Business? As usual....

As we start on a new year, still smarting from scary economics and shaky financial futures, the old argument about why so many nonprofits are so poorly run is getting a lot of play.

“We need to be run more like businesses,” one camp asserts.

“Like Enron, GM, (fill in the blank)?” another group scoffs .

We are—are not—businesses, which are—are not—a good (or bad) model.

We are getting too hung up, I think, on nomenclature.

The question that is too often asked is: Why is it so hard for organizations to understand that they must be run as a business? Rather, I think, we should questions why is it so hard for them to understand that they must be well run with careful oversight and clarity as to what is needed to accomplish their mission? We would then get closer to the issue at hand for many (not all) nonprofits.

The biggest problem I see is a lack of balance in organizations who do not want to invest in building the infrastructure (which includes IT, Accounting and yes, Advancement—marketing, fundraising, government relations) to support the programs that are their purpose. And by investment I mean money, resources and commitment.

Too often, administration and fundraising are seen as orthogonal to the organization rather than as true partners who can ensure that the programs have a strong foundation on which to rest. And way too often, we look at our funders and donors as the enemy rather than our partners.

There is also, it seems, a willful “know-nothing” attitude rampant in the nonprofit sector.

Over the years, I’ve been shocked at how many nonprofit professionals don’t know the first thing about the law of gifts; have not clue what is required in order for a donor to take a (legitimate) tax deduction for a contribution, or even when it is a contribution. I have sat at way too many Board meetings, where the chair of the finance committee drones on about the financials, which no one else seems to understand.

I’m thrilled that Charity Navigator and other charity watchdog organizations are stepping back from a rating that focuses only on percentages of revenue spent on programs versus administration and fundraising. I’ve been around too long not to see that while turning on the lights may not be sexy, it is necessary in order that we can run our programs.

Clearly there needs to be a focus on outcomes but we also need to understand what those outcomes are. And that ties back to mission.

In this new year, whether you’ve already made your New Year’s Resolutions or not, let me suggest that we all focus less on how much good we think we do, and concentrate instead on how much better we all could be.

Whether you are staff or Board member, learn about the laws that govern your nonprofit. Commit to good governance as well as good programs; be part of the solution rather than simply cursing the problems.

One important way to do is to take off the blinders, open the doors to the silos and understand that, truly, we are all in this together. Plan strategically for the coming year (rather than simply doing yet another strategic plan).

Start with your clients—what do they need? Let me repeat that: What do they need? Then think about what the organization needs in order to provide that.

Sit down with staff and volunteers, find out what they think is needed. How does it mesh with the needs of your clients? Do all these needs match your mission? If not, why not? What would need to change here?

Your budget is an important part of planning strategically. Is yours realistic or did you just roll over what you’ve done in past years? Has your Board been truly involved with budgeting or have they been kept out of it, relegated to approving a fait accompli?

While I don’t believe that Boards should scrutinize every expenditure, I do think they cannot be good stewards for you if they don’t understand truly what it takes to run the organization. If your Board hasn’t been involved, involve them now—you may be surprised at some of the good ideas that can generate.

Budget, remember, is not only about expenses; it’s also about revenue. If you charge fees, when was the last time you looked at them? Really looked at them. Has your Board ever been part of that process? What about other sources of revenue? Are you tapping into everything you can?

All organizations (and individuals) sometimes suffer from the “this is the way we do things because that’s the way we’ve been doing them.” And sometimes, those ways actually are the best ways. But this year, challenge yourself to look at things through a new prism, mindful of history but not totally bound by it. Yes, those who don’t study the past are often doomed to repeat it. But by the same token, if you don’t ever dare to try something new, you may find that you are caught in past mistakes, missteps and are missing the boat completely.

Janet Levine is a consultant who focuses on increasing productivity for nonprofit organizations, their staff and volunteers. She can be reached at janet@janetlevineconsulting.com.

