A perplexing situation that has been obvious for generations is how some of the largest foundations begun with money from compassionate American capitalists have morphed into some of the most virulent opposition against capitalism and America.
Fortunately, every so often, principles arise (Bravo Goldman Sachs) as this story from the Wall Street Journal reports.
An excerpt.
“Earlier this month, hundreds of New Yorkers received an unusual dinner invitation from the Lower East Side People's Federal Credit Union.
“The Credit Union, a small lender serving New York's poor, was holding a fund-raiser to celebrate its 25th anniversary. Among the chief sponsors listed on the invitation was Goldman Sachs Group Inc.
“Among the honorees: "Occupy Wall Street."
“They might as well have asked Marie Antoinette to dig into her purse to support Madame Defarge's knitting business.
“Shortly after the invitation was sent out, Goldman withdrew its name from the dinner. It also pulled the plug on its $5,000 funding pledge.
“The debate that ensued—between bankers and nonprofit chiefs, philanthropists and financiers—turned a modest fund-raising dinner into a heated battleground between Wall Street and the Occupy protestors, exposing contradictions on both sides.
“On one side was Goldman Sachs, which told the credit union it didn't want its name or money used to celebrate a protest movement known for placards like "Goldman Sachs is the work of the devil," dinner organizers said. The investment bank's giant glass-and-steel headquarters tower is just blocks away from the protest headquarters in Manhattan's Zuccotti Park.
“On the other side of the debate were several hosts and board members of the credit union, who said honoring the protesters is more important than the money from Goldman—even though the funds were slated to cover a quarter of the dinner's $20,000 cost.
"Their money was welcome, but not at the price of giving up what we believe in," said Pablo DeFilippi, one of the dinner hosts and associate director of member development at the National Federal of Community Development Credit Unions. "We lost their $5,000, but we have our principles."
Monday, October 24, 2011
Friday, October 21, 2011
Hybrid Nonprofits
An excellent article from Harvard Business Weekly about the challenges they face in fulfilling their mission.
An excerpt.
“For those who like to view things in black and white, it's tempting to divide the working world into two camps. There is the for-profit sector, primarily driven by the prospect of financial success. And then there's the not-for-profit world, which eschews the almighty dollar in the pursuit of curing societal ills. In reality, though, the line between the two is growing blurrier.
"In the not-for-profit sector, a number of organizations are trying to be less dependent on donations and grants," says Julie Battilana, an associate professor at Harvard Business School. "In the meantime, facing increased public pressure to help address societal problems, for-profit firms have adopted social responsibility policies, which have pushed them to focus more on social initiatives."
"Some of them have been accused of losing sight of their social mission, or even having a negative impact on the populations they were trying to help"
“In the wake of this evolution over the past decade, more organizations have adopted a hybrid business model in which a social mission is the primary goal, but they still aim to generate enough commercial revenue so they can survive and thrive without depending on charitable donations like a typical nonprofit would. Commercial microfinance organizations often adopt a hybrid model, for example: they provide business loans to poor people who wouldn't traditionally qualify, but they still depend on the loan recipients paying them back with interest.
“The main problem with the model is that hybrid organizations run the risk of suffering from so-called mission drift—meaning that they stray from their original goals—usually by focusing on profits to the detriment of the social good, but sometimes vice versa.
"Mission drift has been identified as a potential problem among microfinance organizations," says Battilana, who has been studying hybrid organizations for several years. "Some of them have been accused of losing sight of their social mission, or even having a negative impact on the populations they were trying to help."
“According to Battilana, there are two key questions that leaders must address to keep the mission on course while still making enough money to sustain that mission: One, whom should you hire to strike a healthy balance between idealism and the bottom line? And two, what's the best way to socialize new hires to stay focused?”
An excerpt.
“For those who like to view things in black and white, it's tempting to divide the working world into two camps. There is the for-profit sector, primarily driven by the prospect of financial success. And then there's the not-for-profit world, which eschews the almighty dollar in the pursuit of curing societal ills. In reality, though, the line between the two is growing blurrier.
