Balancing the Mission Checkbook

How many of you have wanted to take a break from the pace and pressure of work and decompress? I have been given this gift in the form of a one-month sabbatical during February. After seeing the positive effects of a similar break on a friend of mine, I made the request and our board quickly agreed. While I didn’t do any other research about sabbaticals, it made instinctive sense that time away would be a good idea for both me and for Nonprofits Assistance Fund. In the year since my request, two other professional colleagues have taken one-month sabbaticals and had very positive experiences for themselves and the staff of their organizations.

Now, just in time for my break, CompassPoint released a study titled Creative Disruption about sabbaticals at nonprofit organizations. This summary of the report is affirming for my own sabbatical and for any of you who’ve been thinking about it.

This study exposes the myth that an executive sabbatical will be a chaotic disruption, finding instead that the creative disruption of a well-planned sabbatical can be productive for the entire leadership of an organization.

Organizational capacity is increased as the second tier of leadership takes on new responsibilities. Governance is strengthened as a result of the planning and learning that goes with a sabbatical process. Executive directors come back rejuvenated, with a fresh vision and innovative ideas, and tend to extend their tenure with the organization. And funders gain a deeper perspective on community needs from the feedback, networking, and innovative ideas that sabbatical alumni bring.

The report is an interesting read, including the results of surveys of executives who took sabbaticals and the interim directors who took on a new role. The subjects of the study were all recipients of funding to support sabbaticals, usually for three months.

I’m eager to see what kinds of experiences and ideas I have during the month. I’ll be kicking back for some of the time and using some of it for reading and discussions about the big issues and ideas for nonprofits in the future. (Although I can promise I will not spend all four weeks of February in Minnesota.) I started this weekend by reading an advance copy of the book Switch How to Change Things When Change is Hard by Chip and Dan Heath. The book addresses the reasons why change is so hard with a well-formed framework that makes the concepts accessible and actionable. They offer three essential components needed for change to happen:

1. Direct the Rider - clarity and direction
2. Motivate the Elephant - emotions and energy
3. Shape the Path - plan and influence the situation

The book will be released on February 16th, but you can read an extensive excerpt in Fast Company.

More reading and thinking to come, but you probably won’t hear much from me this month. We’d love to hear any comments about sabbaticals from other nonprofits - what have you done, or wished you could do?

What amount is the right size of donation for your organization? Most of us would laugh at the question and answer “$1 million, of course.” But ask again, with a dose of both reality and prudence. What is the amount that would have a long term, stabilizing impact on your organization if you could rely on annual gifts from many donors? It’s probably far, far below $1 million. It’s probably even below $1,000. Many nonprofits overshoot this number, though, chasing larger gifts and grants, thinking that bigger dollars are the answer. I’m not sure that’s ever a realistic strategy, but I think it’s too risky in the midst of the recession.

The Value of Smaller Gifts

I’m pleased that smaller gifts are drawing greater attention and wanted to highlight a few noteworthy examples. The article Save Our Ship in American Theatre Magazine describes the efforts of theaters to rebuild from financial struggles:

The hero who emerges from emergency campaigns is the small donor. Practically every artistic leader I spoke with used the words “grassroots” and recounted anecdotes about donated piggy banks. Over and over, artistic leaders said that it was not one single donor that saved them but rather many, many modest donations - gifts of $100 and $150 that added up to serious money.

The value of many, many small donations was proven on November 17th. At the end of the fundraising-palooza of Give to the Max Day, 38,778 gifts had been made totaling $14,000,406. That divides to a $361 average gift. Many of the most impressive Give to the Max Day campaigns yielded great numbers of both donors and dollars with pretty small average gifts. The organizations with the largest numbers of donors had average gifts ranging from $75 to $100. Organizations receiving the most dollars also had modest average gifts between $65 and $325.  Other examples of the power of small donations can be seen in the international response to the recent earthquake in Haiti, such as the American Red Cross raising $3 million as of 9am EST in $10 increments through a text message campaign.

