Moving Forward in Uncertain Times

In November of 2016, the Boston Globe reported on a pervasive sense of concern and uncertainty in the nonprofit sector as President Trump took office. The Globe reported Jim Klocke, CEO of the Massachusetts Nonprofit Network, as saying, “People are apprehensive, people are wondering what’s going to happen on a whole bunch of fronts. There’s an awful lot of concern out there.”

Six months later, the full effect of the new administration on the nonprofit sector remains unclear. But despite continued uncertainty, many of the nonprofits we serve want to move forward. To inform their planning at a time when the future is particularly hard to predict, they are looking to a variety of data sources and using the data in creative ways.

Here are three data sources our clients have drawn on to shape their assumptions and inform their plans for the future:

1.      One client looked to recommendations from the Heritage Foundation to the Trump administration on how to reduce the size and scope of government. Based in part on Heritage recommendations, our client chose not to hinge their growth plan on partnerships with agencies that Heritage had tagged for major cuts in government funding. The Washington Post confirmed the wisdom of this when it reported that the budget Trump released this spring bore a “striking resemblance” to the Heritage Foundation’s model.

2.      For another client, Wellspring conducted research on the scale and pace of budgetary changes after the election of another conservative American president who was determined to make big change, fast – Ronald Reagan. Under Reagan, cuts to social services came quickly, affecting nonprofit funding by the second year of the administration. Our client used this history as a guide for what they might expect under Trump. Now, they are proactively preparing for cuts on a similar timeline as what social service agencies saw under Reagan and are working to ramp up private funding in time to fill the gap.

3.      Several of our clients are learning from results of a survey of 162 foundation CEOs published by the Center for Effective Philanthropy. The survey assessed how foundations are altering their grantmaking as a result of the election of Donald Trump. It found that three quarters of foundation CEOs are making or plan to make changes in their work as a result of the election. The most frequently reported areas for increased emphasis were collaborating with other funders, advocacy and policy at the local or state level, and convening grantees. Only 1% expected their grantmaking to decrease, while 14% expected it to increase. Many respondents expected to increase funding in areas hard-hit by political change. Our clients are drawing on these insights to inform their conversations with funders.

Nonprofits need not be paralyzed by periods of uncertainty. If they look in the right places, they can find data that can inform their plans and prepare them to meet the future, whatever it looks like.

But What If? Hopeful in the Face of Reality

Poverty. War. Hunger. Climate change. Justice in freedom. Illiteracy. Overpopulation. The income gap… On many a day, I take stock of the state of the world and panic. Given the reality of these inextricable challenges, I sometimes wonder if it has to be this way, by necessity. Must this be our social paradigm because, like a law of physics, it is an underlying, fundamental principle of our world?

Thus I was struck with inspiration when I read Alan Lightman’s The Accidental Universe: The World You Thought You Knew, where the author-physicist explains that the universe in which we live may in fact be only one of infinitely many alternate universes. Indeed, the same fundamental principles of physics from which the laws of nature derive may lead to many different, self-consistent universes with significantly different properties of matter and energy from our own:

“The situation could be likened to a school of intelligent fish who one day began wondering why their world is completely filled with water. Many of the fish, the theorists, hope to prove that the entire cosmos necessarily has to be filled with water. For years, they put their minds to the task but can never quite seem to prove their assertion. Then, a wizened group of fish postulates that maybe they are fooling themselves.  Maybe there are,  they suggest,  many other worlds, some of them completely dry,  and everything in between.”

This “multiverse” concept is revolutionary for theoretical physicists, and the chapter reads a bit like science-fiction, teetering on the edges of philosophy, religion and science. The implications of this theory (if it turns out to be true) are enormous:

“If the multiverse idea is correct, then the historic mission of physics to explain all the properties of our universe in terms of fundamental principles—to explain why the properties of our universe must necessarily be what they are—is futile, a beautiful philosophical dream that simply isn’t true. Our universe is what it is because we are here."

I read this with a mixture of mind-blowing awe and great relief. The fundamental principles of our universe may not be as fundamental as we believe them to be. It is possible that the underlying tenets of our economy and culture remain fixed (competition is good, capitalism is sacred, individualism is revered, etc.) and that a social paradigm drastically different than our current one exists within this axiomatic system.

If it does not have to be this way, how else can it be? I don’t know. But simply knowing that an alternative reality is plausible, I am hopeful.   

The Key to a Great Workout

greatworkout

The New Year brings gyms and workout classes filled to the brim with people who have set a new year’s resolution to get in shape. As a workout fiend myself, I love going to workout classes that are fun, but also tough and little painful. The fun keeps me engaged, but it’s the discomfort in the process that makes me stronger.