"In the not-for-profit sector, a number of organizations are trying to be less dependent on donations and grants," says Julie Battilana, an associate professor at Harvard Business School. "In the meantime, facing increased public pressure to help address societal problems, for-profit firms have adopted social responsibility policies, which have pushed them to focus more on social initiatives."
"Some of them have been accused of losing sight of their social mission, or even having a negative impact on the populations they were trying to help"
“In the wake of this evolution over the past decade, more organizations have adopted a hybrid business model in which a social mission is the primary goal, but they still aim to generate enough commercial revenue so they can survive and thrive without depending on charitable donations like a typical nonprofit would. Commercial microfinance organizations often adopt a hybrid model, for example: they provide business loans to poor people who wouldn't traditionally qualify, but they still depend on the loan recipients paying them back with interest.
“The main problem with the model is that hybrid organizations run the risk of suffering from so-called mission drift—meaning that they stray from their original goals—usually by focusing on profits to the detriment of the social good, but sometimes vice versa.
"Mission drift has been identified as a potential problem among microfinance organizations," says Battilana, who has been studying hybrid organizations for several years. "Some of them have been accused of losing sight of their social mission, or even having a negative impact on the populations they were trying to help."
“According to Battilana, there are two key questions that leaders must address to keep the mission on course while still making enough money to sustain that mission: One, whom should you hire to strike a healthy balance between idealism and the bottom line? And two, what's the best way to socialize new hires to stay focused?”
Thursday, October 20, 2011
The Learning Organization
Becoming one is a key attribute of success, whether forprofit or nonprofit and the leading thinker in this field is Peter Senge, whose magisterial, The Fifth Discipline: The Art & Practice of the Learning Organization, is the one book you need to have in your library.
This article from Stanford Social Innovation Review examines the difficulties involved in actually becoming a learning organization.
An excerpt.
“Reinventing the wheel—this well-worn phrase describes one of the oldest of human follies: undertaking a project or activity without tapping into the knowledge that already exists within a culture or community. Individuals are blessed with a brain that, some of the time, remembers what we’ve already learned—or at least that we’ve learned something. But what about organizations?
“Consider the views of Kim Oakes, director of sharing and communities of practice at the Knowledge Is Power Program (KIPP), a national network of 99 charter schools serving 27,000 students via 1,900 teachers. Oakes told Bridgespan’s research team: “We know that about 80 percent of our teachers create materials from scratch. … It became increasingly important to connect our teachers, so that they could build upon one another’s ideas rather than work in isolation.”
“Or consider World Vision, an international Christian development organization with an annual budget of more than $2 billion operating in 93 countries. World Vision was facing the consequences of rapid growth. In the words of Eleanor Monbiot, its senior director for knowledge management: “We were growing at 10 to 15 percent a year. We had moved from everybody knowing each other vaguely, to a breaking point. … The No. 1 need was to know what people were up to, where the best practices lay.”
“KIPP, World Vision, and a host of other nonprofits, large and small, are tackling the challenge of making their organizations as smart as the individuals who constitute them. In short, they are engaging in the hard work of organizational learning: The intentional practice of collecting information, reflecting on it, and sharing the findings, to improve the performance of an organization.
“Authors ranging from the late business historian Alfred D. Chandler Jr. to MIT Sloan School of Management senior lecturer Peter Senge have emphasized the value of knowledge and learning inside organizations. But, to use another well-worn phrase, this is easier said than done. In the fall of 2010, a Bridgespan Group team surveyed 116 nonprofits about how they learn—and how they translate the knowledge gained into practice, to increase their impact and fulfill their missions. We then explored these topics through interviews with more than half a dozen organizations, which were recommended by their peers for their innovative approaches to learning.
“The results of the survey indicate that nonprofit leaders care deeply about capturing and sharing knowledge across their programs and fields. But they also identify three significant impediments to organizational learning: a lack of clear and measurable goals about using knowledge to improve performance; insufficient incentives for individuals or teams to participate in organizational learning activities; and uncertainty about the most effective processes for capturing and sharing learning. These issues also surface in forprofit organizations, according to outside studies, where knowledge hoarding between business units can result from competition for resources. In the nonprofit sector, however, 97 percent of survey respondents said their leaders value knowledge sharing as a means to achieve their missions. Still, many of them struggle to do it well.”
