As with many ranking systems, the 100 Best Nonprofits to Work For in Oregon is a survey-based process. It combines the rankings of self-reported, staff survey responses and an employer benefits survey.  The scores of the organizations are then parsed into categories or small, medium, and large nonprofit agencies.  According to the Oregon Business Magazine, 170 nonprofits participated in the survey with over 5,500 individual employee surveys received from participating agencies.

Underneath the “contest element” of the 100 Best ranking, is a very important organizational management tool. From the perspective of those I spoke with at the recognition event, the ranking of “100 Best” was, indeed, the expression of an organizational culture of continuous improvement rather than a “bragging rights” contest.

Perhaps this thinking was best captured in a conversation I had with an Executive Director of an organization that has been on the list for three years.  Clearly animated she said, “The survey has each of my employees giving us feedback on our work environment, our management, and communications, along with their opinions about how well we are doing on mission, goals, career development, and compensation. The information is way more valuable to me and my board than the award” (A bit later in the conversation she did concede that the award was also important in fundraising, marketing and her agency was glad to have received it).

As I pondered the “best of event” my mind began to wander into thinking about continuous improvement as an organizational mindset.  As my consulting practice is based on nonprofit performance improvement, my first stop down the road of thinking was to do a quick math calculation.  There are almost 16,000 public charities registered in Oregon (source) and yet only 170 agencies participated in “100 Best” survey process.  That means only 1% of the nonprofit organizations in Oregon were considered for the designation of “100 Best.”  I am not suggesting that only 1% of nonprofits are interested in being named among the “best” but the statistic does beg the question, “how many nonprofits intentionally strive to be among the best?”  In this post, I want to reflect on the role of a “best thinking mindset” for nonprofits and offer some practical strategies for getting started on a continuous improvement process.

Engage Everybody: One of the first principles of continuous improvement is that it is not a “solo practice” or even a top down “management event.”  Continuous improvement is foremost a shared culture and only secondarily is continuous improvement a practice. Here is a simple diagnostic. Stop and think about how often in a board or staff meeting did you hear the question, “What can we do to improve…?”  How many different people ask the question?  Does the question relate to your agency’s programs, operations, evaluation –or all the above?  If your self-reflection suggests that continuous improvement is not as active as a value as you would like in your organization, then start a conversation about the critical need for continuous improvement in the nonprofit sector today.  A few reasons for continuous improvement include: a) growing demands for services require high quality services delivered effectively, b) funders are increasingly demanding continuous improvement, c) high performing organizations are more stable and thriving work environments. (here is an interesting masters thesis on the topic)

Self Assess: Once you have a critical mass of interest in continuous improvement then it makes sense to identify the opportunities for improvement. One way to assess your opportunities is to facilitate a conversation using an appreciative inquire approach that identifies your Strengths, Aspirations, Opportunities and Results (see here & here).  This can be either preceded or followed by a more detailed assessment using more formal assessment tools (great online tool database here).  With an assessment complete, prioritizing your needs is an exercise of determining which of the needs map with your organizational aspirations and hold the greatest potential of a positive return on the invested time and energy required to make the improvement

Develop a Focus: At this stage of the process, it is important to develop a way to focus the energy and attention of the entire organization.  Focusing organization attention can be accomplished using tools such as a written workplan (see here & here) or a visual organizer (see here).  Further, developing a focus includes creating a tracking process to ensure process is being made on performance improvement plans developed.

Rapid Cycle Test: Performance improvement is operationalized with the use of an iterative process to create, measure and monitor changes over time.  One such process is to frame change as a “rapid cycle test” that is a four step cycle of Plan, Do, Study Act (here is a great primer).  In short, this process suggests change is: a) planned, b) implemented as a pilot (do), c) followed by a study of the results, and d) the results acted on (either further implementation of the change or revision of the change in another cycle of piloting).

As this performance improvement cycle becomes an embedded cultural practice, your organization will become stronger. Indeed, operationalizing a performance improvement culture is clearly the mark of a “best of” organization.  I would like to reiterate,  performance improvement is a critical nonprofit management competency to master and increasingly is not optional. The rapidly changing times demand that nonprofit organizations focus myopically on developing the highest level of organizational functioning and still reach higher. Borrowing from the iconic Harry Potter books, getting to where you want to be requires, a clear destination, determination to get there, and deliberate effort.  Performance improvement requires no less.

As always, your thoughts are welcome.

• Economic Restructuring: It almost seems like stating the obvious to write that we are in the middle of one of the most dramatic restructuring of our economy that  we have seen in decades.  One only needs to look at the growing disparity gaps that is creating a tsunami of declining wealth, as evidenced by double digit real unemployment, increasing poverty, and growing housing and food insecurity. The damage is evidenced most profoundly in already marginalized communities and is driving unprecedented demands for the basic services that the nonprofit sector provides. Coupled with this economic decline and stagnation is the failure of our elected officials, at all layers of government, to create rational public policies that adequately sustain the physical, social, and cultural infrastructure of our county. The fiscal stability of many nonprofit agencies is additional collateral damage caused by the restructuring.  To survive and thrive, many nonprofits are fundamentally rethinking the way programs and services are funded and sustained.  The economic threat requires all nonprofits to invest the time and energy into creating, not just a fundraising plans, but a revenue development plan, which focuses on the total capital requirements required to support agencies and builds tenable long-term funding models.

