On Friday, June 11, the Nashville Business Journal ran a story about the conclusion of a recent study by Charity Navigator entitled “Nashville nonprofits get low marks for efficiency.”

CNM President Lewis Lavine issued a retort which ran on page 33 of the June 18th edition of the Nashville Business Journal:

Last month, more than 250 nonprofit leaders attended a conference sponsored by the Center for Nonprofit Management. The keynote address was delivered by the author Dan Pallotta, who connected intellectually with his audience by stating that nonprofits should be evaluated by their outcomes rather than by a set of contrived financial indicators.

After hearing his arguments, I was discouraged to read a local headline last week “Nashville Nonprofits Get Low Marks for Efficiency.” The accompanying article was quoting a new study by Charity Navigator, a New Jersey-based evaluator of nonprofits.

Charity Navigator selected only 30 large Nashville nonprofits for its study. From these 30, it concluded that Nashville’s charitable community ranks 26th among the thirty selected cities nationally. A key indicator in the study was that this Nashville group spent 12 cents to raise $1 in contributions, while the national median was 10 cents. Another indicator was the level of the salaries earned by these charities’ CEOs.

Nowhere in the statistics used by Charity Navigator is any measurement of the results or outcomes of the labors of our nonprofits. What these nonprofits accomplished in our community is not relevant to these evaluators.

Pallotta, in his Nashville speech, told a tale of two soup kitchens. The first was dirty, poorly run, served barely edible food, and catered to a small group of needy souls. Its CEO was poorly compensated, and it had very little expense in its fundraising program. The second was a clean, modern facility, efficiently run, with excellent programs and nutritious food, and a large number of clients whose lives were changed through its outreach. The CEO received a fairly high salary and performance compensation. It spent money on its fundraising campaigns, but was successful in its efforts.

According to evaluators like Charity Navigator, the first soup kitchen would receive a higher rating.

We have just witnessed the largest flood in our history. Our nonprofit community has gone above and beyond its means in caring for those in need. An example is the Community Resource Center that was itself destroyed in the flood. It continued to provide goods to those whose homes were destroyed. Another is Hands on Nashville that made 15,000 placements of volunteers within days after the disaster. Neither was included in the Charity Navigator study.

So let’s evaluate the performance of our charitable and nonprofit organizations. But let’s do so using indicators that matter – let’s example what they accomplish every day in our community.

On May 18th, 2010, over 250 Middle Tennessee nonprofit leaders came together for a day of learning at Belmont University’s Curb Event Center. Attendees completed the day feeling “rejuvenated,” “refreshed” and ready to go back to work serving the community. Bridge was an opportunity to foster growth and healing in a community of givers.

 One of the huge takeaways of the day came from keynote, Dan Pallotta. Dan brought forth many new ideas for our sector to explore. Anyone in the room could see that there were light bulbs going off in brains throughout the Curb Event Center during his speech. Some of his major points included:

 1. “Feel-Good” Benefits of a Nonprofit Career are Overrated

Pallotta argues that medical researchers, book publishers, and environmentally conscious companies all feel they are giving back to the world and are not asked to sacrifice quality of life. Nonprofit employees are often working in typical office environments and are not the volunteers on the front lines helping the community. Therefore, the majority of nonprofit employees are not getting the feel-good benefits of daily service. In addition, board members and funders have considerable power over nonprofits, while those individuals have for-profit employment. They are also getting to experience service without sacrificing their income.

 2. “Overhead Costs” are Crucial to Fulfilling Mission

Culturally, we have been trained to ask the question, “What percentage of my donation goes directly to the underserved?” Pallotta argues that this is the wrong question to ask and is perpetuated daily by the media, state attorney generals and organizations like Charity Navigator and the Better Business Bureau. He states in a blog post, “The next time you’re pressured to keep overhead low when you know it will compromise effectiveness, explain that doing so is a violation of your conscience, your ethics and yourself.”

 3. People Want to Be Asked to Do the Most, Not the Least They Can Do

Why is the person who spends 99% of their time building personal wealth and 1% of their time on a charity board called a philanthropist and individuals that give 100% of their time to building a service organization are called “staff”? Pallotta believes that our definition of philanthropist is too limited to the wealthy class, and therefore, small donors never aspire to be more. We are making giving to charity easier every day, but what we need to do is ask donors to do more than send a text message to give a small amount.

