The Nonprofit Consultant Blog

Can non-profit organizations meet all the needs for-profit businesses currently meet?

2009-06-30T11:21:00.000-07:00

I just came across an interesting blog post by Stephen Monrad with title of "Can non-profit organizations meet all the needs for-profit businesses currently meet?" His conclusion is that "If a non-profit organization wanted to produce toothbrushes, there is no reason in principle that it couldn't."

I found it to be an interesting post. What follows is the comment that I left on the blog:

In the original post you say that there "is no reason that I could find that they need to limit their work to charitable or social goals." Well, actually, there is... In the U.S., at least, nonprofits receive their tax-exempt status - 501(c)(3) - from the IRS. The application requires a statement of the organization's charitable, educational, or social goals or mission. Presumably, the IRS reviews that before approving the application... presumably...

But, that doesn't mean that a nonprofit couldn't manufacture toothbrushes. If, somehow, the production of toiletries were related to the charitable purpose. For example, I'm aware of a catering company that is a tax-exempt nonprofit. The nonprofit's mission is to train at-risk populations in how to work in the food industry. New cooks enter the program, are trained, work real catering gigs, and then graduate to make room for the next group of new cooks.

To the clients hiring them for parties, they're just like any other caterer, but to the IRS it's a legitimate social enterprise providing educational assistance. I don't know how to translate that story to making toothbrushes, but you get the point.

A nonprofit can also run a for-profit business. A typical example would be a thrift shop set up to support a social cause. In this case, the IRS sees the profit from that enterprise as "Unrelated Business Income." The nonprofit does pay taxes on that portion of their income, but as long as it doesn't become their primary activity, it doesn't endanger their tax-exempt status for the charitable work.

In one of the comments, Clyde writes, "... Losses are a definite probability, but profit is a no-no, by definition." You'd think so, but "nonprofit" is really a misnomer. Nonprofits can (and, in good years, should) earn more than they spend in order to build reserves for lean years (such as we're now experiencing). What nonprofits are barred from doing is distributing that profit to the Board or principals as dividends. Profit is wonderful, as long as it is re-invested into the charitable mission.

Anyway, thanks for this post - It's an interesting conversation.

Mission-Driven Careers

2009-05-20T17:29:00.000-07:00

I know of very few people in the nonprofit sector who are here "just for a job." The few that are don't rise high in the ranks, and don't usually stick it out for very long. Those of us who've made a career of the nonprofit sector do it as part of our personal mission.

Mission is what drives us to work long hours for below average wages and next to no benefits. Mission is what makes all of that bearable, and even inspiring. We may occasionally be tempted to look for greener pastures, but we always end up back on our missions.

Jobs for Change, a part of change.org, is looking to inspire and recruit the next generation of nonprofit leaders - those looking for a mission-driven career. Here's a part of their Vision Statement: "We believe...

"People are the most important factor in advancing social change. To address the social and environmental problems we face, we need to attract a diverse range of people and the most promising leaders from across the country to work on issues both local and global in scope.
"To attract these people, we need to enhance the social sector's ability to recruit, develop, and retain talent. Too many people interested in a career in service do not end up or remain in the sector because of a range of obstacles that include misperceptions about work and compensation, insufficient information about how to take the first steps, or limited recruiting resources from budget-strapped organizations. We need to address these issues."

I've signed on to that vision statement and am pleased to put my name on the list of those who've been mission-driven in our careers, and who hope to inspire the next generation of nonprofit leaders.

Should Your Nonprofit be on Twitter?

2009-05-10T07:36:00.000-07:00

By now, I'm sure you've all heard of the micro-bloggging platform, Twitter. In a nutshell, micro-blogs - or "tweets" - are posts of 140 characters or less, typically answering the question, "What are you doing now?" Twitter is also the hottest thing going right now in terms of web 2.0 / social media. But is it right for your organization?

First, some of the criticisms of Twitter: "It's shallow." "It's vapidity to the point of depravity." "Who cares what you're doing right now?" And, when users take the "What are you doing now?" question too literally, those criticisms can be very valid. Posts of "Waiting for the bus," or "Just finished lunch, need to burp," are hardly useful or inspirational to anybody but the person who posted them.

On the other side, a few months back when a US Airways plane made an emergency landing in the Hudson River, Twitter got out the news quicker than any official media and carried the first photo of the evacuation of the plane. The presidential campaign of Barrack Obama demonstrated to community organizers worldwide how Twitter could be used to promote events, get out a message, and raise money for causes. But, again, is it right for your organization?

I personally love Twitter, and previously on this blog I've encouraged all nonprofits to use blogs and other social media as a communications tool. But on Twitter, I have to say that it may not be the best choice for smaller organizations who don't have staff dedicated to either outreach or public relations.

This is because the best use of Twitter requires listening, as well as frequent posting. One of the simplest, but most powerful, tools within Twitter is the reply post. Beginning a tweet with @(username) makes it a reply to that user.

If you're not prepared to quickly read and follow-up on replies to @yournonprofit, your use of Twitter could backfire. Rather than be seen as involved in the community and wanting two-way communication, you risk appearing out-of-touch or as putting yourself above your supporters.

