Tuesday, April 23, 2013

Donors are more like used car buyers

Recently a nonprofit contacted me to "fix" their grant boilerplate because an application was denied. I am not a fan of cut-and-paste grant language. Still, as boilerplate goes this organization had a pretty good pitch.

Luckily for them the grantor had sent the grant back with the comment, "results not quantified". That really threw the nonprofit for a loop. To put it simply, they were offended by the comment. They had shown how many people they had served in the past three years, documented the number of repeat versus new clients to show continuing need and included a number of testimonials from clients. That's the way they've always done it. That approach had previously gotten them a fair amount of funding, so why didn't it work this time?

As foundations and even individual donors operate in the current cash-strapped environment and confront possible adverse changes in the tax code, they are beginning to act more like used car buyers and less like the tooth fairy.

If you have ever shopped for a used car you probably started out with a subjective list. For your new ride maybe you want a black car with a high-performance option package and it needs to look cool. You may find a dozen or so candidates that fit that list. Then your selection criteria becomes more objective. You want it to be in a certain price range. How many miles on the odometer?  How much tread on the tires?  How good is the paint? Has it got good service records? How much extra equipment do you get for comparably priced models? Has it ever been wrecked?

No one thinks there is anything wrong with that scenario. Everybody pretty much shops for used cars that way. You demand a lot of information so that you can make the best decision about how to most wisely spend your money.

That's pretty much the same mindset that is driving the current donor trend toward seemingly hard-nosed approaches to handing out grant money or even major gifts. Donors want to award funding to the best vehicle for their funds. Even those nonprofits that seem to have a continuing relationship with certain foundations or donors are suddenly being held to a higher standard.

The trend in nonprofit funding is to place a measurable value on every mission. The pitfalls of this approach by grantors are obvious when considered from the viewpoint of smaller or more local nonprofit missions. Suppose that you offer free 6-week art classes to inner-city youth. Is it possible to quantify improvements in painting skills, improved compositional awareness or any of the intangibles that are specific to that genre?  Are you supposed to follow the participants to see how many became professional artists?  How do you quantify creativity? Is there any place in the world of philanthropy for local charity or is everything going to be focused on some massive global program with clear metrics?

At first glance some programs just don't seem to lend themselves easily to numerical measurement or financial representations. There is a justifiable perception in the nonprofit community that by reducing every mission to a formula the real spirit of the nonprofit mission  is dulled, and even worse, this type of mission may not receive enough funding to survive.

Does that mean you should ignore or repudiate the trend? Only if you really don't need grant money. This is the current wave, and you can either ride it or let it roll over you. History shows that to survive everything has to adapt, so how do you adapt to this new reality?

You could consider defining or stating the program/mission goals differently. Instead of a program goal  program being "to offer fun and challenging physical activities to improve childhood health"  you might state it as  "to provide physical activities that produce improved long-term positive behavioral and physical attitudes toward controlling obesity". The latter statement provides focus and definition for data collection and conditions the grantor for the data to follow. It also places your agency under a more stringent standard for service delivery. Once you define the program in terms of desired results, you can prove that it is effective or alternatively, that the funds you are requesting will make it effective in achieving the desired results.

Taking the art class example above, you could define the program as a way to reduce participation in gang activities, or as a way to encourage children to move away from video games to more creative forms of self-expression. That would give a starting point to include hard statistics and follow-up reporting. You can provide some form of numerical reporting for almost any type of program or mission. That will make the program more credible to funding sources instead of just a feel-good exercise.

Supporters for your mission still exist, but there are a lot of organizations competing for the same dollars,  just as there are lots of used muscle cars for sale. Those supporters want to kick the tires a little more now. That shouldn't offend you; it should make you proud to show them you've got the best ride out there for them. 

Tuesday, April 16, 2013

Philanthropic climate change

After seeing a number of posts related to Ken Stern's book "With Charity For All"[i] I bought and read it. Aside from the sometimes torturous case studies of large philanthropic donors, it isn't a bad read from the standpoint of understanding why large sums of money don't easily equate to optimum results at the client level. I found some of the passages on the rise and fall cycles of the nonprofit industry in the United States and elsewhere interesting from a historical perspective. As a window into a segment of the philanthropic and nonprofit world most of us will never see, it has value. Relax though, this isn't a book review.

