non-profits

Funders Who Reward Capacity Development

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Creative and sustainable nonprofits are drawing more and more funding from "investors" while the pool of feel-good "donors" is shrinking.

You can trace much of how nonprofits operate back to the source of their funding.

The majority of nonprofits have a Development Director whose key role is not development of the organization, but development of funds for the organization. They are in charge of writing grants, reporting on grants, courting foundation contacts and major donors, managing fundraising campaigns, and basically asking for money.

In my experience, very few nonprofits see "development" beyond the role of asking for money, over and over and over again.

If we trace this back, it's easy to see the reason for this reliance on repetitive fundraising.

Historically, many foundations and donors demanded that the greatest possible percentage of their funds be invested in direct program services. In other words, donors have demanded that nonprofits spend donated funds right away, with no investment in the future.

This idea was set in stone by organizations like the Better Business Bureau Wise Giving Alliance, Guidestar and Charity Navigator; sites whose profit model was based on giving donors solid information about the nonprofits they were considering donating to, but whose lack of concern or awareness of genuine indicators of mission efficacy resulted in a long era of comparing nonprofits based on one major indicator: their "overhead".

In fact, many states (including Utah) still publish the percentage of donations invested in direct program services on charitable solicitations permits - requiring these permits to be displayed on location and making such information available online, as if it were a genuine indicator of impact that was comparable across mission focuses.

This hyper-focus on a particularly meaningless percentage has resulted in enormous pressure to pay as little as possible for everything, from space to supplies to talent. Nonprofits are expected to get everything donated and to attract bleeding hearts who will work hard in crumbling offices on the bad side of town for less money and terrible health insurance.

I was talking with several talented employees of a local nonprofit that I admire a great deal for their forward-thinking revenue models last week. I was amazed to learn that because of their location, they are approached daily by drug dealers and have to watch their young clients deal with the same interactions as they come and go from classes.

A for-profit arts school would absolutely never subject their clients to this type of environment; it's bad for business. This organization is catering to the same clientele with unique and important STEM education, yet they have not made it a priority to move to a better location. Why? Almost certainly because it would increase their overhead.

While many nonprofits are responding to opportunities for sustainability and internal revenue creation, they continue to sacrifice in ways that ultimately lead to poor performance of those initiatives, or outright failure.

However, the nonprofit culture is shifting, albeit slowly.

Family foundations are now being run by a younger generation, a generation characterized by entrepreneurship and impact. More and more corporations are investing in nonprofit grants and awards that reward sustainability and innovation. And thanks to technology, we are witnessing nonprofit and for-profit startups that are making a splashy impact, while giving 100+ year old nonprofit in the same niche a run for their money.

With this shift, those big three online nonprofit rating services finally backed away from this percentage as an indicator of mission performance with an open letter in 2013 and a follow-up letter to nonprofits in 2014.

The days of doling out $10,000 checks for feel-good programs are petering out and it's a good thing.

While I've witnessed many nonprofits deny this shift and struggle to incorporate better business models into their long-term mission strategy, the process is leading to stronger, more accountable, and increasingly sustainable cause organizations who may very well multiply their impact on homelessness, domestic violence, animal cruelty, addiction, and every other mission focus.

And much of this credit comes back to funders and donors who are willing to invest in the long game, who are looking beyond the percentage of donations invested in one-time services and reinforcing the importance of internal capacity.

Eide Bailly's Resourcefullness Award is just one example of a funder that sees the bigger picture, investing a total of $15,000 in nonprofits with creative and sustainable revenue generation initiatives in Utah, Arizona, Colorado and Minnesota (applications are due August 12th).

Here in Utah, our Community Foundation just held it's third Social Investors Forum, curating a community-wide dialogue around the importance of funding unique, innovative, and sustainable nonprofit initiatives while bringing new funders to the table who are more comfortable with "investing" rather than "donating".

Our state Arts & Museums Division invests up to $2,500 in arts organizations each year specifically to aid them in developing their capacity.