This article from Stanford Social Innovation Review examines the difficulties involved in actually becoming a learning organization.
An excerpt.
“Reinventing the wheel—this well-worn phrase describes one of the oldest of human follies: undertaking a project or activity without tapping into the knowledge that already exists within a culture or community. Individuals are blessed with a brain that, some of the time, remembers what we’ve already learned—or at least that we’ve learned something. But what about organizations?
“Consider the views of Kim Oakes, director of sharing and communities of practice at the Knowledge Is Power Program (KIPP), a national network of 99 charter schools serving 27,000 students via 1,900 teachers. Oakes told Bridgespan’s research team: “We know that about 80 percent of our teachers create materials from scratch. … It became increasingly important to connect our teachers, so that they could build upon one another’s ideas rather than work in isolation.”
“Or consider World Vision, an international Christian development organization with an annual budget of more than $2 billion operating in 93 countries. World Vision was facing the consequences of rapid growth. In the words of Eleanor Monbiot, its senior director for knowledge management: “We were growing at 10 to 15 percent a year. We had moved from everybody knowing each other vaguely, to a breaking point. … The No. 1 need was to know what people were up to, where the best practices lay.”
“KIPP, World Vision, and a host of other nonprofits, large and small, are tackling the challenge of making their organizations as smart as the individuals who constitute them. In short, they are engaging in the hard work of organizational learning: The intentional practice of collecting information, reflecting on it, and sharing the findings, to improve the performance of an organization.
“Authors ranging from the late business historian Alfred D. Chandler Jr. to MIT Sloan School of Management senior lecturer Peter Senge have emphasized the value of knowledge and learning inside organizations. But, to use another well-worn phrase, this is easier said than done. In the fall of 2010, a Bridgespan Group team surveyed 116 nonprofits about how they learn—and how they translate the knowledge gained into practice, to increase their impact and fulfill their missions. We then explored these topics through interviews with more than half a dozen organizations, which were recommended by their peers for their innovative approaches to learning.
“The results of the survey indicate that nonprofit leaders care deeply about capturing and sharing knowledge across their programs and fields. But they also identify three significant impediments to organizational learning: a lack of clear and measurable goals about using knowledge to improve performance; insufficient incentives for individuals or teams to participate in organizational learning activities; and uncertainty about the most effective processes for capturing and sharing learning. These issues also surface in forprofit organizations, according to outside studies, where knowledge hoarding between business units can result from competition for resources. In the nonprofit sector, however, 97 percent of survey respondents said their leaders value knowledge sharing as a means to achieve their missions. Still, many of them struggle to do it well.”
Wednesday, October 19, 2011
Nonprofit Voters
An interesting article from Blue Avocado about the results of a voting survey of nonprofit employees.
An excerpt.
“In a survey of 560 staff at health and human service nonprofits, a remarkable 100% of senior managers and 92% of "line staff" (non-senior managers) are registered to vote. Wow! And . . .
• Nonprofit staff are 49% more likely to be registered than the general population.
• Nonprofit staff were 21% more likely to vote than the general population (in the 2010 election for governor).
“Letting candidates know that nonprofit staff vote
“SVCN is presenting these findings to the county board of supervisors and to city councils, to show that nonprofit staff are voters. "You'll hear even more from us right before the November election!" vows executive director Patricia Gardner.
“Nonprofit staff volunteer more, too
"Not only do we work in the nonprofit sector," Patricia says, "but we volunteer in the sector -- everyone is doing it!" In fact, 90% of senior managers and 72% of other staff volunteer in the community.”
"We know we [nonprofit staff] put in extra time where we work, but we're also volunteering elsewhere," says Patricia. "Our sector leaders are actively engaged in the community in many ways."
An excerpt.
“In a survey of 560 staff at health and human service nonprofits, a remarkable 100% of senior managers and 92% of "line staff" (non-senior managers) are registered to vote. Wow! And . . .
• Nonprofit staff are 49% more likely to be registered than the general population.
• Nonprofit staff were 21% more likely to vote than the general population (in the 2010 election for governor).