When debriefing a recent strategic planning project with our client, the CEO joked that the strategic planning process had been “mostly fun, and a little painful.” Our consulting team had brought up some tough questions that were uncomfortable for the organization’s leadership to confront, but ultimately important to figure out as the organization looks to the future. And the leadership’s efforts to think through those challenges will make the organization stronger.

The parallelism struck me. The point of strategic planning is to make an organization stronger in the long-term. It’s fun to think about the future, especially the opportunities. But, it can also be uncomfortable to face challenges and threats to the current way of doing business. For me, it’s fun to be active, but I’m not getting stronger if I’m not challenging myself. As workout instructors are always encouraging their classes, it’s the tough moments when we most want to quit that we are making the most progress towards our goals. And, upon finishing a workout, I always feel accomplished and glad I did work through the hardest parts. Our work can be like that of the instructors, and my hope is that every organization feels that sense of accomplishment and progress through strategic planning.

We Can’t Do It Alone

Collaboration.jpg

A number of clients with whom I have worked recently have been grappling with the desire to affect large-scale change, while also facing the reality of targeted expertise and limited resources. We have been working with them to understand their core competency – where they deliver the most value – and to scale those efforts, while partnering with or referring their service recipients to other organizations that offer tangential value.

This article goes even deeper into the need for and benefits of extensive collaboration for large-scale change.

New Census Data Shows Declining Poverty

I was heartened to wake up yesterday to a headline proclaiming a noteworthy decline in the US poverty rate last year– the largest annual drop since 1999. According to new census data, the number of people living below the poverty line declined by about 3.5 million.

 

As the NY Times article states, job growth, low oil prices and increased minimum wage requirements are no doubt important contributors to declining poverty rates. But I also want to take this opportunity to recognize and thank the many individuals and nonprofit organizations that work tirelessly to fight poverty on a daily basis - some of whom I have been lucky enough to work with. You too are making a difference and, while I know we have a long way to go, I think it is important that we all take a moment to celebrate this headline.

Millions in U.S. Climb Out of Poverty, at Long Last/ NYTimes

 

Who are we not?

For an organization, just as important as “who we are” is “who we are not.”

It is an easy trap for an organization to want to be all things to all people, though that approach often leads to doing nothing really well. A focused and well-defined strategy is not only useful to inform an organization on what it is and where it is going, but is also useful for clarifying what an organization is not. A strategy can be a good filter, such that using the discipline to check that work fits with the strategic direction – and eliminating work that does not fit – can help avoid spurious efforts that drain resources or lead to lack of clarity. Effort will be put in the places where it is needed the most and will have the most impact.

In other situations, an organization does something very well, but needs to shift course due to market changes or business lifecycle. When a strategy adds elements to an organization’s scope of work when staff are already stretched thin, I often hear the question “how will we ever find the time to do that?” At that point, the strategy is a useful test or yardstick by which to measure all of the organization’s work, and weed out the efforts that no longer fit with the strategy. This then frees up organizational bandwidth to tackle those efforts that are directly in line with the strategic direction of the organization.

Using a strategy to define what we are not – in addition to what we are – helps make an organization’s identity crystal clear and efforts coordinated for maximum impact toward a common goal.

Brewing Non-Profit – For-Profit Partnerships

Linea_doubleespresso.jpg

I recently read about an exciting new partnership between Starbucks, a for-profit company, and the Queens Community House, a non-profit, multi-service settlement house with 25 sites in 11 neighborhoods in New York City.  I was intrigued.  

Queens Community House solidified a partnership with Starbucks to create the first US-based "opportunity café," which will be located in Jamaica, Queens. The new store is an example of Starbucks' nationwide initiative through which it seeks to deepen its commitment to communities by hiring local staff, engaging area vendors and providing a dedicated in-store training space for use by non-profits.  In this new “opportunity café,” QCH will provide training to young adults who are interested in the food sector in order to provide unemployed youth with the skills and experience they need to launch a successful career in the food sector.  

Reading about this partnership brought to mind a few other interesting ways food organizations are giving back to their communities by working together with for-profit companies.  Panera Cares, is operated by Panera Bread, the bakery / restaurant, and is a chain of community cafes in neighborhoods around the country where the restaurant provides suggested donation amounts for all menu items and customers pay what they can and the excess goes to charity, and where one can earn a meal voucher by volunteering in the cafe.

Recipe for Change, run by Chef Bruno Abate from Tocco Restaurant in Chicago, is a course that teaches prison inmates everything from knife skills and kitchen sanitation to recipes for pastas, sauces and desserts — key job skills they can use when they're released and looking for employment.  The program builds self-esteem and teaches inmates about good nutrition.

