Funders need to listen

By Todd Cohen

Paying attention to the needs of clients is a critical skill and “best practice” that many funders seem to sorely lack.

Funders are quick to preach to the nonprofits they fund about the need to “engage” their own constituents so they can be more responsive and effective in their programs and fundraising.

But when it comes to their own shops, funders seem less like welcome wagons for the community and more akin to fortresses protected by moats and drawbridges.

A new study, based on a survey sponsored by Grantmakers for Effective Organizations, or GEO, and conducted by TCC Groups, says grantmakers that are using strategies to listen to and learn from grant recipients are more likely to provide the kind of support nonprofits need to thrive.

That includes general operating support, multi-year funding, and grants to help nonprofits build their operating “capacity,” says the study, which surveyed 755 grantmaking organizations.

Increasing those types of funding is needed to help nonprofits “address the ever-changing needs in their communities” and represents “one of the most critical decisions a funder could have made in the past several years,” says J McCray, author of the study and chief operating officer at GEO.

The study finds that, on the whole, “progress across the foundation field has been generally slow” in terms of providing those kinds of support, a trend it says is “not surprising given the kinds of pressures facing the nonprofit sector and philanthropy.”

And it says most grantmakers “did not significantly change their stakeholder engagement practices” during the troubled economy of the past three years, a trend it calls “disappointing,” although it says “stability during turmoil and the fact that there was little backsliding may represent no small accomplishment.”

Still, it found what “appears to be a connection between stakeholder engagement practices with grantmakers making smarter decisions about what to do with their funds to better support grantees.”

And the study identified a possible “shift in the way that funders see themselves and their role in supporting nonprofits.”

Funders, it says, are looking for additional ways “to stay plugged in, including feedback from grantees to help strengthen their performance.”

If they truly want to help nonprofits build their capacity to help people and places in need, funders should do more than simply talk about “engagement” and actually begin to practice it.

That means finding ways to truly listen to nonprofits and the communities they serve, and then providing the kind of funding that will boost nonprofits’ ability to learn, lead and grow.

Nonprofits need time to think

By Todd Cohen

In the face of unprecedented storm and stress in the charitable marketplace, nonprofits need to be thinking smarter about how to work better.

While taking time to think about how to improve operations and programs must seem like a luxury these days, it has become an urgent necessity.

Innovation does not have to produce a groundbreaking new program or business process.

It can be as simple as rededicating an organization to its core mission through client services and a back-office that are streamlined and highly focused on tracking and achieving results.

Getting back to basics, in fact, can be precisely the innovation that many nonprofits need most.

But whether it involves pioneering a new program or improving a tried-and-true business process, innovation requires thought, which first requires commitment and support from a nonprofit’s funders, board and CEO.

Yet as often as not, if not more so, that kind of investment and leadership for nonprofits can be absent without leave.

Far too many funders and boards are clueless about the needs of the organizations they support and oversee, unwilling even to try to find out what their problems are, and too passive or inept to take action if they do happen to stumble on the fact that their organizations are in trouble.

And far too many CEOs try to run their organizations by enabling if not demanding business as usual, and by controlling information instead of sharing it with staff members or encouraging them to think for themselves and work with one another to identify and solve problems.

The corporate culture at too many nonprofits, in short, is akin to that of government agencies or other public institutions in its mediocrity, its dysfunction and its reinforcement of problems by ignoring them or denying they exist.

Far too many nonprofits take employees for granted, treating them like hired help who are supposed to follow orders, and not think, take chances or question decisions.

That culture of dysfunction also works to crush original thinking before it even has a prayer of beginning to sprout.

Funders, nonprofit trade groups and consultants also have become obsessed with the idea of collaboration, an idea that they have pushed on nonprofits, which in turn have paid lip service to collaboration through seemingly endless meetings that result in few if any actual decisions or results.

None of these approaches are strategies designed to foster the innovation nonprofits need if they are going to survive and thrive.

Two recent articles in The New York Times underscored the value and critical role of individual thinking in powering innovation.

In “The Rise of the New Groupthink,” Susan Cain wrote on Jan. 15 that research “strongly suggests that people are more creative when they enjoy privacy and freedom from interruption.”