These focus changes are critical to creating long-term impact. In effect, these are genuine investments that multiply the impact of the funders. They trigger and support internal capacity development and revenue generation programs that allow the nonprofit to further its reach and its mission, year after year.

That's a donation check I want to write.

So, whether your making a personal donation, a grant award, or a creating a corporate giving program, consider reaching out to nonprofits within your mission focus area and finding out which ones are making this leap.

Invest in the long game, not low overhead, which is too often an indicator of low growth, unsatisfied employees, high turnover, and ultimately, low impact.

And for you nonprofits, invest in talented, creative minds that can challenge your status quo, and brag about how you are positioning to make a difference for now, and for the future.

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?

The Nonprofit Management Audit

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The goal of a management audit is to identify your internal blind spots - the risks the organization is incurring due to gaps in day-to-day operations. It's more commonly practiced within the corporate world, but non-profits are especially at risk for unknown weaknesses. Passionate, well-meaning people found beautifully optimistic nonprofits everyday. There is a notion that a running a "charity" will be nothing like running a business; nowhere near as difficult.

While most fail quickly, many nonprofits make it past infancy to the point of acquiring space, allocating a stable salary for the founder-turned-Executive Director, and hiring a few staff members.

This is the next major fail point.

The compliance requirements, reporting, paperwork, payroll taxes, liability insurance, property tax exemption declarations, sales tax reimbursement requests, charitable solicitation permits, business licenses, accounting systems, spreadsheets, meetings, and much more aren't what the founder envisioned.

Without experience, it's nearly impossible to recognize which puzzle pieces are missing and which will cause you the greatest grief. This is where the management audit comes in.

A professional management audit should be conducted by a consulting firm so as to provide objectivity and hopefully some resource-saving expertise. But organizations of all sizes should engage in regular, internal management reviews to continuously build an infrastructure that is sustainable and protect your 501c3 status.

To help you get started, here are the major areas I might review during an audit, depending on the goals of the organization:

Foundation

Charitable Purpose By-Laws Mission Vision Strategic Focus Annual Plan Long-term Strategic Plan Impact (Outcomes)

Regulatory & Compliance

501(c)(3) Status Charitable Solicitations Permit Business License(s) Independent Financial Audits (Voluntary or Required) Annual IRS 990 Submission Workers Comp Unemployment Insurance General Liability Insurance Directors & Officers Liability Insurance Policy & Procedure Document Retention Policy & Management Industry-Specific Regulatory Requirements

Executive Leadership Team

CEO / Executive Director CFO / Financial Director Additional Leadership Roles Team Structure & Decision Making Process Development & Coaching Board Chair Involvement Succession Plans

Financial

Zero-Based Annual Operating Budget with Board Approval Frequency of Financial Reporting to the Board Financial Controls in Writing and in Action Bookkeeping Responsibilities Accounting Software / Firm In-Kind Donation Tracking Restricted Funds Management Diversification of Revenue Earned Income Activities & Unrelated Business Income Compliance Annual Financial Review/Audit 990 & Financial Review/Audit Board Review & Approval Overhead Percentage & Sustainability Cash Reserves Physical Assets Security

Board of Directors

Recruitment & Member Induction Process Director Agreement / Code of Conduct Director Terms Director Compensation Conflicts of Interest Policy & Annual Disclosures Meeting Minutes Number of Quorum Meetings Annually Committees Level of Attendance & Contribution Director Onboarding / Ongoing Training Board Chair Succession Plan

Human Resources

Employees - Open Position Postings - Equal Employment Opportunity (if covered entity) - Employment Applications - IRS W-4 - I-9 - E-Verify (15+ Employees) - Regular Supervision - Documented, Regular Performance Reviews - Timesheets - Any Required Training Documentation - Labor Law Compliance Posters

Independent Contractors - Categorized Correctly - Current Contracts - Business License - Professional License(s) - Invoices