“Letting candidates know that nonprofit staff vote
“SVCN is presenting these findings to the county board of supervisors and to city councils, to show that nonprofit staff are voters. "You'll hear even more from us right before the November election!" vows executive director Patricia Gardner.
“Nonprofit staff volunteer more, too
"Not only do we work in the nonprofit sector," Patricia says, "but we volunteer in the sector -- everyone is doing it!" In fact, 90% of senior managers and 72% of other staff volunteer in the community.”
"We know we [nonprofit staff] put in extra time where we work, but we're also volunteering elsewhere," says Patricia. "Our sector leaders are actively engaged in the community in many ways."
Tuesday, October 18, 2011
Congruence, Alignment
Both mean about the same and both are becoming much more crucial in an era of shrinking funds for nonprofits, both from government sources and from private philanthropists.
They are also core elements of my consultancy practice.
This article from Harvard Business Review, which uses the term coherence, also meaning about the same, takes note.
An excerpt.
“There is a crisis in the not-for-profit sector. Since the great recession began, donations to the largest charities in the U.S. have dropped by billions — down 11% in 2010 alone, according to a recent report from the Chronicle of Philanthropy. This was the worst decline since the Chronicle began ranking its "Philanthropy 400" list of America's largest fund-raising charities in 1990. Leaders of philanthropic and other non-profit organizations naturally blame the economy for this problem; and many expect things to get worse as the economic malaise drags on.
“But the financial meltdown has not affected all charities and not-for-profits equally. It is the more versatile, general-purpose charities — including such well-known, diverse institutions as The United Way Worldwide and the Salvation Army — that are faring the worst. For more tightly focused not-for-profits, such as the Cleveland Clinic and the network of Food Banks around the country, the decline is not nearly as sharp.
“Why the disparity? Our own research on organizational strategy and leadership more broadly suggests a reason. Since 2010, we've been conducting an ongoing survey of managers' attitudes about the strategies of their organizations (click here to take the not-for-profit version of the profiler). More than 65% of the respondents from the non-profit sector said it was a significant challenge to bring day-to-day decisions in line with their organization's overall strategy. When asked about their frustration factors, 76% (the largest group by far, and a larger percentage than their for-profit counterparts) named "too many conflicting priorities." When asked about their organization's core capabilities — distinctive things their association could do better than anyone else — only 29% said these supported their organization's strategy, and almost 80% said that their association's efforts to grow had led to waste.
“All of these results suggest that, while the hit to fundraising has hurt many not-for-profits, the more fundamental core problem is strategic. These institutions lack a strategy for connecting their mission with their ability to deliver. In short, this is a crisis of coherence.
“Coherence is a fundamental alignment among the elements that create value in an organization. A coherent not-for-profit has three core strategic elements fitting seamlessly together. First, there is a well-defined "way to play," a distinctive way of achieving the organization's mission — thus making a difference in a way that would otherwise go unfulfilled. Second, the organization backs up its mission with a system of interrelated capabilities: a combination of processes, tools, knowledge, skills, and organization, all focused on reliably and consistently delivering what is needed to create value according to that way to play. Third, all its activities relate to this strategic mix; if it doesn't have the capabilities to perform some service, in a way that fits with its overall strategy, then it leaves that to a different organization.”
They are also core elements of my consultancy practice.
This article from Harvard Business Review, which uses the term coherence, also meaning about the same, takes note.
An excerpt.
“There is a crisis in the not-for-profit sector. Since the great recession began, donations to the largest charities in the U.S. have dropped by billions — down 11% in 2010 alone, according to a recent report from the Chronicle of Philanthropy. This was the worst decline since the Chronicle began ranking its "Philanthropy 400" list of America's largest fund-raising charities in 1990. Leaders of philanthropic and other non-profit organizations naturally blame the economy for this problem; and many expect things to get worse as the economic malaise drags on.
“But the financial meltdown has not affected all charities and not-for-profits equally. It is the more versatile, general-purpose charities — including such well-known, diverse institutions as The United Way Worldwide and the Salvation Army — that are faring the worst. For more tightly focused not-for-profits, such as the Cleveland Clinic and the network of Food Banks around the country, the decline is not nearly as sharp.