• Political Indifference:  The second threat that faces nonprofit organizations is political indifference. We are facing a radically polarized political environment where there is a relentless pressure to cut domestic spending with little tolerance for increasing tax revenues.  In this environment, domestic spending is slashed repeatedly in a “death by a thousand cuts” scenario.  If there was ever a time that demanded political engagement from the nonprofit sector, it is now.  As nonprofit leader turned congresswoman Donna Edwards was recently quoted as saying, “This is not a time for sitting on your hands. It’s a time to be involved and be active and to care about what’s happening, not just in your community, but what’s happening in our country.”  Nonprofit leaders have the moral obligation to advocate for the communities they serve as nonprofits know, from the day-by-day experience, the human impact that are in the faces and stories  connected directly to budget cuts. It is no longer acceptable for nonprofit leaders and board members to hide behind the false, sweeping generalization that acting politically  jeopardizes the legal status of their nonprofit agency. These times, demand a politically engaged nonprofit sector.

• Community Fragmentation: In this hostile environment, there is also a tendency for community fragmentation.  At the surface, this fragmentation can bee seen in the polarized political debates that are pitting those with resources against those without.  On a secondary level, fragmentation can be a seen within the nonprofit ecology. Many organizations talk about coordinating services, collaborate on projects, and often serve together on issue-focused community coalitions. However, when the conversation nears the waters of service efficiency, duplication and effectiveness, collaboration tends to fragment. Such fragmentation threatens to undermine the sum total of services provided to the community.  Without thoughtful discussions related to providing high quality services, with high efficiency and measuring our collective impact, we do a disservice to our clients, communities, and donors. It takes courage to build nonprofit community because it forces us to look at sharing resources, consolidating programs and services, and perhaps even restructuring organizations through partnerships and mergers.  Such courage is needed now more than ever.

• Unfocused Message: A fourth environmental threat to the nonprofit sector is that we tolerate an ambiguous and unfocused message about our work and our collective impact as individual agencies and collectively as a nonprofit sector. Polling data repeatedly demonstrates that the community has an unclear understanding about the nonprofit sector.    In part, this ambiguity is tied directly to the nonprofit sectors’ struggle to  communicate a clear message about the critical role that nonprofit organizations play in contributing to the social, cultural and economic health of our communities. As we move forward in coming years, most nonprofit agencies will find success to the degree that they develop and execute a clear, intentional, and visible, communication strategy.  In short, if the community does not know your agency or what you contribute to the quality of life in the community then why should they care about your success?

• Lack of Meaningful Impact Data: In my opinion, the lack of meaningful impact data is the greatest threat to any nonprofit agency.  The clarion call for accountability and performance is a call that is becoming louder on from foundations, government grantmakers, and even individual donors.  We now live in an emerging context of “impact funding,” where decreasing resources are aggregated and targeted to address significant needs that can be leveraged and scaled (external link). In this environment, nonprofit agencies need clear and compelling data to compete, thrive, and effectively serve their communities.

These five threats create an environment that fuels public skepticism of the work of nonprofits.  In an environment of scarcity, a politically indifferent and fragmented network of nonprofits, with an unfocused message and a lack of demonstrative impact, will slide from relevancy towards irrelevancy. Yet turning this page upside down, a new image appears.  It is an image of nonprofit organizations with a strategic opportunity to dismantle these environmental threats.

While economic restructuring may feel like standing on the shifting ground during an earthquake, nonprofits engaged, with a collective political voice, carrying a focused and clear message about the needs and values of a strong  sector, can take limited control during the disaster and take the lead in the rebuilding effort.  From this aspirational viewpoint, I personally believe that better days are ahead for nonprofit organizations. With vision, focus, discipline and strategy, nonprofit organizations have the opportunity to seize the day, even in the midst of environmental challenges.

As always, your thoughts are welcome.

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Postscript: It is to this end of creating smart strategies and lasting impact that I began my consulting practice nearly two years ago.  Since that time, my firm has partnered with a number of agencies to create and operationalize bold strategic directions in a hostile environment.  I invite you to learn more about us and our services and should you need a partner in success, contact us for a free consultation.

In a recent blog that appeared on the Chronicle of Philanthropy ‘s website titled: Bankruptcy Isn’t a Solution to Nonprofit World’s Woes, the Philadelphia Orchestra was held up as a “poster child” of an agency where bankruptcy was the wrong solution to a fiscal crisis. In this article, the author argued that debt restructuring rather than bankruptcy was the correct and more appropriate solution to the crisis.  The point of the article was to declare bankruptcy as bad strategy.  However by focusing myopically on the debt of the orchestra, the author  oversimplifies the complexity of the crisis.

In the case of the Philadelphia Orchestra, a cursory Google search reveals a number of articles and commentaries suggesting that along with debt, there were other internal and external issues contributing to the crisis that included tension with the musicians who opposed the bankruptcy,  ticket sale declines dating back to last season, fiscal pressure caused by pension obligations, as well criticisms of a lack of leadership accountability.  One thing is clear, the fiscal crisis of the Philadelphia Orchestra did not appear “ex nihilo” but was years in the making and it is an oversimplification of the crisis to suggest that the solution was simply choosing the best option for debt restructuring.

I would argue that, similar to the orchestra, that  most organizations in fiscal peril are in that place because of a composite of internal and external factors in the social-citizen sector ecosystem. With the exception of grassroots and small nonprofit organization, fiscal crisis is rarely caused by a single event. Rather, fiscal crisis is often the culmination of ongoing failures in the organization’s strategic capacity. In the case of the Philadelphia Orchestra, publicly leading with bankruptcy rather than strategy was just one more  organizational leadership failure. Leading with bankruptcy rather than strategy was the self-inflicted cause of intense public criticism leveled at the Orchestra’s top decision makers.

