Nonprofit

Managing Through Change: Part III - Mobilizing Advocates to Fight for Government Funding An Interview with Donald Romanik, Former Vice President for Legal and Governmental Affairs at Oak Hill

Oak Hill is a leading provider of services and residences for the severely disabled in Connecticut. It operates a main campus in Hartford with dozens of group homes around the state. A few years ago, Oak Hill faced a familiar challenge for many nonprofits—shrinking government support even as need remained high.

Oak Hill’s service population included some of the highest need people with intellectual and physical disabilities in the state, and Oak Hill was one of the only providers equipped to care for these difficult cases. Oak Hill had been covering budget shortfalls with their endowment, but realized that this couldn’t be a long term solution. They looked at ways to decrease cost, but found that it would require them to stop serving the highest need populations and even shut down some of their residential facilities. This would have been a disaster for the individuals whom they served, and their families, as no other provider was equipped to provide the kind of care at which Oak Hill excelled. Rather than bend to these pressures, Oak Hill took a different tack, and successfully mobilized the families they served to advocate for additional state funding.

Recently we spoke with Donald Romanik, former General Counsel at Oak Hill. He shared five insights on how to successfully pursue additional funding through advocacy

Insight #1 – Focusing on revenue can be the answer when cost cutting or other efficiencies aren’t an option

Donald Romanik: “Our Director at the time had the philosophy that bigger was better. It was also a time of deinstitutionalization and privatization, so the state was looking for capacity among the providers they funded. We were opening homes at an incredible rate, but supplementing the cost of the programs over the reimbursement we got with our endowment. We had a nice endowment that most of our sister organizations did not have, and that worked for a while. But eventually, the Board said the endowment was not there to subsidize chronic underfunding. We looked at cutting cost and being more efficient. But we decided it was not only about that—it was about the value we were bringing to the table. We were the provider of last resort. The state called us when no one else could take someone. So we told the state they needed to increase their rates. We were the largest, but also one of the most expensive providers, because we were unionized. Part of the issue was convincing the government we were worth the price differential.”

Insight # 2 – To secure additional funding, empower families to advocate for their loved ones

Donald Romanik: “To convince the government of our value, we hit on the idea of involving the families of our residents. This was really the first time that we got families involved. There had always been a reluctance to involve parents in advocacy because of an almost paternalistic belief— that we were there to take care of their poor disabled child. But, we realized it was a way to empower parents as advocates for their kids. Legislators are used to seeing the administrations of organizations like ours asking for money. But when someone comes and says ‘I am a proud parent of a resident at an Oak Hill facility’, they stop and look. Those are their constituents, not the usual suspects.”

Insight #3 – Choose the right families for the most effective advocacy efforts

Donald Romanik: “You need to choose the right people to be involved in advocacy. They should be constituents who not only appreciate the services and needs of their own family member but also understand the broader mission, the idea of the common good, and the role of government. Also, identify people who can articulate their views in a very personal and compelling fashion.”

Insight #4 – Give families a variety of entry points for advocacy

Donald Romanik: “We gave the families various entry points. The easiest entry point was to provide a template for a letter to their legislator—they could sign it and add a little note. The next level was to ask them to call their legislator, giving them a script they could use. Additionally, some people were politically active in local districts and were comfortable coming to rallies at the capital or testifying at public hearings.  This was all before social media. In this day and age, there are a lot more user-friendly ways to engage people. You can ask a parent to do a 30-second video where they say how great Oak Hill is while sitting next to their daughter in a group home, then post it on your website or Facebook page. Organizations need to take full advantage of the myriad communication opportunities that are available now.”

Insight #5 – Keep pushing and do it right

Donald Romanik: “Remember that you are competing. Government funding is a zero sum game with a limited pie. And, you can’t assume people know you exist and are doing good work. You have to tell legislators once, twice, three times in different ways. Bombard them with emails, texts and social media, but do it in a respectful way. For this to be successful, you also need leadership at the top and participation at every level of the organization—rank and file people, employees, parents, etc. It is time consuming and can be frustrating, but it is really critical to the mission of the organization and, more importantly, to providing services and supports to core constituencies.”