“Why the disparity? Our own research on organizational strategy and leadership more broadly suggests a reason. Since 2010, we've been conducting an ongoing survey of managers' attitudes about the strategies of their organizations (click here to take the not-for-profit version of the profiler). More than 65% of the respondents from the non-profit sector said it was a significant challenge to bring day-to-day decisions in line with their organization's overall strategy. When asked about their frustration factors, 76% (the largest group by far, and a larger percentage than their for-profit counterparts) named "too many conflicting priorities." When asked about their organization's core capabilities — distinctive things their association could do better than anyone else — only 29% said these supported their organization's strategy, and almost 80% said that their association's efforts to grow had led to waste.
“All of these results suggest that, while the hit to fundraising has hurt many not-for-profits, the more fundamental core problem is strategic. These institutions lack a strategy for connecting their mission with their ability to deliver. In short, this is a crisis of coherence.
“Coherence is a fundamental alignment among the elements that create value in an organization. A coherent not-for-profit has three core strategic elements fitting seamlessly together. First, there is a well-defined "way to play," a distinctive way of achieving the organization's mission — thus making a difference in a way that would otherwise go unfulfilled. Second, the organization backs up its mission with a system of interrelated capabilities: a combination of processes, tools, knowledge, skills, and organization, all focused on reliably and consistently delivering what is needed to create value according to that way to play. Third, all its activities relate to this strategic mix; if it doesn't have the capabilities to perform some service, in a way that fits with its overall strategy, then it leaves that to a different organization.”
Monday, October 17, 2011
Creative Disruption
A good story on the difficulties and opportunities facing the nonprofit human service sector from the Chronicle of Philanthropy.
An excerpt, with links at the jump.
“With a bigger share of America’s population reaching old age and growing more diverse, social-service organizations are in for some big changes in the not-too-distant future. Adding to the challenge: the turbulence in government and private financing.
“For the past six months, the Alliance for Children and Families—a membership group for human-service charities—has interviewed nonprofit leaders, gathered focus groups, and conducted surveys to identify the emerging trends organizations must embrace to succeed.
“Today the alliance has published its findings in a new report, “Disruptive Forces: Driving a Human Services Revolution.”
“Sparking Conversation
“Some of the six trends detailed in the report will sound familiar, such as the need for nonprofits to demonstrate to potential donors the results of their programs as well as the emergence of new types of financing that combine social and financial returns.
“But the report also includes some provocative observations that are likely to spur debate. For example, when discussing “information liberation,” which refers to the fact that a new generation of consumers is more likely to share information about themselves, it’s clear that the report’s authors disapprove of social-service groups’ approach to handling client information.
“The human-services sector has used ‘privacy’ and ‘confidentiality’ as an excuse to avoid developments that promote information sharing,” they write. “Information sharing can improve service-delivery models such that they ultimately give consumers more control over how their information is shared and allow other agencies in the same continuum to provide better care.”
“The report calls on organizations to integrate advances in science and technology into their work and suggests that brain scanning might be one way for charities to demonstrate the effectiveness of their programs.
“Boards will find themselves challenged by the ethical tension between high-tech and high-touch approaches,” the authors write.
“Other forces cited in the report that require nonprofits to act: growing competition that requires a willingness to take risks on innovative projects, plus a focus on “branding causes, not charities,” to persuade donors to focus on the issue, not on a particular group.”
An excerpt, with links at the jump.
“With a bigger share of America’s population reaching old age and growing more diverse, social-service organizations are in for some big changes in the not-too-distant future. Adding to the challenge: the turbulence in government and private financing.
“For the past six months, the Alliance for Children and Families—a membership group for human-service charities—has interviewed nonprofit leaders, gathered focus groups, and conducted surveys to identify the emerging trends organizations must embrace to succeed.
“Today the alliance has published its findings in a new report, “Disruptive Forces: Driving a Human Services Revolution.”
“Sparking Conversation
“Some of the six trends detailed in the report will sound familiar, such as the need for nonprofits to demonstrate to potential donors the results of their programs as well as the emergence of new types of financing that combine social and financial returns.