The primary reason I wanted to see his viewpoint is that the book has been variously described as leading the coming wave of philanthropic responsibility and a forecast of the end of individualized charity. Opponents in particular hold up this book as an example of why grant-making organizations are too hung up on business-style metrics and absolute control by the grant-makers of the nonprofits they support.

There is no doubt that foundation and corporate grant-makers are beginning to formulate standards of performance-based outcome measurement. No longer is it enough to include touchy-feely testimonials and call them outcome measurements when applying to this type of donor. For instance, the book documents an aborted initiative by the Gates Foundation and the effect of that experience on the foundation's current rigid insistence on reporting and yes, control of the dollars from the standpoint of impact.

It doesn't disturb me that any donor, whether they are  operating from a corporate philosophy of optimum results for investment or as an occasional ten-dollar a month supporter, wants to know that the funds actually have the desired result.

What does disturb me is that while Mr. Stern decries the waste, ineptitude and even outright fraud inherent in the charitable sector he simultaneously complains that the big donors require too much control and exert too much influence over the use of their funds. His profile of the impact of the Joan Kroc bequest on the Salvation Army's core mission is an example of this.

I get inquiries nearly every week from small nonprofits to write proposals to these large corporate-style foundations.  After all, that's where the real money is, and a grant from one of these players can be life-changing for a small organization. I can certainly write the application, but ultimately a positive result rests on the shoulders of the nonprofit. This is the professional level, and far too many smaller nonprofits are unaware of the rules. While the axiom that "people give to people" is still a factor in the nonprofit world, in the context of large-scale supporters, one might almost say that "organizations give to organizations".

 In my view, too many nonprofits are conceived as social benefactors, and end up being professional fundraisers. The mission gets lost in the constant struggle to obtain enough funding to simply survive. As Mr. Stern comments on pg 205 of his book, "Social investors focus solely on impact…They focus on the end customer, rather than targeting contributions to smaller charities so they can make a difference to the organization". To achieve that focus, the organizational strength of the grantee is a significant part of the equation.

The key phrase is "social impact investors". In the context of the book, these are the contributors and donors looking for change on a grand scale. They aren't as interested in the local neighborhood after-school program as they are on the larger societal need for the program. These are the big dogs of the philanthropic world. You might even say as the Gates Foundation and their peers go, so goes the sector.

There is no doubt that there are a great many nonprofits that should not have entered the field at all. They are philosophically and monetarily unable to achieve their mission and adversely contribute to the public perception that bigger is best. They waste finite dollars and human capital and may turn off donors to the point that their whole mission focus gets a black eye.

Still, without new blood and fresh ideas and enthusiasm entering the nonprofit arena, I believe we will get the same bureaucratic bungling, stale ideas and ineffective results that are inherent in maturing companies and corporations in any sector. Developing objective analysis tools for measuring effectiveness and mission-centric results is a worthy goal, but certainly not the only tool. To me at least, it underscored the need for less centralized and industrialized philanthropy at the grassroots level while profiling exactly how to use the trends to good advantage.

The take-away for me is that no matter how small your organization may be, you need to understand the driving forces behind the current giving philosophy of nonprofit supporters. Documented results at the client or street level definitely matter. Organizational professionalism and the ability to document ground-level change and statistically measurable improvement are no longer the sole realm of the giant nonprofits.

There will always be people that give because it simply makes them happy to do so, but the important supporters, the ones that can offer significant monetary security for your organization are demanding results. Even at the local level, the grassroots nonprofit that can provide provable data and transparency regarding fund use is going to have an edge over the ones that can't. If you are the nonprofit that gets defensive when asked to provide financial data, ignores strategic planning, thinks budgets are for policy wonks or doesn't like to document your efforts and results in detail, you are going to find yourself left behind.

[i] "Ken Stern, With Charity for All: Why Charities are Failing and a Better Way to Give (Doubleday, 2013)

Monday, April 15, 2013

Procedures don't exclude passion!

This blog is largely targeted to small nonprofits and people wanting to start nonprofits, but it apparently  struck a nerve with a board member at an established nonprofit, as evidenced by this email excerpt.