The purpose of this blog is not to dissect the bankruptcy decision of the Philadelphia Orchestra but focus on the what it means to lead with strategy in a time of crisis.  To this end I would suggest the following attributes of leading with strategy:

• Lead Beyond Crisis Thinking: Over a year ago, I wrote a blog about crisis thinking where I outlined the importance of focusing on mission, vision, outcomes as well as participatory leadership as the keys to moving beyond crisis thinking. My contention was (and is) that collectively reflecting on the core of an organization’s purpose and achievements is the prerequisite step to unleashing transformative creativity.

• Lead Systemically: Managing from strategy requires a systems view of the nonprofit agency and the local “ecosystem” in which the agency operates.  In other words, by mapping the patterns of the external ecology (i.e., local economy, grant-maker funding patterns, the political landscape) and the internal ecology (i.e., employee moral, program quality and innovation) directly effect an agency’s ability to design broad solutions to a crisis.

• Lead with Transparency: The most critical attribute in managing in a crisis is to be relentlessly committed to transparency.  Internal staff and the external community deserve absolute transparency and honesty. Transparency discloses how the agency got into the crisis with candor and responsibility.  Without transparency a crisis in confidence linger as a cancer even if the presenting problem is resolved.

• Lead Restoratively: The concept of restoration is a causal chain.  First and foremost, restoration presents a wholistic solution to manage and prevent recurrence of the crisis.  Crisis requires leadership repair, which, in turn leads to the repair of confidence.  Crisis evokes fractured relations with board, staff, community, funders and clients.  Leadership repairs. Without a focus on restoration, the crisis ripples to a secondary “confidence crisis” that can cast a lasting shadow over an organization.

While this post has been written from the perspective of managing while in crisis, the principles outlined are perhaps best understood as a primary or secondary prevention strategy applicable to a broad cross-section of agencies.  The leadership qualities described in this post, applied as prevention are diagnostic and beg the question, “how durable would your strategic leadership be in the time of a crisis?”  For most, the answer lies in the degree to which the agency actively cultivates the qualities of strategic leadership in the absence of crisis.  After all,  leading with strategy is simply the discipline of good leadership.

As always, your thoughts are welcome.

At the same time while conservation may temporarily preserve the status quo, in the face of an every growing demand for nonprofit services and solutions, a conservative strategy is untenable in the long-term.  Senior nonprofit executives and nonprofit boards engaged in operational planning may find comfort in budgeting to “known” revenues but “revenue-driven” budgeting may undercut growth and undermine the long-term health of an agency.  Under-investing in administration and infrastructure, leveling or reducing salaries and benefits, underfunding reserves, or a host of other conservative fiscal moves, can amount to the proverbial “death by 1,000 cuts,” where the cumulative effects temporarily deferred, may suddenly manifest as an organizational crisis or  an  inability of the agency to meet the organization’s mission.

This post is part of an ongoing series related to strategic planning.  As a precursor to strategic planning, I believe that an agency needs to cultivate a culture of courage.  So here is one take on the outlines of  principles that embody organizational courage.

Be Authentic: More than once I have interviewed an executive director or board chair who has confided that the constant adapting to changing funding streams shapes and reshapes in subtle (and not so subtle) ways, the organizational mission and vision. One exasperated director shared, “Some days I’m not even sure if I am walking into the right building.”  While mission-drift often starts unintentionally, such incremental creeping is prevented by a myopic focus on authenticity.  Every program, every funding decision, every grant application,  must be guided by a clear mission and vision in the context of the compelling need(s) it seeks to address.  Authenticity provides the focus an agency needs to envision a future that is greater than the current economic reality.

Be Intentional: Too often boards of nonprofit organizations get mired down in the operational details of the current agency operations.  The mundane and immediate, such as a year-to-date 10% revenue shortfall, adding a new policy or procedure to the organizational canon, or figuring out how to improve the computer network, while all important, can impede and intentional strategic focus.  When a focus on the operational becomes a cycle routinely eclipsing the strategic, it becomes harder to be intentional about the future.  To be successful an agency needs an intentional focus on strategy that is clearly palatable throughout the organization.

Be Large: With a conservative mindset, many nonprofit organizations are constantly engaged in fundraising, grant writing and trying to keep together a patchwork of revenue streams.  Messaging to the community and potential funders is “we are worthy of support because we are doing good things on virtually no overhead.”  Large, turns such thinking upside-down.  Large re-frames the message from “we are worthy “ to “there is a compelling community need and we are catalysts to effectively address that need.”  Fundraising becomes resource development and in a coordinated strategy, an agency seeks investors interested in creating a social return on investment. Being large supports the  assertions of being a catalyst with clear and measurable outcomes as well as benchmarks for quality and continuous improvement.  There is little question about the presence and leadership of the organization in the community.

Be Radical: While being conservative can preserve the core, being radical can expand the core.  Yet, radical needs to be defined.  While radical may carry the perception of risk or polarization, radical is simply the ability to ask the hard and profound question “what if?”  The “what if” questions spawn radical ideas that can be translated into strategy and action.  Questions like: “In the context of the compelling need, our mission and vision, what if we could do things differently to create a larger impact?” or “If we were to fundamentally rethink our relationship to our community and our supporters, what new models for service delivery would emerge?” need to be asked. Creating a culture that thinks radically is one that expands the agency’s horizon even if when the current economic clouds partially obscure the view.

