Nonprofit Harvest

Tomorrow I’m going home for Thanksgiving, and I’m looking forward to seeing friends and family for the first time in a while.  I live half a country away, so I don’t get home as often as I would like.

I think it’s interesting, and timely, that in the last few weeks both my original and adopted hometowns blew me away by their community and collaborative spirit.

Partnerships That Produce Results

First, Buffalo, NY took full advantage of Extreme Makeover: Home Edition coming to town, using the opportunity to transform an entire neighborhood and illustrate the importance of green building practices, such as deconstruction.

Then Minnesotans donated more than $14 million dollars to 3,141 nonprofit organizations in 24 hours, setting a national record. That is certainly above average.

Wow.

Neither effort would have been possible without significant community support - in the form of 5,000 volunteers and 38,778 donors, respectively - as well as the work of countless organizations behind the the scenes and some public-private partnerships.

There is no reaction except to be humbled. But there are lessons that we can learn for projects large and small.

Let’s Collaborate

Right now, everyone who wants to improve the nonprofit sector is emphasizing collaboration.  Certainly in some instances the results are impressive.  But successful partnerships take a lot of work and trust.

There is no one size fits all model. Collaborations range from joining forces on a project to combining backroom operations to a full merger.  Advantages include increasing impact or taking advantage of unique skill sets, such as in these examples, and minimizing costs.  Challenges include letting go of control, managing the needs of diverse stakeholders, and confusion around roles and responsibilities.

GiveMN as an Example

The GiveMN Give to the Max Day effort was incredibly successful in promoting individual giving, engaging new donors, increasing online donations, and getting significant amounts of cash into the hands of nonprofit organizations.

However, there was also confusion around some details, especially the matching funds. Regardless of how the uncertainty happened, it underscores the importance of clear communications among stakeholders - in this case that includes the 3,141 nonprofits, 38,778 donors, and the project partners.  Everyone needs to be on the same page about project goals and outcomes.

Beyond illustrating the widespread community support for Minnesota’s nonprofit sector, GiveMN also shows that nonprofits and their supporters can effectively use social media and other online tools to leverage their networks to take action.  There was an earned media blitz from the partners, but organizations and individuals took advantage of email, facebook, and twitter to get the word out.  The very nature of social media is collaborative.

What are your stories of collaboration? What lessons have you learned from those experiences?

Case Studies

• Nonprofit Collaboration Case Studies
• Where Can I Find Case Studies of Nonprofit Collaborations, Mergers, and Other Strategic Alliances?
• Joining Forces in the Back Office - Lodestar Foundation Resources
• Interview: Collaboration Prize Co-Winners
• What happens when two competitors combine forces
• By sharing expertise, agencies are able to improve operations, save money and help more clients

Tools and Resources

• What do I need to know about collaboration and other kinds of strategic alliances?
• Nonprofit Mergers and Acquisitions: More Than a Tool for Tough Times
• Project ReDesign and Merge Minnesota

Scenario Planning

The McKinsey Quarterly recently wrote an article about the advantages (and some potential pitfalls) of scenario planning.  At Nonprofits Assistance Fund, we love scenario planning for the reasons laid out in McKinsey Quarterly:

Scenarios are a powerful tool in the strategist’s armory. They are particularly useful in developing strategies to navigate the kinds of extreme events we have recently seen in the world economy. Scenarios enable the strategist to steer a course between the false certainty of a single forecast and the confused paralysis that often strike in troubled times.

What’s in your Planning Toolbox?

Here are some resources that can help you craft your own scenarios.

• Scenario Planning tools:
  • Scenario Planning Example
  • Scenario Planning Worksheet: A blank template for you to use
• Cash flow template
• Contingency and Scenario Planning - What’s the Difference and How Do Nonprofits Get Started?
• Focus on the Destination, Not the Route (Budget)!

You can also read Kate’s post on this topic, What H1N1 Taught Me About Contingency Planning.