For those organizations who have staff whose primary role is public communications, and who are tech-savvy, Twitter can be a great way to connect with potential supporters, organize activities, and (yes) raise needed funds.

But if Twitter is going to be an after-thought to an over-worked staffer who's focus is elsewhere, it's probably best to stick to traditional blogging for now. But, what you can do is encourage your supporters who are on Twitter to give you plugs (with links) on their Twitter feeds.

How Much Should Board Members Give?

2009-05-05T09:19:00.000-07:00

This is the question that has haunted many a nonprofit Executive Director and Development Director. How to encourage Board giving without either asking too little or scaring off new members.

A posting today on the Chronicle of Philanthropy's website asks if "the expectation of giving is something that is simply understood?" and gives a quick roundup of how some organizations answer the question.

The Asian American Justice Center in Washington, asks board members to "either donate or raise $2,500 for the organization - an expectation that is spelled out in their job descriptions."

Gail Perry, a consultant and author in Raleigh-Durham, N.C., says that "Board members will contribute and raise money for organizations that they believe in strongly," and that "They will give the minimum when they 'have' to." Ms. Perry believes that un-engaged Board members will find giving requirements "offensive." "Our job, of course," Ms. Perry goes on to say, "is to get them so fired-up that they are sitting on the edge of their seats ready to ... give."

My experience is that "give or get" policies are popular, but I always encourage my clients to tell their Board that they need to "give and get."

To me, the "getting" is part of their fiduciary responsibility as a Board member to make sure the organization is financially stable and sustainable. The "get" can be done in many ways, from directly asking friends and family, to arranging matching gifts through their employer, to helping plan an event, to writing grant proposals, etc.

The "give," on the other hand, is a recognition of their personal commitment beyond the work. The point I make to Boards is that if they have not personally invested in the organization, why should anybody else? And, I go on, people will know. Perhaps not the average donor, but Major Donors will ask about Board giving, and so will Foundation officers when they come on site visits.

As to how much they should give, I don't believe in stated dollar minimums. Rather, I prefer the phrase, "Board members must give at a personally meaningful level." That means that if a member normally makes $500 gifts to other nonprofits, they should give $750 or $1,000 to the nonprofit they're on the Board of. If they normally give $25 to others, they should give $50 here.

I work with mostly smaller, local organizations, who are particularly timid about the Board member ask because their Boards are more likely to include former clients and neighborhood activists than high-powered international executives and bank owners. An ask that takes ability to give into account, while still recognizing and honoring their commitment to your organization, allows the client representative to give $2 while sitting next to the Doctor who gave $5,000, each knowing they were respected and that they did all they could.

It is up to the Executive Director and Development Director (if you have one) to personally craft the ask, just as you would any Major Gifts ask, based on what you know of your Board member's giving history, occupation, net worth, etc. Explain the "personally meaningful" policy clearly, and ask with confidence.

If your Board member is still reluctant to give, it may be time to question their commitment and start recruiting to fill that seat.

Nonprofit Marketing and Fundraising Zone

2009-05-04T19:46:00.000-07:00

I am pleased to announce that as of today, the Nonprofit Consultant Blog is part of the Nonprofit Marketing and Fundraising Zone. The Zone is a topic hub started by Katya Andresen, Nancy Schwartz, and Kivi Leroux Miller for collecting and organizing information around these topics.

I'm honored that my posts will be in the company of posts from some of my favorite nonprofit blogs, including Donor Power Blog, Getting Attention, Kivi's Nonprofit Communications Blog, Studio 501c3, and several more.

You will find a link to the Nonprofit Marketing and Fundraising Zone in the sidebar to the right, along with a search form to find articles on that site compiled from this blog and each of the other participating blogs.

Stimulus Caution

2009-04-26T08:01:00.000-07:00

With the drying up of donations from individuals, grants from foundations, and contracts from local governments, many smaller, locally-based nonprofits are looking to Washington for funding, hoping to get in on some of the economic stimulus packages as a means of surviving this recession.

While the temptation for "big money" or "easy money" is a terrific lure, and we do need to investigate all potential funding sources for our organizations, I do want to express my concern that you approach with caution.

Consider not only your short-term money needs, but the long-term effect of the funding, and your capacity to take on the project.

Most of these stimulus programs are not designed for grass-roots organizations; they pretty much require large structures, with already large budgets, and the capacity to take on new projects without much additional overhead.

Seriously, if you have an annual budget of only $500,000 you should not be looking at a grant for $300,000/year for only two years, and with only 5% allowed for administration.

First off, you're likely not going to be approved for such a thing, and the time spent pursuing this would be better spent on more realistic prospects. But secondly, if you did get the grant, are you really prepared for such a massive expansion of your program? Can you realistically manage it with what they allow for overhead? And what will you do when the money goes away? That will be quite a shock to your organization on all ends.

Now, that doesn't mean you can't benefit from the stimulus money that's been announced. By partnering with larger organizations as a sub-contractor, you can help them perform the work (keeping your staff employed) without being directly obligated to the Federal government and all the bureaucracy that that entails.