What Are the Next Steps?

CNM would like to explore with the Middle Tennessee community how we further this discussion. What do you think are the next steps in this conversation? Should we even be having this conversation? Tell us what you think in the comments section! We promise to put your ideas into action.

This post is part of a weekly series previewing the topics that will be discussed at CNM’s May 18th Nonprofit Conference: Bridge to Excellence. Click here to register for this exciting day long learning event featuring keynote speaker Dan Pallotta, author of Uncharitable: How Restraints on Nonprofits Undermine Their Potential, a #1 bestseller.

José Gonzalez and Renata Soto are leading the breakout session “Rumba Roast Fair Trade Coffee: An Exercise in Social Entrepreneurship.” The session will highlight the story behind Rumba Roast Coffee. This fair trade organic brand was launched in 2007 by Conexión Américas, as a mission-related fundrasing endeavor with the support of Belmont University and Bongo Java Roasting company. The impact of this venture is felt both in Latin America and in Middle Tennessee. The fair trade coffee empowers farmers in Latin America, allowing them to get a fair price for their quality coffee; in turn, the sales from the coffee in Middle TN support Conexión Américas programs. Learn from their experience with social entrepreneurship, and walk aways with ideas of how to earn money for your own nonprofit! Click here to read more about Rumba Roast coffee. Continue reading for more information on presenters José Gonzalez & Renata Soto. Continue reading ‘Road to the Conference: Featured Presenters, José Gonzalez & Renata Soto’

This post is part of a weekly series previewing the topics that will be discussed at CNM’s May 18th Nonprofit Conference: Bridge to Excellence. Click here to register for this exciting day long learning event featuring keynote speaker Dan Pallotta, author of Uncharitable: How Restraints on Nonprofits Undermine Their Potential, a #1 bestseller. Amy Lynch specializes in high-energy keynotes that reveal the key components of Generational Alignment™ and position organizations for bottom line results. She is the author of the award-winning How Can You Say That? about parent-teen communication; and she is Generation Y columnist for Biz Journals, syndicated to business newspapers in more than 40 markets. Her ideas have been featured in USA Today, the Boston Globe, the Chicago Tribune, the Dallas Morning News, the Washington Post, and NBC Nightly News, among others. Amy is leading the breakout session, Who’s Next? Succession Planning for Multi-Generational Nonprofits at the Conference.

Road to the Conference: Featured Presenter, Amy Lynch

Generation Y and Economic Crisis: What you can expect from your Millennial employees during economic crisis, and what you can do to keep the Gen Y talent you need.

Despite their reputation for being pampered, a close look at the Generation Ys (a.k.a. Millennials) in your company may reveal more pragmatism than privilege. Recent surveys reveal that since 2006 Millennials have become more realistic about job expectations. In fact, Gen Ys have the lowest expectations of all four workforce generations when it comes to “soft” workplace benefits such as a pleasant work environment, liking the people they work with or having flexible hours. Here’s why.

Fiscal realists

Few of today’s 20-somethings escaped childhood free of financial worries. The oldest Millennials were born in 1980, right after the Japanese finished eating our industrial lunch and just in time to learn the new verb “downsizing.” Millennials were toddling off to preschool in 1984 when the Bureau of Labor Statistics first began to record worker displacement in response to widespread layoffs. They were in elementary school when their families experienced 1987′s Black Monday and the recession of 1991. During junior high and high school, they watched the dot-com bubble go full cycle from boom to bust. Then came Enron and 9/11 –and all of this before the economy began its current vertiginous dive.

Generation Ys have never experienced a sustained period of financial prosperity, and they have no memory of job security. They don’t even expect social security to be there for them later on. In one study, young adults said they believed they were more likely to see an alien spacecraft than ever to receive a social security check.

Then there’s debt. Median credit-card debt for low- and middle-income Millennials is $8,200. The average college debt for recent grads is more than $20,000 and rising. About half of all college grads go home to live with Mom and Dad for about a year after they leave school. Cheap rent beckons.