Authentic, intentional, large, and radical are four terms that illustrate a strategic organizational culture that is applied rather than an abstraction.  Such terms provide a base that an executive team and board can use to measure progress and be accountable to. By operationally defining a strategic culture, an agency enters into the process of strategic planning from a position of strength, opportunity and aspiration, which are prerequisites of a results-driven process.  So it bears repeating – Be authentic, intentional, large, and radical.

As always, your thoughts are welcome.

Fast forward to a few days ago. I was participating in a synchronous chat using Twitter on the topic of creating a “courageous nonprofit board.”  Twitter is an abysmal tool to have a meaningful conversation with forty or fifty nonprofit professionals, however, it was interesting to see the group spew out a steady stream of almost random 2-3 sentence messages.  While as coherent as the playground of a preschool, the messages passing across my computer screen did offer the opportunity for me to further self-reflect on the topic of board development.

In the past, I have written episodically on the topic of board development and, in this post, I wanted to put in writing some thoughts about an evolving framework for board development. While not complete, I hope it serves as some directional anchor points that nonprofit leaders can use to think about board development and performance.

The Oregon Attorney General has boiled Nonprofit Board service down to a 12-page booklet with lots of white space. Many nonprofit boards would do well to start organizing their operations around the core functions of care, loyalty, obedience, and oversight. However, once the basic structure is in place, it is important to get outside of the core and into the “white space.”  Indeed, once a board gets into the white space the pathway gets interesting as it in the white space where the metal of high performing boards is tempered. So what exactly is found in the white space? I would suggest the following attributes:

Commitment, Consensus and Community It is my fundamental belief that high performing boards cannot exist without a tacit sense of community. Board and staff will be successful in direct proportion to the degree that there is a shared sense of purpose and focus that is organized around a commitment and consensus (as in general agreement and not unanimity). In practical terms, it means building board membership first and foremost from the perspective of  the agency’s vision, mission, community and culture.  Without social connectivity between board member and the organization, the board will be challenged to excel.

Internalizing Theories of Change, Leverage, and Scale A second dimension of a high performing board is for members to understand how the agency seeks to effect change. It is essential that a board is clear about the social impact intended by the agency, specifically: 1) how the agency employs theories of change, 2) how the agency’s internal programs and services and its external partnerships leverage or magnify impact and 3) how the agency’s growth trajectory will ultimately scale the social impact.  Cultivating a strong understanding of the theoretical framework for the agency is not only an intellectual exercise but becomes the core language and frame of reference used by board members as they discuss strategy, performance improvement, and is the place from which the board makes decisions.

Understanding the Local Nonprofit Ecosystem A third dimension of a high performing board is for the board to understand the nonprofit and social service sector in general and possess a deep understanding of the local nonprofit and social service ecosystem. Understanding how the local nonprofit agencies, government, philanthropic organizations, citizens and business collectively work to address community needs, enables a board  to better use their civic reach to strengthen the agency they serve.

Engaging in Three Core Planning Processes One of the themes of my blog this year is to focus on the core nonprofit planning processes. As I have written before, strategic planning, evaluation planning, and resource development planning are three intersecting disciplines that serve as the strategy core for a board. Indeed, the simplest measure of board performance is the degree to which they invest time, energy, and resources in the three domains of nonprofit planning.

Organizing around the Long View A final dimension of a high performing board is to organize around the long view. It is my belief that high performing boards are measured over years and not months. Boards become high performers with an intentional and disciplined approach to developing a deep understanding of the agency it serves.  Such a board also cultivates learning and inquiry management practices that comprise an iterative learning-to-action cycle over time.  Culture, history and enthusiasm are grown with intentionality and patience. Strong boards take time to develop.

Most nonprofit board members have a passion and mission affiliation for the organization where they serve. Most board members also bring high-value skills and experiences that can support the growth the agency.  The task of leadership is to recognize the contributions of each board member and to weave together the individuals into a collective board that becomes more than the sum of its parts.  Offered in this post are germinal ideas that can be used to help nonprofit boards strengthen and clarify that process of weaving together a high performing board.

As always, your thoughts are welcome.

As a starting point, I want to create a visual for the concept of nonprofit program accountability. Among the technology assets in the empire of Google is a tool called NGram Viewer. Using this tool, one can enter a word or concept and graph the use of the word over time (using as a reference the database of Google Books). I recently used NGram Viewer to graph the concept of nonprofit program accountability. As you can see in the figure, nonprofit accountability first emerged as a concept in the late 1970’s and bumped along until the early 2000’s. It was at that point that the term began a steep incline with nonprofit program accountability becoming a living, breathing, much talked about idea. Note: please don’t overestimate the value of this word picture as I am not suggesting there is any rigor to the underlying data –its just a illustrating concept. With such a steep growth, one would expect nonprofit program accountability and evaluation to be a priority within nonprofit organizations. Enter conceptual and practical disconnect.

Quick story. I was once talking with a nonprofit board about program accountability and evaluation. At one point in the conversation, a board member sitting back with his arms crossed asked, “is there any reason to think our funders have a problem without performance?” The response was “no, our funders are happy.” The second question of the board member was, “Does the agency staff think we’re doing what we need to be doing?” The response to this question was definitive, “Yeah, we’re doing great work.” The third question began to sound like the case was being built question by question, “So, is anyone asking us for greater program accountability and evaluation?” The third answer was more tentative, “um, no, we aren’t being asked for anything new.” With an air of pronouncement came the board members final rhetorical thought. “So why are we having this conversation about program accountability and evaluation?” Needless to say, program evaluation got little traction that evening.

