June 18, 2019

Broadening Impact: Success Factors for Non-Profits

Pradeep Aradhya

Pradeep Aradhya
CEO/Novus Laurus LLC

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The United States has one charitable organization for every 860 citizens.  Practically every socially minded person you know is connected to and/or giving to some charitable cause. Nearly every large corporation has a charitable foundation and nearly every corporate executive has a non-profit board membership. All of these causes are worthy. And all of them have the same challenges. They struggle with fundraising, scaling, impact metrics (either non-existent or reports that merely address participation rather than results). Quite often their leadership teams have just dug their heels in and remain oblivious to the fast-moving world and market! So how does the world change for the better? And if you are a Philanthropist, Sponsor, or Board Member how do you ensure that your contributions are effective?

Here is a readout of the current state of non-profits in the USA (2015-2016)

1.57M charitable organizations in the USA

- A tiny 2.39% of these take 90% of total reported non-profit revenue of almost $3.75B 

66% of non-profits have revenue less than $1M  

- Arts, culture, and humanities, environment and animal-related, and youth development non-profits generally fall below the $10 million threshold. Examples of these organization types include art museums, national park conservatories, animal shelters, recreational and athletics programs, and boys and girls clubs. See here for full list of types. The larger revenues are predominantly hospitals and universities:

The larger charities tend to be national, and it could be argued that charities with less than atleast $50M ($1M per state) in annual revenue have no hope of creating national level impact. Here is a table showing that fewer than 5000 of the 1.6M US charities have revenues larger than $50M. And fewer than 10,000 have more than $10M:

Source: https://trust.guidestar.org/what-does-the-nonprofit-sector-really-look-like

Can the smaller charities effectively solve the problems they target? Will they bring about pervading and sustainable change? Is it enough to be a grassroots organization with good ideas and hope? It is entirely conceivable that some organizations take on only localized challenges (e.g. saving the local theater) and choose not to become larger. However, causes that touch the larger world do need to consider more. For example: local river watershed efforts can benefit by collaborating with larger river preservation efforts. How long will these smaller organizations need to grow to $1M, then $10M, and the hope for national presence? Is the total funding available increasing in proportion to new organizations being conceived or are they all vying for the same money? Is there overlap and duplication of effort? Do these charitable programs manage to do everything required to achieve even strong local impact?

In 1999, Owen Wells, President of Maine’s Libra Foundation, wrote an op-ed piece in which he argued that Maine’s 1400 non-profits needed to be entrepreneurial, avoid duplication of effort, innovate, collaborate, and accept occasional failure. Since that time, nine non-profit hospitals have merged into a single entity, Maine Health. Each hospital maintains its own identity, but a single governing board allows for cost savings and pursuit of statewide projects. Thus for example, through Maine Health, the Libra Foundation distributes free books at well-child visits. By his or her fifth birthday, every child born in Maine has a personal library of twelve carefully-selected books.

Below are a list of orthogonal success factors that govern the construction and acceleration of impact for non-profit organizations:

1. Money: While funding is clearly central to impact and growth, it guarantees neither. If anything, money follows impact and vision, not the other way around. Sustained funding and longevity is always a challenge. Even when there has been growth in revenue, did it lead to genuine change or merely to swell in existing metrics?

In 2015, the Noyce foundation completed a long-standing plan to sunset and spend down its assets. In preparation, the trustees contacted several of its previous grantees, all leading non-profits in the education field. The trustees challenged the organizations to envision their next stage of growth. What would make them more effective, inspiring, vibrant? The foundation did not name a monetary figure. Instead, it awarded the most convincing plans the millions of dollars the plans required.

Here are four core principles in regard to non profit funding that few organizations manage to understand or master:

Chicken or Egg: Every organization says, "If we had the money we could build capacity" ... to raise more money or have greater impact. This is a vicious circle. Only entrepreneurial thinking can extricate the organization from it. Lay the egg first and expect the chicken that comes to find its own feed. That is to say find a way to increase capacity first and then back-fill with the money generated. Organizations too timid to take any risks will stagnate with impact and be unable to inspire larger and regular donations! Only phenomenal runs of luck bring in steadily increasing funding with no internal changes.