Volunteer Applications Volunteer Hours Reporting Background Checks (Voluntary or Required) Confidentiality Agreements Onboarding Process Ongoing Internal Training Opportunities (Voluntary or Required) Disciplinary Action Policy & Documentation Hard & Electronic HR Files Security

Outreach & Development

Strategic Development Plan Development Calendar Website Social Media Grant Proposals & Follow-Up Special Events Major Donors Individual Donors & Stewardship Promotional Materials Outreach Activities Community Engagement Industry Network PR

IT

IT Equipment Phone System Software & Technology Email System Shared Calendar System Accessibility & Security Internet Access Policy

Space, Equipment & Supplies

Space Ownership / Lease Office & Staff Supplies Staff Break Areas

*Disclaimer: I primarily work with nonprofits located in my own state. Some of the identified requirements or permits are exclusive to Utah.

5 Common Nonprofit Budget Blemishes

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Most nonprofits get their start with a founder who is passionate about the mission...not the numbers. Here are a few of the common budget blemishes that can result in a grant request blunder.

1. Your budget isn't actually a budget.

I may love your mission, but if I'm going to give you $25,000, I want to know you can manage it well, and hopefully multiply its impact through effective fundraising. Unfortunately, when you give me a budget that is simply a list of current revenue and expenses (like below), I lose confidence.

Budget Blunder 2

I kid you not, I've seen several budgets that were essentially set-up like this.  Make sure your budget looks like an actual annual operating budget, not a list of expenses that grows each month. It's a projection of an entire year's worth of revenue and expenses, based on history.

2. You have a big red negative number at the bottom.

No matter how much I love the redwoods, I really don't want to dump my money into a swirling drain of demise.

Often times, the budgets that are "in the red" are simply a misunderstanding. A budget shouldn't include only the revenue commitments you already have, it should include realistic revenue increases that you are pursuing. Young organizations will likely build new revenue into their budgets year after year until they stabilize. Just because you haven't received the $10,000 donation you need to close the gap yet doesn't mean you aren't going to.

If you're projections look like your heading for a major loss or bankruptcy (and, yes, nonprofits go bankrupt all the time), you either need to close your doors or devise a serious action plan for how you are going to course-correct. This should include both serious expense cut-backs and increased revenue strategies. Your budget should reflect realistic projections from those efforts (a lower, less worrisome, red number).

3. You have a positive number at the bottom.

Ideally, you should be crafting a zero-based budget. If you have a surplus, give it a name and move it up onto an expense line. If you are purposefully generating a surplus to build reserves (nonprofits should aim for at least 6 months of operating reserves), assign it as such.

If I'm a potential grantor, I want to give me money to the organization that needs it, not one that already has more than they know what to do with. Name every dollar based on how you will spend or save it, protecting yourself from the perception that you're running a money-making machine.

4. Your budget doesn't match reality. 

If you raised $5,000 in individual donations last year, you're probably not going to raise $500,000 this year. And if you have a salary line of $100,000, you better have a corresponding payroll tax/fringe benefits expense line.

A budget is a critical management tool that lets you know if you're winning or losing. It should be used as a constant guideline and substantiate your decisions as an executive. If you're budget is missing expected information - like annual insurance premiums, fringe benefits, professional fees (like the CPA for your 990 prep), or utilities, funders will wonder if you really have a grasp on all of your expenses, or if you're just shooting from the last balance on your bank statement.

5. Gaps from Missing In-Kind Revenue & Expenses

It can be difficult, especially when you're just starting out, to appropriately track and project in-kind revenue/expenses. But if you're mission relies on a hefty influx of in-kind support, your budget should reflect that. Otherwise, your description of your capacity won't match the figures in your budget.

For example, many nonprofits receive donated space. Get a letter from your lessor documenting the market value of the space and include that in your budget. Remember that in-kind revenue, such as donated space, volunteer services, or items used in your programs, generates an equal expense. It's a wash.

