Lessons on how nonprofits can behave more like for-profits

Upon joining the non-profit sector, a number of people opined to me that they are happy I’ve decided to dedicate my time and effort towards strengthening the sector’s work. In fact, one of the sound bites I kept hearing is that non-profits – despite their inability to sell equity (and thus raise money through either private investors or the larger public capital market) or the lack of an agreed upon “profit” metric for measuring organizational success – need to behave more like for-profit businesses. So, listen up my fellow non-profit professionals, I’m going to impart some words of wisdom I learned from my days working in the for-profit world (at institutions such as Freddie Mac, UBS Investment Bank, and others).

We need larger pay packages to attract and retain qualified professionals. In order to create the type of fast thinking, innovative companies such as AIG, Bear Stearns, Enron, Tyco and others, we need to increase our compensation packages. Currently, this kind of fast-thinking/innovative executive talent retails for approximately $10.5 million, or roughly 344 times the average worker’s salary ($30,700). Since the average executive director of Southwestern Pennsylvania only makes a mere $96,110, or 3.6 times the average worker’s salary – that’s a lot of innovation we’re leaving on the table! Lesson #1: if we are to attract for-profit executive talent then we must start paying our non-profit executive directors better.

Ignore sustainability and adopt a “do whatever it takes” attitude to exceed your short-term goals. We in the nonprofit sector spend far too much time talking about creating sustainable programs and achieving long-term outcomes. Instead, we need to adopt a more market-centric view of the world, just as for-profit businesses have to when their performance is measured by the market. Take General Motors, for instance. In the late 1990s and well into the first decade of the 21st Century, GM ignored suggestions that the company should rethink its focus on the sale of light trucks and SUVs and instead become a pioneer in the production of fuel-efficient (sustainable) automobiles. However, GM’s short-term focus on becoming the premier seller of light trucks and SUV (its most profitable product line) seemed to be paying off:

In 2002, GM sold more than 8.5 million cars and trucks and was the first auto manufacturer to sell 1.2 million SUVs and 2.7 million trucks in a calendar year. The company set industry sales records in the United States and owned nearly 15 percent of the global vehicle market. And investors took notice – the company’s stock rose approximately 45% over the next year.

Of course, you know the rest of the story by now – fuel prices rose and consumers grew tired of paying for non-fuel efficient vehicles. GM was stuck with a bunch of cars and trucks (mostly trucks) that they tried to “give away” with 0% financing and large rebates – again, focusing on exceeding the company’s short-term sales numbers even at the expense of hurting long-term profit margins – but nobody wanted them. Lesson #2: for-profits rarely practice sustainable planning so why should your organization.

The market rewarded GM's banner 2002 year with stellar market returns in '03. Nevertheless, GM's lack of a sustainable business model finally forced the company into bankruptcy in '09.

Transform your board. Nonprofit executive directors, not only are you egregiously underpaid relative to your for-profit brethren, but also you need to hold more board power. This year’s Nobel Memorial Prize in Economics winner, Oliver Williamson, in a recent article, “Corporate Boards of Directors: In Principle and in Practice,” submits that today’s corporate boards are largely ruled by the CEO and are passive financial stewards. He writes:

The CEO is in de facto control of the operation and composition of the board…most boards most of the time are responding with nodding approval, and boards are beset by inertia, hence are slow to become active when the corporation experiences adversity” (260).

In hindsight, we’ve spent far too much time espousing the idea that nonprofit boards need to be active and chart the agency’s strategy, raise money, etc. After all, when is the last time you heard of a corporate board functioning this way? No, on a corporate board the CEO/Chairperson sets the agenda and the remaining board members are asked to “nod in approval.” Lesson #3: we need to retrain our board members to be passive financial stewards and centralize all power with the executive director (and newly appointed chairperson).

