cc >> Jeanan Yasiri Moe: This is
Entrepreneurship in Society, a course that is offered through
the University of Wisconsin School of Human Ecology.
I'm Jeanan Yasiri Moe. As we begin today, I would like
to extend thanks to our partners for supporting this course, the
UW Office of Corporate Relations, the UW College of
Engineering for their technical support, and financial support
that's provided through the Ewing Marion Kauffman which is
committed to advancing academic education in entrepreneurship.
Additionally, we'd like to thank our media partners, Wisconsin
Public Television and their University Place crew for taping
today's lecture. I'm pleased to introduce our
special guest today, Dennis Johnson, vice-president of
advisory services with Forward Community Investments.
Forward Community Investments provides its clients with
guidance and resources that help to build a strong, secure and
sustainable statewide non-profit community.
Dennis has been with Forward since 2010 and holds and MBA
from the University of Nebraska Lincoln and did his
undergraduate here at UW. So he is a Badger.
He brings to his role strong skills in working with nonprofit
executives on organizational development planning and
facilitation as well as budget planning, project management,
and human resource functions. Today, Dennis is going to be
discussing building capacity is building success in nonprofit
social venture enterprises. Please join me in welcoming
Dennis Johnson. [APPLAUSE]
Dennis Johnson: Well, thanks, Jeanan.
I appreciate the opportunity to be here and talk a little bit
about what Forward Community Investment does and how we are
helping to build the capacity of nonprofits across the state of
Wisconsin. How many of you, just maybe with
a show of hands, are you familiar with community
development financial institutions?
Anybody? No.
Okay, maybe. Someone's got a little bit
there. We are a CDFI.
So we are chartered by the US Treasury, and our initial
charter was around providing access to capital to nonprofits.
So if there's anybody here in the business school or pursuing
any of those types of programs, really what our aim is to
provide access to capital for nonprofits that cannot find
conventional financing. Either the rates are not
attractive, the terms are not attractive, or, quite honestly,
in the economic environment in which we find ourselves today,
many nonprofits can't go to a conventional financial
institution and get credit. Just as many small businesses
can't get credit today, but it's even more exceptionally hard for
nonprofits. So we've been around for about
20 years. We started in 1994.
We have lent close to $30 million in our history.
We are based here in Madison, but we are a statewide
organization. Up on the overhead screen here
are just kind of the lines of business that we serve.
We're divided into four different areas.
One is advisory services which, as Jeanan had mentioned, I'm
responsible for. That includes learning
opportunities similar to this, but most often we work closely
with nonprofit executive directors and board members to
help build their capacity around nonprofit finance.
We also do some one-on-one consulting around nonprofit
finance, that's included in advisory services, and a couple
of other initiatives. Because we are a community
development financial institution, we are required to
raise capital to lend. So oftentimes individuals,
institutions, will ask us and wonder, well, where do you get
your money from to lend out to nonprofits?
And so our money comes typically from financial institutions
themselves. Because we lend to low to
moderate income serving population nonprofits, they get
CRA credit with their investments with us.
We also have many socially responsible investors that are
looking for a more local or regional type of investment.
You may have heard of the Calvert Fund which is a national
mutual fund company that invests in socially responsible
investments, and oftentimes you can send your money into them,
and you don't really know where it's going.
And so as a CDFI, investments that come to us are being lent
here in the local community. So we've done local projects
here in Madison and across the state for the last, like I said,
almost 20 years. Talking a little bit about our
lending services. We do loans.
We do lines of credit. We do loans for working capital.
We do pre-development loans. Many different types of
activities in our lending department are things that,
again, traditional lenders would not really look at.
We'll look at subordinate positions in a third or a fourth
position. We'll go up to a 95% loan to
value. So we're really doing things
that are more creative than many traditional lending
institutions. And then the last bullet here is
around our research initiatives. We, for the last four years,
have been doing a statewide nonprofit economic impact
survey. And we're going to talk a little
bit about that here in a few minutes, just some of the trends
that we're seeing there, but those are included in our
research initiatives. So, here's our mission and our
vision. Our mission is to transport
communities by building capacity and mission-based organizations
through leveraging lower cost capital, expert advisory
services, and timely resources. And our vision is a strong,
secure, and sustainable nonprofit community across
Wisconsin. So, again, we're here to build
the capacity of nonprofits and really try and help them be more
successful in achieving their mission, and that's our mission.
Just some goals for today. I was talking with Jeanan here
before we got going about some of the other speakers that
you've heard this semester or maybe are coming.
I guess there's one coming after me here in a few weeks which I
think is interesting. But I want to provide some
context first on what I think the Wisconsin nonprofit
community looks like. So I'm going to reference back
to the survey that we completed last fall, provide a little
information around what the landscape looks like today for
the nonprofit community, and then I want to jump into helping
you understand some of the trends that the sector is
seeing. I understand that one of the
readings from today might tie closely to that, and that was
not planned. She did not tell me what you had
on deck as far as the pre-reading, but I think it will
merge nicely there. And then I'm going to jump into
really what is capacity and what is capacity building.
What's the difference, why is it important for the sector, and
how can we explore some effective practices in building
capacity. And then, lastly, share some
ways that our institution is helping organizations with their
capacity building. So that's kind of a road map for
today. So, here's a few statistics.
And I think oftentimes when you think of nonprofits, people have
a misperception, perhaps, of what type of organizations that
they are. The university, obviously, is a
nonprofit organization, a very large nonprofit organization.
There are healthcare institutions that are nonprofit
organizations. There's also the local food
pantry. There's community development
facilities. There's community centers.
And I think oftentimes nonprofits don't maybe get their
full value and the recognition that they deserve, and so here's
a couple of things. In Wisconsin, they are the fifth
largest employer. Almost 250,000 people across the
state of Wisconsin work for a nonprofit.