In his book The Art of the Turnaround, Michael Kaiser describes the process of Alvin Ailey Dance Company’s financial recovery. He offers this advice:

Aiming to fill a deficit with one extraordinary gift is usually just a pipe dream. We need to focus on “right-sized gifts,” gifts that make sense given the budget and the profile of the organization. For the Alvin Ailey American Dance Theater, with a $6-million budget and a $1.5-million deficit, $50 was too low and $1-million was too high. At Ailey, while we did receive larger gifts, we focused our fund-raising on $1,000 gifts. Our board felt comfortable asking for this amount from friends and associates, and this was an amount that would make a difference to us.”

If you prefer to hold out hope for large gifts and grants, be aware of the risks. The Minnesota Council on Foundations just released their 2010 Funding Outlook based on a recent survey. The survey found that overall funding by Minnesota’s foundations will stay fairly level in 2010 compared to 2009, for which we should be thankful. There is wide variation, though, in the grantmakers’ forecasts. More grantmakers expect decreases in giving in 2010 than expect increases: 30 percent expect to give less compared to 25 percent who expect to give more. At least 20% of foundations expect to decrease the number of grants awarded, as well.

Keep up the grantwriting, RFP submissions, and lunches with prospective large donors. But take Michael Kaiser’s advice to heart - make the priority for 2010 to build a reliable base of “right-sized” gifts.  They really do amount to something very important.

I have not had the H1N1 flu.  I hope to keep it that way. However, this flu is starting to really affect me because of the number of people who are not so lucky.

As an example, in just the last week:

• I attended two important meetings where key participants were missing in action.
• Three training events and webinars were canceled.
• A professional associate stayed home with his son for several days.

Two days ago we had to scramble to replace the speaker for one of our own training events.  That really brought this home.

Scramble really describes the activities. There were many emails sent looking for a replacement, and the reply often was “I’m already scheduled for another training, meeting, travel…” Fortunately, a replacement was found (who did a great job) and I am grateful for the size and quality of the network of consultants in the Twin Cities.  But it’s clear that none of us have any slack in our schedules anymore. All the reductions in staff and hours in the past year have taken their toll, removing any elbow room (if there ever was any to start with).

Contingency Planning

The whole process got me thinking about contingency planning. This is going to happen again and again this year and we all need to be prepared. We have a Disaster Recovery Plan, but it wasn’t developed to address this situation. We need to have a plan for deciding when to cancel a meeting or training, when to use a backup plan, and who to call on for reinforcements. We might need to look around for some elbow room again by scaling back a little on commitments for the next few months.

How are you adjusting to more and more absences caused by this flu? Do you have a clear agreement on priorities and steps to take when you have multiple staff members all sick at once?  The Nonprofit Risk Management Center has a number of useful resources and tools, including a list of contingency planning resources and a tutorial on business continuity planning.

As with any planning process, agreeing on the priorities and responsibilities is step one. We’re starting today.

Update: Here is an H1N1 Flu Preparedness Toolkit from the National Council of Nonprofits.

Three cheers, at least, are deserved for Grantmakers for Effective Organizations (GEO) new publication On the Money by Nancy Burd. You can download either the executive summary or full report from the website.

As summarized on the GEO website:

This publication highlights the financial challenges nonprofits face and the ways in which grantmakers are both improving the situation as well as perpetuating the problem.

The first section, Assessing the Problems, identifies five problem areas:

1. Restrictions on Funding
2. Misperceptions Around Sustainability and Growth
3. “Too Many Masters”
4. Onerous Grantmaking Practices
5. Knowledge Gaps

The other sections discuss Barriers to Smarter Grantmaking and Ideas for Grantmakers.

It’s impressive how in 28 pages the author distills a variety of ideas, research, and practices about the realities of financial instability faced by nonprofits. The report also provides helpful and realistic suggestions for grantmaking organizations based on practices that have already been developed and implemented by foundations.  The advice and guidance for funders is great, but this guidebook is a must read for everyone in our sector.

I’m pleased that GEO will be focusing on nonprofit finance and encouraging foundations to understand how “many prevailing approaches and practices in philanthropy can unwittingly create problems for the nonprofit sector.” Many nonprofits have experienced these unintended consequences and will welcome a dialogue on this topic.

However, nonprofit organizations also have a lot to learn from the report’s comprehensive overview of grantmaking. Misconceptions about the true cost of programs and capital needs apply equally (or more) at many nonprofits. We can’t expect a seismic shift in foundation practices and investment unless we nonprofit leaders understand and can effectively communicate what it takes to sustain ourselves.