"I am so sick of people like you telling nonprofits to operate like businesses that I can't find words to express it. WE ARE NOT BUSINESSES! Furthermore, we don't want to be a business. We exist to help people or support causes and there is no room in that mission for your silly performance evaluations or business plans or any of that stuff.  All that just takes time and money away from our ability to deliver services and adds to our administrative costs. We can only exist if we can express our passion and create that passion in other people."

I appreciate this person's willingness to share that viewpoint. I do respectfully submit that I have never suggested that being more business-like in the procedures of obtaining grants and controlling administrative processes should take precedence over achieving your mission. In fact I addressed this very issue in the post "Structure not Stricture"(http://cloudlancerwriting.blogspot.com/2013/02/structure-without-stricture-winning.html).

Grant applications generally require some proof of impact. Some programs will not produce the desired results, just as some products are not successful in the marketplace. It is up to you to prove they are worth funding, and I'm not sure how you can do that without having any evaluation procedures in place. If the evaluation shows weaknesses, why would a grantor fund it?

I'm not sure why having procedures in place to measure outcomes or prevent waste of grant funds should be diametrically opposed to the passion for the mission. If I was a donor to this person's organization, I would certainly want to know if they met their program goals, or judge for myself whether their programs actually met my personal passion for their cause. Add to that the undeniable fact that more foundation and corporate funders are expecting a higher level of performance (outcome) measurement and better accounting for funding. The need for planning and measuring program impact seems to be something you would want to do.

I certainly understand that helping even a handful of people or animals, cleaning a mile of highway or whatever your mission addresses is preferable to doing nothing. My goal is to help nonprofits attract funding and keep expenses at a realistic level to provide the maximum ability to achieve and expand the mission. I just don't know any way to do that without utilizing some practices that overlap into the world of conventional business. In far too many cases, what I observe is that there is an unwillingness to confront problems, and not having procedures in place allows the organization to ignore warning signs.

Take the strategic plan (which is not a conventional business plan).  Properly constructed this should actually support and expand enthusiasm, not put a damper on it. Good nonprofit strategic plans are for the purpose of focusing efforts on mission accomplishment, not counting pennies. If it exposes a flaw, wouldn't you rather know about it and fix it  before you commit countless hours and dollars to a project doomed to failure?

If this nonprofit is getting maximum impact for the mission, meeting all their goals and are as big as they ever want to be, then by all means they should continue to do what they are doing. I do wonder how they know that they are meeting their goals if they didn't have a way to set that goal in the first place, and I sincerely hope they are not measuring effectiveness by number of people in a program, rather than by how many people are better off in some way because of the program.

Having said that, I see far more organizations that are barely surviving because they can't answer even the most basic questions that grantors ask, and for them I will continue to advocate for having structure within their organizations. There is a reason why the Internal Revenue Service reported that over 10,000 nonprofits simply ceased to exist in 2012. If I can prevent that through assisting nonprofits to survive and prosper, then I've met my mission goals. 

Rebecca Lee Baisch

Tuesday, April 9, 2013

Crowdfunding for nonprofits-an overview

New and small nonprofits, much like new or small businesses, struggle to attract capital. I have addressed some ideas for those wishing to start a nonprofit in previous posts, but if you've cleared the first hurdle of forming a recognized 501(c)(3) you may be asking - what now?

You have probably independently confirmed my oft-repeated advice that there really is a gap between becoming a nonprofit and applying for support from grants. There isn't enough privately controlled foundation, corporate or public government funding out there to support every nonprofit and there probably never will be, so what other sources are there? According to Giving USA statistics published on a government website, in 2011 73% of all charitable support was contributed by individuals[1]. The problem is in directing that support to you, particularly when it is outside of your immediate local area.

One source gaining popularity is the crowdsource or crowdfunding model. The idea behind this as it is currently being used is similar to investing groups for businesses. Crowdfunding is a growing industry of its own, stemming as do most business models from need. One example of this is found in companies formed in emulation of the Kickstarter creative project funding model.

Essentially, these are web-based donation aggregators. For the purposes of this post, I am only considering those that cater to small nonprofits or smaller projects versus the large social impact investor sites. Some are locally focused, while others are regional or national in geographic focus. 