In rural parts of the state, which is oftentimes where we're
working with clients, many times they're the largest employer in
those particular communities. Up until recently, I would say
nonprofits have been quite a stable employer given the
uncertain economic conditions and things that are happening
across the state and across the country given our certain
uneconomic opportunities that I think it's not quite as stable
as it used to be but if you look at historically they are a
stable employer. And the last point here is
really one that really gets back to our mission in really trying
to help build the sector is that I think oftentimes the
organizations that are doing the heavy lifting in these
communities is really critical to the well being of the
residents and the individuals living in those communities.
So it's really critical those services they provide, whether
that's a community center and maybe it's for at-risk youth,
maybe it's for the elderly, they're really oftentimes
serving populations in our communities that, if we're not
really paying attention closely to, we may not realize who's
helping to bring those services to the community and making sure
that it's supportive. So, one of the things that we
talked about recently is, I did a learning session in Wisconsin
Rapids yesterday and we talked about this idea of the new
normal. And here's a picture of our
economic outlook update from last November.
And really fully appreciating the demands on Wisconsin's
nonprofit community have exponentially increased in the
last few years. Nonprofits can really no longer
work on the models that they have historically.
I think that's really a large part of setting the stage for
today is there's two things that are really going on.
One is economic and the other is there are trends changing, that
we're going to jump into here in a little bit, that really are
creating nonprofits to get stronger, to get better, to be
more effective, to really be more focused on their mission
and make sure that they are really serving the individuals
and the organizations that they have sought to achieve when they
got that nonprofit status. Our survey results from last
fall, a couple of interesting statistics that I wanted to
share is that, again, we focus on the nonprofit finance area.
So many of the questions are focused around cash flow,
budgeting, what kind of reserves you have in place, and those tie
directly to whether or not that organization is going to be able
to continue to sustain itself through these uncertain economic
times. So a couple of quick statistics
that came out of this survey from last fall.
The one being 51% of the nonprofits surveyed have less
than three months cash on hand last fall.
You can probably imagine if you look at yourselves and think
what do I have in my savings account, how am I getting
through the month to make sure I pay my rent or my tuition or
whatever is going on. Organizations, nonprofits
included, just like any small business have to really pay
close attention to the cash they have on hand so that they can
make payroll and pay their fixed and their variable expenses each
month. So this particular statistic is
really quite startling to us that more than half the
nonprofits that we surveyed across the entire state, which
we put out about 6,000 nonprofits on our list served,
we use other organizations like Jeanan's group here at the
university and other partners around the state to try and get
the word out. More than half of them have less
than three month's cash on hand, which is really, I think, a
startling statistic. 46% of those reported government
funding decreases in their last fiscal year.
I think that's one thing that we probably tend to see and hear on
the new, read about, that our government funding is shifting
radically and quickly and that organizations really are kind of
in a tailspin and trying to figure out, okay, if I'm not
getting as much funding from government to run my
programming, how am I going to continue to either do the
programming or how am I going to do it differently to make sure
that we're fiscally responsible. One other thing, nonprofits that
were more financially secure and capable were more likely to
pursue long-term strategies for success.
And that's really where we kind of are going to today and around
capacity building is that we're really trying to help build
nonprofits to be stronger, to be more effective, and really look
for some strategies that maybe have not historically been
prevalent in the industry. I think if you think of the
for-profit sector, which is where I spent the majority of my
earlier career, it's always about making a dollar for
whether it's a publicly traded company or it's an independently
owned company, it's the bottom line, and I think nonprofits
have always been really focused on their mission, which they
need to be, but in today's world those lines are blurring and
they are having to shift and look for more creative ways to
generate revenue to sustain their programming.
And then the last point from the survey here is the more
financially secure a nonprofit was in its future, the greater
likelihood of success. And I think that speaks to the
sector in general as well in that the more confident they
were about the type of programming they were doing, the
more likelihood they were going to be successful.
And that's one of the gains that we see in the capacity building
work that we do is that organizations that are
financially secure and that are confident tend to have greater
outcomes. So here's two slides, I think,
that cover a couple of things here that are interesting.
The first one, capacity building is about strengthening and
preparing for challenges and opportunities.
It looks at how prepared they are for change, on the left-hand
of the screen you see here, and on the right-hand side, how
solid of a grasp on the environment do they have.
And we looked at them and cut the data in three different
ways. If they were having some type of
chronic financial problems, if they were healthy but they felt
that they were vulnerable, or if they really felt that they were
financially healthy. And nonprofits that are
financially confident feel more prepared than vulnerable or
struggling nonprofits. That might be intuitive, again,
but I think this confidence is directly tied to available cash
reserves but appears to reflect nonprofit leadership as well,
which is going to be, again, one of those pieces that we're going
to come to as it relates to the capacity building is that it
really comes down to leadership in the organization.
And that's not just in the organization but that's also the
board of directors that are governing these organizations.
The other slide here that also came from the survey is around
confidence in their service approach and concerns about how
to react to things that were happening.
Again, we cut the data and looked at whether or not they
were having some chronic financial problems, were they
healthy but vulnerable, or were they financially healthy.
And here you can see that financially healthy nonprofits
are more confident about the services and less concerned
about the potential changes. And for service confidence and
reactions, the difference between struggling nonprofits
and those that were vulnerable was less extreme.
So, again, you may look at these numbers and think if they're
more confident, those that felt that they were in a financially
healthy space, they agreed they were more confident in their
service approach. Those that were having financial
problems were certainly more concerned.
So hopefully that gives you a little bit of context about some
things that are happening in general across the sector.
The next section here is really what I want to talk a little bit
about a consulting firm in California that prepared a large
national study around the convergence of some trends that
are happening in the sector. And I think this really speaks
to why organizations need to be doing things differently and
also why they're exploring different types of social
entrepreneurship opportunities. So this came from La Piana
Consulting. They developed this monograph,
again it's called convergence, which sought to eliminate
several key trends and, really, their interrelationship between
the two. So that's kind of the diagram
here that you're seeing on the screen which are especially
relevant to nonprofits as they look towards the future.
The idea behind this thought piece was to spark discussion
across the nonprofit sector and to have these ideas inform
ongoing planning and strategy development given this new
economic reality. Now, this study came out, I
believe, in early 2010, so it's about a year and a half,
18 months ago. But the research identified five
key trends converging to reshape the social sector.