Hot Bread Kitchen, a bakery and non-profit social enterprise in Brooklyn, aims to build lasting economic security for low-income, immigrant and minority individuals by training and supporting them in achieving jobs and fair wages in the culinary industry.  Two-thirds of the organization’s operating budget is funded through sales of bread and rental of commercial kitchen space, and is used to train and educate individuals so they can turn their passion for cooking into a profession that can be used to achieve economic security.

This kind of partnership not only is exciting for what it will do for the neighborhoods and the participants involved, but is good food for thought as to how non-profits and for-profits can work together in creative ways to better communities and make a positive difference in the world.

Bon appetite!

Being Nice Looks Good On You

Image: Amy Anenberg

Image: Amy Anenberg

Though I love getting a seat on the New York City subway during my commute to work, I am quick to offer my seat to the elderly, disabled or pregnant. When I offered my seat to an older woman on my subway ride this week, a fellow subway rider (and stranger) handed me a pre-printed card that read “being nice looks really good on you.” It made my day and was a great reminder of the power of being nice. I’ve read many articles that talk about the personal and professional benefits of being nice – increased trust, success, and happiness to name a few – and encourage us all to think about how we can spread “nice-ness” in our personal and professional lives.  Here’s a link to an article I read a while back on this topic that has stuck with me: http://www.theatlantic.com/business/archive/2015/06/it-pays-to-be-nice/396512/

And for those of you in New York City, you should be aware that I am now on “nice patrol.” The card I received asks me to pay it forward so I am now scouring the streets of New York looking to hand-off the “be nice” card to a fellow do-gooder!

One Reason Why I Love the Nonprofit Sector

Image: Maayan Ohayon

Image: Maayan Ohayon

At Wellspring Consulting, we work entirely with nonprofits. I am often deeply moved by the leaders in our client organizations, their selfless approach, and the missions they are serving.

I vividly remember one day when we were helping the leadership team at Open Circle rethink their pricing. Open Circle trains grade-school teachers in methods to help their students learn how to get along interpersonally. To assess Open Circle’s pricing, we studied their competitors, interviewed their customers, and built an economic model of their costs and revenues. We found that Open Circle could charge more for their services, and we suggested that they do so.  But Lisa Sankowski, Associate Director at Open Circle, pushed back, saying, “We wouldn’t want to charge the schools more. They’re already under enough economic hardship, and higher prices would only make it harder for them.”  So we chose not to increase prices to the schools. Instead, we presented funders and donors with a clear depiction of Open Circle’s economic model to demonstrate why additional support was needed. This worked. Open Circle raised more money and met their economic needs.

To me, Lisa’s response crystallizes something I love about the nonprofit sector, and which I have seen many times over. Leaders of nonprofit organizations care deeply about the ultimate wellbeing of their customers. Laura Walker, President and CEO of New York Public Radio stayed at the radio station through the terror of 9/11, keeping it open while the frightening chaos rained about their offices. Thanks to her bravery, listeners all over the city were helped in their response to the crisis. Debbie Bial, Executive Director at Posse Foundation – which supports low-income youth in going to top colleges – communicates an infectious enthusiasm about Posse’s kids, their talents and their potential. Through her leadership Posse now operates in ten cities across the country, and she has personally taken scores of photos of radiant young adults on their college graduation day, which now hang on the walls and website pages of the Foundation. And Kathy Douglass, who left a lucrative career as a partner at one of the top law firms in New York City, founded In Motion, an organization providing free legal services to victims of domestic violence. Over 20 years under her guidance, the organization has served thousands of women.

Daily, I am touched by such leaders’ caring, vision and tenacity. I believe in them, and what they are doing. I am stirred by the amazing ways they are making change happen. And through them, I am able to be a part of something much larger than myself.

Data and Privacy

If you’re looking for a concise primer on using data in the nonprofit space, you can do a lot worse than this recent SSIR article by Jim Fruchterman. I particularly appreciate that Fruchterman integrates concerns about data security and privacy into his basic framework. At a time when many nonprofits are scrambling to increase their analytics capacity, data security can feel like it’s nice to have rather than an essential. But subjects as varied as e-vouchers for food and children’s school records can raise concerns about privacy, particularly the privacy of vulnerable populations. As sophisticated analytics become more common, the obligation to “first, do no harm” remains as pertinent as ever.

Focusing on Impact

I recently had an interesting conversation with a friend who teaches at a business school about some of the economics concepts he emphasizes with his first year MBA students.  He shared that he consistently hammers home the distinction between growing profits and just getting bigger. That is, what ultimately matters (assuming a company aims to maximize profits) is the product of revenues and profit margins, not revenues for their own sake. While this emphasis goes against the growth-at-all-costs mindset that seems to drive many business decisions, focusing on profits is a better recipe for a company’s long term health.