As you read these “lessons,” I hope it is apparent by now that there is an awful lot each sector – the for-profit and non-profit – can stand to learn from one another. I think the three lessons above illustrate areas the for-profit sector should take a cue from the nonprofit sector and consider adopting these practices. Conversely, there are a number of for-profit practices – strategic planning, capital budgeting, using data to inform evaluative programmatic judgments and more – that I believe are beneficial for nonprofits to adopt. However, to think that either sector has a monopoly on best practices is just over simplistic and flawed logic. As Jim Collins’ writes in his monograph Good to Great and the Social Sectors, “We need to reject the naïve imposition of the ‘language of business’ on the social sectors, and instead jointly embrace a language of greatness” (2). Touché, Jim.

 

The Law of Subtraction

Every year thousands of executives and senior level managers spend millions of dollars trying to answer the question: how do I better run my organization? To accommodate this demand, a plethora of management books, tools, workshops, and lecture circuits are annually launched. Fortunately, every so often, a management book is written that presents a novel approach or unique solution – and Matthew May’s In Pursuit of Elegance is one such book.

While May’s book focuses on the creative process of crafting “elegant” solutions, yet another salient idea that surfaces from the novel is what he calls the “Law of Subtraction.” The Law of Subtraction says that an organization should seek to continuously improve the quality, cost, and delivery speed of its product/service (value-adding).

Summoning the lessons from his nearly ten years of work experience with the Toyota Motor Corporation, May suggest that well run organizations (value-adding) do this by focusing on eliminating to the best of their abilities the things that hurt quality, raise costs, and slow things down. To repeat: great organizations achieve their goal of continuous improvement by eliminating the things that negatively impact quality, costs, and time.

A simple case study will illustrate this point: Fortune magazine in March 2008 named Apple “America’s Most Admired Company,” as well as “Most Admired for Innovation,” honors stemming from the launch of its hugely successful iPhone. However, this market-changing innovation occurred as a result of Apple’s stop-doing strategy – or its implementation of the Law of Subtraction. As CEO Steve Jobs put it:

“We tend to focus much more. People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of many of the things we haven’t done as the things we have done.”

In practice, the Law of Subtraction suggests that your organization’s leadership team carefully define what mission-related product/service it excels at delivering and then begin the process of allocating resources in a “subtractive” manner. In the case of May’s old employer, Toyota, this approach (called the practice of Kaizen) decreased employee stress levels; led to higher and more consistent job performance; and reduced the wasteful use of organizational resources.

As you begin to think about your own nonprofit organization, and how the Law of Subtraction might apply, start by asking a classic Peter Drucker question: If you weren’t already in a particular program, would you start it today? If the answer is no, May’s Law of Subtraction suggest you may have found a jumping-off point.

 

Save the Date: TechNow is October 29!!

Those of you who know me, know that I get really excited about TechNow, our annual nonprofit technology conference.  TechNow energizes me in a way that only one other event in the year really does (and that would be NTEN’s tech conference).

Hence and therefore, please don’t be shocked if I’m spouting TechNow from here until October.  When I get excited about something, I tell people.  This is no exception.  🙂

So….mark your calendar, tell your fellow techies, co-workers, and friends!  TechNow, the annual conference devoted exclusively to nonprofit technology, will be held on Thursday, October 29, 2009.

This year, we have another fabulous and relevant keynote speaker for you!  We will be joined by Mr. Ami Dar, the founder and executive director of Idealist.org.  Built in 1996 with $3,500, Idealist has become one of the most popular nonprofit resources on the web, with information provided by 90,000 organizations around the world, 70,000 visitors every day, and a staff of 60 in New York, Buenos Aires, and Portland.  Ami plans to speak about how nonprofits can successfully collaborate, accomplishing more with fewer resources.

This year, we are delighted to be hosted by Robert Morris University at its very own Sewall Center, located on RMU’s Moon Township campus.  The Moon Township campus is near the Pittsburgh International Airport and is easily reached via car or Port Authority bus.

If you would like to be notified when TechNow conference registration opens on the Bayer Center’s website, email me at leonard@rmu.edu.  Look for more TechNow updates in the upcoming months, including a re-vamped conference website!

Hooray for Technovians everywhere!

 

I used to think that Twitter was the dumbest idea I’d ever heard…

That was then, this is now.