While each dynamic has profound implications for how nonprofits
will do business in the future, it's really the convergence of
those five that are going to transform the sector.
So I'm not sure, I think you can probably see them pretty well
here, but they range from these demographic shifts that are
redefining participation in the sector to technological advances
that abound in the sector, networks that are enabling how
work to be organized in new and different ways, interest in
civic engagement and volunteerism is certainly on the
rise, and sector boundaries are certainly blurring.
So each of the five major trends is changing the way that
nonprofit sector operates. I'll just give you a couple of
examples. For example, nonprofits
increasingly develop profit generating enterprises.
Corporations are becoming increasingly active in the
social sphere, and out of this mutual crossing over, new
organizational forms are emerging.
And I think that may tie to, perhaps, one of the pieces that
you're reading about today for this particular session.
In the past, those seeking to create social impact were
primarily driven by a single model, the nonprofit.
The future will bring a wider array of structural options and
a greater willingness to experiment as well as heighten
demand for accountability and compelling measures of social
value. So historically, nonprofits it's
been around mission. Historically, for-profit
organizations, it's been around profit.
And now we're starting to see those two kind of merging and
blurring some. So the driving question can be,
what do we really want to accomplish?
And I think you're seeing more for-profit organizations trying
to take a mission related approach to their business
model, and you're seeing more nonprofits that are really
trying to find ways to generate revenue.
Successful organizations, obviously, will quickly move
beyond those traditional assumptions about how those
goals are attempted and think again creatively about those
structural forms. So if we take a look at each of
these five particular trends, the first one, again, these
demographic shifts are really redefining participation.
This probably is not a surprise to anyone.
There's some data up here that shows the age of the population
in the United States in 2010 and what it's projected to look like
in 2030, and I think we've been hearing for some time around, oh
my gosh, the baby boomers are retiring, they're retiring, how
are you going to replace all of these workers in the workforce?
And really there's a couple of different things that are going
on there. Obviously, younger generations
comprise and increasing percentage of the workforce, and
they bring with them new values and expectations around work,
around activism, and around the use of technology.
The dynamic may challenge the ability of nonprofit
organizations to attract and provide a place for this new
generation to find meaningful participation.
Younger people have different expectations in what they want
out of their jobs and out of their work and their lives.
In addition to the management challenges presented by a new
set of workforce values and expectations, the current
leadership of the sector, of the nonprofit sector, is really
faced with this inevitable task of succession planning.
And I think one of the things that is really kind of emerging
here is this idea of shared leadership models, and they're
newer, I think more progressive, how can we get everyone
involved, how can we take more of a team approach to the work
in which we're doing and the decisions that are being made,
and that's really very different than traditional and
hierarchical management leadership models.
So the challenge is not so much the whole changing of the guard
that was feared. I think about five years ago
everyone was thinking all these baby boomers are going to leave
the workforce, but I think that really has not played out as
much, and part of that is economy.
I think many of them have decided to wait, perhaps stall
their retirement. So we have this new challenge,
maybe not so much that there's this exodus of all of this
knowledge and skill set in the workplace, but now we have
younger people who bring a different skill set and a
different knowledge and we have a more mature work base that is
not quite ready to leave the workforce.
So a couple other things on the demographic shifts.
A couple things here. What we would call a responsive
nonprofit, those that are more progressive and really trying to
be ahead of the trends, in this particular context a responsive
nonprofit is really diverse and intergenerational.
Its leaders have market awareness and respond
strategically. Their organizational
infrastructure includes those systems of shared leadership
that I was just talking about. The second trend, technological
advances abound. The rise of social media has
challenged nonprofits to embrace new ways of connecting and
communicating and really demanding greater openness,
greater transparency with their constituents and their
stakeholders. With the plethora of new
technology tools comes the need to improve both organizational
ability to choose among them and which ones to use.
I was chatting with Jeanan before we got started.
One of the things that we have included in this presentation
with other groups is this idea that is social media a fad.
Is it something that's passing in the way, and I contemplated
whether or not I would play that today, and I was thinking I have
to really think about the audience.
Most of you, I'm assuming, are significantly younger than I am
and are probably all over the social media.
And so I don't think it really serves the greatest purpose to
say that social media is not a fad because you probably know
that and realize that by Facebook and Twitter and YouTube
and all the other technologies that are out there.
But as an example of this technology advances abound, one
of them is that there's a tendency for the eager nonprofit
to jump into social media to create a single organization
wide web identity. Our organization, honestly, has
struggled a little bit in gaining some space in that
Facebook, that Twitter, that social media, and one of the
things we have struggled with is that I think historically
nonprofits have really wanted to have one voice.
They wanted to present themselves as kind of one tone,
one tenor, and when you look at social media and if you have
multiple people in an organization that are trying to
manage that social media, it's difficult to have one voice and
one tone and one tenor when you have multiple people that are
trying to have in impact, whether that's Twitter, whether
that's blogging and whatnot. So, I think nonprofits that are
effective in adopting new technology understand that it's
today social media culture, people want authenticity.
They don't want an overly marketed message.
They want it to feel like it's natural and that it's authentic.
They want to hear real stories from actual participants in a
nonprofit's activities. They want the opportunity to be
more than the passive audience members whose social activism is
limited to writing a check. They want to be on the inside.
They want to co-create the dialogue, and communication must
be continuous, it must be personalized, it must come from
multiple sources. And all of these trends pose
cultural challenges for many nonprofit leaders.
Again, if you think of the demographics and, historically,
many nonprofits have leaders that have been in those seats
for a long period of time, there are some demographic and some
cultural challenges there. Successful nonprofits will use
technology strategically as part of an overall communication
plan, not just because it's a novel and because it's a tool
for advancing the mission, not an end in and of itself.
