The other day someone asked me if I would comment here on the announced closure of a particular non-profit. It wouldn't be appropriate for me to do that by name given that I work for a prominent foundation in the same region.
It was not a group that I knew or have had any professional dealings with, meaning I have no more information to go on than their public statements, website, and annual tax returns posted on Guidestar. That's obviously limited data, in particular it offers no meaningful information about the impact of their programs. But then that limited public information seemed to paint such an obvious and familiar outline that I did write the following by email:
I see annual revenues veering wildly up and down the last few years [literally doubling and halving from year to year], which added to their public comments about loss of foundation funding strongly suggests they were still (more than a decade after their founding) largely reliant on foundation grants to exist. I see little evidence of any organization-building -- the mission and lists of accomplishments are all over the map, no evidence of any coherent strategic or business plan, etc.
It's the non-profit equivalent of looking at a 20-year-old restaurant and realizing that the owners were still running it like a 2-year-old one. I'm sure any program officer at any foundation would agree with that sad assessment, and hence I suspect that the foundations that had been incubating them finally gave up on it. A non-profit enterprise which after 15 years still hasn't done anything about diversifying its revenue stream has no more likelihood of succeeding than a 15-year-old law firm that still gets all its revenue from three repeat clients. Had I been asked a couple years ago for advice on this group it would have been basically, "You're failing because you're running the business into the ground, and the foundations will give up on you any day now."
Note I said "incubating", because that is what foundations do -- we are not a permanent revenue source and anyone who thinks we are is very new to this sector. Foundation grants are only an eighth of all charitable support in this country and corporate is only a bit more. Individual donors are where the long-term sustainable money is, and individual giving to nonreligious non-profits in this country is now close to $200 billion a year and still rising steadily -- so any non-profit with a reasonable track record of mission product can build an individual donor base, and doing so ain't rocket science. I can't tell why they failed to do that but it sure looks like they did....If more-detailed financials revealed sizeable individual-giving support and no more than half the annual budget coming from foundations then I'd have to change my diagnosis, but I'd happily bet you a nice dinner that they wouldn't.
I could have added that in addition to now analyzing non-profits regularly as a foundation officer, I know exactly whereof I speak on the above issues from direct sad experience. None of which is to suggest that I think the above analysis is anything but a quick gut reaction, it's certainly not based on anything close to the level of information that I'd collect in my professional capacity.
Now with the disclaimers out of the way, I believe some experienced folks read this blog a bit, so what do you think? Does it sound like I'm jumping too quickly to a conclusion, or does that off-the-cuff autopsy ring true?
Showing posts with label strategic. Show all posts
Showing posts with label strategic. Show all posts
Friday, February 02, 2007
Friday, November 03, 2006
"Non-profits should be run like a business"
How many times have we all heard that one? From board members, relatives, U.S. Senators from Iowa, ad nauseum. Like most non-profit professionals I used to roll my eyes and get defensive every time I heard this piece of sage advice, and hence used to get eyestrain a lot.
Some folks in our field are firing back to say: run like a business? Why aim so low? The clearest exponent of this view is someone who's never worked in non-profits: business consultant and writer Jim Collins in his monograph Good to Great and the Social Sectors: Why Business Thinking Is Not the Answer. I've read it and he makes a valid point: most businesses are not run well. That's the nature of the free market, for every successful Southwest Air there are several sluggish stupid failing airlines. People telling non-profits to operate "like a business" always cite the few smart winners while forgetting that the norm is mediocrity, like sports fans who remember Mickey Mantle and grumble that today's players can't carry his cleats. (No they can't and neither could 99% of the players in 1960, because he was MICKEY FLIPPING MANTLE, duh). If the business world was so beautifully well-run would Dilbert cartoons be pinned up in a million cubicles?
But honestly that response, while accurate, is responding to a straw man - this cliche is not actually trying to tell non-profits how good to be but something different. Through some instructive experiences I've come to the idea that folks parroting it are completely wrong in the way they usually mean it and dead on the money in a different way.
Most often that statement is rooted in the idea that non-profits are not operated in a business-like manner: that we don't do "real budgeting" or have to comply with normal legal standards or ever fire poorly-performing staff, etc. Perpetrators of such silliness invariably turn out never to have worked for a non-profit and are astonished to discover that we don't actually operate in the same manner as Aunt Bea's annual bake sale for Opie's scout troop.