I just finished reading a fascinating, revelatory book by Clay Shirky called Here Comes Everybody.   It’s about the radical changes in this brave new world we’re inhabiting when it comes to things like communications, organizing, publication…

We all know it’s going on.  From texting to blogging to Facebook to tweeting, everything’s different from the way it was last century, last year, heck, almost last week.

For old folks like me, we know Web 2.0 is out there, we may even use some of the tools, but we don’t really “get it.”  In fact, to some extent, we never will.  For example, at my house we have grad students living next door to us.  My wife and I have been stunned by how unfriendly they are when we pass in our back yards.  But our son explained to us that they’re not being rude, they just don’t interact with people that way – the way that we do.  They do it through technology.  Our son understands this because he’s 21.  And, at 21, he already feels a gap between himself and high school students!

The world is a very different place.  Mass amateurization and collective wisdom (notice that the link I inserted above for explaining Web 2.0 goes to Wikipedia, a poster child for these changes) are replacing dedicated, authoritative (also, sometimes, authoritarian) sources for news.  We are relying on the self-correcting collaboration of the masses for the dissemination of knowledge.  And the centuries-old model of filter (e.g., evaluate for accuracy, relevancy, etc.) first and then publish has been turned on its head as the Web has become a medium in which we publish first then let external forces filter the information after the fact.

But back to Twitter.  Who cares that you just left the coffee shop, or you’re going to get a haircut this afternoon, or you’re telling a snarky little in-joke that I don’t understand?  I certainly don’t.  But that’s just the point.  I’m not supposed to.  Those of us who don’t “get it” see all this as public communication.  But it’s not.  It’s just chatter among friends, across cyberspace instead of across a table, but not intended for those outside the small circle.  And once you understand that – once you realize that even though this overwhelming barrage of messages is out there for all the world to see, they’re only meant for an infinitesimal, carefully selected group of people to actually look at – this whole thing starts to make sense as a way for a new generation to communicate.  Those of us from the old school have been confused by thinking the medium is the message, but it’s not.  The message is the message.

And this is just the insignificant beginning.  Twitter is saving people who are unjustly imprisoned.  Twitter is leading to election protests that stress entire governments.  Twitter and the new organizing and communications power of Web 2.0 are changing the very framework of how society functions.

Don’t underestimate this, and don’t forget it.  If you want your nonprofit to be meaningful in the future, Web 2.0 is one bandwagon (remember those? – I don’t!) you’d better figure out how to get on.

 

My Own Personal Fail Whale

I have decided.  I want a Fail Whale of my very own.

When Twitter experiences an outage, users see the following image and an error message “Too many tweets! Please wait a moment and try again.”

Instead of making excuses or blaming others, Twitter accepts its failures gracefully and with a sense of humor.  Hence, my idea of having my own personal Fail Whale.  I love this image – the birds representing support and someone kindly lifting up the whale after his failure.  The whale looks relieved, doesn’t he?

Too often, we are so rigid with ourselves and so afraid of failing that we never try anything new.  The “what if’s” start eating at us and before you know it, we’re sticking to things that are safe and familiar.

Clay Shirky, author of “Here Comes Everybody” and one of the keynote speakers at NTEN’s Nonprofit Technology Conference in April, addressed our (as in nonprofits) fear of failure in his speech.  Some quotes from that keynote:

• “We spend more time figuring out whether something is a good idea than we would have just trying it.”
• “Fail informatively – Fail like crazy.”

I recall him saying that it’s better to have five good ideas then one great idea…and even better to have 20 okay ideas than one great idea or five good ideas.  That we nonprofits tend to over-analyze and over-plan instead of just jumping in and giving new ideas a try.  Sound familiar?

Why do we spend so much time in the analysis and planning phase?  I think it’s because it puts off the implementation phase…the phase where you actually have to do something rather than just thinking about doing something.  See, when you are simply thinking about doing something, that’s failure-free.  (If you daydream about failing, please call me and I’ll Google a therapist in your area.  That’s just not normal.)  It’s when we take action that the possibility of failing becomes a reality.

This is not to say that failing should go unnoticed or unaddressed.  We just need to be less harsh with ourselves when we fail.

