In case you missed it, a short humorous piece I wrote for generocity.org in the spring.

Nonprofit Partnerships: Harder than Ordering Pizza

Nonprofit partnerships are hard. If you can avoid collaborations, you should. Think about the last time you tried to get a group of friends or family to decide on what type of pizza to order, or where to go for dinner. That’s hard enough. Then replace each individual with an organization with a variety of priorities and approaches to solving the same problem. Are you banging your head against the wall yet?

I know how difficult this can be. I work at the Urban Affairs Coalition as part of the Freedom Rings Partnership, a collaborative effort of over 16 government, education, and nonprofit organizations. We are working to close the digital divide, and we’ve accomplished a lot. But it isn’t always easy.

Despite the difficulties, there’s one very good reason to collaborate—when the problem you are solving is big. Really big. For us, it’s that 41% of Philadelphians don’t have access to the internet, which is vital for employment, education, finding health information, and meaningful community engagement.

If we need to collaborate to solve big problems, we’d better make sure we are collaborating as effectively as possible, so our energy is focused more on solving the big problems than squabbling over the little ones. If you find yourself unable to avoid collaboration, here are a few simple points to keep in mind.

Communication is Key 

You’ve heard it a thousand times. But it’s so true—and so easy to forget. Let’s go back to our friends trying to agree on their pizza order. What happens when the vegetarian requests peppers on the pizza, and it gets reported back as pepperoni. You’ll have some unhappy vegetarians. And you can explain all you want that it was an honest mistake—but they’re hungry, and they aren’t eating pepperoni.

Miscommunications can easily happen between just two people. But when you’re working with dozens or hundreds of people, misunderstandings are even more likely to occur, and even harder to prevent. When collaborating with other organizations, it is necessary to employ extreme vigilance to ensure that your communication lines are clear and open, and that every effort to convey information is thorough and efficient. Otherwise, you’ll spend all your time re-explaining and smoothing over mistakes rather than accomplishing the important job at hand.

Does this mean more meetings? Sometimes, yes. But if you are thoughtful and focused, those meetings can be some of the most productive of your life.

Money is Everything, and it’s Nothing

In the nonprofit world, no money = no program. A partnership is only effective if the groups making up the partnership have funding in place to power their activites. If the organizations don’t have enough funding to accomplish their programs and contribute to the partnership, they will be stretched too thin (although honestly, who isn’t?). They’ll be less effective partners, with insufficient time to commit to communication and distracted by competing priorities.

Perhaps even worse, the partnership runs the risk of falling into the politics of the scarcity mindset, where each organization sees the other as a competitor, scrambling for the same funding and hurting themselves and the partnership at the same time. A good partnership creates opportunity and abundance, not scarcity.

So some reasonable level of funding is essential for productive collaboration. While it is necessary, it is not in the least sufficient. The partnership needs to have shared goals and a strong sense of collaborate decision making. If an organization is participating in a partnership only because of the funding it brings, they will be a reluctant collaborator. This reduces their effectiveness as a strategic partner, and may even cause them to sow seeds of discord in the partnership. These small disagreements can easily lead to serious rifts and even doom the entire endeavor.

A Partnership is a lot like a Relationship

Marital counselors will tell you that if you want to have a strong relationship, you need to believe in and focus on yourself first, but also be willing to make sacrifices for the other person. Nonprofit partnerships function in much the same way. An organization will obviously prioritize its own goals, and it’s of essential importance for a nonprofit to stay true to its mission. However, there must be a give and take, where the organization is willing to make some changes or concessions for the greater good of the partnership. An organization thinking entirely of itself will not make a good partner, while neither will one that has no direction and allows itself to be entirely subsumed by the collaborative.

Despite these pearls of wisdom, it’s still a struggle every day to stay focused and effective. But practice makes perfect right? So start small, and the next time you’re ordering pizza for a group, keep these principles in mind.

Next time you are tempted to ask the above question, think about this excerpt from Dan Pallotta’s book, Uncharitable.