This conversation got me thinking about one of the most common strategic planning questions that we get from our clients at Wellspring: “How can we grow our revenues?” Like the business sector, the non-profit world often uses revenues as a measure of organizational success.  This makes sense, since revenues are necessary to run programs – and greater revenues suggest a greater scale that in turn suggests more impact. But is revenue growth really the right way to focus the objectives of a non-profit business?  I am increasingly convinced that the answer to this question is “no”.

You may be wondering – if we are not focused on revenue when building out a strategic business plan, then where should we focus?  Non-profits are in the business of maximizing social impact. To stretch the business metaphor, it’s like a non-profit’s margin, so total social impact is the product of scale and efficacy. Strategic plans that aim to scale up projects that less directly serve an organization’s mission, or that distract staff and management, can lead to a larger – but less impactful – organization. For those of us who care deeply about maximizing social impacts, this is not an optimized outcome.

An impact-centered model can help non-profits determine whether they should grow at all.  If there are scale-up opportunities that don’t distract or detract from current work, consider seeking additional revenues to support this expansion. But remember, most organizations can only stretch themselves so thin without affecting their impact – good data, careful analysis, and organizational discipline are invaluable in determining (and then respecting!) where that point lies.  

Fundraising Starter Kit

Funding: it’s a tireless chase that can exhaust a nonprofit, sucking up resources for insufficient financial gain and limiting the organization’s ability to achieve social good. It’s no wonder, then, that Executive Directors and Board members alike often approach Wellspring for answers to their funding challenges. Our approaches vary and depend upon their needs. They can range from in-depth analysis of government sources to identifying program outcomes that are most attractive to foundations.

While an organization’s development strategy is, by definition, client-specific and non-transferable, through our client work at Wellspring, we have come to realize that there are certain practices that are noteworthy. For example, as part of our recent work with a longstanding, youth development organization, we generated a list of best practices for attracting foundation dollars. These practices, developed through conversations with organization leaders with strong fundraising records, apply to many different organization.

So, without further ado, the list of suggestions:

  • It’s all about the data: Organization leaders were clear: without strong demonstration of impact, you’re risking chances of funding. Like all savvy shoppers, foundations, and donors and corporations too, want to know that their dollars are going to good use. Identifying clear metrics and building robust technology systems to track performance are critical. Without them, many foundations won’t entertain the idea of supporting your organizations. And so, while these efforts may be time consuming and expensive, the upfront cost and hassle will pay off in the end.
  • Make friends: One Executive Director put it best: “Don’t treat foundations like ATMs.” Winning grants is not transactional. It’s about building relationships. It’s about spending time in funders’ offices and bringing them along in your vision to affect the world. As a result of these efforts, you will have someone to turn to – someone who understands your organization and values its impact – when you need funding in two years’ time. 
  • Welcome them into your home: No matter how good of a storyteller you are, nothing illustrates a program’s power better than seeing it in action. So invite funders to watch the magic happen. Let them see what drives your organization. Let them see what compels you to show up at their door, asking for money – and they’ll be more likely to oblige. 
  • Be innovative: What’s new is always attractive – and this can be particularly frustrating for longstanding, even if high-impact, organizations. While acknowledging this frustration, experts noted that you can appease funders’ desire for novelty by injecting elements of innovation into the regular update of programs. Some also advocated for being strategic about program growth, incorporating areas of foundation interest. At the same time, they warn against bending to the every whim of foundations. Doing so could leave you with incoherent growth and programs that are not mission aligned – and, consequently, with an organization that is less appealing to funders.

To be sure, these suggestions are not a panacea; they won’t cure your every funding woe. But it is a strong starter kit that will put a new “oomph” in your development efforts, even those that are already strong.

Funders Want to See “Skin in the Game.” Here are Three Ways to Show It

Image: Shutterstock

Image: Shutterstock

If a nonprofit leader is plotting a bold new move, he or she generally needs to inspire new support from a range of partners and donors in order to pull it off.  But how to do this when the new undertaking involves significant risk?

Careful research, a well-conceived business plan, and a clear and compelling pitch are certainly critical to developing buy-in. But my client work suggests another opportunity to inspire confidence from potential partners in the face of uncertainty that many nonprofits miss.  

Demonstrating that people have “skin in the game” – or have made specific commitments to the field of play – can have a powerful influence on those still standing on the sidelines. The term “skin in the game” is often used in business and finance. But in the nonprofit context it can refer to much more than monetary investment. And the “skin” can come from valued partners, the nonprofit itself, or the community it serves.

Here are three ways I’ve seen this work.