Ever beaten yourself up about anything?  I have…loads and loads of times, for days and days, even.  Sample mental self-talk:  “You are such an idiot.  Why did you do that?  Why did you say that?  Why didn’t you say this?  People are going to think you’re a total moron.”  And so on and so forth.  What we should be doing instead is dealing with ourselves in a nurturing manner.  Accept the failure, glean the lessons from it, and move on:  “Yes, I made a mistake.  Yes, I see where I could do or say that differently next time.”  Put up your Fail Whale and keep at it.

---

Watch the entire Clay Shirky keynote here:  http://blip.tv/file/2148546/

 

Got Dashboard?

A how-to guide on getting more out of your board

One of the really nice things about my job at the Bayer Center is the abundant amount of learning opportunities around me. Accordingly, yesterday I sat in on Sally Mizerak’s “Using a Dashboard” class.

For those of us not in the automotive sector, an organizational “dashboard” is likely a “user-friendly, often color coded summary chart(s) of the key indicators of an organization’s performance.” I liken it to CliffNotes for staff, management, board members, donors, etc.

The “art” of designing your organization’s dashboard really depends on what story/message you’re trying to summarize. For instance, Scott Leff and I have been busy recently helping organizations reduce the stacks of internal financial reports they disseminate to board members and instead replace these trees with a single, colorful, summary financial report. From this report, board members can quickly glean how the organization is performing (actual vs. realized budget), how much cash is available, and how the organization is financially performing relative to its local and national peers (benchmarking) and its own past results (trending).

[Editor’s note: My colleague Jeff Forster points out that he posted about Dashboards last month with two big points: 1) dashboards aren’t just about financial measures, although they’re obviously quantifiable and 2) CRM databases have thrust dashboards to the fore as though they’re something new under the sun (but they’re not). Also, Jeff and me rode together in CDCP’s Pedal Pittsburgh (50+ mile) ride last week and spent much of the time discussing this blog entry and nonprofit dashboards, kind of.]

One way to get the internal dashboard dialogue started is to ask yourself if your board’s financial reports are telling the story that you are hoping to convey. If the answer is “yes,” then next ask yourself if you can do a better job of summarizing this information into one report?

If you think you can be doing better, then you probably are not using your board’s time wisely. (You’re supposed to be talking about mission-related information and not spending all your time on financial minutia.) A suggestion – consider putting aside a few hours to spend with your staff/colleagues/Finance Committee and conference on what financial picture/story you’d like to convey to your board. The benefits you’ll get in return from a more mission-focused board will far exceed your time investment.

Have a question or something to add to this post? Leave a comment, and you’ll be entered to win a 1 GB USB drive. One winner per week through the end of May.

 

Preventing Burnout: A Different Kind of Energy Conservation

In the mid-90s, when I was still doing my undergraduate work, my Research class professor told us “at any given time, you have three resources available to you:  time, money, or energy.  When you are working on a project, you have to figure out what you have the most of and use it to your advantage.”

Those words have stuck with me all these years and I still try to live by them.  Some days it’s not all that easy, especially as of late.  I have days that I begin with the best of intentions and my goals for the day all planned out.  A barrage of emails and phone calls later, my day has derailed, I haven’t gotten to half the things I planned and I’m feeling like a exhausted failure.  Raise your cyberhand if you know what I’m talking about.

I know everyone’s tired of hearing about the “economic downturn,” but it’s a reality and the effects in our sector are starting to become more apparent by the day.  Eliminate the “money” piece of the equation above.  That leaves us time and energy.

Time?  Who’s got that to spare right now?  We’re laying off workers, taking on new projects like crazy, and more people need our help than ever before.  Eliminate “time” from the equation as well.

That leaves us energy.  If energy is our resource, we have to be careful to protect it.  I’m talking about prevention of employee burnout here.  Nonprofit leaders, busy as they are, must take a moment to evaluate their staff and consider who’s a potential candidate for burnout (including themselves!).  Employees must equally take the responsibility for themselves and take action against burnout.  Once it’s happened, it’s too late.  Burnout is like the metaphorical snowball rolling downhill – it gets bigger the longer it goes.

