Balancing the Mission Checkbook

Mark Kramer addressed the United Front 2011 session on Collective Impact with great examples and stories, and one particular recommendation which resonates with veterans of less-than-successful collaboration efforts: you need a backbone agency to be successful in collective impact. Kramer has other ingredients necessary for a good cooperative stew, but this particular social agar is often overlooked because… well… it’s new spending. To quote Marcia Avner from the MCN Annual Conference the next day, “get over it.” If we are going to increase our impact, we have to do it right.

Conference attendees talked about how to communicate the need to leverage collective resources, but this collaboration doesn’t happen out of the ether. If we are truly going to coordinate impact – focusing our organizations on what we do best that springboards the work of another – we cannot expect that level of communication to occur without dedicated resources. Any nonprofit rockstar worth her/his salt can tell you just adding more work to the same people means something else will get short-shrift. We have to decide what we can do, and what must be the responsibility of our collaborators. That requires logistics. That requires people.

Like any good fan of framing, supporters of collective impact need to shift both thinking and language around things like logistics, meetings, coordination and the like. Collaborators, funders, partners and clients will have to get used to hearing things like backbone, leverage, and impact. We can spend $1 million across 10 agencies and impact 1,000 people moderately well. Or, we can spend $1.1 million across 11 agencies and impact 2,000 people extremely well. Case number two costs more money, but does anyone really doubt that it’s worth the extra costs? Nonprofits that are ready to take on collaborative work have to be ready to change how they communicate about money. Collaborators should agree on a budget for their backbone organization, and talk to their supporters about how they are intentionally and affirmatively spending money for better coordination and more effective services. Nonprofits cannot run away from this conversation, but rather must get in front of it.

A final stage to leverage impact will be in how nonprofits internally view their backbone collaborators. These allies should be viewed as trusted advisors: to communicate clarity, to consult when there are questions, and to provide great value for the money. Any successful neighborhood hardware store understands this role. Sure, it’s possible to figure out how to fix a plumbing job through trial and error and the occasional “how-to” YouTube video. It is however, faster and easier to ask the experts at the local hardware store. Yes, they have an interest in meeting daily sales, but more importantly, they have a stronger interest in showing value and keeping you as a life-time customer. Your backbone collaborative organization has the same incentive. Rather than viewing them as “overhead”, nonprofits need to start thinking of them as the expert that just saved them enormous time, frustration and misdirected effort so they can get the job done. Viewing the backbone organization this way brings transparency to the collaboration. Service delivery organizations won’t have to wonder if partners are duplicating effort or creating more work just to get resources – their backbone collaborator will communicate the purpose of their efforts and share which results build on each other, adding greater value. Successful nonprofits will embrace this communication, and as soon as we do that, we can shed the resentment which previously sneaked into collaboration work.

A large percentage of nonprofits view their strategic plan as an essential part of managing the organization. The process of developing a strategic plan clarifies the purpose of the organization in a mission statement, and gets the staff and board on the same page by setting goals and priorities. The most commonly used tool for financial planning, on the other hand, is the annual budget. For many nonprofits, the financial goal represented by the budget boils down to this: “we hope we can raise enough money to pay for programs and overhead this year. We’ll work really hard to get this done.” Unfortunately, that’s a lousy way to plan.

What nonprofits need is the financial equivalent of the strategic plan that sets goals for programs and organizational development. This kind of financial plan is not for one year. It includes big goals, a clear path to accomplish goals, resource and capacity needs, and benchmarks for monitoring progress. Just as the process of strategic planning brings everyone together to set goals and sort through options and priorities, developing a strategic financial plan reveals the strengths and weakness of the current financial structure and sets goals that are more than annual revenue targets. What’s the right cost structure for delivering programs with measurable impact: paid staff, volunteer, intern, national service corps? These decisions will determine program, management, and financial structure. This idea is illustrated well in the article about Nonprofit Business Model Statements published on Blue Avocado last year.

Most nonprofit strategic plans that I’ve read give limited attention to the financial structure that will be needed to be successful. Some include some projections in an appendix, but most include a short set of financial goals such as “increase fundraising”, or “implement new individual donor program.” Our resource article Transforming Nonprofit Business Models describes the four components of business models: mix of revenue sources, cost of effective programs, infrastructure, and capital structure. A strategic financial plan needs to address each inter-related element of the model both now and what will be needed for the organization to achieve its goals over the next three to five years.

The steps followed in developing a strategic plan include agreeing on the vision and mission, gathering internal and external information to assess community needs and organizational capacity, establishing three to five year goals, and describing more specific objectives for implementing the plan. Strategic financial planning requires similar steps:

• Agree on a vision for financial sustainability
• Analyze financial history and trends
• Conduct a SWOT assessment of the business model
• Identify the current business model
• Evaluate the financial requirements to fully implement the strategic plan
• Assess the external community and market drivers and internal capacity for changing the financial structure
• Describe the business model that will be needed in five years
• Create a three to five year implementation plan

Strategic planning needs the commitment and participation of many skills and perspectives from inside and outside the organization. In the same way, strategic financial planning requires technical expertise for analysis and projections, strategic thinking about structure and alternatives, and creativity to weave together vision, mission and business models.

I’ll be presenting a more thorough session on the need for financial strategy and strategic financial plans at United Front 2011 on Thursday morning. This is going to be a great conference with lots of bold topics about strategy, leadership, and impact. Join us if you can!