They want to be clear on their goals, their expectations, and
consider a new kind of ROI. Rather than return on
investment, we're taking that as return on insights and really
getting to understand and know what's going on inside that
organization. A responsive nonprofit is
experimenting in this context for technological advances with
new tools strategically, crowd sourcing ideas and content,
using social media and web 2.0 tools for fund raising and
friend raising, which I think is a big trend that's happening
right now here in Madison actually.
And, obviously, capitalizing the opportunities for virtual work.
I would imagine you're all using Blackboard or some iterative of
Blackboard, and so I think this idea of how we work in a virtual
space and really in this global economy has changed
significantly, and that's one of those trends that I don't think
nonprofits have really kept up with.
The third one around networks enabling work to be organized in
new ways. Working with and through
networks is not necessarily new. The traditional concept of
networks includes coalitions in the nonprofit sector.
It might be alliances, it might be partnerships, some type of
learning communities, and various other collections of
individuals and organizations working towards a common goal.
However, with the advent of these new technologies and new
norms for working collaboratively, the potential
impact of networks is increasing exponentially.
There's a piece in the La Piana convergence study that came from
the Monitor Institute, and it refers to these new ways of
applying network theory and technology to traditional work
as working wikily. I'm sure you're all familiar
with wikis. And observe that allows for far
deeper and more meaningful collaboration that was
previously possible. It's now just as easy for an
organization to learn from and collaborate with an individual
located across the globe as it was with that nonprofit across
town. And so I think those types of
technologies are really helping to network and bring people
together. Again, a responsive nonprofit in
the context of networks is really nurturing those networks.
They're regularly working with geographically dispersed
individuals. They are working with dispersed
organizations and other networks to accomplish goals, to be
transparent with their collaborators and their
competitors, and striving for that systemic impact as much as
organizational success. So, I think the thing on the
bottom of this particular slide is pretty key in that formal
organizations are no longer the only way to get things done.
The fourth trend, and I stole this picture from your website,
I don't know if you recognize it but I have sourced it there on
the bottom, is around civic engagement and volunteerism is
rising. I think one of the things, as we
look at this particular trend, is the election of a former
community organizer to the highest office in the United
States serves as a vindication of the nonprofit sector and an
inspiration for increased civic engagement.
Yet, much of this energy has been captured by the public
sector led by the Obama Administration rather than,
perhaps, by the nonprofits. Excuse me, together with the
rise of opportunities for direct engagement through online
activism and virtual volunteering, this puts
nonprofits in a precarious position demanding that they
meet rising expectations and also continue to prove their
added value. So, in coming years, we
anticipate and unprecedented number of active retirees and
also this new generation of younger professionals who were
raised with community service. So maybe just by a show of
hands, how many of you are volunteering somewhere today or
providing some type of community service?
I think that's just a trend that continues and so it kind of gets
back to the demographic shifts. You have a younger generation
who, I don't want to say that's an expectation, but it is a part
of their DNA in growing up today in that you give back.
And we have a retired workforce that's coming into the
population and trying to continue to give something that
they have perhaps been giving over time.
So it really presents this tremendous opportunity for the
sector, but only if the sector really learns to successfully
engage both of those parties and figure out a way to help them
work closely together. Together with the rise of
opportunities for direct engagement through online
activism and virtual volunteering, this puts
nonprofits in, again, a precarious situation demanding
that they meet rising expectations and prove their
added values. So, on the fifth one, I think
we're on the fifth one now, is this idea of sector boundaries
are blurring. So I think this kind of gets,
again, to perhaps one of the articles that you've read for
today, but this idea that the sector, blind, competitive
environment is emerging when Wall Street investment houses
are starting to compete with local United Ways.
It's really interesting, community foundations, those
that are for donor-directed funds and a growing emphasis on
corporate social responsibility really means that the social
virtue is no longer perceived as exclusive to that nonprofit
brand. There are many for-profit
companies that are trying to leverage through social
entrepreneurship and other means this way of trying to perhaps
imitate and use some of the success that the nonprofit
sectors had for a long time in their business models.
So, meanwhile, as donor demands for accountability and evidence
of the impact intensify, regulations that once preserved
that unique role for nonprofits are now all of the sudden coming
under fire, and they're really at risk.
So, the idea of cross-sector collaboration, new
organizational forms, whether that's an LC3 or some of the
other forms that were on the front slide here, certified B
corporations, are you familiar with certified B corporations?
They're corporations that are really trying to advance social
issues and mission related work but still also have some type of
a profit model. C4s are on there as well.
I think these trends will seriously challenge nonprofits
to maintain their tenuous hold on identity as a sector and not
just become under-capitalized competitors in this increasingly
blended economy. The blurring of the sector
boundaries creates opportunities for a growing number of public,
private, and corporate nonprofit collaborations to share learning
and innovation. I think that's really kind of
the beauty of what's coming out of this is that you've got that
for-profit model, you have this nonprofit mission model, and
they're coming together, and, yes, it might be a little bit
contentious at times because they're coming at it from two
different ways, but it really is helping to improve both worlds,
I believe, and I think that's a real positive thing.
Some organizations are taking things a step further and really
becoming those kind of hybrid organizations where they're
operating simultaneously in multiple sectors.
So you may have a for-profit corporation that also has a
nonprofit business entity within that, and you may have a
nonprofit business entity that is now starting a for-profit
company to generate some additional revenue streams.
So everything is really kind of getting blurred as we would say.
In the context of this fifth trend, a responsive nonprofit is
really actively considering implementing and/or funding
those alternate organizational structures, cross-sector
partnerships, and ways to make markets work for the
organizations and those it supports.
So, there are three priorities for the future that kind of came
out of the convergence monogram. One was around leadership.
I talked a little bit about this earlier, but skilled leadership
really will be essential to the sector's ability to successfully
navigate the trends described in the convergence monograph, and
the changes these trends bring about will call for a rethinking
of concepts of nonprofit leadership.