To that end, in hopes of helping all of us who are struggling to be idealists in this particular time and place in history, here are some resources about burnout that includes symptoms, factors, and tips for prevention:

http://www.helpguide.org/mental/burnout_signs_symptoms.htm

http://www.livestrong.com/article/14719-preventing-burnout/

http://news.cnet.com/8301-13555_3-9918793-34.html

http://home.vicnet.net.au/~cardoner/uniya/un5su08.html

http://www.friedsocialworker.com/Articles/burnoutinhumanservices.htm

http://www.rci.rutgers.edu/~sjacksox/PDF/PreventingEmployeeBurnout.pdf

http://www.fastupfront.com/blog/small-business-labor/handle-with-care-managing-employees-who-must-wear-multiple-hats/ (source of photo above)

---

Have a question or something to add to this post? Leave a comment, and you’ll be entered to win a 1 GB USB drive. One winner per week through the end of May.

 

Just Do It!

A little over a week ago, Scott Leff and I attended Jessica Jackley’s discussion about how she started Kiva.org and is busy transforming the world we live in. No joke! (As of March 8, 2009, the organization that Jessica co-founded has distributed $63,010,010 in loans from 458,538 online lenders, which has funded 90,201 loans in the developing world. Simply, what Kiva and Jessica has accomplished has been nothing short of amazing!)

However, one of the central messages I took away from Jessica’s discussion is that if you see an area with a need, and you’re capable of filling that need, then “just do it!” Don’t worry if you don’t have a business plan, executive summary, financial projections, etc. Just get started doing the work and fill in those “details” as the need arises.

What’s interesting about Jessica’s message was that when I went through my formal business education at the University of Maryland’s Robert H. Smith School of Business, her kind of thinking wasn’t exactly encouraged; if you were going to start an organization, or even a small grassroots movement, you had to have a plan. Preferably, this plan would have charts and graphs, a clear and tightly woven mission statement, and at the very least some semblance of an Executive Summary to work from. And so I bought into this kind of thinking…

So, last summer, when a few of my friends brought up the idea of starting a “fun” running group, I was thinking that this might turn into a bit of hassle because we needed some type of organizational structure and, really, who has time for that (see previous paragraph)? Plus, my friends were convinced that I knew something about running and could “coach” them through the process. After all, they reasoned, I’d run in a bunch of races and could help them do so, too. Of course, I thought this might be a little difficult because I had no formal coaching experience.

Nevertheless, I thought we’d just go with it and see what happens. So, the initial group of 5 runners (including me) would convene once or twice per week last fall at Frick Park and run 4 to 5 miles together as we all trained for the Ikea Half Marathon.

The initial results from this experiment/“group love” were very encouraging: we had 9 runners finish their first 13.1 mile half marathon and 4 of these runners were first timers. From there we’ve added more runners and now have a list of approximately 30 runners.

The reason I bring this up is that nearly one week from now 8 runners from our club are going to try and do something they have never done before: 6 are going to run the 26.2 mile marathon distance and 2 are going to run the 13.1 half marathon distance for the first time! Watching friends of old and new dedicate themselves to completing their goal – some overcoming initial weight issues, injuries, frustration, and tears – has served to reinvigorate my passion for this sport and athletics in general.

I guess you could say that this, and a few other life experiences along the way in my 29 odd years, has taught me that Jessica Jackley is right after all: if you see a need and have some passion/expertise in that area, then you owe it to yourself (and the world) to jump in! Forget the formality and rules and all the organizational structure you think you may need and just start working, organizing, and doing.

I come back to our running club and the upcoming marathon and think what a sad thing it would’ve been had we not come together and formed our club. Fortunately, we did! And one week from this Sunday, I’m going to watch some of my friends accomplish something they have never done before, and most thought impossible one year ago. I hope that you’ll come out and support these runners and more at the Pittsburgh Marathon. See ya at the race!

Have a question or something to add to this post? Leave a comment, and you’ll be entered to win a 1 GB USB drive. One winner per week until the end of May.

 

When mission means everything…

 

This is what it means to be totally committed to your mission…

Yesterday, Garrett Cooper and I had the pleasure of hearing a talk by Jessica Jackley, co-founder of Kiva.org (and Pittsburgher by birth and upbringing).