If you need a little help in the budget arena, don't go it alone. Either recruit financial expertise onto your Board or hire a consultant to help you get it right. If you just need a functional template, you can get one here. If you'd rather just send in the figures and come back on Monday with it done, I can also help with that.

There's no reason to work in your weaknesses. It doesn't serve you or your mission.

Got a budget question? Post it in the comments. Chances are, someone else is wondering the same thing.

New Tools for the DIY Founder

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I specialize in building the backbone of young organizations, allowing them to scale their impact. Over the years of working within this segment, several consistent pain points have emerged:

  • Preparing a professional annual budget that actually helps guide decisions
  • Setting up compliance activities (business licenses, charitable solicitations permit, labor law compliance, etc)
  • Establishing paperwork and procedures for new hires and independent contractors
  • Implementing financial controls
  • Developing overall policy and procedure documents

Often times, figuring out exactly what is causing the ceiling on your efforts is part of the mystery.

However, I often encounter passionate executives who are know they are missing these pieces, but they just don't have that expertise. This is especially true in the nonprofit sector where founders become CEOs without much formal training on the dark side of organizational leadership: spreadsheets, paperwork, and compliance.

This is why I'm launching affordable toolkits for the Do-It-Yourself founders out there.

Reinventing the wheel is time expensive and often results in subpar outcomes, but hiring the expertise is often cost-prohibitive, even under a temporary consulting agreement.

Instead of paying $300-500 for someone like me to commute, meet you face-to-face, and develop an annual budget, simply throw your figures into a spreadsheet and exchange it for a professional workbook containing your annual budget and variance reports, automatically calculated based on your actual results during the year. All for a flat, affordable fee and in just a couple days.

Already have a decent grip on your budget, but need to convert it to a format that will help you track revenue and expenses easily and present professional reports to your Board? Simply download the DIY Budget template.

Hiring your first employees or bringing on an independent contractor? HR is synonymous with paperwork and payroll demands you do it right. Download the HR quickstart toolkit and get a handy checklist for your new hires plus all the paperwork you need, easily customized for your company:

  • Employment application template
  • Timesheet template
  • Contract template
  • Invoice template
  • IRS Forms

Virtual Budget Prep, the DIY Budget Template, and the DIY HR Toolkit are all available now. More products are on the way, including starter policy and procedure, an earned income for nonprofits workbook, and a financial controls toolkit. Be sure you're on the mailing list to get the latest product updates.

Growing your organization shouldn't mean late nights pouring over IRS publications or scouring an Excel spreadsheet for the broken formula. You have better things to do to advance your mission.

How to Score During a Give-A-Thon

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Utah is in the midst of our annual day of giving, Love Utah, Give Utah. Founded and hosted by the Community Foundation of Utah, 400+ nonprofit organizations are working to score new donors, exposure, and prizes. What factors set apart the winners from the less lucrative campaigns?

1. Cultivate Community

The nonprofits who really stand out during give-a-thons have an established community of fans, both live and online. They don't wait until a week before or the day of the event to blast their mailing list with an appeal. Instead, they curate ongoing communication and opportunities for interaction. Just like on social media, you want to communicate for the purpose of engagement at least five times for every appeal.

Lacking this foundational component and its already the day of? You can still improve your results.

2. Invite Interaction

Spy Hop Productions, a youth media nonprofit

Some donors have reported having received more than 15 email appeals from different organizations just today. That's a crowded field, especially when you consider the dozens of work-related emails that demand attention.

Beyond the obligatory email appeals (which you should ensure include a photo or two of your purpose in action), the frontrunners have created opportunities for hands-on interaction with the mission. Some organizations are running open houses, some are having parties, and others are running telethons. Some great examples:

If you can interact in person with community members who are interested in your cause, even strangers who weren't aware that their hobbies or activities aligned with your mission, you'll generate more buzz and potential new donors.

Not sure if you can command enough participation to come off as a success? Team up with other organizations who share your donor base.