Download this report, read it, and copy it for your board and senior staff.

This is not a breakthrough idea, but I am completely convinced that leadership will be the only determining factor for the survival and success of nonprofits throughout this recession. I see signs of it all the time. As the months of recession drag on, the effects of the presence and absence of real leadership at nonprofit organizations becomes more and more clear. A couple of really interesting recent blog posts got me thinking about these leadership voids and how to fill them.

In the post Nonprofits Will Never Be Respected Until We Start Respecting Ourselves, Rosetta Thurman confronts the self-induced damage of low wages, chip on the shoulders image of many nonprofit employees. She then builds up to this call to action:

With all of our own moaning and groaning about our sector, it’s no wonder other people emphasize the “non” in our nonprofit field. Believe me, I’ve been guilty of all of the above. But what’s happened is that in all of our “insider baseball” talk amongst ourselves about what’s wrong with our sector, we have somehow internalized it all to conclude that this is just how it is. This is just the nature of “nonprofit culture”. We forget that WE are nonprofit culture. The nonprofit “sector” is made up of individual organizations, which are made up of individual people, which means that this is all up to us. It is what we make it to be. So when are we going to be the change we say we wish to see?

Echoing the “take charge” message in An Open Letter to Arts Administrators, Adam Thurman (Two bloggers named Thurman, hmmm) describes the painful position of mid-level arts administrators who don’t feel supported, respected, or valued.

It doesn’t have to be like that.  I know you’ve probably convinced yourself that all the garbage you deal with is just the cost of being in the field.

It isn’t.  If the group you work for is being run poorly it is because people are ACTIVELY making choices that allow that to happen.  It isn’t just a matter of circumstance.  It’s an outcome of choice.

You deserve better then that.  You deserve to work at an organization that produces great art, treats people with respect and pays fairly.  No matter how much people may tell you otherwise those three goals are NOT mutual exclusive.

He then advises that these arts administrators give themselves a year to help bring about change - or to leave.  I love the simplicity and enormity of that advice.

Be a leader, or leave.

But how can you be a leader if you aren’t the CEO, Executive Director, CFO, Director of Development, Board Chair, etc, etc?  By leading, that’s how. I know of many cases where a new board member, mid-level program manager, or finance staffer stepped into the void, told the truth, and brought about important change. To be frank, there is risk and a lot of work involved.

Our new Recession Risk Assessment resource includes suggestions for actions to take based on the risk level. For organizations with high level of leadership risks, the advice is: “The organization urgently needs a leader to step forward to call attention to the challenges, even if it causes discomfort.”

Be a leader - why not you? Why not now?

Where do you send the condolence card after the death of a nonprofit?

Today’s Star Tribune reported that the Senior Federation to Shut Down because of financial challenges resulting from drops in both grant support and memberships. The economy is certainly a big factor since the Federation’s funders include several health care organizations that are cutting budgets everywhere. Membership declines reflect both demographic shifts and changes in the needs of their constituents. Founded in 1973, the Federation really made its mark in the 1990s with advocacy and action to make prescription drugs more affordable with bus trips to Canada and online sales.

This news about the Senior Federation is not the first or the last time that a nonprofit will close. Two weeks ago Centro Legal closed its doors after almost 30 years of providing legal services to low-income, Spanish-speaking clientele with issues related to housing, domestic violence and immigration. The loss of these services has a very real impact on the community.

The current economy has exacerbated the already fragile financial state of many nonprofits which is likely to result in more closures. Every closure is hard, painful, and sad. This sadness made me think about the sadness I’ve seen in the past month after the cancer-related deaths of three acquaintances. These losses were hard, painful, and very sad. Each of these wonderful people were remembered at memorial services billed as “A celebration of the life of … ”  The events were indeed celebrations with music, laughter, tears, stories, and food. Friends and members of the community even bring the food, passing out turkey sandwiches and brownies in church basements and park shelters.

I think that we need to organize memorial services for nonprofits. A celebration of the life of the Senior Federation, a celebration of the life of Centro Legal, a celebration of the life of _______ . Current and past board and staff members, clients, members, funders, and the community could gather to tell stories, cry a bit, remember the history and changes, take pride in the impact and significance of the organization, and say goodbye. Invite me and I’ll bring a tray of brownies.