Do some charities say that a fundraising expense is really a program expense and vice versa?  The Nonprofit Overhead Cost Project studied the Form 990 of 126,956 charities.  The following findings are remarkable:

• Nearly half of the charities studied reported zero fundraising expenses.  Of the larger charities with annual revenues between $1 million and $5 million, one-quarter reported zero fundraising expenses.
• Twenty-seven percent classified some or all accounting fees as program expenses, despite the fact that the 990 instructions give accounting fees as an example of what is meant by “management and general” expenses.
• Only 25 percent of nonprofits receiving foundation grants properly account for those proposal-writing expenses as fundraising costs.
• Just 17 percent of nonprofits receiving government grants properly account for those proposal-writing expenses as fundraising costs.

To see why this is a problem not just for someone deciding where to make a meaningful donation, but for the sector as a whole, check out this Nonprofit Quarterly article.

A few weeks ago I thought I had come up with a brilliant ad campaign to correct misconceptions in philanthropy, where someone would take out billboards emblazoned with the words “I am overhead” and a picture of some good looking nonprofit staff person.  I thought, “I can’t believe Dan Pallotta hasn’t thought of this… I should contact him!”  Luckily, before I did, I finally started reading his book Uncharitable, and realized he already HAD thought of this idea.  I saw him speak about a year ago, and the idea must have been stored somewhere in my sub-conscious, then dredged up as an original idea. 

The concept of overhead is something I’ve been thinking a lot about recently.  Many of my favorite nonprofit bloggers have posts about why you shouldn’t use overhead as a determinate in your giving, including this post by the aforementioned Dan Pallota on a law proposed in Oregon last year, this post by Sean Stannard-Stockton (summarizing Paul Shoemaker of Social Venture Partners), and this post by Saundra Schimmelpfennig on how organizations use accounting tricks to make their overhead ratio look good.

I agree with all of these posts and many more like them.  But while the overhead ratio clearly is a red-herring, the amount of good that can be accomplished for each dollar is still quite important, as GiveWell is good at reminding me.

I became involved in reading, writing, and thinking about high-level conceptual issues around nonprofit effectiveness and smart giving while on a somewhat hiatus from working in the nonprofit world.  A few months ago I took a position in a nonprofit, and I now spend every day working on implementing a program that I have to hope and believe is changing people’s lives.  Traveling from the lofty heights of thinking about how nonprofits should work in a perfect world, to face the reality of trying to implement solutions in a very imperfect world can be a bit jarring. 

So the reason why I have been thinking about overhead more lately is because, in a way, I am overhead now.  (Note: Technically I am not overhead - i.e. I am charged directly to the grant.  But I think I fit in with what most people think of as overhead - an administrative expense.)  I don’t do any of the actual work of delivering services to our clients.  I spend most of my time either in meetings, working on spreadsheets, or writing reports.  If I wasn’t there the work would still be happening - but if I do my job well then more and better work will be done, hopefully justifying the cost of my bi-weekly paycheck. 

But wait, that’s not all.  There’s also my boss and an accountant, who do similarly behind-the-scenes work.  And the actual work is not done by my organization, but by a number of partner nonprofits who we re-distribute funds to.  They all have bosses and accountants too. 

And we’re funded by the federal government.  Just like my boss and I oversee our partner nonprofits to make sure they’re doing what they’re supposed to do, there are people in the federal government who spend time making sure my boss and I are doing what we’re supposed to do. 

That means money goes through at least 3 layers before it’s directly helping anyone (assuming we are helping people at all - another topic for another day).

How much money for this project goes to making sure everyone’s doing what they’re supposed to be doing, rather than directly to doing the work?  Probably too much. Does that mean the program shouldn’t exist?  I certainly hope not. 

What should we do about it? I don’t know.

I think a big part of the problem comes from the inefficiencies inherent in the behemoth known as the federal government.  My organization’s role seems to be more clearly of value to the project (if I’m not biased that is).  We are managing a complex partnership of organizations.  This is messy, but also means the organizations can work together and leverage each others work in a way that they never would without the partnership. 

What’s tricky is where to draw the line.  Would I be able to justify my role to a potential donor?  If I weren’t involved in this project, would I be persuaded to give? 

