The capitalist nonprofit? Dan Pallotta speaks in Vancouver

Cancelled dreams
Image credit: Chris Devers and Banksy

Dan Pallotta, author of Uncharitable, recently spoke to a sold-out crowd in Vancouver, hosted by Vantage Point and sponsored by TELUS. I wasn’t sure at first if his speaking style could sustain the hour+ talk, but he won me (and the audience) over early with his humour and his substance. I had the pleasure of watching the presentation twice – I listened the first time, and tweeted the second.

The basis of Pallotta’s talk was based around two ingratiating issues that face the nonprofit sector. I’ll outline them briefly here, but I also recommend reading the book.

Be like business, without all the benefits of business

Nonprofit organizations are often told they should “be more business-like” or “become more professionalized”. However, the tools that business use to succeed are not available to nonprofit organizations (or perhaps are available, but organizations are harshly judged when they use them). Hence the subtitle of Dan’s book: how restraints on nonprofits undermine their potential. Charities must respond to the great inequities that the powerful tools of capitalism have created, but without using those same powerful tools.

What percentage of my donation is going to the cause and how much to overhead?

This is just a less educated way of asking “are you effective at advancing your mission?” Because evaluation of programs is difficult to do and to share effectively, and the only way that charities officially report on progress is through CRA reports and return, the easiest (but not the most valid) way of measuring charities’ effectiveness at advancing their missions is through financial ratios that show how much money goes to programming (aka “the cause”) vs other costs, like administration and fundraising (also “the cause” but somehow not understood as so).

Constraints

Dan deals with these two issues with describing the constraints they put on nonprofits.

  1. Compensation: “Nonprofit salaries should be low.”So, apparently it’s OK for people to get paid well if they play football, or refine oil, or create magic weight loss pills. But if they are doing good, attempting to rebalance the inequities of our world, getting paid well is taboo. Because of the feel good “psychic benefit” we’re told.The nonprofit compensation debate in Canada came to a head recently when Liberal MP Albina Guarnieri proposed Bill C-470 (which Dan rebutted in an op-ed piece), which seeks to limit nonprofit compensation. However, I would like to note that financial incentives indeed are important for furthering the good in the world. There is a reason that we offer tax receipts for donations to charities. The feeling of doing good doesn’t do it all. And if we truly want hunger eradicated, our rivers protected, and our diseases cured, should we be attracting the best and the brightest to do it?Someone I met recently attacked the salary (not even the level of salary, just the fact that there was a salary) of the SPCA CEO. “A volunteer could do that,” he said. Umm, a volunteer could run an organization with a budget of over $10 million dollars and a staff in the hundreds? We wouldn’t imagine asking that of a private sector CEO.
  2. Marketing. “Nonprofits shouldn’t pay for advertising.”Dan argues that it would be irresponsible to put a new product out on the market and not advertise. But somehow nonprofits are held to a different standard, even though nonprofits are fighting for a market share of consumer spending like any other business.
  3. Risktaking. “Nonprofits should not take risks when fundraising.”If an event or campaign isn’t profitable in its first year, it will likely be squashed. However, success is built on experience, which means that new, innovative and perhaps risky fundraising opportunities are not sought out. Many businesses are not profitable in their first year(s), but again, nonprofits in general and fundraising campaigns more specifically are held to a different standard.
  4. Long term investments. “Nonprofits results have to happen now or else.”Nonprofit funding from large proportions of their revenue bases (government, foundations, corporate giving) is often done on a yearly basis. Which means that any outcomes of the program have to happen within 12 months. However, the private sector benefits from huge investments over years in research and development before final products go to market. Nonprofits lack that advantage.
  5. Profit incentives. “Nonprofits can’t offer profit incentives in order to grow.”Private and public companies benefit from being able to offer the opportunity for financial profit over time in exchange for an influx of growth capital. Small examples of this exist in Canada (CDCs, or community development corporations) but a whole new corporate model needed to be created for these types of organizations. Revenue generating arms of nonprofit organizations miss out on this opportunity.

Dan asks: if organizations with purposes of community benefit aren’t able to do these five things, how can they be expected to succeed?

Perhaps we should remark upon was has been done to date in spite of all of these expectations and constraints existing since the beginning of charity.

So what about the issues with “overhead”? The CBC infused fear into the public’s perception of nonprofits when it ran a series on nonprofit overhead and costs of fundraising. This has been responded to (fairly pathetically, I might add, but hey, nonprofits aren’t supposed to pay for advertising at therefore have weak relationships with news agencies, so it’s OK that the alternative voice was heard so weakly, right?) by many, including Vantage Point and Imagine Canada. Sure, there are crooked organizations in the nonprofit sector, but these are crooks, not nonprofits.