1. Put a dollar amount on in-kind contributions  

One of our clients had ambitious plans to take a pilot program and scale it up to serve a significant portion of all pre-K students and their families in a major urban school district. The program had strong evidence of effectiveness and the growth plan was well conceived. But the plan relied heavily on philanthropic funding, none of which had been committed yet.

In preparation for a meeting with a room full of funders contemplating investment in the plan, we worked with our client to make the Department of Education’s support for the plan concrete. While the DOE was not committing dollars to the program, they were committing their buildings, significant time from teachers and administrators, instructional hours, and professional development time. We put a number value on these critical resources. The total was impressive and helped inspire the major philanthropic investment that followed.

2. Show concrete commitments from credible partners

Another nonprofit I worked with asked its long-term university partner to make specific commitments to gathering and analyzing data on the effectiveness of a program the nonprofit hoped to launch. The commitment of intellectual resources from a respected university increased the credibility of the program to potential funders and other program partners.

But what if you don’t yet have a partner whose commitments you can leverage?

3. Lead before asking others to follow

Nonprofits can start with putting their own skin in the game. That can look like 100% Board giving to the new plan, over and above their gifts from the prior year. It can look like a major portion of their discretionary budget allocated to the new undertaking, or an investment in developing a strong business plan. It can look like a low-income community that raises funds internally through bake sales and barbeques before asking for external investment from donors. These efforts send a strong signal that the nonprofit has committed whole-heartedly to its plans and will see them through.

At the end of the day, showing skin in the game helps potential partners breathe easier, knowing that risk is shared and commitment is strong. 

Building Diverse and Inclusive Volunteer Networks

Many nonprofits rely heavily on volunteers to be their boots on the ground and eyes and ears within the communities they serve. As discussions of diversity and inclusion have become more common, some organizations are asking whether their volunteers ought to better represent the communities they serve. Why might an organization want a more diverse and inclusive volunteer network? And what could an interested organization do to build one?

(Much has been written on definitions of diversity and inclusion. In this post, I use diversity to mean demographic [e.g. disability status, racial or economic] representation whereas inclusion refers to the involvement of different types of folks in governing and operating processes.)

There are many reasons that an organization might want to create a more inclusive and diverse volunteer base. First, when volunteers interact directly with the people an organization serves, having volunteers that are more similar to the client population may create a more welcoming environment in which clients feel freer to pass along information about what is and isn’t working. Diverse teams also promote creativity and hard work. An inclusive organization will provide opportunities for this new information and divergent perspectives to be incorporated into programmatic decisions, ultimately leading to better outcomes.   

Second, while we usually think about volunteerism as helping others, research shows that it is correlated with a host of mental and physical health benefits for volunteers themselves. Furthermore, academic research proposes that volunteering gives low-income individuals opportunities to build social, human, cultural and political capital. So expanding the diversity of a volunteer pool can act as one more way for an organization to strengthen a community.

Finally, as the U.S. experiences a diversity boom, organizations that have traditionally drawn from a homogenous pool of volunteers may need to expand the volunteer populations they engage, just to maintain their volunteer capacity.

Once an organization sees the benefit of a diverse volunteer base, what are the practical steps it can take to recruit and retain this volunteer base?

While it might seem obvious, organizations can begin by asking members of different communities to volunteer. In the 2013 Volunteer Supplement of the Current Population Survey, more than 42% of volunteers reported that they first became involved when they were asked to do so. Volunteers tend to respond more to personal appeals. Therefore, it may make sense to ask any existing staff or volunteers who come from those communities the organization is targeting to act as ambassadors. Ties with other organizations can also help, since some evidence indicates that institutional facilitation of volunteering is particularly important among those who are low-income and people of color.   

Organizations may also adjust the duties they ask volunteers to undertake and volunteer management processes to retain more diverse volunteers. The match between a volunteer’s skills, interests and reasons for volunteering and the duties they’re asked to complete is a strong predictor of whether that volunteer remains active. Organizations which are investing in transforming their volunteer pools should be particularly vigilant in asking new volunteers whether their expectations are being met.

While approaching all people with dignity and respect is a given for many nonprofits, processes that feel inclusive to one set of volunteers may need to be tweaked to facilitate participation for a new pool of volunteers. For example, a formalized process for sharing ideas might discourage certain volunteers from speaking up. Above all, organizations should seek out input from new volunteers about how to improve processes to make them feel welcome. While each organization’s circumstances differ, most benefit from being both purposeful and flexible in the ongoing process of building a diverse and inclusive volunteer network.   