When we turn to the literature, we fare no better. For example,  a series of articles published by smart academic  Joanne G. Carman and her colleagues, support the notion that the practice of program accountability and evaluation varies tremendously among nonprofits. Abstracting one statement from the studies illustrates the theme of her and her colleagues work.

“The picture that emerges is one that is decidedly mixed, illustrating a range of behaviors that challenges the current perception that most, if not all, funders are asking nonprofit organizations for more evaluation and performance measurement data.”(1) - emphasis mine

Even more recently, The Center for Effective Philanthropy published a report titled, “Grantees Report Back: Helpful Reporting and Evaluation Processes” that concluded, “On average, grantees do not find current reporting and evaluation processes to be very helpful in strengthening their organizations and programs.” In differentiating the use of evaluation and reporting, the study concluded that “Grantees who report discussing their report or evaluation with their funder perceive the reporting or evaluation process to be more helpful — yet nearly half of grantees say no discussion occurred.” -emphasis mine.

The conceptual and practical disconnect between program accountability and evaluation and the perceived usefulness of such efforts is clear. While we talk about nonprofit accountability and evaluation, the practice of such efforts is uneven and inconsistent. If this is the state of field practice, the next logical question we need to ask is “what are the barriers that get in the way of program evaluation?”

First is the wall. Money –or more appropriately the lack of it. Many will say that the disconnect between evaluation talk and practice is directly connected to the lack of resources. “We can’t afford to do evaluation.” is the typical response to the lack program accountability and evaluation data. However, I suggest that you can’t afford not to. I personally believe that the day is rapidly approaching when funding agencies and donors begin to say, “The emperor has no clothes.” I have written before that, at the organizational level, transparency and accountability are becoming increasingly important. Without supporting program level accountability and evaluation data, I also believe that nonprofit organizations will come under greater and greater skepticism. So while at face value the barrier of “no money” may be true, the wall must come down and every organization must make it a priority to dismantle this barrier. A final thought is that the wall of “no money” actually hides the real barriers to program accountability and evaluation, of which, I believe there are three:

Skills, Support, Confidence & Value: I believe that a significant barrier that prevents many organizations from seriously addressing program accountability and evaluation is found in the alchemy of “lacking skills” in evaluation and “lacking the support” to conduct evaluation. Too often the leadership of organizations fails to invest in developing the organizational skills and support to conduct evaluation. Skill development and support does not have to be costly. There are a variety of online resources that are a Google search away. Relationships can be built with local colleges and universities or seek out a qualified consultant.  Finally, if you need money, then raise it. Enough of the excuses.

The second part of this barrier is the lack of confidence and values. Some have labeled these two variables as core motivation. If one understands the value of a task and has confidence that they can do the task then there a greater likelihood that the task will become a priority. Putting these pieces together, to overcome this barrier, an organization should develop an approach to understanding and resourcing evaluation that builds confidence and create a culture and an organizational value that supports evaluation and the use of the resulting data.

Missing or Misaligned Incentives Another barrier to program evaluation and accountability is found in the area of incentives.  To start, ask yourself some inquiry questions such as

• When was the last time that your organization celebrated a data report that demonstrated program effectiveness?
• When was the last time you presented program evaluation results in a public venue?
• When was the last time that your major funder provided you with adequate resources to conduct an evaluation?
• Have you ever been penalized for having or not having evaluation and accountability results?
• Has anyone ever asked for your program accountability and evaluation results?

These are a just a sample of questions that can be used to probe where the incentives for evaluation are (and are not) for your organization. Exploring the incentives, lack of incentives, or misalignment of incentives is another way to, not only identify an evaluation barrier, but to dismantle it. As a result of this inquiry, an agency should clearly be able to identify positive incentives for program evaluation and, if they can’t be identified, they should be created.

Fear that We are the Emperor: Perhaps the largest barrier to program accountability and transparency is the fear that evaluation outcomes would reveal that we are the proverbial emperor. “What if we measure and the results are negative?” can be a paralyzing specter if our mindset is one of fear. However if we want to develop ourselves into a socially innovative nonprofit organization we must dismantle fear and embrace inquiry. We need to understand that program accountability and evaluation is the source of power and empowerment. Without evaluation how can we improve or measure progress? Program evaluation is the stuff that makes program giants, changes things, and disrupts unmet needs.   Conversely the lack of data simply perpetuates the myth of nonprofits as nice organizations doing good in the community.

What I am arguing for this is post is the need for nonprofit organizations to consider their relationship to program accountability and evaluation. The literature and practice might suggest that the field of the social-citizen sector talks about accountability and evaluation but at the same time, also suggests that we have been less than successful at operationalizing that talk with any consistency. However, I would argue that this is case where field practice does not matter. I believe that socially innovative nonprofit organizations are those that invest in the development and implementation of a solid plan for program accountability and evaluation. As illustrated by the Venn diagram, organizational strength and impact is more durable in the presence of a solid evaluation and accountability approach that is connected to strategic and resource planning.

Program accountability and evaluation strengthens internal practice as a focus of continuous improvement and serves as an external benchmark to proclaim an organizational commitment to excellence. As nonprofit agencies continue to look for ways to innovate in a resource-constrained environment, building and implementing strong strategic plans, resource plans, and evaluation plans will position agencies well to effectively meet compelling community needs.

A always, your thoughts are welcome.

(1) Carman, JG. (2009). Nonprofits, Funders, and Evaluation Program Accountability in Action. The American Review of Public Administration 39: 374-390.

