sustainable

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

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.

Give a man a fish...and you've got a problem

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The problem? He's coming back for another fish tomorrow, and the next day, and the day after that. Too many organizations fail to empower men (and women) to fish on their own. There exists a powerful opportunity to improve the long-term outlook for every client we reach, whether we operate a nonprofit or a for-profit. And consumers recognize the difference.

What is the long-term impact of your work? For the individual? For the community? 

Case in point: The U.S. Healthcare System

Within the traditional disease-oriented "healthcare" system:

My child has a rash that is concerning. I call the local pediatric clinic after searching online for which one is in my plan. I make the earliest possible appointment for tomorrow afternoon. It's the only appointment available, but I will be at work, so I ask my husband to handle it. They drive 15 minutes to the clinic, fill out four forms, and wait 15 minutes for the physician. The nurse rooms my daughter and they wait for another 10 minutes. The physician looks at the rash for 5 minutes, recommends an over-the-counter cream, and then bills the insurance for $180. After contractual adjustment, we pay $153 a week later. The rash has still not cleared and my daughter came down with a bad cold several days after the visit...my own throat is a little scratchy.

Consumers, within the healthcare sector and beyond, are beginning to demand a different experience.

They recognize when they are authoritatively told what to do and when they are educated, cared for, and empowered. The latter is a much more satisfying experience.

In what ways are you only giving out fish? Your customers may be demanding a fish. They may genuinely appreciate the fish. But, how you could add in the resources, tools, and approach to truly empower them to fish?

This is especially imperative within mission-driven organizations.

I can hand out a box of food at the local pantry to an impoverished single mother of four and feel really good about it. But, what will that mother do when the food in the box runs out in a few days? Will she have a job, transportation, child care, a living wage, a safe home, and the ability to buy or grow her own food?

The next step could be as simple as a job skill training once a month in the pantry warehouse or posting the job ads and relevant wrap-around services on a bulletin board where clients wait in line to pick up their box.

For-profits get caught in the fish giveaway trap as well.

As a consultant, I may undermine demand for my own services by offering do-it-yourself resources and tools, but the truth is: If you serve your customers well and empower them to do more, you will always be in demand. Meanwhile you will empower yourself to do more by removing dependence on a limited asset...you.

I hire a CPA for my taxes to avoid learning all the ins and outs of various IRS schedules, but I demand that my accountant educate me on how to manage my personal finances better. I've referred nearly a dozen friends and family members to my current CPA because he exudes this rare quality.

The organizations who will rise and stay at the top aren't creating dependency. They are creating empowered evangelists who sing their praises, and become donors or referral sources.

Are your teaching your clients to reel in their own tuna?

The Laws of Subtraction

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The Laws of Subtraction by Matthew E. May was selected in a book club I recently joined. It's a compelling concept and I would have picked up the book otherwise, but I might not have finished it. The six laws of subtraction that May proposes are designed to help us remove the superfluous because success in the "age of excess everything" demands the skill of subtraction. That piqued my interest, as we really do have unlimited options and distractions and the key is the ability to prioritize and tune out the rest.

May compiles more than 50 different stories and perspectives on the topic, resulting in a book more than 200 pages long. I am an easy reader - I love nonfiction and I love new ideas that I can put to use. Unfortunately, I fell asleep twice while attempting to read The Laws of Subtraction.

May failed to apply his own methodology to his writing. The stories and metaphors designed to illustrate his laws went well beyond the point. I would have expected a book on the laws of subtraction to be short, concise, and laced with thought-provoking "Aha!" moments. Unfortunately, the gems were buried in lengthy explanations and I truly don't recall any of the specific laws themselves - they weren't catchy and actionable.

That being said, I respect May's obvious expertise and passion for the topic and took away a few pearls that certainly made the read worthwhile:

Pulsing

Pulsing is the concept of working in 90 minute stints with recharging breaks in between, such as a walk, meditation, doodling, or reading. Studies of brain activity show that we move from higher to lower "alertness" every 90 minutes. May points out that the symptoms of pushing the boundaries include restlessness, hunger, drowsiness and loss of focus, which explains why I find myself staring out the window and eating M&Ms.