Impact Impact Impact: Demonstrating steadily growing impact begets funding! The “number served” is the lowest level of impact. While it may work well for McDonald’s, it does not demonstrate effectiveness of a program that wants to change lives. Develop a theory of change (see below) and metrics for its various stages and show how the organization is tracking year over year. One Executive Director said foundations did not have any metrics they want to see for her area and that she had to educate them. The non-profit world is too old for this to be true. Either the theory of change and metrics impress and inspire funders or no money will be forthcoming. There is only so far that blindly sympathetic contributions will go. Honest sharing of impact measurements, even when they show areas of failure, can lead to new funding if the organization has a plan for how to overcome the failure. Sustained and repeat sponsorship will quickly wise up to the difference between initial buzz and true impact. If an organization does not have the contemporary appeal and credibility that comes from proactive adjustments to real metrics, it will be chasing new or smaller donors each year.

Larger Than Local Focus: A charity must set aside unnecessary humility when speaking of vision for change. While focus is necessary, talking only about local challenges or changes may not be inspiring enough. Nor will a vague aspiration for broader efforts convince anyone. Funders want to see a clear time line and strategy for growth, or the organization will be viewed as “merely” a local player, and larger contributions will go elsewhere.

Figure Out The Easy Money & Scale It: Few organizations whether non-profit or even for profit, understand and prioritize revenue sources well. Of all the sources of money or revenue that an organization might have, some are easier than others. Analyze which sources take the least effort and scale those sources first. This is life blood. Even biological systems attempt efficiency by minimizing effort spent on core life processes. Any organization that manages to scale those low effort funding sources has the most efficient fundraising mechanisms possible. Board member contributions should be mandatory. This is necessary in order to build a culture of support rather than merely opinion and also to assure external funders that their contributions are valued. Lastly, non-profits get too attached to "free services". If the methodology or service is valuable, then there is a market where someone can afford to pay for it. Having recipients of services contribute something to their cost helps convince other funders that the services are valued. Examine ways to add those revenue sources.

2. Develop A Theory Of Change (TOC) & Wield It: Most charities go through three stages - ideation, operationalization, scaling. While everyone struggles to get operational and stay operational it is actually irresponsible to even attempt operational stability without a carefully thought out TOC. This must include the stages and metrics along the paths leading to change or impact. A time bound plan to implement it must follow shortly thereafter. You can edit the plan as you move forward but not having a TOC is shooting in the dark and a way to muddle along with a misaligned and misdirected organization. Make sure your TOC accommodates contemporary conditions: in particular - technology (see next). A good TOC with metrics for various paths and stages allows an organization to show impact in a much more granular and tangible manner. Funders will be impressed. Staff and volunteers will be motivated and focused! Here are examples.

3. Grow effective teams: Non-profit teams have to be entrepreneurial. On two counts, boards and executive teams have to ensure a mindset for change. Firstly, teams that dig in to an ideology and either cannot or will not change run the risk of becoming outdated as new possibilities and market forces emerge. And this is particularly true on the second count: technology is changing the landscape for funders, programs and its participants, organizational operations, and volunteers. Large for profit organizations find themselves obsolete overnight due to changing customer expectations and behavior. Everything is becoming technologically supported and customer centric. Similarly, a substantial shift is being observed in online giving. Monthly online giving grew 40% from the previous year. Donations made on "Giving Tuesday" rose 148% from 2013. Further, marketing online is not just an option, it is now "live or die". 92% of nonprofit marketers are creating content that is mobile compatible and possibly even personalized. Online content marketing is 62% cheaper than other forms of marketing. Non-profit organizations do not have the luxury any more of pursuing dated methodologies or strategizing indefinitely. As funders, volunteers and program participants follow buzzy technology trends, any organization that stagnates is rapidly headed for obsolescence. No more can non-profits afford lifestylers or Luddites.

Southern New Hampshire University (SNHU) has a sticker price of $40,000 for a four-year bachelors degree. This private non-profit has 135,000 enrollments of which 97% are online. “It’s a word we can’t use in non-profit higher ed—that students can be students but they can also be customers,” says President Paul LeBlanc of SNHU . Online alumni earn an average of $51,000 within 12 months of graduation. SNHU runs an online competency-based education (CBE) program that serves a total of 1,000 refugees in Rwanda, Malawi, Kenya, Lebanon and South Africa. The goal: educate 50,000 in 20 locations by 2025. This nonprofit is well on its way to becoming the billion dollar college of the future.

4. Geographical Resources: Apart from funding, nimble staff and board, and an effective TOC, building impact that exceeds the merely local requires geographical networks with program venues and reliable volunteer networks. Building everything organically as a single organization is too difficult and needs the entire organization to be available for geographical mobility. It is easier to find ways to merge paradigms and programs into existing infrastructure in other geographies than to build it from scratch in each town or region. If non-profits do not find sister concerns and organizations, and figure out how to play along-side them, they will turn into a single town sensations that merely dream of deep national impact. Non-profit boards and leadership should look beyond their buildings.