Managing Through Change: Part I - Leading in an Uncertain Environment

An Interview with Scott Giles, President and CEO of the Vermont Student Assistance Corporation

The Vermont Student Assistance Corporation (VSAC), is a nonprofit public corporation providing citizens of the state with information and financial resources to attend college. The organization has awarded over $600 million in grants and scholarships, and has served over 400,000 students since its inception in 1965.

When Wellspring first worked with VSAC their role was to raise capital in the bond markets, and repackage the money into loans offered to students. After the Obama administration took office, the federal government moved to take over the management of student loans, calling it the Direct Loan Program. The federal government offered to make organizations like VSAC into “loan servicers,” thereby managing communications and payments for loans they would no longer own. VSAC faced some difficult choices. Should they participate in the Direct Loan Program as loan servicers? Were there other lines of business they should move into?

Before these changes, VSAC’s work had been well-funded and they had grown into a major employer in the area. They also ran programs that helped students make the best financial aid choices. VSAC questioned how best to respond to the changes in their external environment, and what their response would mean for the structure of their programs and organization.

Recently we spoke with Scott Giles, President and CEO of VSAC, who shared seven guidelines drawn from how VSAC successfully managed through this change and uncertainty.

Guideline #1 – Invest heavily in relationships with organizations who share your interests

Scott Giles: “There were signs that people wanted to make this change [from federally guaranteed to Direct Loans], and we were engaged in a pretty heady political conversation about the two competing programs. We [VSAC and related organizations in other states] were members of several trade associations. We had invested the time and effort with political leaders in our state and in DC as important stakeholders. I think that working with other organizations facing the same challenges is particularly important during these times of change. We invested as much time in building and nurturing relationships with other organizations as we did with customers or more traditional nonprofit stakeholders. Therefore our state representatives, the Department of Education, and other political players knew the value that our organization provided, and why what happened to us mattered. But it was a big challenge to motivate our counterparts. Connecting with political leaders is work, and it can seem like it is taking away from the bottom line.”

Guideline #2 – Develop multiple “fall back” options even as you advocate for your current programs

Scott Giles: “At the end of the day, the legislation that eliminated our program happened within a week. But because we had made the investment in talking with our delegation, we had our “plan B” already in place, which was to contract with the federal government to service loans. At the same time, we were thinking about what to do if plan B didn’t work out. We looked at diversifying and not putting all our eggs into one plan B. At the time, this approach was controversial, but in terms of where we are today, it turned out to be a good thing. The initial plan B was loan servicing, which we are in the process of exiting, and plan C was our nonfederal loan program, which has really taken off.”

Guideline #3 – Set benchmarks and decision points to assess progress and navigate uncertainty

Scott Giles: “Early on, VSAC thought Direct Loan Servicing was the path forward. But the work we did in strategic planning highlighted for us that there were significant uncertainties about the success of that program. At the same time we were working through how to do Direct Loan Servicing, we were exploring other possibilities that lay within our competencies. From a planning perspective, it was critically important to have decision points and set clear benchmarks to know if a plan was successful as it was being implemented. If we weren’t achieving specific goals, we knew when it was time to question whether the investment made sense. The strategic plan helped us lay that framework.”

Guideline #4 – Be analytical and thorough when making decisions in times of uncertainty

Scott Giles: “To manage in times that are chaotic, do planning that is very analytical in the beginning. Clarify assumptions and data points, and build a strategy based on these, along with tactics to implement the strategy. We did this with our strategic plan. Then, go back and question those assumptions on a regular basis because the world is changing. We avoided problems because we re-examined our assumptions every six months. If we hadn’t done that, we wouldn’t have noticed problems until it was too late to do anything.”

