In yesterday’s post, The Recession and Transforming the Nonprofit Sector, I wrote about Dr. Paul Light’s webinar about emerging trends in the nonprofit sector and my major takeaway that we need to challenge prevailing wisdoms in the nonprofit sector in order to transform the sector and emerge from the financial crisis as a strong, viable whole that is greater than the sum of its parts.
Here are four prevailing wisdoms and modus operandi that we need to challenge:
Low overhead = good organization.
Charity Navigator, to its credit, is working to revamp its rating system to focus on things other than administrative versus program expenses, but the effects of years of promoting low overhead as a performance metric have taken their toll on the nonprofit sector. What can we do? Nonprofits can work to educate their donors. Step one: stop promoting your organization’s overhead ratio in your marketing materials.
Restricted grants are the best/only way to meet donor intent.
Despite numerous calls from nonprofits, associations of nonprofits, and other groups, foundations continue to mostly give restricted grants rather than general/operating support. I find this, honestly, baffling. While foundations are restricted themselves by donor intent, I don’t think many donors’ intents were to make operating difficult for the organizations they wanted to support. To follow up on the previous prevailing wisdom, there are necessary and beneficial overhead expenses in nonprofit organizations. Particularly in times of economic distress, funding to keep the lights on, pay the fundraising staff, and cover the rent is absolutely essential to organizations’ ability to perform their missions.
What can we do? Foundations can continue to move towards providing more general/operating support. And nonprofits can ask for it. Frame needs not in terms of deficits, but opportunity – not, “we need general/operating support so that we don’t have to lay off a staff person,” but, “we need general/operating support so that we can continue to grow a strong organization that delivers the valuable services that your funding dollars generously support.”
Competition for funding dollars means we can’t share information.
Yes, nonprofits compete for funding. And the competition is tough. Foundations, governments, and individual donors have limited funds, and, filled with good intent, can only give them to a limited number of organizations. And information is valuable in the fundraising process. What makes your organization’s programs successful might be the very thing that differentiates you enough to get the grant or the large donation. But information hoarding comes at a cost to the sector and to the constituents we’re trying to serve. Organizations that operate in similar fields or geographic areas, or work with the same set of constituents end up reinventing wheels. Constantly. Funders then fund similar programs that result in similar knowledge that could be shared with significantly magnified impact. But the incentives don’t exist for organizations to share information about impact and outcomes – except when funders require it (and then, frequently, the funders don’t share).
What can we do? Funders can ask for information about outcomes, impact, what works, what doesn’t (see talking about failure below), with the explicit intent to share that information broadly with related organizations (both funders and those organizations delivering related services). Funders can do that in a way that doesn’t require nonprofits to adhere to an arbitrary (or funder-determined) set of outcomes measures that doesn’t align with the organization’s own evaluation and tracking mechanisms, but rather one that encourages grantees to track information, learn from it, and share it. Nonprofits can think a bit more broadly about what information, shared with other organizations (even competitors) would ultimately best serve their constituents. In other words, if sharing information about what’s working and what isn’t in your programs would help your constituents (and help you better meet your mission), shouldn’t you do it? What if other organizations also shared more information? Wouldn’t the ability to learn from their experiences help you serve your constituents better (and help you better meet your mission)? What little steps can you take to start sharing information that will contribute to a rising tide to lift all constituent and mission boats? Of course, you shouldn’t share everything, but think about what information truly needs to be kept, and what can be shared.
Talking about failure will hurt your organization.
There was an episode of Family Ties where Alex P. Keaton went to interview at Princeton University, his dream school. When asked about what unique qualities he possessed, he responded, “At the risk of sounding immodest, you see before you a young man without a flaw…unless, of course, you find me immodest, in which I have one flaw” (watch the video, starting at 7:39). While the nonprofit sector generally doesn’t resemble an 80s sitcom, there is a prevailing notion in the nonprofit sector that organizations must present themselves the way Alex did in the interview – that they must be perceived to be perfect or else risk losing funding opportunities. Discussing failed programs and initiatives, according to the prevailing wisdom, risks losing future funding opportunities. The fear is very real – many funders would rather hear about successes, and worry that continuing to invest in an organization that has failed to deliver a program risks throwing good money after bad.
This is a very difficult notion to combat. Some funders are starting to discuss failures (recently an notably, the Northwest Area Foundation), and need to encourage their grantees to do so as well – but need to make it clear to grantees that they will not be penalized. This is a cultural shift that needs to happen for the betterment of the sector – foundations (and individual donors) need to encourage, even reward, sharing and openly discussing failures and need to make it abundantly clear to grantees that they will not be penalized for their openness and self-reflection. And it needs to go a step further. The benefit of discussing failures is the ability to learn from them – and to have others learn from them so that we, as a sector, can build on collective wisdom and generated knowledge to better serve our constituents and our missions.
What do you think? What are the prevailing wisdoms that foundations and nonprofits need to challenge in order to transform the sector and shape a strong emergence from the recession?