I would add emphasis on the first 90 minutes of the day. What would happen if you invested the best of yourself each day into your highest priorities, with a targeted deadline less than 90 minutes away followed by an enjoyable activity? Sprints result in quick wins that build momentum.

Design...In Everything

FedEx LogoWe often only think of design when it comes to logos and advertisements, like this FedEx logo. (Do you see the white arrow?) But simplicity and clarity truly are desirable in all our interactions, so why not consider how simple and clear our lives and businesses are designed?

I often explain too much, burying my focus in a muddle of words. I also save way too many documents in a pile on my desk, just in case I might one day want to review one. What areas of your organization are cluttered or absorb an inordinate amount of your energy? Do you have white space where a person can relax, create, and work effectively?

Intentional Limits

In the past two years, I have often found myself paralyzed by the sheer number of directions I could go in. We all have a variety of passions, interests, and strengths...which to pursue? May observes that intelligent limitations provide the necessary frame to contain our efforts. Without those purposeful guideposts, we stare at a blank page.

Derek Sivers, author of Anything You Want, notes, "Give yourself some intentional restrictions in life and you'll finally get inspired to act. Restrictions will set you free." In what ways can you set better boundaries on your work, your time, and your relationships so that the next step is obvious and builds on the steps that came before?

The Principles of Skunk Works

Skunk Works is the top secret Advanced Development Program for Lockheed Martin. Their legendary chief engineer, Clarence "Kelly" Johnson, developed a strict set of principles for leading this shoestring rapid innovation team to repeated success, and they hold true for leading any team:

  1. It's more important to listen than to talk.
  2. Even a timely wrong decision is better than no decision.
  3. Don't halfheartedly wound problems - kill them dead.

The implications of the lessons contained in The Laws of Subtraction are open for application to large organizations, small groups, and individuals. Fewer distractions, clear direction, and clean space benefit everyone involved.

Root Cause Analysis: The 5 Whys

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I love memorable and easy to implement tools for problem solving. After all, solving problems is at least half of what leaders spend their time doing. Mine as well make it simple. Root cause analysis sounds uber complex and it can be. There are a variety of methods and tools out there that take hours upon hours to complete. Sometimes that's necessary, but I'm a fan of trying the simplest solution first and then escalating the complexity if the problem continues to rear it's ugly head.

The 5 Whys is nothing new, it's part of the Six Sigma process and became well-known from it's use with Toyota Production System in the 70's. I was just recently reminded of it from a good friend, Kim Barber. Kim is an adjunct professor with the University of Utah's School of Business and a wealth of practical information. In fact, that's what she teaches: putting management theory into practice.

Quick & Dirty Root Cause Analysis: An Example of The 5 Whys in Practice

Problem: Phone calls and emails aren't returned in a timely fashion or at all. Instituting a "Return all communications within 24 hours" rule has been ineffective in changing the trend.

1. Why? Quick interviews with the worst offenders reveal that they "just don't have time."

2. Why? They indicate that they have too much paperwork that they are behind on.

3. Why? Pushing the question, it becomes apparent that these staff are always behind, making paperwork more time-consuming since they have to go searching for the old information.

4. Why? Their supervisors nag about the deadlines, but never actually enforce them with any interventions or consequences.

5. Why? Addressing the identified issue with supervisors reveals that they don't feel comfortable enforcing the deadlines that they themselves don't keep. This is the way deadlines have always worked; ie. this is a problem embedded in the culture.

Without peeling the onion back five layers, the folks interested in solving the problem with returned phone calls would have been left with supervisors blaming their staff on the surface, but enabling the behavior through their own lack of commitment. The root cause of poor role modeling was able to be impacted directly, trickling down to the staff members.

Sometimes what appears to be the problem in the surface is only a symptom. More often than not in my experience. Try the 5 Whys for yourself next time you encounter a problem in your organization.