The cost of fundraising on these sites range from a  few dollars to as much as 15% of the total amount raised or donated. All of the twenty or so sites I have researched to date have some sort of monetizing strategy, and that is just fine as long as you carefully weigh the pros and cons. Most charge monthly fees ranging from under twenty dollars for a monthly account to several thousand dollars for annual memberships. Most of them charge processing fees for each donation on top of the sign-up fee. Just be aware that these fundraising sites are businesses in their own right and have to make money to survive.

These sites have different presentation strategies, ranging from simple narrative postings to video presentations. Some require videos, others allow images and graphics while some are text-only. This is one place where having a professional review your presentation before you post it will certainly improve your chances. Some of the sites offer this as a fee-for-service add-on. Another consideration is your social media presence. Some of these sites require that you utilize Facebook or other social media platforms to raise the funds, so you will need to develop a broad base of social media contacts to be successful.

Aside from the charges, there are some other things to consider. If you do not reach your funding goal, all donations are credited back to the donors, often in the form of a credit to be used for other projects. I have seen some squawks from donors online because the funds weren't returned to them directly, or that refunds were slow. Funds are usually disbursed from 30 to 60 days after the funds are made available by donors.

This fundraising strategy is certainly an avenue to consider. Caution here: I cannot possibly stress too strongly the importance of doing thorough due diligence  when signing up on these platforms. Some are apparently successful and reputable, but there is certainly great potential for scam artists here. Check with the charities that are currently posting on the sites. If the site gives a list of funded projects, verify that the project or charity actually exists and ask for feedback on their experience with the site. Read and re-read the terms of agreement for site use. This is not the time to blindly check "I agree".

Supporting your nonprofit - Rebecca Lee Baisch dba Cloudlancer Writing Services

Tuesday, April 2, 2013

Why Nonprofit Data Matters

Big nonprofits all started as smaller nonprofits relative to where they are at present.  The trick is to continue to move forward, and doing that requires improving both structure and funding. I often hear grassroots organizations complain that they would love to be "big fancy nonprofits" but they can't grow because they receive no support from foundations or major donors. The question becomes how can you access increased funding?

There is a general feeling among small nonprofits that their efforts and accomplishments are overlooked by larger and wealthier grant makers. There is no doubt that the largest grant makers often tend to partner with large nonprofits, both in terms of actual monetary support and in the scope of the RFP requirements released for proposals.

More effective use of funding and greater accountability are two areas where large nonprofit organizations are perceived to be better investments for foundations and corporate funding sources than grassroots organizations.  They all provide impeccable accountability for the funds, maximum utilization of grant funds for large impact programs, and good opportunities for recognition of the donors. In part their funding success is due to the results donors receive when they perform due diligence, i.e. qualifying prospective grantees as funding candidates.

In 2013, more than a dozen organizations have joined forces to  provide better reporting tools to enable foundations, nonprofits  and other funding sources to share data and perform better due diligence. A overview of this trend relative to social impact nonprofits is presented in Philanthropy and the Social Economy - 2013: The Annual Industry Forecast by Lucy Bernholz[1].   Although the report is geared to large organizations, the principles and information apply to all nonprofits.

Some small organizations don't seem to quite grasp the importance of supplying clean, verifiable data to prospective donors and particularly to online verification sites.  Perhaps it is a by-product of a sense of possessiveness, or simply a lack of understanding regarding the importance of data collection and its subsequent dissemination. If providing this information makes you feel uncomfortable or exposed, you need to understand that it has a genuine purpose, and is required by every grant source as well as the federal government.

In legal matters there is a saying that if it isn't documented, it may as well not exist. Hearsay evidence is not admissible in court proceedings, and it's not very effective in fundraising either. This applies both to proving  your organizational integrity by making your public records easily available to donors and verification sites such as GuideStar, and documenting your local impact.
You may only be at the point of applying to local community foundations for support, but you need to begin your growth cycle by capturing all the data relative to your program. There is almost no such thing as too much raw data. This doesn't initially have to be an expensive piece of software, or a custom designed metric. A simple spreadsheet and simple surveys can be a good starting point. Even a Facebook "donate now" button has data.  How much did you need, did you meet your goal, and what did you do with the money? Give donors confidence by providing that data.

If you need help in documenting your data contact Cloudlancer Writing Services or email me at granthelp@ida.net.

[1] Available as a free download from Grantcraft. Registration is required. http://www.grantcraft.org/index.cfm?fuseaction=Page.ViewPage&pageId=3744