So, do keep your eyes and ears open for these opportunities, but do so with caution, with careful analysis of your own capacity and how the goals of the funds fit with your programs, and with a willingness to be a partner with others in your community.

(Of course, a stimulus bill aimed at "bailing out" small, local nonprofits would be quite welcome as well...)

What are your volunteers worth?

2009-04-09T07:58:00.000-07:00

According to the Independent Sector, the estimated dollar value of volunteer time for 2008 is $20.25 per hour. According the report, this value

"...is based on the average hourly earnings of all production and nonsupervisory workers on private nonfarm payrolls (as determined by the Bureau of Labor Statistics). Independent Sector takes this figure and increases it by 12 percent to estimate for fringe benefits."

Of course, for specialized work (lawyers, architects, etc.) the BLS assigns higher average rates, but only use them when the specialist is volunteering in their professional capacity (IE: Don't value a Doctor's work at the higher rate if she's helping with the filing).

Why are these values important? Because volunteer time is part of how we in the nonprofit sector leverage donor dollars. It's part of the story of how we can get $10 worth of services out of a $5 gift. Donors, large and small, private and institutional, want to hear that their investment in your organization is helping to bring in additional resources.

Track the hours and assignments of your volunteers, and include that value in budgets as an in-kind donation. Tout that figure in newsletters and annual reports. But, according to FASB (the Financial Accounting Standards Board), only include the figure in official reporting if "the organization would have purchased the services if they had not been donated."

So, what do you think of the $20.25/hour figure? Too high? Too low?

Thinking of the small, local nonprofit where I'm currently the Interim Executive Director, and other like-sized organizations, I wondered if we were now valuing the volunteers more than the staff.

Our average wage for non-supervisory staff would be about $15/hour, adding 12% as Independent Sector did for "benefits" (really, just payroll taxes, SSI, etc. - most of these staff are part-time and not receiving health insurance, etc.), that bring our figure up to $16.80/hour.

Do we now need to launch into a conversation about how we value our staffs?

When Incentives Turn into Disincentives

2009-03-26T07:53:00.000-07:00

All of us in the nonprofit sector are aware (or, should be aware) that the Foundations who support us have a minimum 5% payout requirement to maintain their nonprofit status. That is, they have promised the IRS that their grants and related expenditures will equal at least 5% of the total value of their assets each tax year.

There are those of us (and if you read this blog regularly, you know I'm one) who consistently call on the foundations to grant out more than the minimum, particularly in years, such as this one, when social need for nonprofit services is high and individual donations are low.

A little less known than the 5% payout, is the excise tax that foundations pay on their investment earnings. Currently, it is generally a 2% tax. However, it is lowered to 1% in any year that a foundation grants out more than their five-year average. This was meant to be an incentive for higher payouts in times of need.

Of course, it is a one-year incentive, since that higher payout raises the five-year average, the tax rate goes back to 2% unless grant amounts continue to rise each year. The return to 2%, according to some in the foundation world, actually then becomes a disincentive to increasing grants in the first place.

According to C. David Campbell, president of the McGregor Fund, a Detroit-based foundation:

"This year, most of the foundations in Detroit will be paying out much more than they have in the past because of the needs... But that will leave all of us in the position of paying more taxes going forward, which ironically will further diminish what we have to support nonprofits."

Enter Senator Charles E. Schumer, New York Democrat, and his buddies, Senators Debbie Stabenow and Carl Levin, Democrats of Michigan. Senator Schumer has proposed eliminating the current two-tiered system with a single excise tax rate of 1.32% in all years.

According to Robert S. Collier, chief executive of the Council of Michigan Foundations

"We are confident this will stimulate more giving by foundations... simply by making the administration of tens of thousands of smaller and midsize foundations much easier because they won’t have to spend a lot of time with their accountants trying to figure out if they have to pay 1 percent or 2 percent."

I'm all for anything that will encourage foundations to do what they're supposed to - support nonprofit organizations - but, really, was figuring out a two-tiered tax system really that much trouble for the foundation world?

And, more to the point, are foundations really saying that the only reason they can't step up and grant out more in this fiscal emergency is because they'll only save on one year's taxes? I know that many foundations are stepping up, and that this does not represent the attitude of the entire sector.

Now, I'm not saying that I'm against Schumer's bill. It's probably a great idea. I'm just saying that certain foundations need to increase their giving in an emergency, excise tax or not.

Good news for fundraisers

2009-03-19T08:06:00.000-07:00

Did I say "good news"? In this economy? Yes, I certainly did. This last January Cygnus Applied Research polled 17,365 people with a history of charitable donations to ask them about their philanthropic plans for 2009. The results (as reported in The Chronicle of Philanthropy) may surprise you:

52% of donors said their gifts would be on par with 2008
Only 17.5% planned to give less than last year
Of those who were committed to a multi-year gift, 87% said they would pay on time
42.5% said they would give to a charity they had not supported in the past if someone they knew was seeking the gift
40.3% said they would give for the first time if the charity was working directly to help people hurt by the recession
Only 16% said they would not consider supporting a new organization

Survey respondents were not being unrealistic about the economy when answering these questions: 39% said they thought it would be at least three years before the economy recovered. 23.4% felt the economy would rebound in less than two years.

