Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

July 25, 2011

Business can do better by doing good

By Todd Cohen

Companies are missing a great opportunity to make a difference while making money because they are failing to apply their business know-how to social problems that affect their business.

But if they truly were to build social enterprise into their business strategy, apply their business sense to their philanthropy, and focus their giving on social needs that limit or even hurt their business, a new report says, corporations could boost their bottom line and improve their communities.

The way to do that is through a strategy known as “sustainable value creation,” or finding “new, scalable sources of competitive advantage that generate measurable profit and community benefit,” says the report, released by Accenture and the Committee Encouraging Corporate Philanthropy.

Pursuing that strategy will require big changes in the way the corporate world thinks and does business.

While many companies develop business processes that are effective in developing and producing profitable products and services that meet market demand, they typically do not apply those same business processes to identify and address social problems.

Successful companies “already have proven mechanisms in place to generate profitable ideas both in the short- and long-term, yet the business opportunities within fundamental societal issues are often overlooked,” the report says.

And that wastes a big opportunity because, as the report says, companies that do a good job looking for the root causes of their core business challenges “often uncover underlying societal problems that, if addressed, may lead to new sources of competitive advantage.”

So if companies were to take the business strategies they develop through their attention to making money and apply those strategies to their philanthropy, and then focus their philanthropy on addressing social problems underlying their business challenges, they might be more effective both in their business and in their philanthropy.

The concept of sustainable value creation also represents an opportunity for nonprofits to better understand the role corporations can play, not only in supporting individual charities, but also in addressing social problems facing their communities.

Individual nonprofits, as well as intermediary and umbrella groups like community foundations, United Ways and united arts funds, all should be thinking about the connections between business and social problems, and looking for ways to help corporations make those connections and do something about them.

Nonprofits can be the brokers that engage corporations in collaborative strategies to address community problems and help them move beyond a narrow focus on the bottom line to a more integrated approach to doing business and doing good in a way that is good for business and for community.

July 18, 2011

Boards fail to support executive directors

By Todd Cohen

Two in three executive directors are expected to leave their nonprofits over the next five years, and a lot of the blame goes to their boards of directors.

Executive directors have tough jobs, trying to manage organizations that continually struggle to do more with less and that must learn to cope with shrinking resources and rising demand for services in a battered economy.

Yet executive directors get precious little support from their boards, which seem to have no idea what their job is, how their organizations operate, or the challenges their staffs face and the support they need.

A new report from CompassPoint Nonprofit Services in San Francisco and the Meyer Foundation in Washington, D.C., says underperforming boards are a key cause of the expected mass exit of executive directors.

New executive directors, for example, are disillusioned “with what boards actually contribute to strategy, resources and personal support along executives’ steep learning curves,” the report says.

Boards also seem to see executive transition, it says, “as ending with the hire, when in fact leaders – nearly all of whom are in the role for the first time – need intentional support and development as they build efficacy in the executive role.”

Nonprofit boards are the leaders of their organizations, and they need to start acting like leaders.

They should be investing time on a regular basis to better understand their responsibilities and the mission and needs of the organization.

They should be deeply involved in thinking ahead for the organization, setting its mission, and making sure it is sticking to that mission in its day-to-day work.

Instead of devoting their meetings to listening to reports from the staff, and then approving them without little if any scrutiny, boards should be focusing on the big issues facing the organization, and thinking about ways they can help the staff address those issues.

And boards should be actively and continually engaged in helping the organization secure the resources it needs, both through their own giving and through the connections they can make for the organizations to prospective donors.

Executive directors and their boards should be working closely together, and looking for ways to get the professional development they need to fulfill their respective responsibilities.

Boards are the leaders of their nonprofits and they need to do a better job leading if they want to keep their executive directors.

July 11, 2011

Charity business model evolving

By Todd Cohen

Like all charities, local United Ways are rethinking the way they do business.

In the wake of the scandal nearly 20 years ago over misuse of funds by the then-CEO of United Way of America, local affiliates wrestled with changes in their fundraising model to address anger and protest among local donors.

Rapid and continual advances in technology, along with changes in employment patterns and the increasing transfer of workers, have accelerated the evolution of the business model for local United Ways, a process intensified by the breakdown in the economy and more recent scandals like the one over the big compensation package the board at United Way of Central Carolinas in Charlotte rubber-stamped for its then CEO.

The effort to transform Charlotte’s United Way since the ouster of the CEO three years ago offers a glimpse of the direction in which other local United Ways, as well as other charities, may be moving in their fundraising.