My experience cemented in my practice, the relationship between the system (or ecology) and social change. As illustrated in the figure (see reference), the socio-ecological model is used by academics and theorists to describe the complexity of social change. In short, the model suggests that there are a number of concentric circles of intervention required to create social change. I like this representation of the socio-ecological model because it evokes the imagery of a pebble being dropped in a body of still water creating larger and larger ripples of change.

Starting with the core of the individual, and rippling through social relationships, families, institutions and community, a socio-ecological approach to change ultimately creates a new understanding of community norms and social policy. In my work with nonprofits, philanthropy, and government, I often see organizations excel in one, or perhaps two, circles of the model but rare is the organization that thinks about its programs and services across the entire socio-ecological system.

At the same time, the word performance continues to gain momentum among nonprofits, philanthropy and government agencies. The performance trend is moving at an accelerated speed and suggests that attention will increasingly focus on impact and outcomes across nonprofits, philanthropy, and government organizations. The democratization of data coupled with the proliferation of options to invest philanthropic resources will force the social-citizen sector to become savvy about tying their need for capital to the outcomes that they produce. So theory of change and performance collide. Organizations that can lead from a position of articulating a theory of change that is based on social ecology will be better positioned to approach donors for resources. Rather than asking for funds to “keep the doors open” a nonprofit can approach donors as investors, inviting them to invest in the nonprofits programs and services that will create social impact at the community level.

So the question that emerges is, “how does one think about creating a socio-ecological change?” I believe that there are several strategic domains of action that an agency should explore to build a social systems – social ecology approach.

Create an Audacious Goal: Jim Collins in his infamous books and articles related to the “Good to Great” research, popularized the concept of the Big Hairy Audacious Goal (BHAG). In short a BHAG “is clear and compelling, serves as a unifying focal point of effort, and acts as a catalyst for team spirit. It has a clear finish line, so the organization can know when it has achieved the goal; people like to shoot for finish lines. A BHAG engages people – it reaches out and grabs them. It is tangible, energizing, highly focused. People get it right away; it takes little or no explanation.” (see reference) The social-citizen sector is in desperate need of nonprofit leading willing to embrace BHAGs and, I believe that it is only when an agency embraces a BHAG does a social systems – social ecology approach become compelling.

Create a Clear Social Impact Model: Elsewhere I have fully described several approaches to developing a social impact model (here, here, & here). In this post it is important to simply reiterate that an intentional model of social impact is one of the core organizing documents for every nonprofit. Whether you use a logic model, social impact framework, pathway model or some hybrid approach, any external funding agency, donor, or social investor should be able to see your model of impact.

Create a Network: When considering the concentric circles of the socio-ecological model it can be intimidating, if not overwhelming to think about. I have had nonprofit leaders say, “there is no way our agency can embrace such an ambitious change agenda.” My response is to agree with the premise that socio-ecological change is beyond the reach of many individual agencies but that organizations as a network have tremendous power. In fact, creating a socio-ecological network holds tremendous potential to address compelling community needs. When a network of agencies are committed to the core processes of communication, coordination, and collaboration the network effects magnify individual contributions of the network members.

Create Accountability: With a goal, model, and network in place, the next strategic domain to consider is describing how the agency will be accountable to the goal. The three standard measures are process (did we deliver what we said we would deliver?), quality (how well did we deliver what we said we would deliver?) and outcome (did what we deliver make a difference?). Evaluation, is essential to s socio-ecological approach because without evaluation, there can be no confidence in the program impact. Stories and anecdotes are increasingly ineffective in justifying the support for social-citizen sector programs. Evidence matters.

Communicate the Results: Finally, completing an organizational focus on the social ecology, it is important to build effective methods to help others understand what you are doing. Communications planning should begin early and continue as an ongoing story. The better the community understands how your mission, vision, programs, services and outcomes connect with a systemic model of change, the more successful you will be in building lasting support for your organization.

Placing these action areas together, the contours of a strategic process become clearer. Without a robust and organizing theory of change, many nonprofits string together related programs and services as opportunities emerge. While in the past, a patchwork strategy may have served the social-citizen sector, such a strategy is less sustainable and durable in today’s increasingly performance-based context. By focusing myopically on a the social ecology and systems-change, nonprofits have the opportunity to strengthen its internal mission, vision, programs and services as well as strengthen the community that supports it.

As always, your comments are welcome.

References
California Tobacco ControlUpdate 2009
Image Adapted from: Centre for Addictions Research of BC
Collins, J. C., & Porras, J. I. (1996). Building Your Company’s Vision. Harvard Business Review, 74(5), 65-77.

The reality is that while finances are important evaluation criteria for nonprofit effectiveness, the impact of the agency on the social need and the organization’s strategy matters much more, when judging the relative worthiness of nonprofit agencies. Indeed, it is puzzling to me that the Charity Navigator expert quoted in the Willamette Week article would perpetuate the mythology of the “program to administrative cost ratio” when just this year, Charity Navigator began a revamping process to its rating system where the new rating weights include Effectiveness and Results as 50% of the score, Financial indicators as 33% of the score (overhead 10% and working capital 23%) and Accountability/ Transparency as the remaining 17% (source: external link).   Further, judging the relative merit of a nonprofit solely on quantifiable data, removes the “nonprofit narrative” from the assessment process.  The human story is part of organizational effectiveness. On this latter point, a relatively new organization, Great Nonprofits is building a rating system based on the narrative of crowds telling the story of nonprofits. Putting these pieces together, the point becomes clear.  It is a terrible oversimplification that says a “program to administrative cost ratio” determines the merit of a nonprofit.