Guideline #5 – Dedicate time and effort to understand different scenarios

“We used an interesting process to decide whether to continue pursuing Direct Loan Servicing. This was a major strategic question with major impact on our organization and our staff. We wanted to make sure we were making the best decision for the organization. I broke our staff leadership into 2 teams. I had people who were neutral or who wanted out of Direct Loan Servicing build a case for staying in. I had those who were more interested in staying build the case for getting out. They worked on their cases for a month, and we all contributed to make sure the data was right. Then, we came back together to fight it out, with each side poking holes in each other’s arguments. After that, we looked to see if we had consensus, and we did. To us, except for the staff impact, the decision to exit was clear.

For the Board, we presented the two cases in full, but didn’t tell them what our initial recommendation was. We let the Board argue it out. Our Board Chair asked whether I was nervous that they would reach a different conclusion from the leadership team. But the way I saw it, if you don’t prepare your Board well enough, they can end up making decisions without all the relevant information. I wanted to give them all the information— if they reached a different conclusion, it would be because they saw something our leadership team didn’t see. In the end, they were unanimous in their decision and agreed with staff leadership’s thinking.”

Guideline #6 – Be transparent and lead not only for the organization as it stands today, but also for the organization you will lead in the future

We had been reviewing our benchmarks and evidence was suggesting that we might need to exit Direct Loan Servicing.  We knew the organization wasn’t ready.  We committed to transparency and openly shared our milestones and our concerns.  It was an uncomfortable way to lead—my peers thought we were crazy and we risked losing good staff.  We laid out the issues in staff meetings—the challenges, the questions, that data we were collecting, the milestones, and what would happen if we didn’t hit the milestones—both to the organization—and to staff.  We even let them know when we thought a decision to stay or leave would be made. Everyone stuck with us.

 To go through that transition, we were not just leading the organization we had that day. We were also leading the organization we were going to create. The audience was both our current staff and our future staff. If we hadn’t prepared our staff for a big strategic move like the one we were about to make, which required losing positions, the team that remained would have no trust.

Once we left the Board conversation with a decision, we immediately laid out the issues in a full staff meeting—the challenges, the questions, the data we were collecting, the milestones, and what would happen next. This was a very emotional meeting but when we made the announcement that we were exiting Direct Loan servicing, no one was surprised, and no one questioned it. Doing things this way was uncomfortable for the organization and uncomfortable for ourselves as leaders, but it sustained the staff’s trust in leadership because we didn’t surprise them, our decisions made sense to them, and they had an understanding of where we were going and what their role would be.”

Guideline #7 – Accept not having answers as a leader in the face of uncertainty

Scott Giles: “I had to learn the hard way to allow a grieving process to take place and not pretend I had answers when I didn’t. Most of us as leaders have gotten to where we are by solving problems and being able to present compelling visions of the future. The visions we prize the most have the greatest certainty. During periods of change, that works for you if you are right but against you if you are wrong. There is a line to walk. You need to be compelling and inspirational enough for people to pull in the right direction. But, if you act too certain, the next time you have to shift dramatically your vision gets called into question. The desire to go in and fix everything to give people confidence and security is a mistake.”

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!

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.

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.

Four Ways to Address a Problem that Won’t Go Away

We are currently working with a client that provides services for victims of crimes, particularly victims of family violence such as domestic violence and child abuse.  Family violence is a persistent issue upon which it seems almost impossible to make a dent. And so, our client wanted to know how they can have greater impact.   To find possible approaches to answer this question, we looked at how other organizations strive to have impact in the face of an enduring, seemingly insurmountable, problem.

Four aces picture

We found four possible approaches employed by other organizations, which we coined, “go upstream,” “a banner to march behind, “expand the picture,” and “strength in numbers.” 