Techbridge is an Oakland, California non-profit that engages grades 4-12 girls in technology, science, and engineering. Launched in 2000, Techbridge has reached over 10,000 students with hands-on engineering and technology projects, career exploration activities, academic counseling, and leadership development. Girl Scouts of the USA is 2.8 million strong—2 million girls and 800,000 adults who believe girls can change the world. in 2015, Techbridge blended their engineering curriculum with GSUSA's Leadership Journeys to creating three Engineer Your Journey planners. The initial one-year pilot was slated to bring the blended Techbridge-Girl Scout experience to over Girl Scouts from five councils (Girl Scouts Louisiana East, Girl Scouts Heart of the South, Girl Scouts North East Ohio, Girl Scouts of South Carolina - Mountains to Midlands, and Girl Scouts Western Pennsylvania). Read about the tremendous impact of STEM at GSUSA with 160,000 Girl Scouts participating in STEM programs annually. A majority of councils offer their members more than ten STEM programs each year.

5. Actively Partner: Most organization are not good at partnering. Neither do they have the ability to effectively cover every aspect of their TOC. Partnerships that can provide complementary program offerings, geographical reach, and championship must be pursued for greater success. Non-profits do not seem to either understand or be able define the win-win needed for partnerships. One of the strangest things I have observed is Boards and EDs worrying about their branding and competition. The brand promise of a non-profit is about the social or environmental change they would effect. It is definitely not about colors or logos or even about methodology. It is extremely short sighted and even selfish for non-profits to ignore that larger community which does include seemingly competing efforts for similar change. It will not be easy to do, but the right thing to do is to merge together such efforts and operate towards change with greater strength than to quibble about who gets to do good! Every board and executive team whether for profit or non-profit must have an owner and expert for partnerships. This is the difference between extremely slow and tedious organic growth vs actually building community and achieving change at scale.

The Maryland Food Bank provides more than 41 million meals to people in need. The food bank collaborates with Maryland non-profits and about 50 local farms to send pre-release inmates into the field to glean roughly 800,000 pounds of produce which annually provides 650,000 meals, or more than 10 percent of the food bank’s meals. While the hungry in Maryland are the prime beneficiaries, the program provides opportunities for pre-release inmates to integrate back into society.

DonorsChooseGlobalGiving, and Kiva—have agreed to work with the Harvard Business School and the John Templeton Foundation to conduct A/B testing on fundraising pages to determine whether certain online giving incentives are more effective than others. This research will help other non-profits achieve better fundraising results.

So which of these factors must an organization master first? A good order in which to take on the mastering and leveraging of these factors would be:

  1. TOC and metrics - carefully considered levers and relationships to achieve change (or methodology) along with stages and metrics for each must be the starting point before attempting any operations. They can always be tweaked based on learning but working without clarity on how the end goal is achieved is a waste of time all around.
  2. Marketing and fundraising increase - Using impact and TOC to market the organization to funders and volunteers to raise money and interest comes next. Identify and prioritize revenue sources. In particular identify as quickly as possible where the easiest money comes from.
  3. Nimble and strategic team - Building out a team that can understand and change according to market forces is paramount. Anyone on the board, executive staff or even volunteer roster who is unable to change with the times will slow the organization down. Slow committee work will not cut it anymore. Working by committee is only viable if it is in short quickly validated sprints. Preserving and building on actionable conclusions is mandatory. If an organization starts over from scratch more than once it is probably a rudderless organization. 
  4. Geographic and volunteer partners - The moment there is a semblance of stability locally, the organization needs to start thinking about spreading geographically further. This might be either physically or electronically. Organizations that understand and handle growth outside their own birth environs are the organizations that achieve large impact and revenues.
  5. Other partners - No organization can execute everything required to create the changes it aims for. Mustering the capacity, expertise and reach needed will not be easy. Partnerships are much easier. To do this, an organization must appoint a partnerships owner or team and define partnering objectives and boundaries. They must clearly cite the mutual benefits so organizations invited to partner are motivated.

These success factors and how a charitable organization handles and tracks with each presents a direct gauge of what the organization will achieve over time. Your filter for where you spend your time and/or money should be honed to look for these as you attempt to maximize your give back!

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