So, the question that remains is if nonprofit worth is not about a single ratio then what contributes to building an unassailable reputation and rating?  I would like to suggest several components that nonprofits might pursue to pass the highest scrutiny of a due diligence process.

Build on the Existing tools: While the Better Business Bureau’s charity standards and Charity Navigator are still imperfect, their methodologies and vetting processes are worth understanding and, if feasible, even participating in.  In addition to these rating systems, I would also encourage nonprofits to participate in Great Nonprofits which presents a very intriguing community building potential as well as register their agencies with Guidestar.  Finally, I would learn about nonprofit rating system of newcomer GiveWell.

Build a Strategic Budget:  While nonprofits need to create annual operating budget within the constraints of projected revenues, it is also important that that a nonprofit also builds a strategic budget that recognizes the true cost of operations and capacity. I outlined the concept of strategic budgets in more detail in another post (here) so I will simply reiterate that a clear understanding of true operating and administrative costs is an essential strategy for resource development.

Build a Strategic Budget and Strategic Plan Context:  I assert that the cost of operations and capacity is only relevant in the context of strategy.  What many fail to understand is that some operating and administrative costs are relatively fixed.  For example, hiring an experienced executive director to grow a small nonprofit or hiring a development director to develop a comprehensive fundraising strategy come at market rate and there are limited degrees of freedom in salary range. A smaller nonprofit making such an expensive hire will see, in the short-term, their administrative and operating costs spike beyond 35% of total revenue.  But if the investment in such a hire can be placed in the context of a 3-5 year strategic plan that doubles the size of the agency then the high administrative and operating cost become understandable and proportionally will decrease over time.  In short, cost in context matters.

Build Fearless Transparency and Accountability:  When in doubt make it public.  I believe that nonprofits benefit when they put out as much data in the open as they can.  At minimum a nonprofit agency needs to be public about: its strategic plan; who is on its board of directors and advisory committees; its IRS Form 990s & IRS Letter of Determination (they are available online already); its audits or fiscal reviews; its annual report; and its program evaluation data. Other steps that can enhance transparency might include a monthly blog by an agency’s executive director; and periodic summaries of board activity and major board decision (maybe as part of blog posts).  In an age of increasing accountability a nonprofit’s transparency matters.

Build an Honest Profile of Program Impact: While arguably the hardest component to do well; having compelling data and story about your agency’s impact is perhaps your best defense to criticism that you spend too much money on administrative costs and overhead.  Many agencies track services delivered yet fail to communicate this data on a routine basis.  Far fewer are the agencies that communicate clear and demonstrative program outcome data.  At the end of the day, the worthiness of a nonprofit agency needs to be judged on outcome data supported by story.  Increasingly donors will ask that that nonprofits demonstrate that they are meeting its mission and, as a foundation representative I was talking to recently, succinctly stated it, “no data – no confidence.”

While I believe that the two articles I referenced at the opening of this post were simplified stories to a much larger and more complex reality, they serve as a wake-up call, not only to the agencies named in the stories, but to all nonprofits.  Are we documenting our story in a way that is open and transparent enough to endure scrutiny and oversimplified accusations?  Can we readily point media, donors and citizens to internal or external rating systems that help the public have confidence enough to invest in us?  Nonprofits that invest resources and work proactively to be on the leading edge of demonstrating effectiveness, transparency, and accountability will be able to answer yes to these questions.  For the rest, what are you waiting for?

As we get started, I want to be up front and provide my working definition of sustainability.  “Sustainability is the systemic and systematic development of program and agency capacity that produces measurable outcomes, successfully navigates change, and demonstrates rational growth over time.” Sustainability planning therefore is based on four cornerstone concepts:

Systemic and Systematic Development: Sustainability planning is inherently based on a systems view of the nonprofit agency and the local “ecosystem” in which the agency operates.  Most effective when intentional and thematic, sustainability planning must address the development of the whole organizational ecology. In other words, the external ecology (i.e., local economy, grant-maker funding patterns, the political landscape) and the internal ecology (i.e., employee compensation, technology infrastructure and marketing/communications) directly effect an agency’s ability to design strategies that ensure financial resources needed for program success.

Measurable Outcomes: A basic premise of sustainability is that the agency and its programs must produce outcomes that are documented, quantifiable, and worth continuing.  Social impact matters and impact alone is the basis for sustainability.  If an agency can’t measure and demonstrate the worth of its programs and services, then it is directly or indirectly violating the trust of these investing in your programs and services.

Navigating Change:  The pace of change in this new economic “normal” demands that nonprofit agencies’ have the agility to navigate change both in response to and in anticipation of the ongoing and rapid realignment of community resources.  “Demand is up and revenues are stretched taunt” will remain the dominate reality for some time to come. Flexibility and adaptation build on the foundation of strategy is a critical component of sustainability.  Rather than “locking down” a static revenue development strategy, an organization needs to strategically understand  its larger funding model and, within that model, invest in rapid cycle testing (external link) of new resource development strategies.

Demonstrating Rational Growth: Sustainability is only tenable when the pace of growth can be assimilated by the organization.  Growing too fast or conversely too slow can be detrimental to the health of a nonprofit.  Finding a growth pattern that can be managed in the context and culture of the organization is also important to sustainability.

