David La Piana

The UK nonprofit sector is served by the Association of Chief Executives of Voluntary Organisations or ACEVO.  This group sponsors workshops, master classes, networking, and other resources for the UK’s nonprofit leaders.

Unlike American institutions such as Independent Sector or the various state nonprofit associations, members of ACEVO are chief executives, from every subsector and every size organization. With more than 2,000 members nationwide, ACEVO is a professional association of leaders, not an organization of organizations.

I marvel at the breadth of their work and the seriousness of their purpose. Most of the ACEVO people I have met are under 40, many closer to 30, and the energy in their crowded offices is palpable. I think the U.S. sector could learn from this group, and perhaps it is time we formed a similar sector-wide leadership association.

As I continue my sojourn in the UK, I learned an interesting fact about the nonprofit sector here: There is a national government department devoted to “third sector affairs.” Even more amazing, this entity has created a multi-million pound fund to support capacity building among the nation’s 200,000 charities.

When I heard this today, from colleagues at a meeting, the only thing I could think to say was, “My God, it sounds like socialism!” When the laughter died down, I discovered that my work here, with UK organizations ACEVO and Capacity Builders, is being financed out of this fund. I always did love socialism.

Seriously, it is inconceivable that America would allow its government to take such an active role in supporting a large portion of the nonprofit sector economy, or is it? Until recently, it was equally inconceivable that our government would bail out the private sector’s financial institutions.

The closest thing the US has to this arrangement is the IRS oversight function. But that is really a policing responsibility, ensuring our sector is obeying the law. There is no unified federal (or state for that matter) effort to ensure the health of our nonprofits.

Without a doubt our nation, and the nonprofit sector that serves it, have both gone through a very tough time over the past couple of years. The crisis brought a barely averted financial collapse, from which Wall Street has recovered quite nicely. Profits are way up, and our biggest bankers seem to have learned – well, nothing actually. The head of Goldman Sachs described the whole near-catastrophe as practically an act of God that mere mortals could neither have foreseen nor prevented.  Regardless, Wall Street is back in the money, big time.

I wish I could say the same for the rest of us. Unemployment is stuck at record levels, which means, among other things, that nonprofit human service providers are stretched to the limit in many parts of the country, with less revenue and many more demands on their services. The nonprofit economy has continued to languish while the financial markets have begun to recover.  Where nonprofits are concerned, unfortunately, there is little hope for a rapid turnaround.

The largest source of income for many nonprofits is state and local government. The recession, while technically over, is still in full swing in most state legislatures. Higher unemployment means both lower tax revenues coming in and more benefits paid out. In places like California, where “dysfunctional” doesn’t begin to describe our pre-recession political system, each budget brings even more draconian cuts.

What can organized philanthropy do about all of this? Foundation funding has in the past been a highly strategic part of the sector’s sustainability.  It needs to play that role again today. Foundations are loathe to “play God,” deciding which nonprofits will live and which will die, but the time has come to place some bets.

As the sector continues to witness the financial collapse of not just marginal performers but important nonprofits, funders can ask “Which groups are too important for us to lose?”  Foundations should identify their top picks, the organizations their communities and fields cannot live without, and invest in strengthening those groups. This does not necessarily mean picking up the tab for government funding cutbacks, but helping these essential groups to rethink their business model, restructure their management and service delivery, and perhaps even join forces with others to withstand the storm.

A few foundations have launched initiatives to help key grantees rethink their models. It is time for the foundation community at large to jump in.

I recently read a fascinating article in Foreign Affairs by Jack A. Goldstone in which he argues that we do not today have a world overpopulation problem but rather a population imbalance. For example, about 90% of the children under age 15 worldwide live in the developing world. Also, 2010 is the first time in history that the majority of the world’s population lives in cities rather than the countryside, concentrating their poverty.

What does this mean for the future? Fast-forward twenty years and 90% of the world’s 25-35 year olds will be living in the developing world, during their most productive years. Unless things change, we are going to have a lot of aging people in Europe, Japan and the U.S. sitting on their money with no one to do the work of our society, while the developing world will be filled with young potential workers without jobs.

In this light our current immigration debate in the U.S. is completely misguided. We are going to need more immigrants from the developed world to perform essential functions and we better figure that out soon.

Perhaps Goldstone’s most intriguing observation is that we in the developing world need to consider retiring to nice, sunny, low-cost spots in the developing world, such as the Mediterranean, Mexico, Turkey and Southeast Asia. Doing so will stretch our retirement dollars and provide jobs locally. It will also force developing countries to build a better health infrastructure, which will in turn incentivize local physicians so stay, rather than emigrating to the developed world, thus raising the quality of medical care generally. I’m in! Retiring to the coast of Turkey or Mexico sounds pretty great to me.

In the meantime, we continue to work with nonprofit clients to help identify how these trends will impact the future of their organizations and the nonprofit sector as a whole.

The stock market finished 2009 up for the year, way up. Unemployment showed signs of moderating if not yet improving, if 10% can be called “moderate.” Yet the sources most commonly found in nonprofit budgets – state and local government, individual donors, and foundations, are all still pinched.

In fact from Hawaii to California to New York, and even small Nevada, state budgets are more than pinched, they are strangled. In Hawaii the state’s schools are closing 3 days a month. California’s UC system  is furloughing everyone from professors to janitors. In fact Berkeley normally hires around 60 new professors a year; this year it is 10.