More than a response to generational shifts, though, is
who is doing the leading. This will require that
nonprofits really look at their organizations that will be led
into the future. And at any given time, dozens of
new and emerging tools as well as many more that are not so new
but are not yet widely adopted are available for volunteer
engagement, for fund raising, for friend raising, for again
working wikily, engaging in managing and dispersing in a
mobile workforce. So just about everything else
and organization might want or need to do to advance on its
mission is certainly possible. It is tempting, somewhat, to
jump on the technology bandwagon.
I mentioned earlier that we're dabbling, and I would say
dabbling lightly, in Facebook and trying to figure out how we
can better use that, but I think organizations, nonprofits
particularly, have to be careful in that they're not just
following whatever the technological whim is at the
time and making sure that they're really leveraging
themselves for that because the sheer number of new technologies
entering the marketplace from one month to the next really
presents some major strategic challenges to nonprofit leaders,
and really understanding the options and recognizing those
tools and technologies with the greatest potential for positive
impact within the context of their organization is really
critical and crucial to them. This shifting environment
creates numerous opportunities for nonprofits to partner, we
talked a little bit about that earlier, with others in news
ways, and at the same time it also brings new competitive
challenges, often with those very same individuals or those
same leaders. Being able to recognize when to
collaborate, when to compete, I think that's going to be one of
those key trends from a leadership context.
This will also require that nonprofits know what they
uniquely bring to the table. What are their competitive
strengths? What are their advantages that
they can really offer? And, quite honestly, that they
have a realistic and objective understanding of their own value
proposition, which I think sometimes some nonprofits have
really struggled with. So, how do nonprofits prepare
for change? We're transition now into the
capacity building context. Whether that's an economic
change, the things that are going on in the environment, or
whether that's kind this idea of these five trends from
convergence. They need to focus on continuous
improvement and in building the capacity of their organizations.
So that's one of the ways in which our advisory services at
Forward Community Investments really works with nonprofits
around the state to help them build their capacity.
And we talk about capacity building and sometimes the
vernacular is not really well understood, quite honestly, even
within our own industry, much less outside of our industry.
So I wanted to just kind of maybe go through and give you a
couple of definitions here. The first one, is I think, from
the Knight Foundation and from Connolly and York, two
practitioners in the capacity building arena, but there's a
couple of key words here. One obviously is mission.
We are mission-focused organizations.
So, around what is capacity? Capacity is that ability of
nonprofits to fulfill their mission in an effective manner.
Effective being the key word there in the Connolly and York
definition as well. In that capacity is this wide
range of capabilities, knowledge, and resources to be
effective. So, I would say if you're
wondering, capacity building in the for-profit sector is
probably organizational effectiveness.
That's probably the similar to them.
So, what is capacity building? Whatever is needed to bring a
nonprofit to the next level of operational, programmatic,
financial, or organizational maturity in order to more
effectively and efficiently fulfill its mission.
This is a definition from the National Council of Nonprofits,
but, again, a couple of key words there.
Next level, you're trying to help move them along this cycle
of continuous improvement. The other thing here in this
particular definition that I would point out is that it's not
just one area that they're getting better at.
It's looking at it from a holistic viewpoint.
So whether that's operational, whether that's programmatically,
whether that's financial, which is our core competency, or
whether it's organization maturity, it's really looking at
this holistic approach and trying to determine how these
pieces of the organization fit together.
And then, obviously, the other word that is bold there is
mission again. Mission driven, it's all about
mission in our sector. The tools that Forward Community
Investments offers to help support this work reflect these
particular definitions and are really aimed to accomplish this.
So, why build capacity? We've been talking about the
trends, we've been talking about this new normal, uncertain
economic times, but competition obviously is greater.
Whether it's competition from the nonprofit down the street
who's maybe providing similar services, whether it's
competition from the for-profit sector and that they're starting
to really look at more mission related work, but there
certainly is more competition across organizations.
And quite honestly, there's more competition for funding today.
Funders have less valued endowments than they had a few
years ago and so they don't have the same amount of resources to
actually donate or grant to particular organizations.
Government, obviously, is changing as well.
So they're really competing for more than just financial
resources. They're also competing for
talent in getting strong leaders, getting strong board
members and whatnot. There's also this idea of this
increasingly complex environments, which I think
feeds back into those five trends again.
Things are getting certainly more complex for the nonprofit
sector. Change is becoming the norm.
Nonprofits really have to learn to be more responsive and have a
higher level of capacity to respond to changes that are
happening, particularly when they're happening as fast as
they are. And then the last one here,
escalating scrutiny in a demand for effectiveness and
efficiency, I think, whether that's government, whether
that's funders, whether that's volunteers, there is this
heightened scrutiny around what are your programmatic outcomes?
How are you achieving the mission that you set out to
achieve? The definition on the bottom
here, the note here from Venture Philanthropy Partners talks
about nonprofits really have an obligation to seek new and ever
more effective ways of making tangible progress towards their
mission which requires building organizational capacity.
So, our model at Forward Community Investments around
building the capacity really looks at this continuous kind of
cycle of assessment and benchmarking, again we have a
tool that we use with organizations that looks at nine
elements of organizational effectiveness, which I'm going
to show you here in just a minute.
So they assess at a point in time of where they are on these
nine elements. Then they take the results from
that particular exercise and they work on an action plan.
Like most things in life, if you have results but you don't do
anything with them, then they don't really matter much.
So it's really making sure that you're implementing the
activities from your action planning.
A couple other things in the upper left-hand corner here is
this is a continuous cycle and a continuous process.
The organizations that we work with to help build their
capacity, we typically work with them on a 12- to 18-month cycle.
So we assess, we help them do their benchmark, we help them
design their action plan, and then we follow up with them on a
quarterly basis by providing some what we would call
accountability coaching to them to really help make sure that
they're living out and agreeing and doing the things that they
said they were going to do in their action plan.
And then, ultimately, we go back and reassess them to see where
they've had gains over that particular period of time.
So the nine elements I was just mentioning here.
Here are the nine elements that we have designed in our
particular tool, and our tool was an adaptation of McKenzie's
tool. There are some really wonderful
capacity building assessment tools out there, but ours was
designed with some influence from McKenzie's tools, so we
describe it as comprehensive yet concise.