I’m still working through the answers to these questions.

Shortly after graduating from college I wrote an (unfinished) essay titled “On Caring” based on the idea that an individual’s capacity for caring is limited, and inspired by what is still one of my favorite quotes:

“There is only a certain amount of kindness in the world.  There is a certain amount of kindness, just as there is a certain amount of light.  We cast a shadow on some thing wherever we stand, and it is no good moving from place to place to save things; because the shadow always follows.  Choose a place where you won’t do harm—yes, choose a place where you won’t do very much harm, and stand in it for all you are worth, facing the sunshine.”      —E.M. Forster, A Room with a View

At the time my hypothesis was that it was impossible to care deeply both about big far away things like wars and poverty, and the close everyday things like family and friends.  I am not sure why I came to that conclusion exactly except that I (mistakenly) thought I was quite good at interpersonal relationships and was puzzled about why I didn’t care about foreign policy as much as a lot of my friends did.

I was perhaps a bit of a late bloomer when it comes to the kind of caring that motivates nonprofit employees, volunteers, and donors. After spending a few days last week arguing on Facebook with someone I didn’t even know about why we should care about the famine in Somalia (and wondering, in the process, why I should care about one other person not caring), I realized how far my perspective has changed. 

But donor fatigue is a real problem, and a crisis like the one in Somalia is ripe for suffering from it.  While I may not entirely remember my frame of mine when writing my diatribe against caring, I do know how much easier it is to put up a wall against far away complex problems that we don’t have a clear solution for, and instead focus on the day to day concerns of our lives - worrying about getting a promotion at work can feel a lot more significant than people I’ll never meet starving in a country I’ll never visit.  In Somalia, this temptation is compounded by the perception that the country is a wreck to begin with and that it’s too difficult to get aid to the people who need it. 

This great piece in the Huffington Post, Why Somalia Matters, discusses this issue and makes a key observation - we are all connected. 

“The neglect of Somalia also reminds us that the world is no more secure than its weakest, most vulnerable people, no matter where they are located. For years after the end of the Cold War, Somalia was overlooked by world leaders and its corrupt regime ignored. Then it fell apart, and now it’s a global problem, a place where uneducated, heavily armed young men commit piracy on the high seas and terrorists train recruits to kill and terrorize.”

In all things that we do, there is an undefined line that we try not to cross.  It’s true that caring too much can be damaging.  This is also evident in the environmental movement.  If I stop and think about how my every action affects the environment it is paralyzing.  We learn to weigh the importance of buying deodorant against buying a car. 

If you start overthinking philanthropy, you can also end up at that moment of paralysis rather than effectiveness.  Of course I can give $20 to Somalia rather than buying that cute skirt I’ve been eying.  But then…. couldn’t I also do without most of my clothing and most of my possessions and well technically I don’t even need this computer since there’s always the library.  It can be a slippery slope.  So it’s much easier to draw an arbitrary line somewhere.

Where that arbitrary line ends up means a great deal to nonprofits and the beneficiaries they serve.  That is why nonprofits aim to make donating easy and the narrative surrounding donating as compelling as possible.  It’s never, “Well we are doing the best we can but we aren’t quite sure how to reach everyone that we need to.”  It’s, “Your donation will save the lives of 5 children.”  How can we be so sure?  Donors aren’t dumb but it feels better to give if your donation is part of a feel good story. 

The process of evaluating a giving opportunity is not an easy one, and that is why so many people either don’t give or give based solely on emotion.  I didn’t know what to think about Somalia at first.  The news media has certainly been painting a grim picture of the aid opportunities there.  I had to do quite a bit of reading on a variety of sites, and based much of my judgements on the track record of different organizations.  I was especially influenced by GiveWell’s analysis of the situation in Somalia and the updates on the Doctor’s Without Border’s website about their work in Somalia.  But if you aren’t immersed in the philanthropy world to the degree that I am, you don’t know whether to trust GiveWell’s research any more than a dude posting inflamatory comments on Facebook. 

And that is a problem I would love to solve. 