In other words,  these four principles that define sustainability move an agency beyond mapping out fundraising activities for the coming year. Sustainability planning is the larger strategic conversation that considers not only revenue projections but also the underlying framework and strategy for maintaining and managing organizational growth.    Unfortunately many nonprofit organizations uncouple organizational strategic planning and fundraising planning –facilitating a separate process for each.  However, it is increasingly less tenable to think about revenues apart from strategy.  Nonprofit leaders must excel at systems thinking and integration.  This challenges the traditional thinking that there are three separate but related processes: strategic planning, operational planning and fundraising calendar development.  Strategic, operational and fundraising planning need to fuse into a single hybrid planning process.  This process sets a clear vision that is supported by integrated outcome driven strategies for program and service delivery; capacity development; and revenue development (fundraising).  Such a plan must be intentional about opportunity management and create the necessary degrees of freedom required for adapting to the changing economic and programmatic landscape.

In the context of sustainability planning, the facilitation and process leadership that is required is led by a strategy focus and is supported and complemented by tactical fundraising skills. Planning for events, building donor databases, and writing grants are important  fundraising strategies but fundraising strategies should not be confused with sustainability planning.  Rather than such formula-driven metrics as donor conversion or event “return on investment,” a facilitation process for sustainability planning is strategy driven and anchored to the longterm success of the agency. Forward thinking nonprofit agencies are increasingly investing their limited time and resources thinking beyond fundraising to models of sustainability.

This post is one of a continuing series on strategic planning and is based on my work facilitating strategic planning with nonprofit agencies. In strategic planning one of my initial conversations with an agency executive director will invariably include a discussion about the use of the strategic plan following its development.  The savvy executive director will describe the concrete ways in which the plan will be used to support agency governance.  S/he will describe the use of performance measures connected to the plan goals and strategies and the specific tools that help the board and staff manage their progress on implementing the plan.  More common however, the the executive director that laments how the exercise of strategic planning rarely impacts the agency in a deep and substantive way.  In this scenario, I am often asked, “how can this strategic planning process be different?”  In this post, I wanted to review the fundamentals of how use the process of strategic planning to increase organizational capacity.

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The obvious direct impact of strategic planning is the written strategy that is created.  At its most basic level in creation of a strategic plan is the DNA of capacity development.  Done well, a strategic plan offers a roadmap for the growth and  development of an organization. With intentional effort to keep the plan present and alive using simple performance monitoring tools, (like a dashboard or scorecard) an agency directly benefits from its investment in strategic planning.  However, I believe the face value of a strategic plan is only the beginning of the use of a strategic plan. Some other layers of using strategic planning to build capacity include the following:

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Board, Staff and Stakeholder Development: While textbook strategic planning can be a very pedestrian process of assessing the current internal and external environment, developing priorities and strategies, and writing a document, I believe the potential of strategic planning is to use the process to develop the energy, passion, skills and knowledge of board, staff and stakeholders.   Strategic planning is about engagement and focus of people and not just about data.  In planning a strategic planning effort, one of the framing questions should be “at the end of this process, how will out staff, board and stakeholders be different?” If this question is pursued intentionally then strategic planning offers and agency to develop the understanding, passion, and commitment of board, staff and stakeholders.  In this context, the planning process can and should include empowerment and learning community approaches. Indeed, a strategic planning process is successful to the degree that it creates a deeper understanding of the role and function of the agency in solving compelling social needs.

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Strategic Dialogue:  Having facilitated the development of numerous strategic plans, I find some of the greatest energy in the process comes as I work with an organization to gather “outside” perspectives.  While not commonly done, I am a strong believer that  organizations benefit from seeking advice and perspective from outside of the agency.  Insights coming from other agencies working on the same issue, from funders, donors, community partners and even agency clients, yield not only valuable strategic planning insights but often begins the process of dialogue.  Once the strategic plan is developed, I encourage agencies to continue the conversation with their funders, donors, community partners, and clients by sharing the strategic directions of the plan.  Some agencies bristle at the concept of sharing such sensitive, internal knowledge and reference the for profit sector’s contention that strategy is proprietary and needs to be guarded. I would counter that being transparent about strategy is actually strategic in the social sector.  Sharing knowledge about strategy makes explicit the position, direction and focus of an agency and can be used to define a larger community or regional agenda.  Engaging in such a dialogue with partners, funders, donors, clients and the community at large fosters collaboration and increases the potential of creating a network of strategies that can improve the collective social impact of all stakeholders.

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Field Building: Paired with the concept of strategic dialogue, a third use of a strategic plan is that it holds the potential to improve the field of practice.  Strategic Planning offers a unique and compressed exercise in evaluation, innovation and system design.  When strategic planning is resourced, well-designed and not simply a rote exercise it is a laboratory experience that has both internal and external dimensions.  Too often a strategic planning process is myopically inward content with asking the question, “how do we succeed in fulfilling our mission?”  While there is no denying that strategic planning is designed to create an organizational future, strategic planning also influences the collective future of the field of practice in which the agency operates.  In addition to how does the organizational “we” succeed there is also a dimension of how does the collective “we” succeed.  One outcome of strategic planning could be the free sharing of lessons learned.  By giving away your knowledge, you enable the the social sector to collectively enhance the knowledge base and field of practice.

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Taken together, strategic planning becomes a layered process of developing capacity.  Clearly and unequivocally the foundation of strategic planning is the creation of an organizational pathway to the future.  However, if layers of “human capital” development, strategic dialogue, and field building are added to the foundation of strategy, a strategic plan becomes a powerful tool to expand agency capacity. Facilitating a strategic planning process is more than following one of any number of strategic planning textbooks.  Strategic planning is large, shaping and capacity-building and it is the responsibility of facilitators to “bring life” to a strategic planning process.  I believe, it is only through this larger lens of capacity development do nonprofits build meaningful strategic plans.

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As always, your comments are welcome.

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