue, pulled in $322,540.

The most successful mission-driven organizations have built loyal and motivated communities.

Social media and online platforms simply provide an efficient (and inexpensive) method to mobilize your community (and their community) around your cause, even if your cause doesn't have cute pictures of babies to post on Facebook.

Social media can seem intimidating and ineffective at first. Most companies have tasked low-level interns to post inspirational italicized quotes on backdrops of flowers every few days.

Unlike this giant waste of time, organizations who engage in activities that build their direct community and then connect regularly with that community online through stories and relevant information take advantage of social media as an amplifier. An example:

A 45-year old banker who regularly gives $20 to various charities loses his 19-year-old son to an accidental overdose. Having previously distanced himself from substance abuse, "those are bad kids whose parents weren't around", suddenly finds himself personally connected to how insidious even a little experimentation can be. He becomes heavily involved over the next year with a local organization that offers prevention, treatment, and support services to his community.

The banker and his wife are now donors and volunteers for the cause and the organization is doing a great job engaging them in their mission. The wife connects with the organization via social media and invites her local church group and a dozen of her friends to donate with a few clicks. They do because they know the family well and are equally horrified at the loss of their son, a young man the same age as many of their children.

A social media ask is a lot easier to swallow for many of us. There is social approval involved in being associated with a good cause and the visibility of our association online can attract others in our network without even an invite. Many stories are so compelling that they go viral, enlisting thousands of unknown supporters in spreading the message and contributing to the need.

You can't duplicate this effect with a direct mail appeal or an event. We don't share the postcard with the hungry kids on the front with our neighbors, coworkers, and family. We also don't often talk about our charitable contributions or affiliations.

While a case can certainly be made that the older members of our communities may prefer a traditional appeal, on a human level we are all more interested in being part of a community, rather than an address on a list. It's not about the ask, it's about whether you provide a compelling space to interact and connect. Even if you engage on social media with stories, if you lack a genuine community on the ground, the few strangers who retweet you or like your page are likely never going to get more involved than that.

If you're struggling with concept of social media:

Instead of looking for strangers in the dark recesses of the internet, step back and evaluate your genuine followers. You may have a list size in the thousands, but do those people have a real connection to your cause and are you providing opportunities to interact? A few small changes in this realm may make all the difference, with the bonus of social media evangelists praising your work to all of their friends online.

Maximizing Impact through Mission Driven Strategy

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Following the latest post on mission drift, how can nonprofits effectively grow, adapt, and innovate for superior performance, while remaining aligned with their ultimate mission? Mission Driven Strategy is a set of guidelines for designing and evaluating strategy toward maximum, mission-based value creation. In many instances, mission-oriented models and guidelines are created within the bubble of the nonprofit culture. Mission Driven Strategy, however, was adapted from the for-profit model, Return Driven Strategy, authored by Mark L. Frigo and Joel Litman.

Stepping back for a moment, if you are involved in a nonprofit, what does strategic planning look like in your organization?

For many, if not most, nonprofits, strategic planning takes the form of an annual retreat where the executive or management team comes together to set a few (or a dozen) goals for the coming year. Very few organizations have a 5-year plan or tangible vision for the future and many are flying by the seat of their pants as they squeeze in the all-day retreat to check-off the annual planning task before they get back to putting out fires while fulfilling five other roles in order to keep overhead low.

While our nonprofits are constantly focused on today, or even yesterday, successful for-profit organizations are positioning for tomorrow. Their products can become irrelevant overnight if innovative competitors get a few steps ahead of them. They therefore invest heavily in strategic planning.

Mission Driven Strategy is simply one of many models which can help us gain a bigger perspective around strategy and effectively position our organizations for sustainability and increased social impact.

As always, we must be cautious in applying overt profit-rooted models and methods to our nonprofit organizations, ensuring that we don't fall into the trap of maximizing revenue around our social causes while disregarding sustainable, positive impact. After all, the latter is why nonprofits exist.

An Adapted Overview of Mission Driven Strategy

Foundational Concepts:

In order to effectively discuss and design a strategic plan, there are a few concepts that we must understand about our organizations. Similar to conducting a SWOT analysis, reviewing the organization through these lenses lays the foundation for the strategic design:

Genuine Assets

What unique or high value assets do we own? Examples could be our unique mission in our geographic area, an ideal location that is embedded within our constituents' community, or a staff comprised heavily of former constituents.

Significant Forces of Change

What external forces are driving change for our mission now or in the near future? Consider scientific or technological breakthroughs; statutory, regulatory, and political change; and cultural and demographic shifts.

The Strategic Plan

Our resulting strategic plan should fulfill the following three goals:

#1: Ethically Maximize Mission-Based Value

Are we doing the right things for the right reasons? How can we adapt or innovate our models, delivery mechanisms, or infrastructure to maximize the value we provide?

#2: Address Constituents' Unmet Needs

Do we have a clear understanding of our causes' needs? How have the needs changed and how will they likely change based on the trends and coming events? How can we best fulfill unmet needs in line with our mission or through partnerships?