A final bit of caution before thinking this news is an open invitation to all sorts of fundraising plans:

Forty-one percent said they had stopped donating to at least one nonprofit group in the past five years because they felt overwhelmed by appeal letters, while more than a third said they were concerned organizations spent too much on fund raising.

As a result, online donations are expected to become more popular, while telemarketing, door-to-door canvassing, and direct-mail appeals may be less successful.

Washing Away in a Flood of Volunteers

2009-03-18T08:48:00.000-07:00

Has your nonprofit been overrun and overwhelmed recently with a flood of new volunteers? The New York Times reports on the influx of the unemployed into volunteer service and its effects, both positive and negative.

The two forces feeding this growing volunteerism are, of course, the recession leaving many people with more free time than they'd care to have, coupled with inspiration from President Obama's call to service.

Here in the Bay Area, the Taproot Foundation - who help with organizational effectiveness by placing skilled professionals in volunteer positions - had more people sign up on one day earlier this year than in an entire month a year ago.

For those larger organizations, who are able to properly train, manage, and use these new volunteers, this is a wonderful resource. But what hit home for me was this paragraph:

... others grumbled that the current love affair with volunteerism ... can be a mixed blessing. Smaller organizations, with staffs of fewer than 20 and no full-time volunteer coordinator, have struggled to absorb the influx, especially since many of them have simultaneously had to cut back on projects in the face of dwindling donations and government grants.

“Can you make them stop calling?” groused one nonprofit executive, who spoke on the condition of anonymity...

I'm currently serving as Interim Executive Director at an agency with nine staff members. The Volunteer Coordinator left that position in December and because of budget restrictions has not been replaced. We now have a backlog of volunteers to follow up with, and limited resources to put them into positions where they can be of service.

Taproot has had to scale back on their recruitment of professionals:

“It’s like a Greek tragedy,” according to Lindsay Firestone, who manages pro bono projects for Taproot. “We’re thrilled to have all of these volunteers. But now organizations are stuck not being able to take advantage of it because they don’t have adequate funding.”

But, as much as we may complain now, we know it won't continue forever. The media focus on volunteerism will wane as another issue comes into vogue, and the economy will pick up sooner or later (sooner, please!) sending these volunteers off to their paid positions.

How we handle these eager volunteers now will greatly influence how we can use them and interact with them later.

Bertina Ceccarelli, a senior vice president at the United Way in New York, sums it up this way:

“My hope is when they decide it’s time to do something else, they have fond memories of what they learned at United Way... Maybe they’ll even become a donor..."

Of course, we all know, nobody just "becomes" a donor. Donors must be cultivated. Sending a potential volunteer away today may mean you're turning down a future donation. Something to think about.

Resisting the Pressure to Merger

2009-03-14T16:56:00.000-07:00

A couple of years ago, I wrote a post here about when it makes sense to take an existing partnership and explore a merger. In that posting, I wrote that

the reality is that it is increasingly difficult for small organizations (budgets under $750,000) to operate successfully, and create sustainable funding. As much as I love small, grassroots organizations, sometimes they can better serve their communities as part of a mid-sized agency.

Today, that is truer than ever, and many of the small agencies that I love so much are in major trouble as their funding dries up, while clients are still lining up at their doors. Also true right now is that there is growing pressure on these small organizations to merge coming from the funding community (foundations and local governments).

In the long term, many of the mergers they envision may indeed make sense. But the savings they imagine will not occur anywhere near soon enough to be a solution to this year's budget problems. In fact, to make mergers truly work for the betterment of the organizations (and their clients), will actually require an additional investment for FY 2009-10 - an investment that doesn't seem likely to come from any of the sources promoting the mergers.

"Quick and easy" mergers really only exist when one of the partners is in such deep trouble that their only other option is shutting their doors and the other partner has plenty of resources to invest in salvaging the best of what the defunct organization has to offer.

When two small- to mid-sized organizations, who are each struggling but surviving, come to the table together, there's much to discuss and agree upon before any mergers occur. From deciding on what name the resulting organization will be called, to which Executive Director stays on (and what to do with the one that doesn't), to how to merge the boards (and elect new officers), to going through and reconciling each line of the two different sets of by-laws, this is a process that can take at least several months to over a year to settle. And once that's done, it's time for the lawyers to review what's been decided and put it into a legal form.

Here's a sample, simplified merger budget:

As you can see, while mergers may save money in the long run (and even that is often questionable if the deposed ED is needed to stay on to manage a second site), there are considerable upfront costs, and a major time investment required to make them work. And, bringing us back to the start of this post, the partnership has to make sense.

A Plan to Survive

2009-03-11T21:15:00.000-07:00

Today I gave a presentation on Fundraising Planning in the New Economic Environment at the Nonprofit Forum in Redwood City. The Forum brought about 200 nonprofit professionals from throughout San Mateo and Santa Clara Counties to the conference center on the Oracle campus to share strategies for surviving the current economic collapse.

I've taught on the topic of fundraising planning many times over the years, and, of course, have my book out on the subject, but the question I had to ask myself in preparing for today was, "Has the current economic situation changed how we should approach the subject?"

