David La Piana

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.

For the past twenty years nonprofits have been told, first by funders, and now by researchers and academics, that they need to measure the outcomes of their work. On the surface it is hard to argue with this point.  We all work too hard not to wonder about the impact of our efforts. Are the children we counsel succeeding in school? How long and how much money does it take to preserve an acre of land? Are atrocities averted by our advocacy efforts? We all want to know and funders and policymakers have a legitimate need to ask.

What does seem arguable is the belief that anything can be measured, and what is beyond arguable, is in fact laughable, is the proposition that a nonprofit should be able to make the resources available to do the measuring.

Here’s an example. A six year old enters a counseling program after his teacher finds him impossible to manage in the classroom, disruptive, inattentive, and aggressive toward other students. After two years of counseling, his behavior improves and he leaves the program. The counselor thinks of this case as a success.

But based on what metric or proof? How do we measure his improvement? There are standardized tools which could have been applied pre- and post-intervention, but they only measure current behavior.The key question is not whether the child is doing better at the moment counseling ends, but whether he continues to do well for years to come. This would require tracking and periodic retesting, which is expensive and difficult, as well as intrusive.

But let’s assume the resources are available to re-test this child in a year. And let’s further assume that the child’s behavior has deteriorated. Is the program then deemed a failure? To get at that question we would have to know what this child’s life has been like for the past year.

Answers to some of these questions could be found if enough resources were devoted to the research. But the cost of this effort could easily be far greater than the cost of the counseling intervention it is studying. And since every individual’s situation is unique, following just a sample of kids would not necessarily allow you to generalize to the entire program’s effectiveness.

Apply this example to your own work. Yes, we want to know if our programs are successful. But are we really willing to invest the resources it would take to provide a real answer?

A few months ago, Janet Camarena of the Foundation Center’s San Francisco office asked me to join her for a podcast interview on strategic restructuring.  I have known Janet for many years and always find her to be an astute observer of the sector, so it was no surprise that she is a very good interviewer.  We talked about the current land-rush mentality around nonprofit mergers, some of the cautions the sector should consider, and many other things.

More recently, my colleague Bob Harrington, Director of our firm’s Strategic Restructuring practice was invited to blog about the role strategic restructuring can play in arts organizations.  Bob’s blog highlights our recent case study on administrative consolidations.

Recently I was asked to judge for the 5th Annual Young Nonprofit Leaders Awards given by Young Nonprofit Professionals Network. This is quite an honor, as I told the organizers, not least because it has indeed been a long time since I could qualify for membership in this group. I do not know what the exact age cut-off is, but I am pretty sure that I am way past it.

This request made me start thinking about the evolution of leadership development in the field. When I was a 26 year old nonprofit leader I was pretty much expected to learn on my own, kind of a sink or swim approach. This was largely true of my generation: we had no specific management training (I had a BA and MA in comparative literature), and sometimes we had no actual experience in the field. We spent a lot of time on the phone asking other, slightly less clueless colleagues questions, and we grew organizations through a lot of trial and error.

This approach fit with my generation’s “do your own thing” approach to life but I am not so sure it benefited our organizations. Back then we figured things out but trial and error is costly when you are on the thin margins of a small nonprofit.

These days more nonprofit leaders have specific training, often a masters in business or public or nonprofit administration, and once in the job they increasingly participate in programs that further develop their leadership and management abilities.

It is more than a bit ironic that having never participated in or benefited from any leadership development effort when I was new to the field, I now spend a great deal of time leading these programs. I’m glad the sector and I have evolved and I look forward to where the next generation will lead us.

In 2006, a Yahoo executive wrote a memo that I think many nonprofits would do well to heed. It became known as the Peanut Butter Manifesto. I just came across it in an article in the New Yorker.

We lack a focused, cohesive vision for our company. We want to do everything and be everything – to everyone. I’ve heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.

Sound familiar? In good times there are resources enough to try new ideas, experiment, spread the nonprofit peanut butter far and wide in an effort to “do everything for everyone.” That could be the mission statement for a few nonprofits I know. But during tough times, you must focus, you must decide what is most important, what is your unique contribution, where you have the best chance to accomplish your mission. This may mean cutting back in some areas to strengthen others. It may mean job reassignments or even layoffs. But your strategy, now more than ever, must be clear and focused.

Pile the peanut butter thick on a smaller slice of bread.