A Good Case for an Endowment

Image: © Rfischia | Dreamstime.com

Image: © Rfischia | Dreamstime.com

I recently heard the story of a donor’s gift to his daughter’s private school. Not, as one might expect, a shiny new fitness center or maker space – but a new set of much-needed storm windows, which would pay dividends in the form of energy savings for years to come. The condition of his gift?  The windows had to bear his family name. 

The story of the “Smith Family Storm Windows” is a compelling statement on the challenges that non-profits face in covering unglamorous expenses – like storm windows – that are nonetheless necessary to keep an organization running. By having the windows bear his name, this donor hoped to highlight the importance of supporting the general operations of the school to other donors.

It’s a story – and issue – that resonates with many of the non-profit managers that I work with at Wellspring. Donors are much more apt to support programs or fund new buildings than to provide unrestricted funds that keep the lights on (or the heat in). Often, this means that organizations must raise operational support through annual campaigns, special events, memberships, and so forth. These income streams can be unpredictable and there is an ever-present anxiety of missing the year’s targets.

For this very common dilemma, a solution we’re often asked about is building an endowment fund, an investment that is set aside for the long-term support of an organization. Only the income, or a portion of the income, is spent each year. An endowment represents the promise of a reliable income stream to cover operating expenses, fill occasional shortfalls, or even seed new work. Many eminent cultural, educational, and healthcare institutions have accumulated massive endowments – if Harvard University is doing it, many wonder why shouldn’t we too? Putting aside the question of whether Harvard actually needs $20 billion for a rainy day, is raising an endowment fund in fact a good fit for smaller non-profits?

I recently found myself pondering these questions while working with a mid-sized regional science center on their five year strategic plan. The center has thrived and grown over its brief ten year history, and has a very active board that’s committed to ensuring the institution’s long-term viability. Its campus, including its LEED certified building, cutting edge exhibits and extensive outdoor attractions, are beyond what you’d expect from a regional institution, particularly one that happens to be located in a fairly remote location. Less surprising is that these programs don’t come cheap – the operational expenses associated with maintaining this impressive infrastructure are a big part of the center’s budget.

The center’s leadership reached out to Wellspring Consulting to help them assess the institution’s long-term financial sustainability. In particular, they had concerns that finding ongoing support for the less “glamorous” aspects of museum operations, namely the maintenance and refreshment of their facilities, was getting more difficult over time, as donor fatigue set in. Some members of the board felt that the answer was the creation of a large endowment fund—the bigger the better, since a larger principal would mean more investment income, and therefore less pressure to raise other funds on a yearly basis. This makes perfect sense, right?

Up to a point, yes – a bigger endowment may be better, all else being equal, but in the world of fundraising that’s rarely the case. There are reasons why smaller organizations might wish to be modest in their endowment ambitions, or even avoid endowment fundraising altogether. The answer to whether a given organization should pursue this strategy needs careful analysis of its current financial and programmatic position, trajectory and goals.

Much ink has been spilled on often underestimated complications that come with building an endowment. Some potential downsides of these funds include:

  • Needing to be big. When it comes to the value of an endowment, size really does matter. To provide meaningful income, an organization’s endowment needs to be substantial relative to their yearly expenses. For example, if an organization has an annual budget of $10 million and it manages to raise $2 million in endowment funds (no small feat for many organizations of this size), that would only give them $100 000 dollars toward their expenses each year (assuming annual earnings of 5%), covering only 1% of the budget.
  • Robbing Peter to pay Paul. Raising enough money to cover current annual expenses poses a challenge to many non-profits, let alone trying to build a fund to cover future expenses. Donors may only be willing to give to one funding stream. Raising that $2 million for the endowment may reduce giving in other areas, including support for core programs.
  • Creating a need to feed the beast. A recent conversation with development staff at a private university highlighted another, less often noted, issue with endowments. Because the size of an endowment is easily quantified, it can become a measure of organizational success in and of itself. This can result in a focus on growing the endowment (to achieve ever greater success) rather than viewing the endowment as means to an end: that is, the creation of an important rainy day fund, or important revenue stream to cover overhead costs.

However, along with these challenges, there are potential upsides to building an endowment, even for smaller organization. Non-profits are understandably drawn to endowment building because, among other benefits, they may:

  • Attract large gifts. Individuals often prefer to make major gifts (including bequests) to support features or efforts that will remain in place long after they are gone. For example, universities and hospitals often receive major gifts that support new buildings, wings, or endowments from individual donors. Contributing to an endowment ensures that the gift lives on beyond the donor. (A corollary of this is that many organizations now require funders to cover future operating costs of buildings or programs they donate.)
  • Signal strength. The existence of an endowment can serve as a signal to donors that an organization will be around for the long-term. This may draw further support from those who wish to invest in an institution that has longevity.
  • Support operations and innovation. Because it comes in as unrestricted dollars, the income from an endowment can be used as needed in any given year—for example, to smooth out financial shortfalls in lean times, and can also be used to cover ongoing overhead costs (paying for those storm windows!), or even fund projects that are more experimental in nature and may put an organization on the cutting edge of its field.