The answer was simply, "No." Good planning is still good planning. The process I outline, and the tools I include, are valid in any economy. The plan that each of them creates for their agencies, of course, will be different today than it may have been a year ago, but the process is the same.

The most important thing was simply to take the time to plan, properly analyzing their funding mix, identifying gaps, establishing realistic goals, and working the plan.

Yesterday, while doing my final preparations for the conference, I came across this posting of a new study by Retriever Development Counsel with a few characteristics of nonprofits that are surviving the recession. Those characteristics include:

Those nonprofits with diversified funding, good management, and "learning cultures" seem to be coping much better than others.
Successful nonprofits appear to be putting more focus on development activities, particularly donor relations, including cultivation of major donors.

This is nothing new. When I was working for Compasspoint Nonprofit Services (one of the organizers of today's conference) during the dot-com bust of 2002 we did a similar survey, and - not surprisingly - we found that those organizations that were doing best were those that had a development plan.

The plans were all different, and all unique to the organizations that made them. There's no right or wrong plan. The only mistake is failing to plan.

Maybe in a good economy you have the luxury of sitting back and "just letting the money roll in" without any design or thought to how it's going to happen. But today we don't have the time to take chances like that. The time spent planning will be paid back to you with security and sustainability.

"Don't Panic!"

2008-12-16T18:02:00.000-08:00

Here's a wonderful quote from a meeting I attended this morning of Santa Cruz County (California) nonprofit Executive Directors, discussing their response to the current financial crisis:

"Don't panic. Not because there isn't reason to panic - there is - but because panic doesn't work."

So, what is your organization doing to respond to the current economic crisis? Have you felt it yet, or have you somehow been spared? I've just set up a survey to gather your responses - Click Here to take survey - Thanks!

(And for those who've wondered if I'd ever blog again, yes, I'm still alive and working. Just working a bit too much in my current Interim ED position... dealing with the just these questions of whether or not we should be panicking.)

Question: Seeking merger funds

2008-09-25T09:08:00.000-07:00

From my email:

There are two nonprofits in my community that are considering a merger/acquisition scenario. I have advised them to bring in a consultant, which they will consider. Do you know of any capacity-building or other grants available that could help with the consultant and other costs of this major strategic move?
Redmond, Oregon

From my reply:

Usually funds for something like that are best sought locally. I can't think of any national foundations, off hand, that are interested in funding merger type activity.

Your best bet is to have honest (and confidential) conversations with the local community foundation, the local United Way, and some of the local funders who are already involved with one (or both) of the organizations.

Giuliani Makes the Choice Clear for Nonprofits

2008-09-03T19:16:00.001-07:00

I'm watching the Republican National Convention right now, with former New York mayor Rudy Giuliani giving his speech. Let me recount a bit of dialogue I just heard. He was talking about the Democratic Candidate, Barack Obama, and critiquing his resume...
GIULIANI:
"He worked as a ... community organizer?"
(Rudy makes strange face)
(audience laughs)
"Yeah, he worked as a community organizer!
And that's just the first problem with his resume!"
Well, if you're a reader of this blog, you are probably familiar with people who work as community organizers, and are possibly one yourself. You know that it's tough work, underpaid work, and often thankless work. You know that it's nothing to make jokes about.

But not at the Republican National Convention, apparently. At the RNC, community organizing and nonprofit work is the stuff of humor, proof of inexperience, and a disqualifier for any "real" public policy work.

Well, I'm certain that the professional thing to do here would be to put my opinions on my personal blog, and keep this blog politics free and opinion free. But the stakes in this election are too high. I care too much about the nonprofit sector, and I care too much about this country to not post this here.

In Barack Obama we finally have a candidate for President who actually understands and has links to the nonprofit sector. In Michelle Obama we have even more nonprofit experience, as she's a former local leader for Public Allies, an excellent organization that I've had the pleasure to work with in my region.

The line is clear here. There is one presidential ticket that honors the work of the nonprofit sector, and one that mocks it. Which do you think will be better for us, and help us to do the work we need to do in our local communities?

This blog is proud to be officially endorsing Barack Obama for President of the United States.

(NOTE: Vice Presidential candidate Governor Sarah Palin just repeated the anti-community organizer slander, this time adding, "The difference between a mayor and a community organizer is that a mayor has responsibilities.")

Nonprofit Website Mistakes: Lack of Transparency

2008-07-25T10:36:00.000-07:00

When people talk about mistakes nonprofits make with their websites, the first thing that comes to mind is usually either no direct donate button from the front page, or an unclear mission statement. But I'd like to focus on a different type of mistake; lack of transparency.

First off, what do I mean by "transparency?" I'm talking about communicating with your community (clients, members, potential donors, neighbors, elected officials, etc.) as openly, honestly, and fully about your operations as is practical and legal to do so.

And I'm not just talking about your programs and the great deeds that your organization performs. I assume that's already on your website (and if it's not, you need a far more remedial article than this one). I'm talking about your finances, your governance, and your management of the public trust.