#3: Target the Greatest Needs for the Greatest Impact

Where are needs increasing or acting as substantial barriers to mission-delivery? How are we uniquely positioned to impact the greatest needs our constituents face?

Measuring and Monitoring Impact

Example adaptation of the Balanced Scorecard model

The model authors recommend using the Balanced Scorecard model (Kaplan and Norton) for establishing metrics and tracking performance around your Mission Driven Strategy.

The Balanced Scorecard tool was developed to help organizations integrate strategic objectives into daily operations, essentially connecting goals to tasks to measurements. A coming post will review best practices in applying the Balanced Scorecard to our Mission Driven Strategies.

The Bottom Line: Considering how forces of change will drive unmet needs within our mission focus, how can we leverage our genuine assets to develop, deliver, and measure maximized impact?

Small donation...MAJOR impact

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It's easy to become so overwhelmed by the enormity of the social problems we care about to become apathetic and do nothing. The amount we have to give seems too small to make any real difference. A mechanism that turns that mentality on its head is gaining increasing popularity across the nation: giving circles.

Giving circles bring everything together to make giving easy, informed, social, and impactful, which is how giving ought to be experienced. By 2007, there were at least 400 giving circles nationwide, engaging more than 12,000 donors, and having given nearly $100 Million.

The basic premise: Small donations collectively fund larger, more impactful gifts decided by members. The magic is in the connections to a community rallying around a cause. A 2009 study of giving circles revealed that members give more, give more strategically, and are more engaged in their communities.

Giving Circles create opportunities to network with people who share your values, learn more about your cause, and become informed on the diverse nonprofits working to create solutions. These organizations are often volunteer-run, ensuring that all, or very nearly all, of your donation goes to your cause.

Importantly for the nonprofits, a larger grant from a giving circle means more than just funding. They gain valuable exposure to individuals who give through the process of deciding the grant and have the opportunity to gain additional exposure through media coverage.

A Peek Inside:

I recently became a member of the Utah Women's Giving Circle. The concept simply made sense to me, but I never expected the experience to be so informative and meaningful.

This last Tuesday, we came together to vote to distribute $20,000, with a ballot of 12 nonprofit organizations. I am already embedded in the nonprofit sector in Utah, but I was completely unaware of several of the organizations on the list prior to the voting process.

However, the point where the awards were announced was what converted me into a lifetime advocate.

With representatives from the nonprofits present, the excitement and tension in the room was tangible. The response from these nonprofit leaders was an experience I will never forget.

2013 Grantees

These critical organizations in our community didn't have to go begging for these dollars and they didn't have to search out our group and complete a tedious application to receive highly restricted funding. We simply invited them to complete a one-page application and then join us for a party in their honor, where we would vote and award the grants live.

That set the stage for a powerful evening centered around community, rather than competition and scarcity.

The positive swell of excitement and appreciation provided enormous reinforcement as a donor, a thousand times beyond a thank you card following a check. I have no doubt that lifetime donors were created in those interactions. The physical connection to the people who are so passionate about our shared cause left an indelible mark.

Get Involved:

While women's giving circles are the most prevalent and could probably take credit for creating this movement around collective giving, a variety of diverse causes and groups have utilized the concept to make a major impact.

If there isn't a giving circle near you that addresses a cause you care about, you should consider starting one. All you need is a fiscal sponsor so that donations are tax-deductible (your local community foundation is a great option) and a few friends or family members who share your ideals.

It's literally that easy, which is why the giving circle movement is only going to continue to gain momentum.

Learn more via multiple reports and resources, including 10 Basic Steps to Starting a Giving Circle and tools for community foundations and nonprofits interested in hosting giving circles: Regional Associations of Grantmakers' Giving Circles Knowledge Center.

Book Review: Your Mark on the World

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I have been waiting to review Your Mark on the World for quite awhile. Written by a fellow Utahn, Devin Thorpe, the best part of this review is that you can get this book for free simply by subscribing to the Your Mark on the World blog. Thorpe has an extensive background in finance as past CFO for a corporation with hundreds of millions in revenue, a prior boutique investment bank owner, former investment advisor, and former treasurer for a global company, among other roles. However, what makes him stand out among his peers who have also done well in the financial sector is how he has managed his personal finances.

Devin Thorpe

A few years back, Thorpe left his position as CFO with MonaVie unexpectedly. He turned it into an opportunity to spend a year in China with his spouse, giving back. He simultaneously wrote Your Mark on the World to help others take advantage of the same opportunity to make a difference, in whatever way that calls to them.

Your Mark on the World literally weaves together basic, but comprehensive, personal finance principles that many of us never learn with compelling stories of regular people making an indelible impact on the world. It's both functional and inspirational.

Financial freedom is a topic I am personally passionate about (I write about frugality frequently on my personal blog). Without learning some basic rules about money, especially how to dump debt and save for emergencies, myself and my spouse would never have been able to pursue entrepreneurship, which for me includes having a much larger social impact than with one organization.

I am consistently shocked at how normal conspicuous consumption is in our society. It is inherently addicting and almost socially required to engage in behaviors that jeopardize our financial freedom, including our ability to give back. I know from personal experience with credit cards, leased vehicles, and even a fancy car financed over 30 years on a second mortgage.