In order to determine whether our client, the regional science center, should build an endowment, the Wellspring team collected and analyzed data from a variety of sources. We made our final recommendation after having engaged in the following activities:

  • Analyzed the center’s current financial status and built ten-year financial projections that accounted for multiple funding and expense scenarios.
  • Conducted interviews with existing and prospective donors to assess their willingness to support the center in the future.
  • Conducted interviews with Board members to ascertain their willingness to give to an endowment campaign and to elicit funds from those in their social networks.
  • Held in-depth conversations with the center’s leadership and development staff to gain a greater understanding of their capacity and support for conducting an endowment campaign.

After intensive analysis of our data, we concluded that this is an appropriate time in its planning trajectory for this science center to move forward with building an endowment. This decision is grounded in a deep understanding of the organization’s capacity, programs, and goals for its future. Key factors that led us to this recommendation include:

  • The source of the center’s future deficit is the maintenance of its impressive infrastructure. Covering this cost requires a reliable stream of operating funds, which is well-suited to the nature of endowment income.
  • The amount of investment income required to cover the center’s shortfalls does not require that they build a Harvard-sized endowment. The endowment goal is aligned with realistic levels of giving for this institution.
  • The center’s existing donor base is willing to contribute large sums in the form of bequests to an endowment.
  • The Board is committed to building a restricted endowment and is willing to actively engage in fundraising for this purpose.
  • The staff leadership of the center understand and are committed to making the investment needed to launch and implement a successful endowment campaign.

While the Wellspring team recommended that the science center pursue an endowment campaign, this should not be interpreted as a global endorsement of non-profit endowment fundraising. If anything, our research and analysis reinforced our belief that strategic and financial planning is not a one-size fits all endeavor. For example, if we had found that most of the center’s individual donors would redirect their support from the annual campaign toward the endowment campaign, we would have reached very different conclusions.

To return to the story of the Smith Family Windows, the school was clearly lucky to have a forward-looking donor willing to “invest” in mundane day-to-day expenditures. For some (but not all) organizations, an endowment fund can serve the same purpose.

Implementing New Metrics

Have you ever tried to implement metrics to measure work or impact and realized it is much harder than anticipated? Recently, a number of Wellspring clients have been interested in implementing new metrics, and I’ve noticed that there are a few key elements that are easily overlooked. There is more to successfully implementing and utilizing metrics than simply declaring you want to understand something; there are three key steps:

1.      Defining

2.      Tracking

3.      Reporting

Defining metrics:

Five metrics that are well chosen and defined work better than 25 that nobody pays attention to.   Useful metrics are often both broad and precise Broad metrics allow for just a few to be used across an entire organization or division. Yet, these must also be precise enough to get at the key indicators of the work being measured. Precision must go one step further to draw boundaries around the details of the metric. For example, measuring instances that your organization is mentioned in the media might is one indicator of visibility, but the strength of that metric is determined by how “media” is defined.  Does it include social media? Does it account for whether the organization is mentioned by a credible news source versus a friend of the organization? Further still, what is considered a credible news source? These details must be defined before the metric can be implemented.

Tracking metrics:

An organizational leader may define a set of great metrics, but can they be tracked using the organization’s current systems? This is just one of many tracking logistics that must be determined. Others include how often each metric will be tracked, what unit of measure will be used, and who will be responsible for tracking. Successful implementation often means having one person accountable for tracking, even if they get the data from various parts of the organization.

Reporting metrics:

An organization can expend vast amounts of energy defining and tracking metrics, but if nobody looks at them to inform the leadership of the organization, it will have been a waste of energy. Reporting should be considered when defining metrics: understanding who will be using this information and for what ends can help identify what metrics need to be defined. Additionally, organizations will need to consider how often reports will be distributed, via what medium, and in what display. Reporting displays should make the metrics easy to interact with and to glean the information needed.

The road to metrics is often paved with good intentions, but without giving thought to each of these steps, metric implementation will likely be challenging and tough to utilize. At the same time, strong metrics can truly help an organization reflect on its work and improve into the future.

Don’t Forget the Community: the Role of Stakeholder Input in Reforming Public Education

On December 10th of 2015, President Obama signed a new bipartisan education bill into law, calling it a “Christmas miracle.” Formally known as the Every Student Succeeds Act (ESSA), the bill maintains the central aims of No Child Left Behind, which include holding schools accountable to higher standards and closing the achievement gap. However, ESSA also recognizes that the path to realizing the goals laid out by No Child Left Behind led to limited change. The bill is a tacit admission that education reform has been stalled by federal oversight.