The National Audubon Society typifies what we called “go upstream.”  This organization began with the mission of protecting birds and their habitats.  But soon an important challenge became clear:  all habitats were increasingly impacted by climate change, leading to negative consequences for birds everywhere. The “go upstream” approach posits that one’s mission is served not only through intervention services aimed at solving certain issues, but also by working on the environmental factors which cause the issues to occur in the first place.  So, The National Audubon Society decided to “go upstream” from the bird territory and now has a more general focus on protecting the environment with the downstream goal of saving birds’ habitats.  What could this mean for our client?  Perhaps they address those things that contribute to family violence occurring in the first place, like poverty. Or, they work to prevent the perpetuation of the cycles of violence by helping abused children heal from their trauma, thereby reducing the likelihood that they will grow up to be re-victimized or will abuse others.

“A banner to march behind” is well exemplified by The March of Dimes.  The assumption behind this approach is that to make a greater difference, one must mobilize the public to develop awareness and a sense of outrage about the issue.  For The March of Dimes, the mission of decreasing birth defects and pre-term birth would not be accomplished with medical research alone, and thus The March took to the streets to get the public involved with fighting for this cause.  Mothers Against Drunk Driving (MADD) is also a good example of an organization which used “a banner” to realize impact, namely a significant reduction of alcohol-related traffic accidents.  Our client, therefore, could consider starting a movement to generate awareness and outrage to help combat family violence.

Terracyle is an example of “expand the picture,” which posits that to make more of a difference, one must engage all involved components of the problem to be part of the solution. Terracyle started out working to eliminate food waste by using it to create quality fertilizers.  The fertilizers reduced some waste, but landfills kept filling, and so TerraCycle sought to make a broader impact.  Today, Terracyle focuses on eliminating many kinds of waste by creating new product lines and mobilizing people to recycle.  For our client, expanding the picture could mean not just working with the primarily low-income, female population it currently serves, but adding services for batterers, wealthy victims, or victims who choose to stay in relationship with their abusers.

Finally, “strength in numbers” is typified by East Meets West (EMW).  The premise here is that one organization can’t make a significant difference on large issues by itself; working together with others with similar missions means that the impact is exponentially increased.  East Meets West started out providing grassroots humanitarian aid in Vietnam, but they soon realized the problems were too big for them to significantly affect on their ownEMW transitioned from offering humanitarian services to building a network of similar organizations that share back-office capacity and learn valuable skills from one another.  Our client could realize this approach through creating a network of similar organizations or employing a regional or national expansion strategy to have a greater impact.

The problem of a persistent societal struggle is one that many non-profits face. These four approaches show how some nonprofits have addressed such struggles in ways that can be applied by others.

The Messy Business of Social Movement Funding

I recently worked for a foundation that had admirable aspirations of creating large scale social change, potentially through a social movement. As we researched the business of social movement building, it proved to be a topic mired in caveats. In speaking with various funders throughout the country, we found that organizations’ timelines for shifting toward social movement building is a great unknown. Funders seeking to fuel this kind of change are in various stages along their journey, as shown by the graphic below. Some organizations have been on this trajectory for decades, while others are just beginning. But in every case, the tactical shift to building social movements as a means to fueling societal change certainly did not happen overnight.

Messy business picture v3 5Nov14
Messy business picture v3 5Nov14

One of the primary hesitations from these funders is their resistance to leading the social movement. The big question that these funders are grappling with is “how do we make a movement happen, without being the movement?” The funders understand that a social movement cannot be dependent on one organization, but to be successful, a movement must take on a life of its own, with the vision and energy coming from the community. Foundations can fuel the movement via funds, capacity building and strategic support during the ebbing periods, but cannot be the movement itself.

Funders’ apprehension to the term “social movement building” itself also stood out. The majority of funders with whom we talked noted that this language can be counter-productive. Even if they internally understand they are using the tactics of social movement building, they use language such as collaboration, networks and ecosystem to represent their approach, while avoiding the potentially stigmatized label.

It seems that a sizeable number of funders are more thoughtfully seeking long-term, deep social changes, requiring the tactics of social movement funding. An admirable goal, foundations should be prepared for a very long-term, difficult-to-define, ever-evolving journey.