Dan takes issue with three factors.

  1. A focus on overhead leads to overhead being taken to be separate from “the cause”. Overhead is part of the cause. The fundraiser, the accountant, the HR manager, the receptionist, the maintenance staff – these are all important roles that make an organization function. Without them, the programs (aka “the cause”) wouldn’t exist, or would function less effectively. Just as in the private sector, a product is more that just the sum of its parts.
  2. A focus on overhead leads nonprofits to forgo things that are needed to advance causes. In an effort to keep overhead low, nonprofits may be unable to hire experienced, strategic staff that are going to advance a cause more effectively. They may cut out professional development, which means the nonprofit would lose out on enhanced skills, productivity, and likely high staff retention. They cut out marketing costs, which may decrease awareness of the cause and donations to the cause.Dan counters, “Fundraising isn’t sexy but it’s where the hope lies. If we want to ramp up impact, we need to invest in fundraising.”
  3. A focus on overhead gives donors bad information. The problem with looking at overhead is that overhead only addresses efficiency, but not effectiveness. Would you buy a pair of uncomfortable shoes littered with holes and made from toxic materials if the overhead of the shoe company was low? “Sure, the shoes are shit, but man, that overhead, wow is it ever low!”Yet somehow, we measure the value of our nonprofits based on overhead, not how well they are advancing their missions. Even Charity Navigator, one of the most often referred to charity evaluator in the US, says that evaluating the effectiveness of charities’ programs is out of their scope. They measure some sort of efficiency, which does not give the full picture to donors.

Dan offered a variety of humourous anecdotes to shed light on these issues, but what was missing was how to tangibly change the public discourse around these issues. He was speaking to a room of converts, and the room was overflowing with self-reassurance and pats on the back. However, how do we respond to questions and criticisms about our practices and our overhead? Dan covered the “what?” and “so what?”, but missing was the “now what?”

But, as this post is going on way longer than I expected (really, if you’ve got as far as this, you should probably just read Dan’s book), I’ll propose some “now what?” in a future post.

So in the meantime, I want suggestions. How would you respond to these questions and comments?

  1. Wow, I heard how much your CEO makes. That’s ridiculous. She’s siphoning off money that should be going to the <insert disadvantaged population>.
  2. I’m not sure about donating to your cause. How much of my donation is going to actually go to the cause instead of overhead?
  3. I saw your ad in the front of Vancouver Sun. How can you justify those sorts of costs?
  4. You shouldn’t be expecting a high salary if you work for charity, because doing good makes you feel good.

‘Best practice’ is a lie…and boring

Holy Grail
Image Credit: drp

Best practice is a lie; but if true, best practice is boring. What is best for any situation depends on many factors within the context.

Once all factors are established and certain, sure, I’ll submit to best practices existing. If the stakeholders, time, place, operating environment, leadership, and what people had for breakfast that morning are all set, I’m sure best practices could be identified. But then the world would be solved and we’d all be drones with exact plans of action for any scenario.

But otherwise, there is no best practice, only good practice.

Good practice depends on good leadership

Can the leader inspire a shared vision around the good practice? Can they motivate and encourage creativity around the practice? Can the model the good practice rather than just preaching it?

Good practice depends on stakeholders and place

Every community is unique. Every organization is unique. Every individual is unique. The uniqueness lies within history, interrelationships, culture, social norms. Best practice is not an ointment to be applied as directed in the instructions on the tube.

Good practice depends on the external operating environment

What works in boom times doesn’t always work in a recession. What works in times of emergency doesn’t work in time of peace. What’s going on in society – are people leaning left or right, looking out for themselves or others, recycling or wasting, etc. etc. Even so, I would say (of the top of my head without any direct evidence) that what often exists as a norm today came out of something radical and “bad” practice in the past.

In closing…

Best practices in one specific context can be useful beyond that context. They can give you ideas. They can build the literature around principles of good practice. They help with community, organizational, or individual praxis. But they aren’t a holy grail.

Social impact and mission myopia

Image Credit: Sam Catchesides

The origin of this post first came out of reading Marketing Myopia, a Harvard Business Review classic from 1960, for my MBA Venture Analysis course. But the theme comes up over and over again for me. Good drill bit companies don’t sell drill bits, they sell holes.

Focus on the purpose, not the product.

An aside: Yesterday was the final day of the third core course in the Certificate in Dialogue and Civic Engagement program I’m taking. The course, Citizens Engaging Citizens: Issues and Practices, was facilitated by Charles Dobson, author of The Troublemaker’s Teaparty: A Manual for Effective Citizen Action and The Citizen’s Handbook, both great resources for social changey types, especially Canadian ones.