Last night I finished reading Billions of Drops in Millions of Buckets: Why Philanthropy Doesn’t Advance Social Progress by Steven H Goldberg.  Although this book was published in 2009 and bloggers are supposed to write reviews of new books, I’d like to spend some time discussing the book on this blog.  So this will be the first in what will likely be a series of posts reflecting on some of the ideas from the book.

The central premise of the book is that there are mid-sized nonprofits in need of large capital infusions so that they can grow rapidly and deploy their already successful programs to catalyze large-scale social change, but that no efficient mechanism exists for them to find this type of funding. 

I have mixed feelings about the urgency of this need.  In some ways I feel like it is spot on and the author gives some good examples of the type of organizations that need this type of funding, such as Teach for America and KIPP.  Goldberg discusses the fragmentation of nonprofit funding, with nonprofits spending valuable time and resources chasing sources of funding rather than executing programs.  I have seen the inefficiencies in nonprofit fundraising first hand and definitely agree the system needs improvement.

However, as a result of a recent conversation I had, I also have started to think that smaller nonprofits focused on a particular region and are completely in tune with that locality are often the highest impact, albeit limited in range.  There has been a lot written recently (and Goldberg touches on this as well) about identifying the best and most effective practices in a variety of fields, so that nonprofits are not “reinventing the wheel” by trying approaches that have already been shown to be less effective than other programs.  If, through research and discussion, social investors determine that an organization like Teach for America has the best methodology for improving education does it make sense to make Teach for America really large, or to encourage more regional nonprofits to adopt the same approach? 

Does scale make sense in the nonprofit world, and if so, where and how does it make sense?  In my view, none of the handful of nonprofits that have managed to grow really large are all that effective.  Is this a sign of our broken nonprofit fundraising process where less effective organization with the best marketing message are able to get the most funds?  Or is it fundamentally challenging (or impossible) for a nonprofit to grow to a large scale while still addressing a problem that has many different nuances depending on location? 

An interesting analysis on the concept of scaling an effective program through replication was written by Jeffrey L. Bradach of The Bridgespan Group and published in the Stanford Social Innovation Review in 2003.  He discusses the idea of using a model similar to franchising to expand the work of a nonprofit with a proven impact.  Like a franchise, the relationship between “corporate” and the local branch could range from very tight to very loose.  I think it would be interesting to see more of the looser model, which would sidestep most of the issues surrounding fragmentation in nonprofit funding, although Bradach discusses some of the pitfalls that come with that model. 

In business school, we are taught how economies of scale can enable businesses to achieve greater efficiencies.  But one of my favorite lessons from Let My People Go Surfing by Yvon Chouinard, the founder of Patagonia, was his realization that in order to be true to Patagonia’s mission and customers, they needed to limit their growth.  He says:

We don’t want to be a big company.  We want to be the best company, and it’s easier to try to be the best small company than the best big company.  We have to practice self-control.  Growth in one part of the company may have to be sacrificed to allow growth in another.  It’s also important that we have a clear idea of what the limits are to this “experiment” and live within those limits, knowing that the sooner we expand outside them, the sooner the type of company we want will die.

I believe this type of thinking needs to be discussed more in the for-profit world, and that it is an even bigger unknown in the nonprofit world. 

I’m happy to announce here that my team won first place in the Liquidnet Impact Challenge (if you follow me on facebook or twitter this is old news, sorry blog).

We invested a lot of time, research, brainstorming, and deep thought into this competition, and came to really believe in our concept.  So winning felt very good.  We’ve been getting quite a bit of positive feedback on our ideas so now we are wondering whether we should try to make the concept we developed actually happen.

We strongly believe that any entrepreneurial idea (or any idea for that matter) only gets better the more it is discussed.  So please please please let us know what you think.  You can do so in the comments here for a public discussion, or if you’d prefer you can email me at kateelang@gmail.com. Also, please share this far and wide with anyone you know who might be inclined to give feedback (we are looking for thoughts from people who are very knowledgeable in this area, or not at all knowledgeable, or anywhere in between).

Here’s a summary of our idea.