“But the report also includes some provocative observations that are likely to spur debate. For example, when discussing “information liberation,” which refers to the fact that a new generation of consumers is more likely to share information about themselves, it’s clear that the report’s authors disapprove of social-service groups’ approach to handling client information.
“The human-services sector has used ‘privacy’ and ‘confidentiality’ as an excuse to avoid developments that promote information sharing,” they write. “Information sharing can improve service-delivery models such that they ultimately give consumers more control over how their information is shared and allow other agencies in the same continuum to provide better care.”
“The report calls on organizations to integrate advances in science and technology into their work and suggests that brain scanning might be one way for charities to demonstrate the effectiveness of their programs.
“Boards will find themselves challenged by the ethical tension between high-tech and high-touch approaches,” the authors write.
“Other forces cited in the report that require nonprofits to act: growing competition that requires a willingness to take risks on innovative projects, plus a focus on “branding causes, not charities,” to persuade donors to focus on the issue, not on a particular group.”
Friday, October 14, 2011
New Corporate Form
As the concepts of social enterprise and venture capitalism influenced business thinking over the past several years, the formation of new forms of doing business have emerged; witness the flexible-purpose corporation in California, as reported by the New York Times.
An excerpt.
“A new type of company intended to put social goals ahead of making profits is taking root around the country, as more states adopt laws to bridge the divide between nonprofits and businesses.
“California is the latest state to adopt a statute permitting what is called flexible-purpose corporations, new companies that are part social benefit and part low-profit entities. The companies are now allowed under laws in more than a dozen states and two Indian tribes.
“States like New York and Massachusetts are weighing comparable legislation — sometimes also known as low-profit limited liability or benefit corporations — and efforts are afoot to get federal legislation passed that would lower hurdles to the creation of such companies, including a quiet push to get preferential tax treatment for them.
“Many of the companies adopting the new structures provide services to nonprofits or are food purveyors that, for example, might employ the disabled. Perhaps the best known is MOO Milk of Vermont, a group of small dairy farmers.
“Unlike a straight nonprofit group, these businesses can tap into conventional capital markets as well as philanthropy.
“And unlike a for-profit corporation, the structure allows investors to emphasize the social mission over making money, and to be supported by money from foundations.
“Directors of many companies want to do the right thing, but they’re so busy looking at how not to get sued for failing to maximize profits that they don’t think more aspirationally about creating a great company that helps the planet and people and also makes money,” said R. Todd Johnson, a lawyer who is among the leaders of the movement to get states to create new legal structures.
“Not surprisingly, the trend concerns some executives in charge of charities, who fear increased competition for philanthropic dollars fueled by the enthusiasm for the new formats among foundations, many of which have been lobbying hard for new laws to foster this type of business.”
An excerpt.
“A new type of company intended to put social goals ahead of making profits is taking root around the country, as more states adopt laws to bridge the divide between nonprofits and businesses.
“California is the latest state to adopt a statute permitting what is called flexible-purpose corporations, new companies that are part social benefit and part low-profit entities. The companies are now allowed under laws in more than a dozen states and two Indian tribes.
“States like New York and Massachusetts are weighing comparable legislation — sometimes also known as low-profit limited liability or benefit corporations — and efforts are afoot to get federal legislation passed that would lower hurdles to the creation of such companies, including a quiet push to get preferential tax treatment for them.
“Many of the companies adopting the new structures provide services to nonprofits or are food purveyors that, for example, might employ the disabled. Perhaps the best known is MOO Milk of Vermont, a group of small dairy farmers.
“Unlike a straight nonprofit group, these businesses can tap into conventional capital markets as well as philanthropy.
“And unlike a for-profit corporation, the structure allows investors to emphasize the social mission over making money, and to be supported by money from foundations.
“Directors of many companies want to do the right thing, but they’re so busy looking at how not to get sued for failing to maximize profits that they don’t think more aspirationally about creating a great company that helps the planet and people and also makes money,” said R. Todd Johnson, a lawyer who is among the leaders of the movement to get states to create new legal structures.
“Not surprisingly, the trend concerns some executives in charge of charities, who fear increased competition for philanthropic dollars fueled by the enthusiasm for the new formats among foundations, many of which have been lobbying hard for new laws to foster this type of business.”
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