Here We Go Again

Edward and Marcia Dawson have made incomes commensurate with those of Wall Street bankers. They are, however, not bankers but the founders of Social Vocation Services, a nonprofit social-service organization in California.

Personally, I don’t care how much money Mr. and Mrs. Dawson have made. But they seem to have done it in not such an ethical manner. That will give a certain group of people the ability to say, “Aha! Those nonprofits—they are just not trustworthy.” And that I do care about.

Nonprofits, it seems to me, get tarred with two sides of the same brush. First we are told we are not business-like enough. We’re inefficient, poorly managed, and unrealistic. On the other side, organizations that play by business rules are bashed because they are untrustworthy and care more about the bottom line than the mission they were created to fulfill.

There’s truth and falsity in both those sides. Nonprofits are businesses, and there should be an expectation that they are run professionally and well. Not that all businesses meet those criteria, but we should be striving to be the best. But as nonprofits, we are also mission-driven organizations, and that mission—not profit—should be what rules.

I worked in higher education for a long time and over the years, the push was to become more “business-like.” The result, I think, is that universities and colleges focus on what brings in revenue rather than on education, which presumably is their mission. Programs are decimated not because they don’t bring value to an educational organization, but rather because they don’t sustain profitability.

The educational sector is not alone in this.

Over the years, I’ve seen too many nonprofits lose sight of their mission. I see that a lot when it comes to grants or gifts that the organization really shouldn’t be seeking.

More than a decade ago I was working with an organization that was offered a grant for a project that did not meet their mission in any way, shape or form. The CEO was all for it—the grant, after all, was equal to a quarter of his operating budget. Saner heads prevailed. They helped the funder find a more appropriate organization for their grant. And for their efforts they received a much larger grant to enhance a core project.

It doesn’t always work that way, of course. Greediness often prevails. People forget why they got involved with nonprofits to begin with. Or, like so many of us, they get seduced by easy money, access to powerful people—all the same things that entice most of us.

They may or may not be bad people, but they are bad for the sector. Not so much, I think, for what they do but for what others make them stand for. A CEO of a for-profit business makes obscene amounts of money, or runs the organization into the ground. People will shake their heads and some will even be enraged. But the business community as a whole isn’t excoriated.

Let the antics of an Edward and Marcia Dawson get out, however, and trust for charitable organizations plummet.

Perhaps it is understandable that we should be held to a higher standard. But until the many, many organizations that hew to that higher standard are topics of front page news, we will have to work harder to ensure that we are letting our supporters know that we not only do good works but that we do them well and we are, therefore, worthy of their gifts and of their trust

Janet Levine is a consultant and trainer, teaching fundraising, board development and grantwriting skills online and face to face. Contact her at janet@janetlevineconsulting.com.

Not not

In his September 15th blog (http://sethgodin.typepad.com) , Seth Godin said two things that really resonated. The first was his opening sentence where he took nonprofits to task for identifying ourselves as what we are not. Defining what we are is something many of us have a problem with.

The second thing he said was that nonprofits abhor change. I agree, but I wouldn’t focus just on nonprofits. And I certainly wouldn’t—as Seth Godin does—focus on the fact that many nonprofits (but not nearly as many as he claims) are not utilizing social networking well. That hardly proves his case.

What is real, however, is the paralysis that hits too many nonprofits when faced with doing things that make them uncomfortable. Far better, I suppose, to wring your hands and (as Godin aptly points out) complain about lack of resources than to actually go out and do something proactive about it. But I don’t necessarily think that social networking is the answer.

An answer? Sure. But at best it is a way to increase the number and frequency of small donors. This can be huge as, yes, the Obama campaign showed. But the truth is that most nonprofits are not national in scope; many aren’t even of concern three blocks from where they have offices. Pareto’s principle, which in fundraising terms says that 80% of the dollars raised come from 20% of the donors, is still pretty viable. What that means that is that social networking can be a great boost to your annual campaign, but probably won’t provide enough funding for those changes that Godin advocates.