Because that's what a nonprofit is: A public trust. You have been granted your 501(c)3 (and your special tax status) to produce something of benefit to the public, and the public is, in many very real ways, the ultimate shareholders of your corporation - even more so than your board members, clients, or staff.

These days the public finds it hard to trust in many institutions (and who can blame them). Lack of trust in nonprofits leads to lack of donations, and restrictions on what we can ultimately accomplish. By being as transparent as possible you inspire trust in your organization, and (hopefully) in the nonprofit sector as a whole. And trust, in turn, inspires donations.

So, how do you make your website "transparent?" Here are a few suggestions to get you started...

Post Your 990s - Your IRS form 990 tax returns are already public information to those who know where to find them (on guidestar.org, for example). But why make people look for them elsewhere? Have your accountant create a pdf file of your 990s and post them annually as soon as you have filed.

Post Your Audits - Show your donors that your finances are in order and have passed a critical inspection. You spend your money responsibly; let your community know.

Post Board Activity - Maybe full board meeting minutes would be a bit too detailed, but why not a monthly summary of board activity and decisions made? A good way to do this is with the next suggestion...

Start Blogging - Show that your efforts at transparency aren't just an annual activity coinciding with your audit and 990s. Make a regular effort to inform your constituents of what is happening behind the scenes in your organization. This could include staff changes, new funding received, even problems with the plumbing (who knows, maybe one of your readers can volunteer a solution!).

Contact Information! - I can't believe the number of nonprofit websites I visit that have a board listing (names only, no affiliations) and a senior staff listing, but then only one general information email address. How about full staff listings with all emails and more some information on your board members. If board members don't all want their emails listed, how about at least the board chair, or maybe a "catch-all" email (board@yourorg.org) that you can forward to each of them?

These are just a few ideas to get you going, I'm sure you can come up with many more once you start thinking about your organization, and how you communicate with your community.

A winning dozen

2008-07-17T09:15:00.000-07:00

The Getting Attention blog of nonprofit marketing guru Nancy Schwartz has today released its list of twelve "Exceptional Tagline Honorees."

Earlier this year, Nancy asked for "great tagline" nominations and received over 1,000 submissions. After 62 finalists were carefully selected, the 12 award winners were chosen by 3,062 nonprofit professionals who voted in an online poll.

The entire list of submitted taglines, details on finalists and award winners, and additional survey findings will be featured in The Nonprofit Tagline Report, to be published in September.

The awards, which Nancy expects to be conferred annually, represent the best taglines in all nonprofit sectors. Check out this year's winners circle at the Getting Attention blog and see how your tagline compares. What's that? You don't have a tagline?!? Then you better see Nancy...

The Board's Role in Supervising the Executive

2008-07-15T15:48:00.000-07:00

I get lots of interesting questions by email, and I try to answer as many as I am qualified to give an opinion on. In this case, the sender is looking for your opinions, as well as my own:

Hi, Ken. I have a question for you and your readers. I am wondering about the duty line between Boards and an Executive Director of a non-profit. What is the role of the Board in supervising that E.D.? If there are problems on a regular basis with how the E.D. executes his/her goals and objectives (i.e. things that fall under the auspices of the E.D. and not the board) does the board deal with this as a normal supervisor would (asking for explanations, suggesting or requiring specific solutions?) or does the Board have to stay quiet? - Jenny - Albuquerque, NM

Jenny brings up a common problem; boards that don't properly carry out their duty as the Executive's supervisor.

While it is true that nonprofit boards should have no role in supervising other employees (all staff should report to the Executive Director or subordinate), the ED reports to the board, and it is the board's responsibility to ensure that the ED performs to their contract. That includes the things Jenny mentions (asking for explanations, suggesting or requiring specific solutions) all the way up to the removal of the ED, if necessary.

Equally important, and even more frequently forgotten, is the board's role in supervising a successful Executive Director. When EDs perform well, boards often feel they have met their obligations to the ED. The result is that years go by without a formal annual performance evaluation, and often without a raise, even to keep up with the cost of living.

So, yes, Jenny, the Board (or the executive committee of the board) does need to execute proper supervision and evaluation of the Executive Director - in both bad situations and good ones.

Do any other readers have anything else to add? Please post your comments below!

Return to blogging (part two)

2008-07-08T10:28:00.000-07:00

Yesterday I apologized for not having posted for a long while, and put the blame on two factors: being very busy, and doing a bit of soul searching. Yesterday's post covered the busy part. Today I'll tell you a bit about what I've been thinking about.

I've now been an Interim Executive Director three times, and it's always interesting, but this last assignment went on for so long (nearly a year-and-a-half) that it became in many senses more like a "real job." So the assignment ending hit me in surprising ways. There is a very real sense of loss and emptiness, much like if a "real job" had unexpectedly come to end.

I'd already been examining my consulting practice and coming to the conclusion that writing grant proposals for a variety of organizations is not how I want to spend most of my time, and have been eliminating those assignments from my client list. For a variety of reasons, I feel that outside consultants can best serve an organization by giving them the knowledge to write their own proposals, and help on a limited basis. I have come to hold the belief that a nonprofit agency that completely outsources it's grant writing is making a strategic error, and probably not getting the best value on their investment, versus building that skill in-house.

