Guest Blog Post – Change is Inevitable
Post by James Faghmous
Coming from a technology background, my early experience as a nonprofit executive has been akin to a Lewis Carol adventure: “curiouser and curiouser!” I have been surprised by the time one is expected to spend fundraising, networking and grant reporting. Certainly these activities are useful, but with moderation. How can we be competitive when we spend thousands of hours chasing funds (fundraising, grant research, grant writing, grant interviewing, grant reporting) for a fraction of what for-profit organizations raise in a single round of venture capital investment at 1/10th the time. This is simply unsustainable. Change is, therefore, inevitable.
I believe that change won’t come from new laws or foundations but from a new generation of social entrepreneurs and donors. Today, highly successful individuals are transitioning from very profitable fields to employ their talents in the nonprofit sector. Some examples are Salman Khan, the hedge fund analyst turned nonprofit educator and founder of Khan Academy. Another example is Wael Ghnoeim, the former Google executive who was instrumental in organizing the recent Egyptian uprising and subsequently left Google to assist NGOs rebuild his home country. These young executives are bringing an entrepreneurship mentality that is becoming increasingly common in our sector.
Executive directors (EDs) are disproportionately hired and evaluated based on their fundraising ability. While these new young executives don’t have the “networks” of experienced EDs, they bring an ingredient crucial for innovation that many veteran executives lack: risk taking. Reasonable risk taking is a must for any organization looking to innovate. One has to try new ideas and often fail before finding that break-through concept. You can try to outsource fundraising, but you can’t buy creativity and foresight.
So where should these new executives focus their energy? When it comes to fundraising, how many donors really go beyond signing a check by sharing their expertise, time, and networks? Maybe 5%, who go on Boards and advisory committees? An effective ED must engage and cultivate that small portion of his/her donor base while outsourcing the rest of the organization’s fundraising needs. The rest of the time must be spent developing a thorough vision and plan for the organization, centred around understanding constituents and anticipating their needs and challenges.
Secondly, change will come faster if these very donors make the sector more competitive by holding nonprofits to higher , more meaningful standards. Before supporting an organization, donors should reconsider the common standard that efficient nonprofits are always low overhead organizations. Yes, any organization should not be wasteful, but having a made-up figure of how much it costs to run an impactful organization just doesn’t cut it anymore. Instead, I foresee donors slowly focusing their attention to the following:
- Collaboration: Does the nonprofit work collaboratively? Who are their collaborators? If an organization claims to be working on “big” problems, they should not be considered serious about solving them unless they have a strong network of collaborators.
- How it employs volunteers: Wasting volunteers’ time, talent, and generosity is much more serious that wasting donor dollars. Managing talents and expertise is the challenge of the 21st century executive. You can tell a lot about the nonprofit you support based on how they manage their volunteers. Accountability can no longer be towards donors only. Young (poor) volunteers will demand it too.
- Earned Income: You don’t sit in the street expecting people to give you money just because you are a nice person. Neither should the nonprofits you support. Donors should expect nonprofits to be creative when it comes to generating revenue. At the same time, how much of the organization’s budget is from earned income? Organizations that spend all their energy generating revenue tend to lose their soul, given they are focused on making money, not on the causes they serve. The ideal organization must strike a fine balance between product development and service. A good example is the Minneapolis nonprofit the Cookie Cart. They strike a good balance between earned income, donations and grants to fund their operations. In this way, they can focus on helping at risk youth instead of making a profit from selling cookies.
- Outcomes versus outputs: It isn’t about how many mouths you feed. It’s about how many lives you pull out of poverty. An organization that focuses on outputs over outcome clearly doesn’t have its priorities straight.
Therefore, I see a new generation of nonprofit executives that are entrepreneurial: risk takers, thorough in their thought process and able to anticipate their constituents’ needs and challenges. We also need a new generation of donors who not only expect organizations to be efficient but also cooperative, leveraging human capital, creative and dedicated to solving the problems facing our society, not just its symptoms.
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Very interesting post. Would like to chat more about your ideas…
Great stuff! I think you did a great job summarizing some of our limitations (as a sector). I hope more entrepreneurs like yourself will join us to make the world a better place!
I agree. I think economic trends are pushing organizations (and its staff and boards) to be more entrepreneurial. But that means also taking on more risk. It’ll be interesting to see if the funding community (both individual and institutional donors) are willing to also take that risk.
Thank you all for your generous feedback. I spoke with one funder on this issue, and they seemed interested in looking at “unproven” ideas. Although, I challenged her, by asking her if her organization would reconsider “General Operation Grants” which, in my opinion, aren’t very helpful and have very limited impact. Take that money and reward creativity and energy over the status quo. To me, that seems like limited risk.