The Problem:

Many donors give to nonprofits based on a marketing message or emotional appeal, while doing very little if any research on the nonprofit’s effectiveness.  This means that nonprofits waste a tremendous amount of resources chasing after funding, which decreases their ability to have an impact. It also means the nonprofit with the best marketing message may be getting more funding than another nonprofit that is actually accomplishing more.

When a donor does try to do the research, there is a lot of noise in the philanthropic sector, with no clear market signals (like a stock market) to help the donor determine which nonprofits are actually having an impact on social problems. 

Our Solution:

Our goal is to expand donor awareness to funnel more funding to the most effective nonprofits.

SPLASH is a website that aggregates the existing ratings and reviews from websites like Charity Navigator and Guidestar, makes it really easy for a savvy donor to do the research, and then helps them leverage social networking sites to share information with their friends and families.

Aggregation: Consider SPLASH to be the Expedia, Travelocity, or Orbitz of nonprofit review sites. We aggregate information from other sites so that we are a one stop shop for nonprofit research. We also integrate advanced search functionality to allow for personalized search results. For example, if a user values nonprofit transparency, the search results will be weighted to emphasize that metric.

Research: The aggregated search results make it easy for the user to view summaries and news, and to quickly drill down deeper into reports.  Users are able to select the results from their search and build a portfolio of projects and organizations to share with their community.

Sharing: Our initial target market is the savvy donor who is already doing some research prior to giving. Our aim is to make it easier for these donors to find information and summarize their research, and then plug in to social networking tools like Facebook and Twitter to reach out to their friends and family. As more casual donors become familiar with SPLASH and social investing issues, we expect our active user base to grow, increasing the number of savvy donors as well as the flow of funds to the most effective nonprofits.

The Ripple Effect: Our Ripple Effect feature uses unique URL tracking to provide users with a dashboard that shows the results of sharing their research. It measures dollars donated, number of donors, number of viewers of the user’s portfolio, and more. This allows users to understand the impact their research has had, giving them a sense of accomplishment from sharing.

If you’d like to learn more and see some really basic mock-ups of what the site would look like, take a look at our finalist presentation:

And again, please provide feedback either in the comments or by sending me an email at kateelang@gmail.com.

Thanks in advance!

I was struck this morning by a blog post by Bob Ottenhoff, the CEO of Guidestar, titled The Path to Sustainability.

In it he quotes Joshua Tripp, CFO of Grameen Foundation USA, as saying:

“Philanthropic funding does not exist in enough magnitude or foresight to bring effective solutions to scale.  Most of the scalable social innovations of the past have had sustainable models: vaccines, hospitals, microfinance, bednets, City Year, etc.  Without a creative, innovative way to engage the market, true scale is rarely possible.  A business model is required.  Philanthropic money can be used to develop and innovate, but the market is almost always required for scale.” [emphasis mine]

He goes on to suggest (this is still Joshua talking, not Bob) that a nonprofit program should progress in two phases, focusing on grant funding in the start-up phase, but moving to self-sustaining profit generation during the operational phase.

Bob seems to agree with Joshua when he points out that this is Guidestar’s model as well. 

I think this line of thought is dangerous.

As a soon-to-be MBA Grad you may expect me to be gung-ho for market-based solutions, and I do have a fascination with the intersection of for-profit and nonprofit models.  I think the movement expecting nonprofits to behave more like businesses is an important one, and one that I support in a lot of ways.  I love the innovation and categorization-bending from B Corp and L3Cs.  But I also believe that nonprofits exist for a good reason.  There are large (and small) needs and challenges that cannot be solved while turning a profit.

An example of an organization combining nonprofit and for-profit models, while relying mainly on philanthropic dollars rather than generated income is Acumen Fund.  Their About Us page states it well:

“Why Charity Alone isn’t the Answer

Poor people seek dignity, not dependence. Traditional charity often meets immediate needs but too often fails to enable people to solve their own problems over the long term. Market-based approaches have the potential to grow when charitable dollars run out, and they must be a part of the solution to the big problem of poverty.