Kiva is a fascinating organization and just about my favorite example of social networking. Kiva is a microlender. That is, they facilitate small loans to people in developing countries (soon in the U.S.) to help them build businesses and become self-sufficient. Unlike the typical microlender, however, Kiva is not the source of the capital for these loans – you and I are!

On Kiva’s website, www.kiva.org, stories and photographs of individual borrowers and prospective borrowers are posted. You or I then go to Kiva and select the person or group that we want to support. We lend as little as $25, Kiva aggregates our money with other lenders, and – Voila! – a new business is launched. And when the money gets paid back, as it usually does, we can pick our next recipient. $25 at a time, and in just 4 years, Kiva has passed over $62 million of loans to the working poor the world over.

Here’s Kiva’s mission: to connect people through lending for the sake of alleviating poverty.

 

Read that again. That is a great mission statement. Clear, succinct, specific. No vagaries here. What do they do? Connect people. How do they do it? Through lending. Why? For the sake of alleviating poverty.

 

Some time ago, a company came to Kiva and offered them $10 million of CSR (Corporate Social Responsibility) money. Kiva asked them what they intended. Were they going to distribute the money to their employees so that all of them could log onto Kiva’s website and join as lenders? No, the company just wanted to give Kiva a check for Kiva to lend out. So Kiva referred back to its mission statement. $10 million could alleviate a lot of poverty. $10 million could provide for a lot of lending. But a $10 million check from a corporation wouldn’t connect people.

 

So Kiva said, “No, thank you.”

 

Let me repeat that. Kiva, a nonprofit less than 5 years old, turned down a $10 million contribution because it didn’t fit precisely with their mission.

 

Would you have that much courage in your organization?

 

This is what being truly committed to mission really means.

 

I’m planning to join Kiva’s network of lenders. Wouldn’t you like to? www.kiva.org

Have a question or something to add to this post?  Leave a comment, and you’ll be entered to win a 1GB USB drive.  One winner per week through the end of May.

 

 

New Book from the Nonprofit Technology Network (NTEN)! Hooray!

At our TechNow 2008 conference last October, we had Holly Ross from the Nonprofit Technology Network (aka NTEN, www.nten.org) as our keynote speaker. 

NTEN is the membership organization of nonprofit professionals who put technology to use for their causes.  It is essentially a community of peers who share technology solutions across the sector and support each other’s work.

I’m excited about one of NTEN’s latest projects: a book entitled “Managing Technology to Meet Your Mission: A Strategic Guide for Nonprofit Leaders.”  The book features a variety of topics on nonprofit IT strategy by a range of recognized experts in their fields:

• Achieving IT Alignment with Your Mission – Steve Heye, YMCA of the USA
• Managing Technology Change -Dahna Goldstein, PhilanTech
• Measuring the Return on Investment of Technology – Beth Kanter, trainer, blogger and consultant
• IT Planning and Prioritizing – Peter Campbell, Earthjustice
• Finding and Keeping the Right People – James L. Weinberg and Cassie Scarano, Commongood Careers
• Budgeting For and Funding Technology – Scott McCallum and Keith R. Thode, Aidmatrix Foundation
• Introduction to IT and Systems – Kevin Lo and Willow Cook, TechSoup Global
• Where Are Your Stakeholders, and What Are They Doing Online? – Michael Cervino, Beaconfire Consulting
• Effective Online Communications – John Kenyon, nonprofit technology strategist
• Effective Online Fundraising – Madeline Stanionis, Watershed
• The Future if IT in Nonprofits – Edward Granger-Happ, Save the Children

As I type this post, I’m attending an online book release party where we are listening to each author talk about his or her chapter.  Sounds like good stuff to me – I can’t wait for my copy to arrive!  It’s available for order at: http://www.wiley.com/WileyCDA/WileyTitle/productCd-0470343656,descCd-description.html. 

If you aren’t ready to commit to purchasing the book, you might be interested in checking out the wiki for the book on which bonus materials, questions, and discussions are being added:  http://www.meetyourmission.org/.