Fuel Nonprofits To Achieve Maximum Good!

I disagree that nonprofits are sufficiently provided for or should be able to rely entirely on innate talent and skills to grow their organizations. The clear answer is that if they could, they would have a long time ago. I believe we have long been in a nonprofit funding crisis due to a deficit of capacity support. From my experience, there is a pronounced silent cry within the nonprofit sector. As research and conversations with quite a number of nonprofit staffers reveal, the cry remains silent because nonprofits fear losing funding, appearing to be weak, or they found that asking for the support they need will be futile – and it often is.

Stanford Social Innovation Review published an article in 2016 titled “Pay-What-it-Takes Philanthropy.” According to the article, nonprofits report that the indirect costs of grants are between 21-89% of the funding given. These costs often well exceed the 15% compensation many foundations and government agencies provide grantees. While it can be argued that this article is dated, there is no question that most executive directors of nonprofits will tell us that their capacity-building needs are underfunded.

There may be times when nonprofits could do more to raise these funds. As some suggest, entrepreneurial models could be used. In some cases, using a business revenue-raising model may be a solid strategy for advancing a nonprofit’s mission. However, there are many cases when doing so diverts staff members’ attention away from the organization’s core reasons for existing. In my opinion, forcing nonprofits to adopt business models simply to survive is counterproductive.

There are other reasons why we should be cautious about providing capacity support to nonprofits. It is quite understandable to have questions when senior staff receive unusually high salaries. We should be concerned about potential scams – they happen. However, many honest, hardworking people in nonprofits are underpaid.

We certainly have a legitimate reason to be concerned about the effectiveness of a nonprofit. We can learn a lot about how a nonprofit works by conducting site visits, volunteering, and by talking to other donors, particularly those who chose to stop giving. There are also good online resources to assist us in conducting due diligence. When giving larger amounts of money, we may wish to retain a philanthropic advisor.

One of my approaches to mitigating risk involves presenting dollar-for-dollar, or less, challenge grants to nonprofits. In these cases, I try to determine if the organization’s development person believes they can raise the remaining amount. Someone I know recently provided a $200,000 capacity-building challenge grant and helped a very worthy organization raise $450,000. And in my opinion, this organization will grow significantly and accomplish far greater good than would otherwise be possible. I am a big fan of joining giving circles. Participating in them can greatly reduce the amount of money each person contributes and often substantially increase the amount of funds raised. (Readers can find a list of many giving circles here and gain training to help start a giving circle here). We can engage in crowdfunding as another alternative to providing the entire amount needed ourselves.

Some ask, why can’t nonprofits do it themselves? Many do – they manage to survive – but they run around in many unnecessary circles, wasting incredible amounts of time. Some employees must work evenings and weekends just to keep up, and they burn out – a phenomenon that draws talent away from the field. Conversely, there are plenty of circumstances when simply adding one staff member, even part-time, lessens burnout and can change the trajectory of an organization; This has been my repeated experience as a funder.

Proceed to Tutorial 8