We’re Growing... But Not Yet

Growth makes for an inspiring organizational story. Boards of Directors and staff can be mobilized around growth. But if work must be done in the near term in order to prepare for growth later, the story may be less than inspiring. People may ask, "If we can't make growth happen now, why expect it in several years?" I faced just this situation recently. One of our clients had just come off a highly successful run of completing innovative projects and raising a large amount of funding to support general operations. However, most of their major projects were nearly complete, and a campaign for unrestricted revenue was ending. These efforts seeded a huge potential for new, innovative program work and an increase in revenue, but that potential was unlikely to be realized until after several years of less outwardly visible initiatives—to plan and begin working on new educational projects, to align work internally and to improve their internal functioning. This organization therefore faced a major challenge: how to communicate with their Board about why growth wouldn't be realized right away, while still telling an inspiring story.

This nonprofit found a way to mobilize their Board members. Rather than avoiding a discussion about two years of flat budgets, the Executive Director explained exactly how the organization was preparing for growth in the future. She shared their new fundraising tactics. She described how increased coordination among staff groups would leading to higher organizational effectiveness.  She worked with her staff to develop a balanced scorecard for the organization, and committed to sharing the results regularly with the Board. And, she asked her Board to help realize the growth by forming committees around a new set of products; reaching out to bring their friends to events; and helping to find new trustees with expertise in needed areas.

As a result, Board members were galvanized and excited. Rather than being disappointed that growth would wait for several years, they were inspired to help realize future success. They understood how they could contribute, and could see clear links between the organization’s plans and the outcomes predicted.

From Magic to Manuals: a Hard but Worthwhile Transition for Social Innovators

In their early days of ground-breaking social innovation, many of the innovators I have known worked out of their proverbial garage, without much in the way of strategy or funding or staff. What they often did have was a gut-sense, growing day by day, that they were on to something big.

They may not have been able to name the critical elements of their approach – whatever those elements were had a kind of magic to them – but they saw the resulting breakthroughs (as did I, working and watching alongside of them)…

We saw street kids who society had given up on re-enrolling in high school. We saw parents reading for the first time with their young children. And we saw once-neglected seniors being well cared for by their neighbors and children.

In their early days, when they had some anecdotes but no data, I have seen social innovators do well to rely on intuition, opportunism, and adrenalin to hone their approach and advance their ideas.

But fast-forward a few years to a day when the social innovation had hard data behind it, demonstrating its transformative impact. At that point, the demands on the innovator looked very different.

Where agility and opportunism once served the innovator well, now commitment to a well-considered growth strategy was needed to win support and ensure impact.

Where the almost magical quality of the program was once a part of its appeal, now the innovator needed to treat any magic as a liability that must be codified or “manualized” so the program could be broadly replicated.

Where financial considerations may not have driven the work initially, now the innovator had to make them a significant part of the equation if the innovation was to realize its full potential for impact.

I have seen these transitions be challenging and sometimes even painful for social innovators to embrace. But if the opportunity for scaling the impact is real, these transitions can be worth the cost.

Losses Loom Larger...

Do you care more about losing a dollar or gaining a dollar? If you are like most of us, losing that dollar will make you more upset than gaining that dollar will make you happy. So, you probably care more about losing a dollar. This phenomenon is known as loss aversion, or the tendency to strongly prefer avoiding losses to acquiring gains. In fact, research suggests that our emotional reaction to a loss is about twice as intense as our joy at a comparable gain.

I have seen this behavioral economic theory play out in many venues. Most recently, I found myself using it to explain why a nonprofit organization with whom Wellspring was working chose not to pursue what, by all practical measures, seemed to be an attractive merger. In this recent project, our client was looking at options for a merger with a specific partner, a much larger organization in the same field that could offer – amongst other things – financial stability.

We went through the necessary diligence process to test the attractiveness of the merger, and, after a series of meetings, both leadership teams decided that there was strong alignment and identified significant opportunities for programmatic synergies. It just seemed to work.

So why didn’t it?