3. Seed Momentum 

The real trick during a give-a-thon is to convert strangers into fans during the event. This is an incredible feat as people are generally wary of donating to organizations or causes they aren't familiar with. However, if you can generate a lot of momentum and excitement, you are much more likely to attract unfamiliar visitors to your campaign.

Consider Noble Horse Sanctuary, a nonprofit that operates on a total budget of $58,000 and has already attracted $9,000+ from 158 donors.  This small organization has outraised 197 other small nonprofits (as of 5 PM, there are still 7 hours to go). Their results are so compelling that many of us at the headquarters for the event have talked about their mission, visited their campaign page, and checked out their website.

How do you build momentum?

  • Find vocal corporate partners to make matching grants, especially those with a large employee base and an eager marketing team ready to take advantage of the sponsorship.
  • Cultivate scheduled donations early so that you start off at midnight with a bang.
  • Task your evangelists with spreading the message on your behalf throughout the day, multiplying your network reach, online and offline.
  • Don't just communicate at your community. Spur an online Instagram and video campaign to stand out from the crowd and create online interaction.

Utah Film Center

4. Fearlessness

Finally, there is a fearless quality among many of the nonprofits who have capitalized on the day. They volunteered to stand in front of the cameras for the stream-a-thon, they joined in the honk and waves, they asked local celebrities to hold up their sign for a photo opp, and they reached out to real celebrities on social media for a retweet.

When it comes to standing out during a free-for-all fundraising campaign, a little bit of an edge helps.

Good luck to all the Utah nonprofits and those of you with your own community give-a-thons coming up. If your community or state lacks an annual day of collective philanthropy, team up with your local community foundation and make it happen!

Get More Donors That Give More

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Do you remember baby Jessica? It was 1987 in Midland, Texas. An 18-month-old Jessica Morales fell 22 feet down a well just 8 inches wide. Lodged in the pipe for 59 hours, the story drew near-continuous coverage on every major network until the toddler was pulled to safety. The sheer impact of the highly visible and horrifying story of this little girl's ordeal on the American public is quite remarkable. The White House held a reception, ABC made a tv movie, and thousands of donors generated an estimated $700,000 in support.

baby-jessica

Pew Research ranks her story 8th in media interest over the past 20 years, USA Today identified her as the 22nd most impactful person on our lives, and CNN coverage totaled more than that of the 1994 genocide in Rwanda, where 800,000 people, including many babies, were brutally murdered in just 100 days. That's an average of 8,000 people per DAY.

The Identifiable Victim Effect

Dan Ariely is a behavioral economist with MIT and the author of The Upside of Irrationality, a wonderful and intriguing book that I just finished and highly recommend. Ariely sheds light on why we give to some causes, and not to others, illustrated by a simple study:

First, random participants were given $5 and offered the opportunity to donate some or all of their newfound money to a charity in response to a food shortage in Africa. Half of the participants received disturbing statistics. The other half received a personal story about a little girl, Rokia: "Your gift will change her life..."

The result? Participants gave twice as much to help Rokia - 48%, as compared to 20%. Why? Ariely pegs our empathy-or-apathy response to three psychological factors:

Closeness

The physical proximity and feeling of kinship you share with the victim. We feel much more for a family member whose home burnt down across the street from ours, as compared to a fire that takes out a village in Angola.

Vividness

How visible and tangible the need is. A picture of a bald, 4-year-old leukemia patient is vivid. A billboard that informs drivers that heart disease is the number one killer of women is not.

The Drop in the Bucket Effect

The faith in your ability to have an impact. We tend to shut down emotionally when we perceive the need to be so large that we cannot do anything of any real value.

How Can Causes Learn from the Baby Jessica effect?

Stalin historically said, "One man's death is a tragedy, but a million deaths is a statistic." Mother Teresa echoed the sentiment, "If I look at the mass, I will never act. If I look at the one, I will."