Why the Marketplace Alone isn’t the Answer

Very low-income people are too often invisible to businesses and society. Businesses see no significant market opportunity and governments view low-income areas as having insufficient tax revenues to pay for basic services like clean water, healthcare, housing and energy. Building new models that provide these critical services at affordable price – in the face of high costs, poor distribution systems, dispersed customers, limited financing options and, at times, corruption – requires imaginative business solutions and partnerships supported by investors willing to take on a risk/return profile that is unacceptable to traditional financiers.”

To me, Joshua’s statement and Bob’s post in support of it is a classic case of the pendulum swinging too far.  It started with the idea of nonprofits behaving more like businesses, and now the term “social entrepreneur” and the “triple bottom line” are on fire.  This is all well and good, but it’s possible to take it too far.  I heartily believe that for-profit organizations can and should work to resolve the big societal issues and have a positive impact.  But I also believe that grant/donation supported nonprofits are still powerful, sustainable, and necessary.

This isn’t too say that the market for philanthropic capital is perfect or that there aren’t a lot of limitations that come with the traditional nonprofit model.  I’m currently reading Billions of Drops in Millions of Buckets: Why Philanthropy Doesn’t Advance Social Progress by Steven H. Goldberg.  Despite the pessimistic title, Goldberg uses the book to offer up a proposal to improve the philanthropic market and address the scalability issues that Ottenhoff’s blog post mentions.  I’m reserving any further discussion of Goldberg’s book until I am able to complete it and write a proper review, but suffice it to say he makes a lot of good points.

So although it may be technically correct that it is very difficult for a nonprofit to scale based on philanthropic contributions today, that certainly does not mean we should give up and expect all projects to generate revenue.  That would be doing the nonprofit world, and society as a whole, a tremendous disservice. 

Who wants to tell a child passionate about dance that they are hopelessly clumsy?  Who wants to tell a friend, coworker, or family member that the song they proudly performed at their first show was a dismal failure?  And, how do you tell them?

Saundra Schimmelpfennig, a consultant and blogger, recently launched a “counter-campaign” against TOMS Shoes.  You can read her blog post or just watch this (pretty stunning) video:

Sean Stannard-Stockton of Tactical Philanthropy Advisors wrote a blog acknowledging the importance of Saundra’s message but questioning whether there is a more effective way to deliver it—without alienating or discouraging individuals who want to feel good about their donation.

Since then there’s been some back and forth, with Saundra clarifying her position in the comments, and Sean writing a second blog post responding to Saundra’s clarification. 

It’s a great discussion and I’m not sure what the right answer is. 

I think (and Sean seems to agree in the comments of his first post) that the shock value of Saundra’s video cuts through the noise and could really stick with a donor to have a big impact on the way they think about causes.  But Sean makes the point that it spends too much time on the negative and not enough time presenting positive, effective choices. 

So we are back to the original question—how do you tell someone “you’re doing it wrong” without discouraging them and raising their defenses?  And, how do you tailor that to different audiences (are donors “delicate children” trying to dance, or can we be more blunt with them like we might be to a brother)? 

I’m glad there are smart people like Sean and Saundra having these discussions to start working toward an answer.

I don’t know if submitting to a competition counts as shipping in Seth Godin’s world but it sure feels like it in mine.

My team was selected as finalists in the Liquidnet Impact Challenge, competing against such well respected business schools as Stanford and Kellogg.  The concept of the competition is to increase the number of savvy donors and funnel more funds to the most effective nonprofits. 

We’ve been slaving away at our presentation.  Submitting it felt good. 

I’m very proud of our work - check it out!

We present to the judges via webinar on April 15th.  Use the comments to wish us luck or offer feedback!

Who knew a blog about philanthropy would have so much to do with etymology?

Two things to think about while I’m busy working away on my team’s finalist submission for the Liquidnet Impact Challenge (philanthropy related!).

One:

The word “profit” is from the Latin for “progress” so non-profit essentially means “no progress” (hat tip to Dan Pallotta).

Two:

The word “crisis” is derived from two Greek words meaning “a turning point” and “to decide” (not “the sky is falling”).  (Stolen directly from this excellent blog post about lessons for nonprofits from social media.)

Stay tuned!