Spend any amount of time working for or with smart successful businesspeople however, and a blunt truth is inescapable: that the non-profit sector needs to learn their essential skill of setting and enforcing choices and priorities in our work. We talk endlessly about that nowadays, boy do we ever -- walk past a non-profit-management classroom and "strategic planning" and "SWOT analysis" will pop into your head like that old TV jingle you can't stop humming -- but we don't yet truly get it in the way successful businesspeople do. Deep down we still think that our noble self-sacrifice in accepting lower salaries than we "could be making in the corporate world" exempts us from the free-market dynamics which focus the minds of those poor soulless automatons over in Dilbert-land.
And so we write four-paragraph-long mission statements, and lovely business plans which never get read again, and my favorite the strategic plan which declares _ten_ top priorities (half of which begin "Address issues of..."). We start big new programs because we've heard that "foundations are throwing grant money at that", without bothering to research what foundations are and are not actually willing to fund in that subject. (Let alone penciling out what the new program will cost when the startup grant ends and we can't bear to shut it down because it's become so essential that we meanwhile re-framed our mission statement to include it).
Poorly-run businesses do those things, and the market punishes them until smarter businesses kill them off. The same, eventually, is true for non-profits. The most-important thing we can learn from the successful businesspeople is how to make a disciplined, reality-based plan and stick to it. So the next time one of them acts like we don't do real accounting, perhaps we should show them a couple of FASB circulars and then ask for help with what they do actually do better than us.
Some folks in our field are firing back to say: run like a business? Why aim so low? The clearest exponent of this view is someone who's never worked in non-profits: business consultant and writer Jim Collins in his monograph Good to Great and the Social Sectors: Why Business Thinking Is Not the Answer. I've read it and he makes a valid point: most businesses are not run well. That's the nature of the free market, for every successful Southwest Air there are several sluggish stupid failing airlines. People telling non-profits to operate "like a business" always cite the few smart winners while forgetting that the norm is mediocrity, like sports fans who remember Mickey Mantle and grumble that today's players can't carry his cleats. (No they can't and neither could 99% of the players in 1960, because he was MICKEY FLIPPING MANTLE, duh). If the business world was so beautifully well-run would Dilbert cartoons be pinned up in a million cubicles?
But honestly that response, while accurate, is responding to a straw man - this cliche is not actually trying to tell non-profits how good to be but something different. Through some instructive experiences I've come to the idea that folks parroting it are completely wrong in the way they usually mean it and dead on the money in a different way.
Most often that statement is rooted in the idea that non-profits are not operated in a business-like manner: that we don't do "real budgeting" or have to comply with normal legal standards or ever fire poorly-performing staff, etc. Perpetrators of such silliness invariably turn out never to have worked for a non-profit and are astonished to discover that we don't actually operate in the same manner as Aunt Bea's annual bake sale for Opie's scout troop.
Spend any amount of time working for or with smart successful businesspeople however, and a blunt truth is inescapable: that the non-profit sector needs to learn their essential skill of setting and enforcing choices and priorities in our work. We talk endlessly about that nowadays, boy do we ever -- walk past a non-profit-management classroom and "strategic planning" and "SWOT analysis" will pop into your head like that old TV jingle you can't stop humming -- but we don't yet truly get it in the way successful businesspeople do. Deep down we still think that our noble self-sacrifice in accepting lower salaries than we "could be making in the corporate world" exempts us from the free-market dynamics which focus the minds of those poor soulless automatons over in Dilbert-land.
And so we write four-paragraph-long mission statements, and lovely business plans which never get read again, and my favorite the strategic plan which declares _ten_ top priorities (half of which begin "Address issues of..."). We start big new programs because we've heard that "foundations are throwing grant money at that", without bothering to research what foundations are and are not actually willing to fund in that subject. (Let alone penciling out what the new program will cost when the startup grant ends and we can't bear to shut it down because it's become so essential that we meanwhile re-framed our mission statement to include it).
Poorly-run businesses do those things, and the market punishes them until smarter businesses kill them off. The same, eventually, is true for non-profits. The most-important thing we can learn from the successful businesspeople is how to make a disciplined, reality-based plan and stick to it. So the next time one of them acts like we don't do real accounting, perhaps we should show them a couple of FASB circulars and then ask for help with what they do actually do better than us.
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