Some causes, like St. Jude's Hospital, have a very obvious face, but many do not. These missions aren't any less important and deserve strategic messaging to connect with a broader base of donors who give more:

  1. Find your baby Jessica. If you're lobbying for cleaner air, highlight Jane, who has asthma and missed 24 days of school last year. Connect your medical supply nonprofit to Joe, who received a knee replacement and was able to go back to work. It doesn't have to be a tear-jerker, but your donor needs to relate.
  2. Focus on a picture and a story. Seeing the face of your mission immediately makes it more personal. Pair that with a compelling and tangible story about their life, stirring an emotional connection. This isn't about being scammy. Your cause is IMPORTANT. Your work has meaning for people. Communicate that.
  3. Drop the statistics. It can be hard to completely delete the fact that there are a million Jessicas out there everyday, but the bigger the problem, the less likely your potential donor will try to help. You have a very limited window to capture their attention; don't turn them off with an impossible task.
  4. Empower the donor. Instead of making your donor feel helpless with depressing statistics, show the breadth of the problem by highlighting how many people were helped last year "by donors like you". Take a note from the Save the Children classic where donor could "sponsor" a child and even get updates on them. There's a reason they garner $600M in contributions a year. Make the smallest donation meaningful.

Review your website, brochure, social media pages, direct mail appeal letters, fundraising speeches, and any other vehicle for connecting with donors. You'll probably find a lot of statistics and very few pictures of real, genuine people and a clear message of how my $20 can make a lasting difference.

Step 1. Invest a day in crafting better messaging and images for your mission and then launch that messaging cohesively across all of your platforms.

Step 2: Put methods into place to identify and collect new images and stories from your work to consistently refresh your messaging and empower more donors to have an impact through your organization.

If you supply direct service partners, provide an easy process for them to funnel stories and pictures back to you. Even if you are layers away from the impact, find a contact on the frontlines and partner with them to tell the stories of those you help.

Don't wait, this is one of those important but not urgent tasks that will forever undermine your fundraising if you don't do it now.

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?

Bleeding Hearts, Cash, and Mission Drift

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"Mission drift" is typically associated with organizations who inadvertently or inappropriately lose focus of their mission and begin dabbling in other areas, although organizations can and at times need to consciously shift directions. Avoiding unproductive mission drift can be difficult, especially for small nonprofits run by bleeding hearts (no offense intended, we all bleed for certain causes).

A nearly harmless drift:

A startup nonprofit that I have worked with provides a very specific service to a very low-income, disenfranchised, and predominantly immigrant population. They exist to serve X need, but in the process they get to witness all of the other needs in the alphabet, from homelessness to sexual abuse to malnutrition.

During the holidays, their devoted team members were particularly vulnerable to mission drift and there were several instances of giving away cash from personal wallets and brainstorming about a giving tree or free food cabinet.

Why is this a problem? It isn't...if your nonprofit exists in a vacuum where no other community services are available and you have endless resources. In this case, you're simply becoming more comprehensive. Drift away!

However, in most cases this type of band-aid reaction causes more harm than good. Not only do we lose focus on what we need to do to serve X need to the best of our ability, we also distract our target clients from accessing the organizations that are experts at providing the ancillary services they need. The homeless client is better served by a referral appointment with the local housing provider than with the twenty that was slipped to her out of sympathy.

A more detrimental drift: 

On the other end of the spectrum, when you have bleeding wallets or business-oriented executives, drift is prevalent for different reasons, most often the draw to cash.

Unfortunately for many human services organizations, the glow of government super grants is often too tempting to turn away from. Instead of focusing their efforts on serving X need, I witnessed as an organization loaded up their existing team members with the task of launching new services in an arena they had zero expertise in.

Why? Because said services were in vogue and $100M+ government contracts were out to bid.

The organization didn't even get an award, but the program had to be in existence to apply and it would be too much of a black eye to turn back now. Needless to say, they aren't serving their new side mission well and the mirage of increased credibility will fade with the poor outcomes and the soon-to-end service fad.