It’s that time of year, when the Wall Street Journal and New York Times devote entire sections to philanthropy, charitable giving, and nonprofits.

The Wall Street Journal Makes It Personal

Why is management advice to the philanthropic sector filed under personal finance?

This section includes commentary about foundation payout rates, general operating support, social enterprise, public-private partnerships, and corporate philanthropy - not personal finance. There is a related blog post on how financial advisers can help their clients maintain their charitable giving in a recession, but it’s not part of the special section.

At least the New York Times section on Giving is part of their US coverage.

Why It Matters

This might seem off topic, but when business leaders (and their publications) tell nonprofits how to behave, how to improve, how to be more efficient and effective, while also treating us as an afterthought, that’s a problem.  It underscore how little time and energy they spend thinking about the challenges - and possible solutions - for our sector.

And I think it also explains why often the rallying cry is “be more like business,” even when that doesn’t make sense.

Philanthropic Investments

If you read about Goldman Sach’s Foundation’s unusual investment strategies, you might be curious about “traditional” investments.  The ideas of prudence and risk management - because the funds are intended to benefit the community - underscore most philanthropic investment strategies.

In her blog post from last year, Jittery About Investments, Kate lays out some fundamental guidelines for nonprofits:

• Time Horizon – Funds that may be needed within a few months must be invested in highly liquid, safe investments. This is the most common type of investment fund for most nonprofits, composed of operating funds and reserves. In order to be assured that the funds will be available as needed, the investment choice must be readily available.

• Risk Tolerance – One of the fundamentals of investing is the balance of risk versus return. Investments with a higher return almost always also come with higher risk. The key question for nonprofit leaders and boards is to understand how much risk is involved and to decide if they can accept the risk. As an example, if the funds to be invested represent the balance of a large program grant that will be spent over the next year, then the organization can’t afford to risk the loss of any of the funds. A permanent endowment fund, on the other hand, is usually invested in a diverse portfolio that includes more risk in return for a higher long-term return.

• Responsibility – The nonprofit’s board of directors is responsible for overseeing this balance of risk and return for the health of the organization and any legal requirements. In order to fulfill this responsibility the board must act as prudent and loyal stewards of the organization’s assets.

Here are some additional resources:

• Notes from Endowment and Investment Policies
• The Chronicle of Philanthropy’s Special Report on Endowments
• The Care and Feeding of a Healthy Organization
• It’s 10 am, do you know where your cash is?
• Cash is Cash, Sometimes

Foundations can also use mission-related investments and program-related investments as part of their portfolio. Learn more about MRIs and PRIs:

• Aggregating Impact: A Funder’s Guide to Mission Investment Intermediaries
• Philanthropy’s New Passing Gear: Mission-Related Investing
• PRI Makers Network
• Program-Related Investing guide from Grantcraft

Nonprofit Harvest

• A four-part series from Nonprofit Capital Management’s blog on tax deductible business expenses
  • Transportation and mileage
    
  • Travel
  • Office moves
  • Education
• Fiscal Sponsorship Revisited from the Nonprofit Law Blog
• MCF Research on Giving Trends Released
• The L3C: A new business model for socially responsible investing

Sometimes I think our sector needs its own superhero - a Nonprofit Mythbuster who would go around busting up some of the perceptions that undermine our ability to do good.

Photo Credit: Dunecasher on flickr

There are many things that make nonprofit work challenging.  However, often we’re not battling the forces of evil (or even indifference), but rather misinformation and public perception.  So I want to focus on some of the myths that threaten our ability to be effective.  Unfortunately, many of these assumptions that are shared by nonprofit staff, boards, and their allies, as well as the general public.  It’s time to educate ourselves and each other.

We are Businesses

In case you have not heard…

We have real employees and comprise a significant portion of the economy.