Part of our work today revolved around ideas that people had for citizen to citizen engagement in their own lives. We were outlining goals, objectives/campaigns, strategies, tactics and actions. The hard part was the objectives bit.

People were often inclined to describe a project output (product) as an objective. For example, “the objective of this project is to create a community asset map/hold a conference for animal rights activists/make Trina chocolate cupcakes.”

However, the true objectives were often related to a change in attitude, a change in relationships, a change in state: some sort of social impact.

Social impact ≠ output

Social impact does not occur because a video gets produced, an art project is implemented, a conference happens, or Trina gets her chocolate cupcakes. Social impact occurs and is measurable because change happens.

If organizations frame their mission, or plan their projects, around an output, measuring success is a check box. Did the the conference happen? Check. Did the asset map get created? Pat on the back. Did the resource get published? Can I has some more funding puleez? Did Trina get her cupcakes? Where are my bloody cupcakes?

If organizations frame their mission, or plan their projects, around an output, they risk becoming irrelevant to their clients. Times change. People change. Needs change. Focusing on the output, the program, the product, is what I call mission myopia: Losing sight of what is really important, and not adapting to the needs of your clients.

Does your organization sell drill bits, or holes?

Instead of the product, think of the need of your clients, your community, that you are satisfying. If you want to create a community asset map because you want to increase community connectivity (which would be important to define before you get going, btw), success should not be defined by the creation of the map.

I would challenge the above in this manner:

  1. If you created the map, but community connectivity didn’t increase, would that be success?
  2. If you increased community connectivity, but the map didn’t get done, would that be success?

Organizations that sell holes would agree with #2.

Practical Implications for the BC Society Act

Making sure your organization defines itself by its clients’ interests rather than a specific program description is incredibly important when writing out the purpose of the organization in your consitution as a part of registering under the Act. If your purpose is related to selling drill bits instead of selling holes, you may find yourself operating outside of the realm of your constitution as times change in the future. Find out more about appropriate purposes in Appendix A of Information for Incorporation of a British Columbia Society (pdf).

Read more on social impact

Other Nonprofit Millennial Bloggers Alliance articles on social impact:

Extroverts vs. introverts in the workplace

The first time I took the MBTI (Myers-Briggs Type Indicator), the results gave me some comfort and understanding. I had been fairly extroverted in my youth, but some long term experiences travelling and living alone helped me to realize the enjoyment I find when I have time to myself.

For those of you familiar with the MBTI, you’ll understand that I’m an ‘I’ on the E-I spectrum. This means that I’m an introvert. It doesn’t mean that I’m shy, but it means that I get my energy from focusing on my “inner world”. I often get asked, to my surprise (and annoyance), “Are you OK?” Apparently being deep in internal thought makes me look upset. What? Am I supposed to walk around with a goofy grin?

The results of an MBTI, like any other ‘personality’ test, can be used in a variety of ways. It’s easy to use your ‘type’ to offer excuses for your behaviour (“It’s OK that I always turn in work last minute; I’m a ‘P'”); instead, I try use my ‘type’ to understand the habits that I default to and the impacts that my behaviours have on those around me.

But enough about me. Here’s a breakdown of some general E vs. I characteristics.

Characteristics of ‘E’s and ‘I’s

Extrovert

Introvert
  • outgoing
  • people person
  • comfortable in groups
  • wide range of friends and acquaintances
  • jumps quickly into activities
  • gets energized by being around others
  • thinks aloud
  • “talker”
  • reflective
  • reserved
  • comfortable alone
  • small group of close friends
  • thinks before starting activities
  • gets energy from time alone
  • processes thoughts internally
  • “(over)thinker”

Impact on the Workplace

An estimated 75% of the general population is extroverted (Tieger & Barron-Tieger, 1995) and reward systems and job recognition are generally set up to value extroverts. Extroverts get rewarded because their work is apparent. They talk openly and often about what they’re working on and how busy they are. You see them and they just look like they’re getting things done. Lots of meetings, people to see, places to rush off too. They’re good at marketing themselves. And somehow, I swear they walk louder.

With extroverts, often “what you see is what you get.” They thrive on the world around them, so the world around them knows what’s going on when them.

But what about introverts?