And in “True Innovation,” Jon Gertner wrote on Feb. 2 that the success of Bell Labs, the legendary research-and-development arm of AT&T that for many years was “the most innovative scientific organization in the world”, was rooted in the freedom and time its leader gave employees to create, and to help one another create.

While most nonprofits are not in business to produce innovative research or products, tnonprofit sector overall serves both as civic society’s safety net, and also as its research-and-development arm.

Nonprofits, in short, serve as labs for developing and delivering strategies to address the symptoms as well as the causes of our most pressing social and global problems.

Yet instead of investing in efforts to build up their organizational capacity, funders and donors traditionally have expected nonprofits to do more with less.

Nonprofit boards, in turn, and too often CEOs, swallow those expectations whole and demand the same of their staff, finding it easier to pander to funders and donors than to speak honestly to them about any capacity problems at their organizations.

Funders, donors, boards and CEOS find it even easier to justify their unrealistic demands of staff in today’s grim economy, which has escalated demand for services from nonprofits while compounding the financial and operating pressures they face.

The warped logic of funders and donors seems to be that the nonprofits they support should stretch every dollar they receive to make an impact on clients, rather than making any investment in thinking or planning, even thought that kind of investment can lead to improvements that will better serve clients.

And the sad logic of boards and CEOs seems to be to pander to their donors and funders for fear that questioning their unrealistic expectations or speaking honestly about organizational problems will risk the loss of their funding.

But while they can be quick to posture and issue directives, funders, donors, boards and often CEOs are not the people who actually must deliver services and run the back-office.

The job of actually doing all that work lies with the staff, and the pressure they face leaves little time to think.

Time to think, however, is fundamental to improving an organization and the services it provides.

So nonprofit boards and CEOs, and the donors and funders who support their organizations, need to find ways to encourage and foster creative thinking by the staff.

Google, for example, encourages its engineers to spend 20 percent of their work time, or one day a week, on projects that interest them, creative thinking that has sown the seeds for some of the company’s big new services, such as Gmail and Google News.

As numerous studies have shown, the ailing economy has pushed nonprofits to the edge, and a growing number are sinking fast or shutting down.

Yet while it may seem like an indulgence in these tough times, taking the time to think creatively is essential for the health and future of individual nonprofits, the charitable marketplace and the social economy.

Funders and donors, as well as nonprofit boards and CEOs, need to step up, show true leadership, and find ways to stimulate and tap the creative thinking of nonprofit staff.

Fundraising opportunity for advocacy work

By Todd Cohen

Advocacy work is fundamental to democracy, can generate a big payoff, and represents a key task for many nonprofits.

But nonprofits also can find it tough to raise money to pay for advocacy work.

Research and watchdog groups that track it report that advocacy funding can produce a big impact on social change, but that it also has suffered during the economic downturn.

The challenge for advocacy groups is to do a better job helping funders and individual donors understand the need for fixing flawed public policies, as well as the difference their support can have on addressing urgent social and global problems.

Tiny share

Overall charitable giving in the U.S. totaled over $290 billion in 2011, according to Giving USA, but advocacy funding represents only a tiny share of those dollars.

In 2009, for example, grantmaking to U.S.-based nonprofits that work for structural change to improve opportunity for the most vulnerable populations totaled just $3.1 billion, according to a report from the Foundation Center.

And the recession simply made it tougher to raise money for advocacy work, a decline that likely will continue, the Foundation Center says.

Big impact

Yet advocacy funding can make a big impact.

Over three years, for example, at least 321 foundations and other donors gave $231 million to 110 groups in 13 states, according to a recent report from the National Committee for Responsive Philanthropy.

The groups that received that funding, it says, leveraged it to generate $26.6 billion in benefits for communities and taxpayers.

Drop in funding

But a separate report, from the Foundation Center, says grants to groups in the U.S. that work for structural change to improve opportunity for the most vulnerable populations fell sharply during the recession, a decline that likely will continue.

And a third report, also from the National Committee for Responsive Philanthropy, says environmental funders do not give enough for advocacy work to protect low-income areas and communities of color from environmental damage.