This is not to say that nonprofits shouldn’t engage in social networking. Of course they should outreach in every way possible. But I think that the change that is necessary in the sector will come from very different actions.

Which brings us back to Godin’s first sentence. How we define ourselves is key. How we tell our stories is also important. But stories without purpose are not much more than entertainment. What is too often missing is that strategic, long view of what we do and how we do it, now and in the future. Nonprofits tend to be better at that from a programmatic point of view than they administratively and, especially, when it comes to resource development.

Fundraising is too often not at the table when the party is being planned but is expected to somehow come up with all the presents. If fundraising were truly infused throughout the organization, if planning took into consideration not just how much something will cost but where those funds must come from, then and only then will nonprofits be able to systematically and continually find the funding they need.

Once nonprofits can support themselves and their programs, then they can begin to focus on what they are and understand than “nonprofit” (or not-for-profit”) is actually a positive. Unlike for profit businesses that exist to make a profit, we have been organized for other purposes, which may be charitable (relating to generosity), educational, scientific. And this is nothing that should make any of us who are committed to this sector feel ashamed.

Janet Levine is a consultant who focuses on increasing productivity for nonprofit organizations, their staff and volunteers. She can be reached at janet@janetlevineconsulting.com. Her online classes will soon be available at http://lmlearningstation.com>

Taking Care of Business

We all know them—those nonprofits that have a wonderful mission, really good programs, but the operations side of the house is run so unprofessionally and so poorly that we are constantly amazed they make it through yet another week.

I’m not talking here about the organization that struggles to make ends meet, though the places I am talking about do that, too. I am talking about places that simply do not take care of business.

Too many nonprofit organizations like to protest that they are not, really, businesses at all. They are mission-driven. They are good people doing good works. But if you don’t do well at doing good works you won’t be doing anything much at all for long.

And besides, non-profits arebusinesses. After all, most are 501(c)(3) corporations. Like all businesses, there are rules and regulations that must be met. This is not a bad thing. On the contrary, most of the time I think it is something very good.

Picture your favorite on-the-edge nonprofit. Think about the work it does, the clients it serves. Now picture it as a well-run organization, with policies and procedures that are in place and actually followed. How many of these would neglect to send appropriate thank you letters to donors? And now, picture those donors. Instead of complaining they are happy and happy to give follow on (and perhaps larger) gifts.

In this organization, budgets matter. Staff (and the board!) knows what it can spend and for what. Programs can grow and flourish; more clients can be serviced.

And staff….they know the job they are to perform and whether they are accomplishing what they are supposed to accomplish.

All right, I admit it. I do have a rich fantasy life. And even most for profit businesses don’t reach those standards of excellence, or even of okay. But that’s not a good excuse for us not to do better.

One problem is that too many nonprofit leaders, and development directors, don’t ever educate themselves on the legalities and, yes, the niceties of running a nonprofit. They don’t know when they have to send substantiation or quid pro quo statements or what the difference is between the two.

Staff and board members don’t understand nonprofit accounting rules, and therefore, are too often confused about when and for what purpose they can touch certain pots of money. And they don’t, therefore, understand what kind of gifts they need to raise and what kind of donors they should cultivate.

While it is good to be passionate about the mission of your organization, it just isn’t enough. We all need to be professional and insist on a level of knowledge and proficiency in every aspect of what we do.

Janet Levine is a consultant who works with nonprofits and educational organizations. She can be reached at janet@janetlevineconsulting.com. Her online grantwriting class is available at www.janetlevineconsulting.com/classes.html.

Boards in a Bubble

The question was should the board be allowed to have direct contact with the staff of the organization. I confess I was amazed that there was even a sliver of a doubt. Does anything really think we must keep our Boards in a Bubble, as if letting them talk directly with those doing the work was something bad?

Free-flow of information is vital. Damming up that raises the question: What are you trying to hide? More to the point, think of the closed-information systems we’ve recently seen (think the Bush administration or the Wall Street debacle) and what they have wrought. Making wise choices and running organizations well is where diversity really counts. Hearing different points of view always helps to make better decisions.