No Child Left Behind “didn’t always consider the specific needs of each community,” said President Obama. “It often forced schools and school districts into cookie-cutter reforms.” Most Democrats and Republicans now agree that education reform is a local matter, specific to the context in which schools operate. This new law works to implement such thinking, allowing states to set their own performance goals, systems for measuring school performance, and processes for improving underperforming schools.

With its call for localized implementation, ESSA recognizes what my Wellspring team has observed in our work with a recent client – the importance of constituent involvement. This client, a mid-sized, private high school, cited having only moderate success with prior strategic plans, which they attributed to limited stakeholder input and buy-in. Consequently, we took a different approach, conducting nearly one hundred interviews, hosting four focus groups and administering a survey to approximately 1,500 individuals within the school’s community. Additionally, we facilitated monthly discussions with a diverse group of constituents that included Board members, school leaders and teaching faculty.

Bringing together such a diverse set of perspectives was critical to surfacing the needs of the community and developing a plan that could be feasibly implemented. Doing so was not without challenge. But, due to the circumscribed setting of a single, independently run school, it was possible to acknowledge, if not address, the concerns of many.

The question then becomes, “Can the state do so on its larger stage?” Or, to ask the more essential question, “Will the state understand the value in involving its various constituents when improving its education systems?”  Just as was true for our work, involving experts across a variety of fields, as well as administrators, teachers, parents, and students will be critical to developing state-wide plans that incorporate both community needs and wants. Equally important is that this will encourage stakeholder buy-in, something which No Child Left Behind sorely lacked and was a key reason for its problematic implementation.

At these early stages, experts are wary about the implication of ESSA. They say that only time will tell us if it will provide an equitable education for all kids, especially the minority, poor, disabled, and marginalized.  For now, states and districts have one year – until the 2017-2018 school year – to determine how to best support their schools and ensure that all kids receive a quality education. 

Inspired by Such Willing Participants

I am feeling inspired after coming back from a client’s annual International Convention in Baltimore. Over two thousand Jewish teens from around the world gathered for five days of innovative programming, speakers, Shabbat experiences and elections last week and our consulting team was there to conduct focus groups with some of BBYO’s most important constituents: teens, alumni, volunteers and parents. Though I began each focus group with a twinge of guilt for pulling people away from all of the exciting events (including a performance by the one and only Jason Derulo…!), I was heartened by the overwhelming participation and positive attitude from participants. People were excited to provide their input, even if it meant forgoing a fun dinner with friends. It reminded me how important broad participation is for an organization’s planning process and how willing many are to share their time and insights to make the organizations they care about stronger.

Learn more about the BBYO International Convension

Not Knowing. It leads to Great Strategy.

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When I was a Partner at The Boston Consulting Group, I participated in the Strategy Institute. A small group of partners and leading academics would come together several times a year to advance thinking about strategy – what it is, how it is conducted, and what makes it successful.

We agreed that the ability to enter into a state of unknowing was critical to great strategy. While it was important to gather facts, analyze data, create hypotheses and generate frameworks, we recognized that it was all too easy to jump to half-baked solutions if we weren’t willing to dwell in an I-don’t-know-the-answer-yet mindset.

I see the value of this mindset regularly in my current work with Wellspring Consulting, as we develop strategy with our nonprofit clients. This state of unknowing may last for 40 minutes in a project-team meeting in which we grapple with data and search for insight. It can last for weeks as a project team racks its collective brain for a strategic direction that is truly right for a client.

But by sustaining a state of unknowing, which can be anxiety-provoking as the clock is ticking and due dates are approaching, one has the ability to see new insights. It is like taking the time to look for patterns in the clouds and, all of a sudden, the shape of an angel appears. Something uncharted and undefined is recognized and defined. In the same way, with great strategy, a period of digging into an organization’s situation with an open mind leads to moments of insight, changing uncertainty about an organization’s future into a strategy. Strategy arrived at in this way is relevant, tailor-made, and empowering.

By the term “a state of unknowing,” I am not implying a lackadaisical attitude, uninformed by data, hypotheses, or past experience. There must be a pressure, an urgency in the midst of unknowing, an eager investigation of all available clues. Like a good detective without a moment to lose, the suspense is high. The hunt is on. It’s this tension between the state of not knowing and the urgent search for an answer from which the insight emerges. 

The capacity to remain in a state of unknowing while urgently looking for an insight is a skill worth having. It helps medical diagnosticians arrive at more on-target solutions for their patients. It helps parents know how to serve their children better. And it results in great strategies that further the future of organizations and their missions.