Foundation support

Many nonprofits, including advocacy groups, tend to rely too heavily on support from foundations, yet those funders account for only 14 percent of overall giving in the U.S.

What’s more, too few foundations are willing to make grants to support basic operations, and that is the kind of support all nonprofits, including advocacy groups need.

In fact, several studies in recent years found, in comparing foundation support for conservative and liberal advocacy groups, that conservative groups tended to be more effective because they received a lot of operating grants, while liberal groups were not so effective because a lot of their grants were tied to specific programs.

Individual giving

In comparison to foundation support, individuals account for nearly 90 percent of all giving, including giving by living donors as well as those who give through wills and family foundations,

And charitable giving for generations has represented roughly 2 percent of gross domestic product, reflecting consistent growth in giving as the economy has grown.

So advocacy groups have a big opportunity to develop better relationships with individual donors and secure more funding for the work they do.

The challenge for all nonprofits, including advocacy groups, is to connect with individual donors, understand what they care about, help them understand critical needs, and show them how their support will help address the problems they care about.

Nonprofits at risk by not planning

By Todd Cohen

Too many nonprofits pay too little attention to planning, and even less to the critical job of developing leaders and plans for replacing them when they leave.

Reasons abound for why planning is missing in action throughout much of the charitable marketplace.

Nonprofits are quick to explain they are financially stressed and operationally strained; their staffs are overworked and underpaid; demands for their services are rising; the job of raising money is all-consuming and seemingly endless; and their boards are asleep at the wheel.

All those explanations are accurate, but they still do not excuse the failure to think ahead.

By ignoring the need to plan, and focusing only on immediate problems, nonprofits put their survival at serious risk when instead they could be looking for ways to manage that risk while also thinking about ways to grow and thrive.

Leadership development and succession planning for senior leader positions represent nonprofits’ single biggest organizational weakness, according to a recent Bridgespan Group survey of over 150 nonprofit leadership teams.

“Strong leadership is a critical component of any organization’s success, but the need in the nonprofit sector is particularly acute,” says Kirk Kramer, a Bridgespan partner who leads the consulting firm’s leadership work.

Bridgespan says research supports the perception that leadership development and succession planning are nonprofits’ most vulnerable organizational soft spot.

Nonprofits promote from within at a far lower rate than for-profits, Bridgespan says, picking 30 percent to 40 percent of senior leaders through internal promotion, compared to 60 percent to 65 percent of senior leaders promoted internally at for-profits.

That failure to promote from within is “particularly troubling given the intensified demand for leaders that many nonprofits are (or soon will be) facing,” Bridgespan says.

By 2016, the nonprofit sector will need over 500,000 new senior managers “as the sector continues to expand as baby-boom leaders retire,” Bridgespan says, citing estimates in its analysis, “The Nonprofit Sector’s Leadership Deficit.”

A key reason that developing future leaders may be so tough, Bridgespan says, is that nonprofits “tend to frame the issue very narrowly as ‘succession planning,’” a term it says suggests a search to replace an executive director.

“That search may be frantic or it may be well planned and executed,” Bridgespan says. “But in any case, it is an intermittent, isolated activity.”

In comparison, the most successful succession planning “is not a periodic event triggered by an executive’s departure,” it says. “Instead, it is a proactive and systematic investment in building a pipeline of leaders within an organization, so that when transitions are necessary, leaders at all levels are ready to act.”

Preliminary findings in a long-term Bridgespan research project to better understand the investment nonprofits should make in succession planning suggest that good leadership development and succession planning “should resemble a set of six linked processes that build on an organization’s underlying human-resource foundation,” the consulting firm says.

Those processes apply to any nonprofit, although the time, effort and resources needed to pursue each one thoroughly will vary based on an organization’s mission, individual characteristic, needs and size, Bridgespan says.

The processes include engaging senior leaders; understanding future needs; developing future leaders; hiring leaders externally, as needed; measuring and improving practices; and building a culture that supports development.

Failing to address the looming crisis in nonprofit leadership simply will make that crisis a self-fulfilling prophecy.