Because of the painful, but liberating, effort required to dig out of our own hole, I find resources like Your Mark on the World to be a breath of fresh air in a world that is constantly suffocating our opportunities to experience and do more than work.

I do have to admit though that the stories were by far my favorite aspect of the book. Thorpe went to great lengths to include stories that personally touched his life. They are all deeply intimate portraits of everyday people taking up a cause and literally changing the world for the better.

Ranging from China to Cambodia and from leper colonies to orphans, the incredible impact of just one dedicated person is illustrated so tangibly that one cannot read Your Mark on the World and continue to turn away from the immense possibilities for your own legacy.

Drop by Thorpe's blog right now, subscribe, and take the next steps toward leaving your own personal mark on the world.

Nonprofit piety won't change the world

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Why do we get involved in a cause? 88% of us give to charity each year. A quarter of us actually go out and volunteer our time. 10% of us have chosen to work for a nonprofit. We want to change the world for the better.

Perhaps you think about your involvement in a more humble way. You're connected to a cause because you want to do "a little good". You hope to have a small part in improving air quality or feeding the hungry in your home town.

But the deeper drive is that the reality we are faced with, whether it be kids having asthma attacks at recess or a decorated veteran going without a meal, is intolerable. So intolerable that we are willing to take action, even if just through a $10 donation or spending an hour serving soup one evening a month.

It is unbearably frustrating that more than 16 million American children go without something as basic as adequate food while Apple releases unimaginable innovations in technology and Facebook made it possible to share our latest meal with strangers in real-time a decade ago. How have we not solved these basic social problems by now? 

Uncharitable author, Dan Pallotta, sheds light on the root problem; the giant wall that stands in the way of world-changing solutions.

It's us.

It's an entire belief system rooted in the "ethics" of charity and reinforced by decades of indoctrination around how nonprofits should operate. Take 15 minutes and watch Pallotta's paradigm-shifting, eye-opening TED talk:

Intrigued? Pallotta recently spoke to the Utah Nonprofits Association in depth. It's an hour that will change how you donate, where you volunteer, and why. If you then share it with a few people you care about, maybe we can truly empower our nonprofit organizations to begin changing the world.

Our biggest problems don't need a bandaid. They need ground-shaking, innovative solutions that require risk, experimentation, and failure. But, we've been trained to look for reverent organizations who simply transform 90% of our donations into direct relief. Instead, we need to look for organizations that will multiply our donations into a force for change that makes more than a dent in today's suffering while also trying new approaches to prevent tomorrow's.

Follow Pallotta's efforts to change the way we think about charity on Twitter: @charitydefense

Thank you to Lauren at the Community Foundation of Utah for forwarding the UNA video (the second it was available)!

Why your mission needs business partners

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The first resource to be released through this blog is a guide to Partnering for Multiplied Impact. There are a variety of topics that could have been tackled instead (and are coming up), including empowering a change leadership team, grassroots problem solving, creating a strategic 5-year vision, and much more. This initial guide focuses on non-profit and business partnerships for a reason:

For most mission-driven organizations, a strong business partner has the potential to multiply impact faster than nearly anything else.

Just a few of the potential benefits business partnerships can bring to your mission:

  • Access to expensive expertise targeted to your gaps, such as advertising, architecture, or digital marketing
  • Political leverage through the biggest voice in the community
  • Loyal advocates and arms-length lobbying resources
  • Vetted and dedicated board and committee members
  • A volunteer workforce
  • Increased exposure and publicity
  • A positive reputation as being an efficient and high impact organization
  • Accountability to long-term goals and results-oriented outcomes
  • Improved effectiveness and organizational capacity
  • Creative ideas and opportunities
  • Increased donations and grants

It's time to get a competitive edge on your cause. If you haven't considered strategic partnerships or wrote them off as too much work with too little returns, take a peek at the new Partnering for Multiplied Impact guide and see if you can't stir up some inspiration and ideas for win-win opportunities waiting in your community.

In what ways have you already partnered with  businesses? What has been the impact for your cause?

Happy New Year! Let's Change the World

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I am so excited to launch the Impact Ignition blog and hope you will enjoy the coming content. Whether you're mission-driven or just here for the universal content around innovation, collaboration and leadership, welcome! The Impact Ignition blog will curate content to help non-profits and other mission-driven organizations become more savvy; to streamline their operations, develop strategic partnerships, and innovate to multiply their impact. It will also include resources, such as training, networking, and funding opportunities.

Subscribers can choose to receive all of the content or to have the non-profit content left out. If you migrated from the other blog, you have only been subscribed to the universal content (unless I know you personally and knew you'd want it all). You can always adjust your preferences at the bottom of any of the emails.

Take a peek at the new blog and let me know what you think. Better yet, it's the perfect time to share some of your expertise via a guest blog post. Why not hit the ground running in the new year by helping mission-driven organizations become better, stronger, and more adaptable?

Thank you for joining me here. I look forward to the community we are creating that will change the world for the better. What's your cause for 2014?