In the last meeting, there was a clear sense that our client was struggling with a looming sense of loss. Though the leaders saw the benefits that a merger with this partner could bring to the field overall, as well as to this organization’s financial situation, our client could not get over the loss it would feel if its brand, programs, people and/or leadership position in the field were possibly lost, or, more likely, transformed by the merged organization.

So, despite the partner’s best efforts to assure our client that its legacy would continue, the merger did not happen.

Clearly, there were a variety of factors that led to this “no-go” outcome. However, I do believe that our client’s looming sense of loss was a key contributing factor. The potential gains were clear: financial stability and exciting program synergies that would lead to greater impact. However, those were outweighed in our client’s mind by the even more powerful potential losses, especially the brand as standalone.

Ultimately, the decision not to merge may have been the right one for a host of reasons. Having said this, it is not surprising that our client focused more of its attention on the potential losses as opposed to the potential gains. We should recognize that, while we are all subject to these behavioral biases, it may be helpful to work through them by approaching our decisions with analytic rigor and, when appropriate, an outside perspective.

What is the Right Organizational Structure for Us?

Org chart 24Mar14-001
Org chart 24Mar14-001

Over the years, I have worked with Chief Executives seeking to get their organization's structure right. They have grappled with questions such as: Should we have a COO to oversee operations? Do we need Regional Directors to run areas of the country? What control should the national office have over local offices? To whom should the Development Director report? One way to answer such questions is to use objective criteria. For instance, a span of control greater than 6 or 7 is a stretch. Or, work conducted by senior people should be delegated down to those more junior wherever possible.

However, objective criteria alone cannot specify an organization's structure. There is the human factor to consider -- we all come with our idiosyncrasies. Take the case of a brilliant Program Director who is expecting a promotion to the COO position, but isn't strong in management and delegation skills. Moving someone else into the COO role could cause the Program Director to leave, while the promotion might cause him to flounder. A third option of assigning an excellent Project Manager to work with the Program Director in his new role could lead to success. Consideration of human factors -- the specific capabilities of the people involved -- leads to an improved solution.

An organizational structure solution may also be temporal -- its value having a shelf life. Because a given structure tends to optimize for some factors while attenuating others, using one structure for too long may cause problems to arise. To address this, organizations may alternate between different structural approaches. For instance, in a national organization with affiliates and a central office, a period of tighter central-office control aimed at reining in quality infractions may be followed by a more laissez-faire approach from the central office to stimulate local innovation. Organizational structures may oscillate over five-to-ten-year periods, first optimizing for one thing, then another. 

Finally, it is useful to remember that a structural solution can only go so far in solving an organization's problems.  People may need to be replaced, or training may be in order. Conversely, when an organization's staff is excellent, one of several different organizational structures may work just fine.

Don't Fundraise for Your Means, Fundraise for Your Ends

Money stars
Money stars

Would you donate money to help improve the skills of a teacher? Or, would you be more motivated to donate so the children in that teacher's classroom would get a better education, and would be more likely to stay in school?

Would you donate money to help a scientist track the pounds of carbon released into the atmosphere? Or, would you be more motivated to donate so that better carbon emission data from that scientist would influence public policy leading to reduced carbon emissions, and thus slow global warming?

Glynwood Center, a nonprofit dedicated to sustainable land use was raising money for a program that brought  together land developers, town officials and land owners to decide on the best use of open space. When the organization asked donors to "Help us bring people together to decide on the best use of open farmland," funding support was meager. When Glynwood Center changed its message to "Help us save farmland," their funding increased dramatically.

Habitat for Humanity in Wilmington Delaware would report the number of homes built each year to its funders. When  the organization added information about the reduction in crime rates and increased employment due to their new homes, funders were more interested in providing support.

Tell your donors about the ends you are furthering -- the benefits to individuals, to society or the environment. The dollars are more likely to roll in.

Is My Organization Creating Benefit? Four types of rationale

City_Harvest_Truck
City_Harvest_Truck

I expect it is important for you to know if your organization is creating social benefit. I think about this a lot, both with the clients we serve, and for our consulting firm. Donors, funders, constituents, and employees also want to know.