• Nationally, the nonprofit sector employs 7% of the workforce - 14 million Americans are nonprofit staffers.
• In Minnesota alone, we are 10% of the state’s workforce, paying $12 billion in wages.
• There are twice as many employees in the nonprofit sector than in the construction industry.

Nonprofits Can Make a Profit

CharityLawyer tackles the top Nonprofit Law Urban Legends, starting with the pervasive (and problematic) assumption that nonprofits can’t make money:

I covered this surprisingly persistent legend in a related post, but it bears repeating. The designation of an organization as “non-profit” or “tax-exempt” does not mean that the organization can’t have money left over in its bank accounts at the end of the year.

Kate discussed this topic last year, Why Nonprofits Should Think About Profit:

Call it what you want – surplus, positive change in net assets, or profit – nonprofit organizations really need to plan for, and embrace, the importance of building financial capacity by generating a cushion. We don’t have a common language for this, and many nonprofit leaders would be uncomfortable using a term like “profit” when describing their financial goals. The word is much less important than the practice of budgeting and managing to build surpluses…  [Woods] Bowman makes it simple and direct: “Where does financial capacity come from? There can be only one place: annual surpluses.”

Not only can nonprofits “make a profit,”it’s in their best interest:

Planning for an annual surplus, specifically an unrestricted surplus, is a positive, important, beneficial, and necessary practice for all nonprofits. I emphasize the importance of viewing unrestricted operating results, rather than the total of all unrestricted and restricted funds, because of the volatility in results caused by the timing of project and multi-year grants.

What can nonprofits do with that money?  A lot of things - invest in their own capacity, which means being able to do better, more efficient work over the long-term.  A few examples of these investments include establishing an operating reserve, enhancing management systems, investing in technology, and staff development.

Capacity Building Enhances Capacity

There are consequences when we are unable or unwilling to invest in our organization.  The Bridgespan Group’s recent article The Nonprofit Starvation Cycle is pretty frank:

Organizations that build robust infrastructure—which includes sturdy information technology systems, financial systems, skills training, fundraising processes, and other essential overhead—are more likely to succeed than those that do not. This is not news, and nonprofits are no exception to the rule.

We have to combat these myths, because they undermine our ability to be effective. Here are some additional resources to help you.

Budgeting for a Surplus

• “Organizational Slack (or Goldilocks and the Three Budgets” by Woods Bowman, published in the Spring 2007 issue of The Nonprofit Quarterly
• Nonprofit Budgets Have to Balance: False!

Cash Reserves

• Operating Reserves
• The Yin and Yang of Operating Reserves   
• Reserves - What Kind and How Much?
• From The Answer Desk: How Much Should My Nonprofit Have in Operating Reserves?

Working Capital and Capacity Building

• Ending starvation by planting seeds for growth
• On the Money
• Beyond Cash Reserves
• Nonprofit Capital
• How to Get Out of the Current Services Trap

Other Myths

Visit Balancing the Mission Checkbook’s series, Mythbusters: Nonprofit Finance Edition for more mythbusters, including

• Donors and Overhead: Maybe They Don’t Care
• The Cash Reserves Myth
• The Magic Donor Myth

Be a Change Agent

Continuing our superhero theme, we’re hosting a session at this week’s Transforming Our Work, the MCN and MCF joint annual conference called Change Agents. This breakout is all about how you can help transform your organization’s business model and be sustainable over the long term.

It could be renamed Learn to Love the Balance Sheet.

In honor of this useful financial document, we’re having a Balance Sheet Haiku Contest.  Submit your poem for a chance to win a special prize.

And for a blast from the past, here is a poem I wrote in response to Nonprofit Quarterly’s call for a mission haiku:

So, do you haiku?

(Post) Halloween Harvest - No Tricks, only Treats

• 19 Free Webinars for Nonprofits - November 2009
• What happens when two competitors combine forces.
• SROI Act II: A Call to Action for Next Generation SROI from REDF
• Nonprofit Groups Spin Off Green Ventures
• What Makes Nonprofits Laugh?