Sometimes organizations look at it and go, oh my gosh, how are
we going to do all this work? But really it is pretty
manageable. But it all starts, again, with
mission, vision, and strategy on the top of this diagram here.
That's really driving all of the things that the organization is
doing and really is the foundation of the work within
the nonprofit organization. Then it's looking at their
service delivery, and impact. Do they have a logic model in
place? Are they measuring their impact?
How are they communicating their impact?
But really making sure that they have strong service delivery and
impact in place. And that's surrounded on both
sides of this diagram by leadership.
Again, whether that's leadership within the organization or
leadership on their board, that's that kind of human
capital component and making sure that all of these things
are coming together through the talent of the organization.
It's not to say that the five elements on the bottom are not
as critical as the others. Clearly, financial is critical
today for organizations to sustain themselves, but really
they're kind of more foundational and pillars holding
up these other elements of the organizations.
So management and development of human resources, strategic
relationships, which again gets to that kind of blurring in
those trends and who are you working with, whether that's a
competitor, whether that's another collaborative
organization, whether that's a for-profit, whether that's a
government agency. Financial and legal management,
again understanding their cash flow, budgeting, those types of
concepts, legal management around the risk management,
those concepts. Operations and infrastructure,
really looking at the facility of the organization, making sure
that they have technology plans in place and that they're able
to keep up in some of those trends that we talked about.
And then resource and revenue development is really what has
historically been known as fund raising.
So what kind of plans do they have in place to really generate
sustainable revenue models for their organization?
So, a couple of factors to consider when organizations are
going through effective capacity building.
The first one here talks about the funders.
Many funders appreciate organizations that are
intentionally building their capacity.
So we encourage organizations that are going into this type of
work to share their efforts with their funders so that they can
build closer relationships with them.
The other piece that I think oftentimes clients that we work
with at Forward Community Investments is that we use
capacity building to help inform other types of work that they
are doing. If they're looking at a business
model enhancement, if they're looking at some type of strategy
development, looking at their organization to see where they
have current strength, where they have opportunities really
can help inform those other types of strategic conversations
that they're happening. I mentioned earlier that
eventually you want to repeat the assessment and the
benchmarking and the action planning processes.
You would not necessarily measure did they have the same
score, the same results in one particular area because
obviously external factors can play in what might be driving
the change in some of those elements over a particular time
period. But really looking more at how
did they impact their action plan when they were going back
to reassess from the prior capacity building activity.
A few factors here that challenge capacity building
progress. These are probably not much
different than they are in any other sector.
But a lack of readiness to engage and a commitment to
change. Some organizations that we work
with, that kind of inertia, we've always done it this way,
they're just not ready to change and they're not ready to engage.
Changes in leadership or an absence of leadership are both
two significant concerns that really have challenged the
capacity building progress. If there's not a director in
place, if there's not a strong board in place, it's really
difficult to impact that without those levels of leadership.
Lack of time, many of the organizations we work with say
we just don't have the time to do this.
But it's like anything else, if you really want to impact the
results that you're having, you have to put some effort in.
The severity of the organizational need, we have
some organizations that come to us and we would describe them as
kind of being on death's door. Going back to the survey in the
beginning where we talked about how much cash did they have on
hand, we have gotten calls from around the state from
organizations saying we can't meet payroll in two or three
weeks, what can we do? That's not the time to start
trying to go on a capacity building process.
They really have other more critical issues to take care of.
And then those organizations that fail to act on their
results obviously challenges their progress.
So here's some factors that contributed to gains.
Kind of the opposite of what we just saw on the other slide
there as it relates to what challenged them.
Having a competent and highly skilled board.
Having strong executive leadership in place.
Using the tools as instructed. We encourage people to really
follow the process and not be jumping around.
Making sure that they're following through.
Assembling a team. We would consider this very much
a team orientation to organizational effectiveness and
that it's not just leadership, it's not just board, it should
be some combination of both. And then defining goals with
specific action steps is really clear as well.
And having a clear understanding of mission and vision.
The action planning piece, it's based on the assessment, based
on the capacity building benchmarking assessment.
We really encourage to focus on causes, not necessarily, again,
the particular ratings in those nine elements, but really to
identify priority areas and high leverage areas where there is
some leverage that you can try and make some quick, what we
call quick hits. But also, determining actions
and resources that are available you have to be realistic with
the action planning piece as well.
Good action planning practices, a couple of best practices here
that we encourage organizations work to reach consensus but be
rigorous. Again, when we're facilitating
these conversations with nonprofits around building their
capacity, oftentimes it can be divisive and a little bit
confrontational, but we really encourage them to work toward
consensus but we want them to be rigorous.
So we try and kind of draw that out when we're working with
them. It's key to identify key
partners that would contribute to the success.
Whether those are funders, whether those are other
stakeholders, you definitely want to make sure you have your
partners involved in the action planning as well because
oftentimes they're the ones who are going to help you achieve
your action plan. The third one here is kind of
the opposite of that inertia comment earlier, but really
incorporating a range of new actions and resources into the
plan. You want to make sure that
you're not just doing things the way that you've always done
them. There's some saying around the
definition of insanity is continuing to do the same thing
and expecting different results. Oftentimes, we have
organizations that we work with and they think that they're
going to raise more money or broaden their mission or serve
more clients, and they're not really doing anything
differently than they've historically done.
So you kind of scratch your head and go, well, how's that going
to work? So it's really thinking about
having new ideas and new actions and resources into the plan.
And then sharing the results with your full board, with your
staff leaders, is another one of the best practices that we
encourage is really making sure that there's good communication
across the organization with the action plan.
So here's a few things to avoid in the action planning process.
Relying on a few individuals to complete it.
You lose that team wisdom, that team buy-in.
If you try to work on too many issues, it can dilute the
efforts. And if you don't take the time
to prioritize, you may end up working on symptoms rather than
root causes. So you really want to make sure
that you're taking the time to prioritize the right types of
activities that you want in your action plan.
A few more here. Relying on resources you always
want to use and not looking further.