So, with no more grant writing clients, and my long-term assignment coming to an end, I've had time to think about "what I want to do when I grow up." The basic options being: continue as is, just with fewer grant writing assignments; look for a "real job" as an Executive Director or other nonprofit leadership position; or "go corporate" and get a "real job" on the other side.

After a little exploration, and talking to several people about different options for me in the for-profit world, I've come to the obvious realization that it's just not for me. I am a nonprofit guy through and through. This was an exploration I had to go through (for the elusive dream of more money and a better retirement plan, etc.), but it was a silly idea.

But I did enjoy that last Interim ED position, and I do miss it more than I expected to. And so, while I'll continue to take some limited term consulting assignments right now, I think my long-term plan is to find a permanent Executive Director (or other senior leadership) position in the nonprofit sector.

Meanwhile, I'll get back to blogging, and shift back from "contemplative mode" to "active mode." I've been sent a great new book, Grassroots Philanthropy: Field NOtes of a Maverick Grantmaker by Bill Somerville and Fred Setterberg, that I'll be reviewing shortly too.

Thanks again for your patience and support.

Return to blogging

2008-07-07T11:42:00.000-07:00

First I must thank all of you who continued check this blog site during my extended break in regular posting. I appreciate it very much, and is one of the reasons I've determined to start posting again.

My absence has been partly due to plain old being busy, and partly due to a bit of soul searching.

First the busy part. I was completing nearly one-and-a-half years as the Interim Executive Director of Grail Family Services in San Jose. It was a wonderful and satisfying experience, through which I learned much and gained terrific insights and experience. Yes, even as a consultant, and somebody with nearly twenty years of public service, half of it in leadership positions, I continue to learn every day.

The assignment began as a simple "caretaker" role, keeping daily operations running smoothly while we negotiated a merger. As the merger talks dragged on, more leadership was required as the normal course of things brought about staff changes and all the other crises that come at nonprofit organizations on a regular basis. After nearly ten months of negotiations, and a draft of the final agreement, it became clear that the merger was not in our best interest, and talks ended.

We then began a process of determining the best path for GFS. Should we pursue another merger? With whom? Should we hire a permanent ED? Could GFS be sustainable if it remained independent? Much time had been lost with developing new funding sources when we thought we were merging. Still, the more than a year of uncertainty had taken its toll on staff, and all agreed that finding a way to make the organization stable and successful on its own was the best avenue to pursue.

After a search of several months, and interviewing some wonderful candidates, we wound up re-hiring the previous Executive Director, who was once again available. The organization is on track for another great year. I completed my tenure as Interim ED about a month ago, but I am continuing as a consultant to assist with their upcoming Strategic Planning process.

And so, that completes the "too busy to blog" story. Tomorrow I'll tell you about the soul searching, and where I am now. Thanks again for your patience during this absence.

The End of Board Committees

2008-04-15T13:51:00.000-07:00

Let's face it: board committees are usually bored committees, and rarely get anything done unless it's task and time specific, so why not just abolish them?

At least, that's the question being asked in the premier issue of 'Blue Avocado' - the new online magazine for people working and volunteering in the nonprofit sector. The site, directed and edited by Jan Masaoka (my former boss at CompassPoint Nonprofit Services), is "half magazine, half blog, half website" and its "aim is to engage and support the people of community nonprofits, the ones who do the heavy lifting in building social justice and strong communities, and who create and drive the ideas that change our world for the better."

Of the articles in the premier issue, which came out today, the one abolishing board committees really grabbed me as being provocative and helpful at the same time. Of course, you'll never get rid of all committees - nor should you - but with a handful of exceptions, board committees do not need be permanent standing structures, and their business can be better served with ad-hoc task-specific groups.

I see two main benefits right off: providing focus and eliminating burn-out. A project specific task force knows what it must accomplish, and by when it must accomplish it. And, by providing that direction, there's no drift or inertia from month-to-month as nothing seems to happen, making committee members bored, anxious, and fed up with board work entirely.

Check out Blue Avocado at blueavocado.org and sign up for the e-newsletter, register an account (it's free, and allows you to leave comments), and join in the conversation.

Walking for Early Literacy

2008-04-10T11:43:00.000-07:00

On Saturday May 10 I will be taking part in the Human Race, a fundraising event for Silicon Valley nonprofit organizations. The Human Race is an annual event produced by the Volunteer Center of Silicon Valley that brings together hundreds of organizations from Santa Clara and San Mateo Counties. Taking part in an event like this provides each organization a "ready-made" fundraising event, without the hassle, effort, or costs of developing one of their own. Volunteer Centers throughout the state and nation hold similar events - Check it out for your own nonprofit.

I will be doing the 5K walk to raise funds for Grail Family Services (GFS), an organization in East San Jose that I have been serving on a consultant basis as Interim Executive Director for a little over a year now. And, of course, I'm asking for your support - Click here if you can pledge any amount of money to help our efforts.