As promised, here’s a follow-up post on the Stanford Social Innovation Review and Association of Fundraising Professional’s 2009 Nonprofit Management Institute conference.

First, despite my initial reservations around the format – 8 plenary sessions over 2 days, no breakouts – it really worked.  The presentations were high quality and the speakers offered diverse perspectives. It also helped that there were generous break periods, where the real work of any conference – networking – gets done. Plus, the venue and weather cooperated very nicely.

The event was a huge success for me because of the fantastic speakers the Institute had recruited. I usually cannot sit through an entire hour-long conference session, call it ADHD or boring speaker overload, but I surely didn’t have that problem the past two days.

What most struck me was the entirely cross-sector conceptualization of social innovation.  Peter Hero, the former community foundation CEO, spoke about the future of philanthropy both capital P foundation philanthropy and small p individual giving. Stanford’s distinguished Professor Hayagreeva Rao discussed interventions in a hospital setting that ultimately saved over 122,000 lives. I spoke to the nonprofit sector about partnerships, mergers, and collaborations. You don’t get that mix at most conferences.

I appreciate that SSIR thinks across sectors, in the nonprofit sector we are far too often sector-bound in our approach to problem-solving. I also found the mix of people in attendance fascinating. There was a strong and diverse international contingent and a great variety of size and type among the American nonprofits present. That mix made for great discussion during the breaks, and I learned quite a bit from several younger nonprofit leaders who shared their perspectives.

I am sure there will be more as I digest the sessions, but that’s the quick download.

This week is Stanford’s Nonprofit Management Institute, an annual gathering that for two days will bring together 300 nonprofit leaders from around the world for what promises to be quite a learning experience. The Institute is not your typical conference, each day there are 4 speakers, two in the morning and two in the afternoon, allowing the entire conference to exist as a plenary, with long breaks between sessions for networking.

The speakers include Chip Heath, Kriss Deiglmeier, Hayagreeva Rao, all of Stanford Business School, as well as Heather McLeod Grant of Monitor, Peter Hero, William Foster of Bridgespan, and yours truly. I am actually quite looking forward to hearing what all these great thinkers have to say, and to meeting some of the interesting and innovative nonprofit leaders who will be in attendance.

Stay tuned, I will give a report upon my return.

I read today that Jeffrey Raikes, new CEO of the Gates Foundation, offered to work for free, as Patty Stonesifer did before him, but the founders did not want to set a precedent. Raikes, like Stonesifer, is a Microsoft millionaire with a second career in philanthropy. The noteworthy element is the level at which Raikes pay was set – $990,000. This apparently is what Bill and Melinda Gates think is a reasonable salary to attract future CEOs. I’ll say!

While this is taking place, virtually every nonprofit leader in America is either taking a pay cut or contemplating one, laying people off or contemplating the need to do so, and looking under the mat for spare change in an effort to keep essential services flowing. I don’t begrudge foundations paying their CEOs lots of money, even if the job cannot be anywhere near as hard as running a soup kitchen. What I do resent is the clamor every time a nonprofit leader asks for a raise or, after a lifetime of service, breaks six figures. No one goes into the nonprofit field for the money, but people do have to live.

I was shocked but not surprised to read this morning that our state’s unemployment has reached close to 12%, a good 2.5% higher than the national average. When you add in “discouraged” workers, the real rate must be somewhere near 16%. I can’t remember this kind of unemployment in my lifetime.

Last week while driving and listening to NPR I heard someone – I was driving so I didn’t write it down – discussing the job market for recent college grads and he said that the nonprofit sector had not suffered as badly in the recession as the business sector, and that for liberal arts majors there were still some opportunities here. I sure tried to be reassured about the sector after hearing this, but I only partly believe it.

Particularly in California, as state budget cuts trickle down to local government and from there to nonprofits, we can only look forward to at least another six months of dismal news, even if the recession bottoms out.

For many years I have been giving talks on various topics at the annual Craigslist Foundation Nonprofit Boot Camp. I usually feel these sessions are pretty well received and several of them live on as podcasts at the Craigslist Foundation web site.

Recently I was very pleasantly surprised to learn that one of these talks, from 2007, entitled “How to Succeed as a Nonprofit Executive Director” is the most popular podcast from all past Boot Camps. In fact, it has been downloaded more than 5,000 times!

And if that isn’t enough for you, my most recent Boot Camp presentation, from this past summer, on Real-Time Strategic Planning, was just uploaded on the site as well.

Check it out and tell me what you think!