You might miss important opportunities by relying on
resources that you always use and not looking beyond those
ones to try and find something new again.
Assuming you can or should do it all.
This is probably one of the biggest ones that we tend to see
with clients we work with is that their action plan ends up
with 10 different things in it. And if you have too many things
that you're focusing on, it's really difficult to try and make
sure that you're going to achieve those particular gains.
And then as we close here, preparing your organization for
capacity building. Part of this is really
repositioning the organization and the leaders within that
organization and really helping them understand the tools,
understand the process, having good communication.
We encourage organizations to consider a formal board
resolution regarding the participation.
It's, again, a great way to have that level of commitment from
the full board by having that resolution.
And, obviously, specifically outlining the benefits to the
organization that were just on a couple of these other slides.
So we have a few recommended approaches.
Making sure the materials are shared ahead of time, discussing
the capacity building at all of the board meetings.
We kind of work through that with our quarterly coaching with
our clients but also trying to find a staff or a board member
that's going to champion this particular process and really
help to develop their capacity building team for that
organization. So, I think that is the end.
Thank you, Dennis. [APPLAUSE]
A lot of fabulous information, and I know that it will pique
a lot of questions from folks. And I always look out to the
students so that they can wave their hands, and I can turn the
mic over to them as they do have questions.
I want to almost go back, just to start the Q&A, I almost want
to go back to the first part of your presentation where you were
really presenting a pretty alarming statistic, and I know
we have talked about this before that more than half of nonprofit
organizations have less than three months cash on hand.
And that, just to clarify, it may mean that they know that
there are other funding sources coming in but they only have
three months of cash on hand. Would that be accurate?
That would be if they know that there's other sources of
funding coming in. I think some organizations are
really finding themselves where they don't have the revenue
coming in, and that's why they've been depleting reserves
over time. So maybe they have historically
had more cash on hand, and now they don't.
The other thing that we've seen over the last couple of years
with the Economic Stimulus Act, there were many nonprofits that
received ERRA money, the Economic Recover and
Reinvestment Act, and those organizations they got an influx
of capital to really help strengthen and improve their
organization and perhaps deliver different programming, but,
ultimately, if they didn't develop the infrastructure to
sustain those enhanced business models, now that the money is
gone they're really kind of struggling to continue with that
impact. >> I appreciate that further
clarification and your emphasis that, yeah, as long as they know
that there is more money coming in but they've been depleting
resources to date. And, of course, as you
mentioned, fewer government sources.
Not sure if you have an answer to this, but I was wondering as
you were talking about that aspect, are we seeing any
particular sector of the nonprofit sector more impacted
than others? For instance, we see groups that
are more aligned with environmental causes or youth
development or health. Any of those more impacted than
others? >> Health and human services, I
think, is disproportionately impacted because of the funding
shifts with government funding. Many of them have long time been
subsidized. Again, many of the clients that
we work with, if you look at the granularity of their funding,
oftentimes those organizations have 90% of their funding coming
from government contracts. If their government contract is
being reduced by say 20%-30%, that can have a significant
impact on that organization in delivering their programming.
One of the areas of building capacity and diversifying
revenue sources can involve how an organization really does
business. And I know I shared with you the
example that the students were involved in reviewing, just in
advance of your coming, it was a story, I'm not expecting you to
know intimately, but it was a story of a local nonprofit,
actually serves statewide and beyond, called ABC for Health.
A nonprofit that actually created a for-profit subsidiary,
if you will, out of a point of intelligence and a product that
they created that will eventually sustain the
nonprofit. How prevalent is something like
that? Can you speak to that at all?
I can speak to it a little bit, I think.
Setting up a formal, separate legal entity is probably not
quite the trend that we're seeing with the organizations
that we work with. I think what we are seeing is
nonprofit organizations really reevaluating their strategy and
going how do we develop alternative means of resource
developing, fee for service? I think there are a lot of
organizations that 5-10 years ago in the nonprofit sector
would have said, well, we gather money either through grants,
donations, maybe some type of corporate giving, or through the
community foundations, but we haven't really ever had to
generate our own revenue streams.
And I think that's one trend that is significantly changing
the nonprofit sector. Many organizations are having
to look at what type of work do we do, and how can we generate
revenue for ourselves whether they're providing some type of
consulting services, I know I worked with a recent statewide
coalition. They're working on trying to
build the capacity of their 80 members across the state.
So we taught them how to use our tools.
They're actually using our tools to provide value, add to their
members, but they're also gaining a little bit of fee
income from that service that they're providing to their
members. So I'm not sure that we're
seeing as much formalized creating a separate legal entity
as much as it's happening organically within the
organization and going we've got to come up with some different
programming to try and generate some revenue.
One other question and it kind of goes back to a concept
that this group explored very early in the semester and it has
to do with creating social ventures.
We actually had an attorney that is well-versed in designing and
developing nonprofit organizations come in and talk
about what that requires. Does Forward Community
Investments provide counsel in that at all?
You were talking about the different kinds of models that
exist out there. B corps and 501(c)(3)s.
Are you providing advice on that or what are you recommending to
people? >> We don't give out legal
advice. We're not attorneys.
So I would just disclaims ourselves right there.
But we do help on the business modeling side in helping to
develop those proformas. If they're thinking of starting
a new venture, we do help build the business model piece from
that nonprofit finance aspect. >> That's helpful.
That really is. And I think that what Melissa
provided us was really good food for thought that it may not be
the answer to develop another nonprofit.
Melissa Scholz? >> Yeah.
She does great work. >> She does and she certainly
shared that information with us. One of the other concepts that
you mentioned, and I am happy to hand off the mic to anybody else
who wants to tell me that they want to ask a question, thank
you, has to do with the concept of merging.
And you talked about collaboration really being
important. Can you talk a little bit more
about why that's so important that nonprofit organizations
start thinking about collaborative efforts.
And we would refer to that is strategic restructuring,
actually, in the industry. But essentially, it's mergers
and acquisitions in the business world, per se.