Under its new executive director, Jane McIntyre, United Way of Central Carolinas is working to transform how it operates and to infuse its organization with a culture rooted in the connection between giving and community.

It also has taken the bold step of recognizing that United Way cannot be everything to everyone, and that making a difference will require narrowing the focus of the problems it addresses.

Based on recommendations from the Urban Institute at the University of North Carolina at Charlotte and a series of panels of 62 community leaders, United Way is planning changes in the way it distributes funds and in the types of programs it supports.

The root cause of most community needs is poverty, and the top health-and-human services priorities in the region United Way serves are programs that address programmatic education in the areas of education, housing and poverty, and health and mental health, the study says.

It recommends United Way focus its funding on “fewer, select causes,” ask agencies to respond to requests for proposals, provide funding on a multi-year basis and based on evaluation of “reliably strong programs,” and fund programs that use “best practices.”

Those changes would mark a dramatic departure for United Way, which runs an annual campaign to raise money to provide annual support to partner agencies that offer health-and-human-service programs that address priority needs United Way identifies.

But like its local counterparts and other charities throughout the U.S.,

United Way in Charlotte is trying to reinvent its business model so it can best fulfill its mission and meet community needs.

Like United Way and other fundraising federations, individual charities are recognizing they may be taking on too much, particularly in an economy and charitable marketplace in which generating revenue has become much tougher and more complicated.

So nonprofits are taking a hard look at the services they offer and the way they do business and raise money.

In a growing number of communities, for example, organizations that address the similar social problems or serve similar constituents are looking for ways to work together, sharing space and back-office services, and beginning to think about the possibility of joint fundraising initiatives.

It has been 100 years since the model for the modern foundation was pioneered by the likes of Carnegie, Ford and Rockefeller.

But just as foundations are revamping that model so they can serve as more engaged social investors, United Ways and individual nonprofits are retooling their fundraising to survive and make a difference in a more complex and challenging charitable marketplace.

July 5, 2011

Investment needed in nonprofit operations

By Todd Cohen

Communities need a break-through strategy to provide the operating support that is critical for local nonprofits.

That will require true leadership from philanthropic and community leaders.

Instead of empty talk and posturing about how important nonprofits are, local leaders should create pooled funds that would invest in the fragile infrastructure of local nonprofits.

To raise those funds, which could be housed at local community foundations, civic and business leaders need to dig deep into their own pockets and also wage a forceful public campaign to raise money from philanthropies, corporations and individuals.

The campaigns should enlist local media, including newspapers, broadcasters, communications firms, social media and bloggers, to help tell the story of nonprofits.

That story is simple: Nonprofits are indispensable to our communities, and they are hurting.

Nonprofits take on our toughest jobs, the ones government and business either ignore or only talk about.

It is the mission of nonprofits to address the symptoms and causes of our most complex social and global problems, and they are heroic in their continuing effort to stretch their limited resources to attack those problems.

And their organizations have been stretched to the breaking point by an economy wasted by the greed of the financial-services industry and its cronies, particularly the housing industry.

Demand for the services nonprofits provide is rising because the crippled economy also has devastated the lives of nonprofits’ clients.

Nonprofits often lack the organizational capacity to operate effectively because they lack the investment they need in staff and board training and in planning, fundraising and technology.

Their boards typically are oblivious about what their role should be in developing a vision and strategy for the organization, and in contributing and helping to secure the resources the organization needs.

And funders and donors, disconnected from the realities of the charitable marketplace and of the day-to-day job of running a nonprofit, are locked into funding priorities that focus on pet programs and ignore nonprofits’ fundamental need for operating funds.

Funders also increasingly require that nonprofits provide “metrics” that show the impact of the funds they receive, a requirement that simply adds to nonprofits’ workload.

Yet funders fail to make the investment nonprofits need to handle that additional workload.

After the economy broke down nearly three years ago, organizations and individuals in some communities stepped up and created pooled funds to support basic and emergency services that nonprofits provide to people in need.

The creation of those funds reflected true leadership and commitment, and can be a model for establishing funds to provide the operating support that nonprofits desperately need now.

Leadership is one of the most overworked words in the nonprofit sector, a term typically used to describe someone with a forceful personality who talks big but often fails to actually do anything except pursue personal ambition.

True leaders talk quietly but authentically, and they lead by serving.

What our communities need today are servant leaders who are willing to champion, with honesty, conviction and commitment, the need to provide the operating capital that community-based nonprofits need so they can continue to serve people and places in need.