GFS "fosters learning and the empowerment of vulnerable families with young children through the delivery of programs that educate, develop leadership skills, and build a sense of community." All GFS programs target parents and their young children ages 0-9, and are designed with community input to address the issues most important to the neighborhood. This approach enriches the child, as well as the parent, and helps them each on the path to success in school, in work, and in life.

Your sponsorship of my Human Race participation could mean:

$25 – five new books for the GFS Children's Library.
$50 – developmentally appropriate toys for GFS' child care program.
$100 – case management services for one parent.
$250 – four weeks of subsidized child care services for one low-income toddler.
$1,000 – eight weeks of literacy services to boost the reading skills of one child.

If you can help out, click here - And thank you for your support!

Introducing IssueLab

2008-04-02T08:18:00.000-07:00

Just a quick note today: There's a new link in the "Blogroll" on the left side to IssueLab's newsfeed.

IssueLab "is an online publishing forum for nonprofit research. Each month we do an editorial CloseUp on a different issue that nonprofits are addressing in their own research work. This month we are focusing on research related to the issue of Volunteerism. You can check out the collection, which pulls work from an interesting cross-section of organizations, at www.issuelab.org/closeup."

The newsfeed (to your left) will bring you all sorts of good stuff.

National Volunteer Week is Coming...

2008-03-13T16:19:00.000-07:00

National Volunteer Week is coming up this April 27-May 3. It's the biggest volunteering event on the calendar, and it's a great opportunity for you to encourage socially minded folks (like your organization's supporters) to participate in local activities.

Head on over to the VolunteerMatch web site and read the press release to find out more about National Volunteer Week, and how your nonprofit can tie into this promotion.

“National Volunteer Week is a terrific opportunity to harness the growing, nationwide surge in volunteerism,” said Greg Baldwin, president of VolunteerMatch. “It affords a chance for individuals to reach out and discover fun and meaningful volunteer activities in their own neighborhoods.”
...
VolunteerMatch is helping transform the landscape of nonprofit outreach—connecting good people directly with good causes, and providing access to an entirely new generation of volunteers who are eager to contribute. Since 1998, volunteers have generated just over 3.4 million matches to the 56,784 local nonprofits registered with VolunteerMatch.

On a personal note, I generally do not use my blog to simply edit and repost press releases I receive in my email (if I did, I'd be posting three or four blogs a day). When I do pass along information from a press release it is because it is an organization or a cause that I believe in and find value in.

I have used VolunteerMatch to find volunteers for several nonprofit organizations and have found it easy to use and highly effective in recruiting quality volunteers. If you can possibly use the theme of National Volunteer Week in your recruitment efforts, I think you will find it well worth your effort.

Market failure and collusion in the philanthropic marketplace

2008-03-05T11:03:00.000-08:00

That's a bit of a heady title, but stick with it and humor me for a minute or two longer. I'm going to use a lesson from basic economics 101 to explain why nonprofits are unnecessarily forced spend too much time and energy chasing dollars instead of achieving their missions.

Cast your mind back to college days. and remember that intro to economics class. Remember how the supply and demand curves are supposed to work? In a functioning market, each are at least somewhat elastic. When demand outpaces supply, shortages occur and prices rise till supply can catch up. When supply outpaces demand, prices begin to drop. In each case, the correction (either dropping prices or increased supply) brings the market back into equilibrium. Ta daa! The invisible hand at work.

When these forces fail to bring the market back to a working situation, for whatever reason, the resulting state is called a market failure. One possible cause of a market failure is collusion; where a number of players one side of the equation agree to withhold either supply or demand in order to manipulate the market for their own ends.

Okay, so now let's look at the market for foundation grants to nonprofits. It is an accepted fact of life that the demand far outpaces the number of grants awarded. We know that the rule of thumb is that only one in twelve proposals will be funded (some of us do somewhat better than that, but it's balanced by those who do worse), and that none of us who have been at it long can boast of a perfect record of every proposal funded.

Because of a low supply of grants from foundations, nonprofits pay a higher than market price for searching out, applying for, and managing what few grants are available to them. Economics 101. That higher price nonprofits pay to receive grants has to come from somewhere, so it comes from programs; from mission.

This would suggest that there's a shortage in the supply chain of charitable dollars. But that's simply not true. Foundations are sitting on massive endowments that could satisfy most any nonprofit's needs. These dollars have already been earmarked for charitable purposes and the donors have already received their tax benefits at the expense of the public treasury. So why are they not being distributed?

And that's where the collusion comes in. While the IRS requires that foundations spend out a minimum of five percent of their endowments each year, the majority of U.S. foundations have taken that five percent to be the industry standard (a few notable exception spend at higher rates, and they are to be commended).

In the face of a contracting economy, with rising demand for the social services provided by the nonprofit community matched with fewer dollars to pay for it, this collusion of foundations has become the single largest impediment to nonprofits succeeding at their missions and a danger to the public safety, health, and societal well-being.

Alright. Maybe I'm going a bit too far here. I like to exaggerate to make a point. But the fact stands: In tough times the community of foundations have the ability - and I would argue social responsibility - to step up to the plate and increase the flow of grants.

And, while we're at it, maybe they can cut some of the administrative burden associated with the process. Oops. I know. This time I've really gone too far.