It is an emerging trend. We get probably one call a week,
I would say, that somehow comes through our organization in
talking with an organization that says our board decided last
night we're merging with so and so.
Or we're struggling and we're not sure that we're sustainable,
can you help us figure this out? So I think on that continuum of
strategic restructuring, it's all the way from maybe on the
lower end of, I don't want to say engagement, but on the lower
end of maybe it's shared programming.
Maybe we're going to do something together.
We're going to test this out. Some organizations we worked
with that may have been co-location.
Maybe we're going to reside in the same space to try and create
some economies of scale for the organization.
So they're going to share some programming, they're going to
share some space. In the middle of the matrix or
the continuum of strategic restructuring lies setting up
shared administration. So we work with some
organizations that maybe they have a full finance department
and they might have another member organization that maybe
they need help with their finance.
So they contractually provide support and services to that
other organization. It could also be setting up a
management support organization. I don't know if you've talked
about MSOs in any of your work here or you're course.
But setting up a management support organization or maybe
it's one entity that provides support to 10-15 nonprofits
around human resources, could be around finance, could be around
technology. And then on the opposite,
the far end of that continuum of scale of strategic restructuring
is truly a merger. And so we had actually brought
La Piana into Madison about a year ago and did some strategic
restructuring workshops. We are continuing to do that
work. They are actually training us
and a cohort of consultants around the state to better
understand their model of moving organizations through some type
of strategic restructure because with the economy, with the
trends that are changing, we anticipate consolidation in the
industry. >> Thanks.
Hi. Thank you for being here, first
of all. My question is, what kinds of
difficulties or challenges do you foresee coming out of the
convergence of the nonprofit, for-profit, and government
sectors? >> Great question.
I would say probably cultural. I think the culture of the
for-profit, and, again, I can speak because I've sat there for
15 years, it's about revenue. It's about making money.
It's about generating more customers or selling more
product or whatever it is. And so I think culturally
that's, and I'm just throwing that out as a Wall Street
kind of analogy, it's about shareholder value.
And I think in the nonprofit sector, culturally, it's so far
away from there that it's about mission, it's about how do we
help people, it's how do we combat homelessness or poverty
or the elderly or the at-risk, and it's no where near,
culturally, how do we make more profit, per se.
And I think there's this cultural kind of conflict that's
going to probably happen there. I know it's happening there.
We see it with some of the collaboratives that we work with
is that there's skepticism, I think, on part of the nonprofit
sector of really is the for-profit sector doing this
because they want to or is it a way for them to perhaps be
perceived doing better good for the world and that only helps
them sell more of their product? And so I think that cultural
conflict is really probably the biggest challenge.
Thanks. >> You're welcome.
Thank you. >> Hi.
So, thanks for being here. My name is Darian.
So, my question is, I have two parts kind of, do you only work
with existing nonprofits or do you help nonprofits get started?
Do you guys give grants to get to nonprofits that are starting?
And then, also, being a consulting type of company, are
you charging for your services or is it like a return after the
nonprofit is already been successful?
Sure. I'll try and remember all three
of those questions maybe. I'll start with the last
question. We are fee-for-service.
So we are a nonprofit. We're a 501(c)(3) ourselves.
My line of business is we have a fee-for-service model so we
charge, basically, an hourly billable rate that we build into
our project tool kits when we anticipate how much time it's
going to take to do particular work.
And then we calculate our program costs by using and
allocation of administration and overhead.
So we are a fee-for-service. Many of our clients are referred
to us by local funders in their communities.
So maybe they have an endowment with the local community
foundation, maybe they're getting funded there, and so
oftentimes it's the funder who's willing to help subsidize the
cost to do our work because they see the value and they don't
want that to stop. So they're willing to make that
investment and perhaps in an organization that they're
already granting. And your first questions was?
I think you kind of just answered it.
It's do you work with nonprofits that are starting?
Oh, the start-ups. We're getting a lot more
questions from start-ups. It's kind of interesting.
You asked the question about strategic restructuring.
So on one end of the spectrum we're seeing consolidation, but
yet, I got a call, actually, this morning from someone.
We're thinking of starting a nonprofit.
I think that's just part of the entrepreneurial spirit of this
sector. But I think it's also a little
bit dangerous in that there are so many wonderful nonprofits
that are struggling so to have more nonprofits entering that
space and competing for those resources, I think we encourage
people that call us and say we're thinking of starting a
nonprofit is to really try and dig into what's your business
model, who are your competitors, who else is doing that, to
really get them to go out and look and find who is because I
think oftentimes the idea might be good but there might be a way
to do it in collaboration with another organization.
Thank you. >> Dennis, I've got two final
questions. One's real quick.
Do you have internships for students?
We do have internships for students, and we're actually
looking for two interns for the summer right now.
So if anybody wants to chat with me afterward, please do.
That's excellent. And I'm just going to conclude
with this question because it's kind of a segue into something
that we'll be talking about in about an hour from now.
You mentioned leadership and I am curious about the renewed
or the skill set that you referenced that leaders are
going to need, in the future, if not already today, to really
lead successful social ventures. >> I think, my MBA was in
leadership so it's near and dear to my heart, but I would say we
prescribe to taking an asset-based approach with the
clients that we work with. Our tools are designed that way.
We really value, I think, organizations and leaders that
take a look at what's working. So whether that's an
appreciative inquiry method or I think it really comes down to
authenticity and being who you are, living the values that your
organization prescribes to, but really making sure there's
alignment there as well. I think strong leadership is
also in this particular uncertain economy or these
trends are really kind of shifting the sector quite
drastically. Leadership is about being
willing to, I think, stand up and throw a stake in the ground
at times and say we're not going to do that or we are going to do
this, and it's, I think, about being able to take risks,
calculated risks I think is important.
But it also is understanding how can you appreciate the value
that everyone brings to the table, whether that's
for-profits, whether that's start-ups.
I think it really gets down to how do you engage with other
people in that authentic role. >> Well, Dennis, I know the
students join me in thanking you so much for being with us today.
[APPLAUSE]