Maintaining mission perspective

The above examples are highly prevalent in the nonprofit sector. Our causes naturally come with other symptoms, whether we start off working toward clean air or ending cruelty to animals. Funding is deliberately used as a mechanism for change, our causes attract passionate leaches who hope we can add their cause to our momentum, and nonprofit work attracts employees who can't help but see how we could do more.

In fact, nonprofit executives are constantly accused of neglecting their duties. As COO of a behavioral health nonprofit, I had the unsavory duty of working with the endless stream of government auditors. One particular auditor was of the bleeding heart variety and should have become a prosecutor with her ability to latch onto a small mistake and make it into murder. However, they all lacked perspective.

We were constantly told we needed to address the barriers to successful treatment outcomes. From creating veteran-specific PTSD programs to posting outreach workers at the homeless shelters to providing referral specialists to the emergency rooms, there was no shortage of ideas (which of course came across as demands without funding).

When you fragment your organization to try to solve every problem associated with your cause, you cannot be effective.

The perspective that nonprofit organizations function to solve all of the problems that come along with their cause needs to end.

The Last Days of the Superbowl as a Tax-Exempt Fundraiser

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The fact that the NFL is still considered a nonprofit tax-exempt entity is really an embarrassment to Congress and a slap in the face to the genuine charities who are working hard to change the world for the better, including the many sporting organizations that actually serve a higher purpose than primetime ratings. Legislation was introduced in both the Senate (Senator Tom Coburn-R, Oklahoma) and the House (Representative Chaffetz-R, Utah) in the past few months to finally close the loophole that allows the National Football League, the Professional Golf Association, and the National Hockey League, among others, to slip under the tax radar while organizations like the National Basketball Association and Major League Baseball pay.

Cleverly named the Properly Reducing Overexemptions (PRO) Sports Act, the legislation would amend Federal tax code to prohibit professional sports organizations who garner more than $10M in annual revenue to qualify for the 501(c)(6) tax exempt status as industry trade associations and public interest groups.

While some may argue that professional sports enrich our lives and provide a culmination that encourages involvement in lower level sporting leagues and organizations, I'm not sure anyone could suggest that the NFL operates with a mission-first approach. Even their mission statement reeks of a profit-first model:

To present the National Football League and its teams at a level that attracts the broadest audience and makes NFL football the best sports entertainment in the world."

This is not to suggest that the NFL is "bad"; for-profits play an enormous and important role in the economy and in our lives. Americans (including myself) love football. In fact, the Superbowl is the one thing most of us can agree on. Whether it's the wings, commercials, or the intense action of professionally-tuned athletes at their peak, 81% of us said we plan to tune in today.

Major League Baseball apparently renounced their tax exempt status voluntarily in 2007. If you quack like a duck, be loud and proud about being a duck. The Superbowl is not a fundraiser for charity.

Author's Note: This particular piece reflects my personal opinion on this topic and other thoughtful opinions are welcomed. 

Do you need to switch your pitch?

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We've all heard of pitch competitions in relation to startups. The pressure is intense and these infant business ideas often have a small window to demonstrate their ability to sell their product (and their company) to would-be investors. But the pitch isn't new and it isn't limited to startups. Mission-driven organizations who have mastered the pitch are recruiting more dollars, volunteers, partners, and investors than those who haven't for the very same reasons: You have a small window to sell your cause.

Too often, a pitch looks like this:

 

We tell people what we do or recite our mission statement rather than sharing the impact we have.

The small nonprofit "provides free mental health services to low-income, uninsured adults" instead of "relieving debilitating mental health symptoms for those most at risk and most in need so they can get back to work and take care of their families".

The community foundation "pools donations and expertise through coordinated grants to improve the quality of life of Sunshine City" rather than "catalyzing ideas into action for good to change our neighborhoods, schools, and community for the better".

How much  more compelling is the following pitch?