Here are four different types of rationale to ascertain the benefit created by an organization. While a higher level of proof may be more desirable, it is not feasible to fully prove benefit for all activities. Thus, all four rationale can be acceptable tools to inform leaders and decision-makers.

  1. An observable, causal relationship - When City Harvest collected 46 million pounds of food from the food industry and distributed them to hungry people, there was an observable, causal relationship: hungry people have been fed. City Harvest can declare the benefit it achieves based on such numbers.
  2. Evidence-based research indicating a causal relationship - The Parent Child Home Program conducted longitudinal research showing that children who had been through their program graduated from high school at higher rates than control groups. This demonstrated a high likelihood that other children going through the program would have their chance of graduating from high school  increased. The Parent Child Home Program can use this longitudinal research as convincing evidence of its benefits.
  3. A theory of change - When Garrison Institute brings together environmentalists, industrialists and government officials and uses meditation to help them find new solutions to environmental issues, Garrison Institute believes that this will help stem environmental degradation. Because this result is difficult to measure given the vast array of factors impacting the environment, Garrison Institute relies on its theory of change to guide its choices and verify the value of this work.
  4. A personal desire - Ethel Donaghue established the Donaghue Foundation with a vision of "continual improvement in people’s health as a result of research being converted to practical benefit." In doing so, she made a choice about where to focus her resources, based on a personal desire. Given that Ethel Donaghue passed away in 1989 leaving her foundation as a permanent legacy, at this point no proof is needed to determine if Ethel's vision is where the foundation should invest.

How Do Kids Build Character? See The Character Lab

Recently we had the opportunity to work with The Character Lab and their remarkable team: co-founders Dr. Angela Duckworth professor and researcher at the University of Pennsylvania, Dave Levin, co-founder of KIPP, and Dominic Randolph, Head of Riverdale Country School in New York City, along with Executive Director Brittany Butler. The organization's mission is to develop, disseminate, and support research-based approaches to building character that enable kids to learn and flourish. The organization's work is part of a growing trend to recognize character as one of the key factors for success in kid's learning and development. What then are the elements of character? In their Character Growth Card, The Character Lab posits that the following seven characteristics can be used to assess character in middle-school children, and help teachers provide students with formative and helpful feedback. Reading these also sparked my imagination and interest in how they apply to my own life, and to those around me.

GRIT

  • Finished whatever s/he began
  • Worked independently with focus
  • Tried very hard even after experiencing failure
  • Stayed committed to goals
  • Kept working hard even when s/he felt like quitting

OPTIMISM

  • Believed that effort would improve his/her future
  • When bad things happened, s/he thought about things s/he could do to avoid similar bad things in the future
  • Stayed motivated, even when things didn’t go well
  • Believed that s/he could improve on things they weren’t good at

SELF CONTROL (school work)

  • Came to class prepared
  • Remembered and followed directions
  • Got to work right away rather than procrastinating
  • Paid attention and resisted distractions

SELF CONTROL (interpersonal)

  • Remained calm even when criticized or otherwise provoked
  • Allowed others to speak without interrupting
  • Was polite to adults and peers
  • Kept temper in check

GRATITUDE

  • Recognized what other people did for them
  • Showed appreciation for opportunities
  • Expressed appreciation by saying thank you
  • Did something nice for someone else as a way of saying thank you

SOCIAL INTELLIGENCE

  • Was able to find solutions during conflicts with others
  • Demonstrated respect for the feelings of others
  • Adapted to different social situations

CURIOSITY

  • Was eager to explore new things
  • Asked questions to deepen understanding
  • Took an active interest in learning

ZEST

  • Actively participated
  • Showed enthusiasm
  • Approached new situations with excitement and energy

The Character Lab is working to develop evidence-based research results to further test the validity and usefulness of these character designations. They also plan to aggregate a set of effective practices from other research-validated approaches.