Yes, of course, the CEO is the primary contact with the Board. He or she should be in regular contact with every member, especially committee chairs. Frequent meetings with the executive committee should be part of the standard operating procedure. Together they should be agreeing on strategic directions and discussing in detail what is going on at the organization.

The Board and the CEO should be partners. If this is so, then there will be respect and an understanding of who is the day-to-day leader and ultimate decision maker at the organization. Steven Sample, President of USC, writes in The Contrarian Guide to Guide to Leadership writes that he will meet and listen to everyone, but decisions are made only in a strict hierarchical fashion. That means he never goes over any of his managers’ heads. That’s good advice for any leader, including board members.

But that should not mean that the Board only interacts with the CEO. This is how poor decisions get made. The Board must hear from those on the ground who are working directly with our clients and must have first-hand knowledge of how our programs are run. This is especially but not exclusively important as it relates to development.

Just as I want my major donors to have as many touch points within the organization as possible—and this always turns into a stronger relationship and, yes, more money—I want my board to have as broad a picture of the organization as possible. Otherwise they cannot either govern well or be passionate and honest ambassadors of our organizations to the public at large. Nor can they be effective fundraisers if they only see what the CEO tells them to see.

Yes, it’s messier if the board and staff talk freely with others. Yes, there is a possibility that an angry staff member may cause some problems (but let’s get real here—angry staff will always find a way to connect with board members; better you should know this is happening), and yes, it means more transparency. But that, I think, is a good thing.

Janet Levine is a consultant who works with nonprofits and educational organizations. She can be reached at janet@janetlevineconsulting.com. Her online grantwriting class is available at www.janetlevineconsulting.com/classes.html.

Failing the Grade

A survey of 1,001 Americans commissioned by New York University’s Organization Performance Initiative should give all of us in the nonprofit sector pause. While a majority of Americans had a “great deal” or “fair amount” of confidence in charitable organizations, only 25% believe that charities do a “very good” job of helping people. The percentage of people who believe that charities waste a “great deal” or fair amount” of money is a staggering 70%, with only 10% of the mind that we are very good” at spending wisely.

Popular wisdom likes to point the blame at others…particularly the very public meltdowns of some very large organizations. Think Red Cross or United Way. But I think the truth is that these very visible scandals simply make the case or “prove” what so many Americans feel. And what they feel is that most nonprofits simply are not doing a very good job at doing good.

It’s not that we are bad or venal people. But too often, we are trying to do our jobs with too little resources and, in many areas, too little knowledge of what needs to be done. Our leaders and our board members don’t understand nonprofit law, what makes a gift, how nonprofit accounting works. Worse, there is little understanding of what our responsibilities to our donors should be.

I frequently speak at service clubs on how to make wise charitable choices. I always ask how many of them have ever made a gift to a nonprofit and never received a thank you letter or tax receipt. I don’t care who I am talking to, or where the club is, at least twenty-five percent of the audience raises their hand. One quarter of every random group I speak with does not believe that they have been properly thanked for a gift.

The number of people who raise their hands when I ask how many have NEVER been told how their donations were spent is even larger. Generally, one-half to two-thirds of the audience feels that the nonprofits by and large ignore them once a gift has been secured.

Less quantifiably, but equally disturbing are the knowing looks and little laughs that I get when I talk about nonprofits who never remind donors of their pledge payments. When we do that, we not only write off the pledges themselves, but we too frequently also write off the donors who made those pledges in the first place.

If we simply thanked, and then thanked again, every single donor for his or her gift, and made an effort to personally let them know how their gift benefitted the organization, I believe that perceptions would begin to change. And as those perceptions change, more people would be willing to reach into their pockets and support the organizations for which we work.

Janet Levine is a nonprofit consultant and trainer. She can be reached at jlevine@levinemorton.com. Her online grantwriting class is available at www.ed2go.com/courses/ggr.