 

How many mailings did you receive between November 1st and January 1st asking for a donation? Now consider the number of emails, tweets, websites, texts and other forms of media vying for the attention of your would-be donors.

If you don't think your in sales, think again. Mastering persuasive communication skills, especially in sharing your impact with potential donors, board members, or partners, is critical in this digital era.

Let's get the juices flowing with some ideas from Dan Pink, master of motivation and author of Drive and To Sell is Human:

 

Take the next step RIGHT NOW. Share your own fast pitch in the comments.

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)!

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?

Ignite Your Intrapreneurs Into an Innovation Engine

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Many organizations, especially non-profits, are lacking an innovation engine - the capability to identify and invest in long-term strategic opportunities that produce growth.

Identify Your Intrapreneurs:

A recent article on the Harvard Business Review Blog Network (Recognize Intrapreneurs Before They Leave) and another from Forbes contributor David Williams (The 4 Essential Traits of Intrapreneurs) help to identify this unique and often neglected species of employee through 6 traits:

1. Their primary motivation is influence and freedom, not money.

2. They're future-oriented and passionate about learning.

3. They "greenhouse" ideas - carefully tending to seeds until they have a strong plan.

4. They engage in "visual thinking" - formulating a series of solutions from the initial spark.

5. They are able to "pivot" - balking momentum in favor of better direction.

6. They're confident, but humble with high self-awareness and sense of purpose.

Interestingly, the authors of the HBR post suggest:

In a firm with 5,000 employees, we’ve found, there are at least 250 natural innovators; of these at least 25 are great intrapreneurs who can build the next business for your firm."

That means that only 5% of your workforce are natural innovators and one half a percent are great intrapreneurs.

If you don't have thousands of employees, you may be looking for a needle in a haystack, which makes it all the more important that you intentionally prepare for and nurture these hidden gems, taking advantage of their entrepreneurial combination of talents.

Nurture an Innovation Engine:

As a former intrapreneur who became fed up with bureaucracy and jumped ship, here's what kept me loyal for years and what would have kept me around longer had it been done better:

  • Foster a culture of grassroots best practices, even if you have a long way to go. Intrapreneurs want to be on a winning team. If you involve your frontlines in steering toward a better direction, your natural innovators will come out of the woodwork.
  • Recognize intrapreneurial qualities and connect your innovators with a mentor. Intrapreneurs question the status quo, which often isn't rewarded in management meetings at lower levels. Connect them with a mentor who can support their ideas and refine their approach to change leadership.
  • Recruit several intrapreneurs onto your executive leadership team. Without change leadership, your executive meeting is all talk with depressing status updates.
  • Intrapreneurs in leadership positions are prone to burn out. Support these executives with enough authority and a team so that they can effectively tackle strategic initiatives with success. This is your innovation engine.
  • Channel your innovation engine's ideas into an ambitious goal and gift it back to them. Big projects that will have a big impact are bright, shiny objects to intrapreneurs. I was always excited to be part of the process of strategic innovation.
  • Create a safe environment for experimentation and revisions. Too many leadership teams try to change on demand, doling out deadlines and metrics to their innovators, which in turn deters creativity and the ability to change course when needed.
  • Lead with integrity. Nothing kills loyalty quicker than deception and loyalty is a cultural pre-requisite for the change that your innovation engine needs to initiate. Adhere to strict values and take swift action to remove negative influences in your culture before they drive your talent out.

The concept of entrepreneurial employees isn't necessarily new, but it's gaining more attention because it's easier and more rewarding than ever before to leave your 9-to-5 and start your own business. Your best intrapreneurs are an online form and a quick website away from complete autonomy.

That being said, people are social creatures who want to be part of something bigger than themselves. By creating and nurturing an innovation engine, your organization will gain enormous competitive advantage over time. Plus, you will likely keep your intrapreneurs from going rogue longer and attract a steady flow of new ones to fill those big shoes.

What do you think?