Introverts…

  • like working in quiet spaces
  • enjoy working independently
  • are reluctant to delegate, but when do, provide little information
  • work well without supervision
  • think and reflect before taking action
  • sometimes share ideas only when prompted
  • listen well
  • appear calm under pressure
  • have good depth of knowledge

Unfortunately, these introvert characteristics can come off in a negative light. Introverts can appear to not be “team players”. They may seem aloof, slow, serious, secretive or lacking ideas. They seem not busy, not productive or not outwardly stressed enough given the pressured circumstances.

Who’s Responsible?

So how can the best be drawn out of introverts?

Supervisors of introverts

  1. Ask their opinion. If you don’t you may be missing out on a whole wack of great ideas.
  2. Be prepared. Give them information (e.g. a meeting agenda) beforehand so they have time to process their thoughts internally before having to share.
  3. Use email. If asking for important input, give your staff time to consider their thoughts rather than putting them uncomfortably on the spot.
  4. Delegate properly. Give them the authority to make decisions on their own without interrupting and micromanaging.
  5. Be flexible in recognition. Don’t assume everyone’s idea of fun and reward is a big party.
  6. Find out where credit is due. Introverts don’t often sing their own praises, so be sure you are thanking the right people when things go well.

Introverted staff

  1. Share your route of thought. When explaining your opinion or providing instructions, don’t assume that everyone else has gone through the same thought process, as obvious as it may seem to you.
  2. Prepare. Request or research information before meetings so that you can prepare your thoughts ahead of time.
  3. Share you successes. Make small daily goals to share a project you are working on, a great meeting you had, or a positive outcome that you have reached. It doesn’t have to be about bragging. Share your passion instead of your ego.
  4. Create space. Whether when working on an important project or debriefing from an intense meeting, find a quiet place.
  5. Share your ideas. Again, make small daily goals to speak up once in a group setting. And don’t fret afterward about whether or not people thought your idea was silly. They’ve probably moved on.
  6. Seek out other introverts. If you have an event or activity to go to, buddy up with an introvert. Use it as an opportunity to go out of your comfort zone and mingle, knowing you can rejoin your buddy if you need to.

In Summary…

Neither introverts nor extroverts are “better” – they are just different. In order to demonstrate personal and professional leadership, understanding self and others is important. Take the time to learn about your co-workers and how they operate.

Additional Implications for the Nonprofit Sector

  • Think not only about your staff, but also about your clients. Are programs and services developed and marketed in ways accessible to both introverts and extroverts?
  • Think even further to your donors. Are solicitations and fundraising activities developed and marketed in ways appealing to both introverts and extroverts?

More Resources

Connection to mission: proposing a new org chart

Credit: Mike Rohde
Image Credit: Mike Rohde

One common piece of an orientation program for new staff or volunteers is a review of an org chart – a chart of the reporting structure of the organization so that everyone knows where they “fit” in the grand scheme of things.

I propose an alternative chart – or at least an additional one.

What about an organizational chart that demonstrates how each person contributes to the mission?

Instead of the Board of Directors and CEO at the top, the mission statement is at the top. Some roles may have a direct link to the mission – those that deliver services to clients, for example. Others may have a role that support the mission down the line. Many roles would likely fit in more that one “reporting line” based on the variety of their duties.

I suspect (since I haven’t actually drawn one of these up before) the resulting chart would look very flipped in many places, articulating the importance of staff and volunteers that might usually show up on the very bottom of a traditional org chart.

No matter what the role, everyone in an organization should be contributing to the mission. Show them how.

Anyone want a strategic management report?

This summer I’ll be completing some of my last master’s courses to complete an MBA in Community Economic Development. One of the courses, Strategic Management, requires a final project that assesses a variety of characteristics of an organization. I’ve figured that rather doing a report for distant company or organization XYZ, I’d like to do one for a nonprofit that might find value in the results of the report.

The topics the report that I need to produce for this course include an overview and analysis of topics such as:

  • Organizational life cycle
  • Organizational and governance structures
  • External operating environment
  • Financial indicators
  • Operational strategies
  • Marketing, financial, and research & development strategies
  • Leadership
  • Alliances and partnerships
  • Performance measurement tools

The report will include suggestions for changes (if any) to strategy or structure that may enhance the success of the organization in fulfilling its mission, along with a time frame for these changes.

There is no limit to the type of organization, but the organization does have to be large enough to have a variety of programs/activities and possible partnerships. I also need to have access to financial statements.

Obviously this report is limited in the sense that I am expected to include pre-determined sections, whereas an interested organization may only want a few areas to be examined. I could provide a complete or abridged report if this is the case. Or perhaps an organization is willing to support a graduate student by providing information to help inform such a report without any interest in the actual report.

In any case, if this is of interest to you and/or your organization, be in touch by the beginning of July.