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Politics, past relationships, religion. These conversation topics are written into thousands of invisible contracts between friends, and understood to be verboten at certain events, like around the dinner table or at family gatherings. These usual suspects can be divisive, inflammatory, and sometimes downright cringe-worthy. And now that I work in the social good sector, charity benchmark websites can be added to that list.
Like most tools of the information age, these websites serve a purpose (providing a searchable database of organizational information for potential donors), but they also introduce new problems. In an industry plagued by a few unforgettable public relations and organizational efficiency snafus, it’s no secret that constituents are more sensitive than ever to unethical or inefficient use of funds. And now, through star ratings and seals of approval, they can gauge a charity’s efficiency against a standard determined by these websites. The result? Your donors increasingly expect a 100% model – where 100% of funds raised go toward mission impact.
From a public relations perspective, it’s tempting to consider implementing or continuing to operate under a model that guarantees a high degree of operational efficiency. After all, both the press and your consumers are increasingly calling for higher levels of scrutiny on issues ranging from nonprofit CEO salaries to the percentage of funds raised that pay for “administrative expenses.” But these models can be growth inhibiting – and in fact run counter to the logic that economists, journalists, and consumers understand to be true for the for-profit sector.
Think, for a moment, about a corporation that you own stock in: what factors contributed to your decision to invest? Likely, you considered whether or not the company is growing, innovative, providing a quality product or service, and powered by visionary and experienced senior leaders. And if you used a website or journal to guide your buying process, the talking points would revolve around profit and growth rate, not employee salaries or the amount of money invested in the office. We expect the for-profit sector to invest in recruiting the brightest minds, the wisest advisors, and the best technology solutions because we know that profitability and growth depend upon a solid strategy and sound infrastructure. And yet, nonprofits are expected to generate more mission-fueling revenue from the same, or often reduced, staff, budget, and tools that they used last year, or five years before.
Yes, there is a huge double standard at play. We work in an industry that creates more from many, but is too often expected to create more from less. And while we must do our part to advance a more nuanced and realistic conversation about investment in our sector, we cannot wait for permission from the public or the press before we make growth-oriented choices for our organizations. And these choices might mean moving away from a 100% model, increasing development budgets, or reversing a mentality that shies away from asking constituents to commit to higher fundraising goals.
Whether your organization’s practices come from an influential Founder, an Executive Director, or the board, it can be difficult to suggest a change that not only requires additional financial investment, but also goes against the grain of a good intention. But if you want to grow, innovate, and evolve, you must start the conversation – and here are three ways to begin.
1. Realign your team around the impact you’re trying to create. We’re often so laser-focused on meeting deadlines, hitting revenue goals for our specific programs, or complying with policies and procedures, that we forget about the broader vision of the organization itself. Your founder’s goal wasn’t to dedicate 100% of funds raised to your mission and mitigate overhead expenses – your founder’s goal was to cure cancer, eliminate poverty, or create opportunities for marginalized populations. Your organization’s influencers are more likely to consider alternatives to business as usual if they are reminded of the ultimate goal of your work.
2. Demonstrate your impact. As you’re working internally to cultivate a growth mentality that encourages experimentation and investment, double down on your efforts to understand and communicate your impact. Talk to your programs department about the specific initiatives rolling out to the community, or the world, and develop an understanding of where your development dollars go. Then, be explicit and detailed in internal and external communications about how that impact is unlocked, and the circumstances that led to your successes. Remember that transparency and accountability are critical to communications with your constituents – and whether you’re thrilled or disappointed with the impact you can take credit for, be honest. This will not only refocus your organization on programming decision that maximize impact, but it will also advance the public’s understanding of the factors truly impacting nonprofit success, and shift the focus from a star rating to the change you’re making in the world.
3. Consider alternative business models. From supporting organizations to forming alliances with other nonprofits, there are a number of emerging solutions to incubate and grow your revenue streams while protecting your organization’s bottom line. Do some research or talk to a third-party expert about alternative financial and organizational structures – especially if you have a robust portfolio of events or programs with inherently high operating costs, but equally high revenue gains. The 501(c)(3) model is not your only option!
The next time you find yourself knee-deep in a conversation about administrative expenses or fundraising costs, take a moment to think about the legacy you’d like your organization to leave. Pull up from the nonprofit sector and take a look at the trends impacting the fastest-growing corporations. Change makers aren’t magicians – and no team or department can be expected to generate massive funds or create innovative solutions without financial support. Our sector’s expectations won’t change overnight – but you can start the conversation today.
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