The bottom line is the recession is over but that makes no difference to the 11 million people who have lost their jobs. Many of them are relying increasingly on nonprofits, especially after their unemployment runs out.  My new year’s predictions are almost too grim to recount: more nonprofits failing, more layoffs and service cuts, continued self-serving conservatism by most foundations, when now is the time to increase their payouts, as a few brave leaders have done.  So, 2010 will be another tough year for nonprofits, perhaps worse than last.

Our new research initiative NonprofitNext and recently published monograph Convergence: How Five Trends Will Reshape the Social Sector has inspired a lot of talk about how to prepare for a future.

We are clear that the trends we study will have a profound impact on the sector’s work but we don’t know how they will evolve, interact, and respond to other economic, social and political developments. What can a thoughtful leader do in this constantly changing landscape?

One thing is certain: traditional strategic planning with its 3-5 year timeframe is not up to muster in this dynamic environment. That’s why we created Real-Time Strategic Planning to create an atmosphere where futurists can flourish.

What is the best way to find something? What’s the fastest and most efficient way to get something done? Using the internet and social networks?

Those are some of the questions asked in a recent DARPA (Defense Advanced Research Projects Agency) Network Challenge competition. All around the country the Pentagon hid (in plain sight) 10 eight-foot diameter red balloons. One was in Union Square in my nearby San Francisco. Then DARPA offered a $40,000 prize for the group that first found all ten.

The winners were the M.I.T. Media Lab’s Human Dynamics Group. They didn’t use GPS, they used email, Facebook and YouTube. Basically, they offered to pay money to people with leads. The effort spread virally through the Internet and the team located all ten balloons in an amazing eight hours and 56 minutes!

Can crowdsourcing to your networks help you achieve your goals faster?

The current unpredictable economic environment for nonprofits is making the traditional three-year strategic planning time frame obsolete. One approach that makes a lot of sense is business model analysis. How well does your current business model meet the need for keeping your organization is the black?

For example, a theatre company traditionally relied on ticket sales for 60% of its revenue and donations from individuals, foundations and events for the remainder. Now, fewer people are buying tickets and the theatre believes the mix needs to shift to 50/50. Business model analysis would test this assumption and if necessary, adjust it. Perhaps ticket sales will fall more precipitously, or perhaps donations will fall even further.

Business model analysis allows an organization to consider every input into its “economic logic” arriving at the best set of alternatives and choosing the most likely path to success. In this environment three-year projections can be misleading, but you still need a roadmap to your organization’s future.

Between budgets, board meetings and the next big fundraiser, most nonprofit leaders have little time to contemplate larger questions. When they do find a minute, the topic is usually the organization’s mission – the good it is trying to achieve. But, is there ever time to consider the philosophical underpinnings of our work? I think this is actually quite important. We devote our lives to important causes, often fighting difficult, even losing, battles, because we believe we are on the right side, the moral side of the issue. But why?

Philosophers, going back many centuries, have tried to define morality, to distinguish good from evil, and to describe our role in the moral sphere. Immanuel Kant, in the 19^th century, wrote a Groundwork for a Metaphysic of Morals, a work I encountered in an introductory philosophy course a long time ago. Kant’s central argument has always stuck with me. Once a person knows what is right, Kant declares, he or she is under a moral imperative to do it. If you are unclear in your heart where the correct course lies, obviously you can’t act. But, after reflection, if you feel confident in your knowledge – this course is morally correct – then you are bound by morality to pursue it.

This is in a way the (unacknowledged) moral basis of the nonprofit sector. Many people go through life without really considering larger social questions of right and wrong, justice and equity.  Those who do, often arrive at the same conclusions: about basic human rights, group responsibility for individual needs, our duty to the planet and to succeeding generations, and similar weighty concerns. People who think deeply about these issues, those who are clear about what is right, often work in the nonprofit sector. Since they know what is right, they feel they must pursue it.  In this sector, we are all Kantians.

My friend and colleague Shiree Teng recently sent me a fascinating article on the role of racial assumptions in leadership development.

The article was created by Leadership for a New Era, a collaborative research initiative launched by the Leadership Learning Community, and examines the assumptions behind current approaches to leadership development, principally a focus on individuals.

According to this piece, American society is fully bought into a view of leadership based on the following principles:

• Personal responsibility and individualism: The belief that people control their fates regardless of social position and that individual behaviors and choices determine material outcomes.

• Meritocracy: The belief that resources and opportunities are distributed according to talent and effort and that social components of “merit”—such as access to inside information of powerful social networks, are of lesser importance or do not matter.
• Equal opportunity: The belief that employment, education and wealth accumulation are “level playing fields” and that race is no longer a barrier to progress in these areas.

As a result, we ignore the underlying unfairness of in-crowd status that the majority culture enjoys. Essentially, everyone is expected to work from a level playing field but the field is anything but level. Yet people from other cultures and backgrounds (not Northern European) often do not have access to the networks and information that allow majority culture members to, or example, easily walk into a new work situation and know the “social rules” that will allow them to get ahead.

Where this set of observations is most poignant for me is in its ramifications for leadership development training. Leadership development that focuses on individuals, usually CEOs, assumes that everyone is in the same position relative to using the information gained from the experience. Yet the subtle ways in which dialogue, work processes and even humor in the work place are reinforcing of dominant culture practices does indeed make entry harder for others. An awareness of this dynamic, and efforts to bring together teams and communities for leadership development, could work against this bias.