Continue reading ‘Road to the Conference: Featured Presenter, Amy Lynch’

This post is the fourth installment of a weekly series previewing the topics that will be discussed at CNM’s May 18th Nonprofit Conference: Bridge to Excellence. Click here to register for this exciting day long learning event featuring keynote speaker Dan Pallotta, author of  Uncharitable: How Restraints on Nonprofits Undermine Their Potential, a #1 bestseller. He is a leading expert on innovation in the nonprofit sector and a pioneering social entrepreneur. As the founder of Pallotta TeamWorks, he invented AIDSRides and Breast Cancer 3-Day walks and changed the paradigm for civic engagement and fundraising for important social causes. Dan has a blog that he updates regularly for the Harvard Business Review. His most recent post questions the IRS 990 Form, and how the collected information is used unfairly.

Road to the Conference: Featured Presenter, Keynote Dan Pallotta

The Tax Form Tax

It’s tax time. USA Today reports that the average American using form 1040 spends 21.4 hours doing his taxes, that we hate it so much that 86 million of us use outside preparers, and that “the cost of all this is $107 billion, or about 1% of the economy — a titanic waste.”

But that ain’t the worst of it.

The IRS form 990 that nonprofit organizations file every year to report income and expenses does a lot more damage. That’s because the numbers get used by watchdog agencies to calculate simplistic efficiency ratios, upon which they draw sharp distinctions between good and bad charities. The public then uses these distinctions to make “purchasing” decisions. I spoke to the head of one household-name charity just last week who relayed the uphill battle they had to fight with donors and board members last year after a watchdog downgraded them on the basis of the form’s numbers, despite enormous new successes in their charitable work.

The reality is that the 990s are being used to judge, rate, and berate humanitarian organizations on the near-term effects of long-term investments, even though the results of those investments are not expected to show up for many years down the road. Worse, those distorting effects are being used to make wholesale character assessments about the organizations.

The fact that the Internal Revenue Service wants a report on income and expenses every 12 months doesn’t mean that humanitarian organizations should be assessing the success of projects within a 12-month period. What earthly relevance does an arbitrary 12-month timeframe have? If the project’s scope is longer or shorter than that, then such accounting will distort the results — usually dramatically. Project financials should be accounted for over the lifetime of the project. Of course.

The for-profit sector is not asked to deliver this kind of hallucinogenic accounting to its investors, let alone its customers. We wouldn’t ask Airbus to summarize the results of the A380 aircraft investment (the massive new double-decker 853-passenger jet) after one year. It would be ludicrous. Indeed, to ask for that summary after five years would be ludicrous. The company would not yet have sold a single plane. Similarly, shareholders won’t ask Apple to summarize the results of the iPad investment after the first year of production. That would give a tremendously distorted view of the overall value of the iPad to Apple’s long-term success. And consumers are never going to ask Apple for any of that data before they buy one of the damned things. Sure, corporations file annual tax returns. But consumers don’t use them to make their purchasing decisions.

So let’s see how this plays out. Suppose a hunger organization raises $1 million a year and has $300,000 in annual operating overhead, giving it a overhead ratio of 30%. It hires three fundraising staff members at a cost of $400,000 annually as a key element in its strategy to triple revenues from $1 million to $3 million over five years. In the first 12 months, expenses on those employees total $400,000, but the revenue they generate is zero. They’re planting seeds — no one expects revenue at that stage in the investment.

Continue reading ‘Road to the Conference: Featured Presenter, Keynote Dan Pallotta’

This post is the third installment of a weekly series previewing the topics that will be discussed at CNM’s May 18th Nonprofit Conference: Bridge to Excellence. Click here to register for this exciting day long learning event featuring keynote speaker Dan Pallotta, author of Uncharitable.

Michael Kipp has been a principal in businesses as diverse as banking, health care and internet commerce. He has worked with nearly 100 corporate, association and nonprofit organizations on board development. He is leading the session, Volunteer Ownership: Rethinking the Nonprofit Board at the Conference.

Road to the Conference: Featured Presenter, Michael Kipp

Board work is frequently characterized by ceremony, instinct, and unfounded assumption. People involve themselves for all manner of reasons: they believe in a cause or have written a check; they want to make a difference, or “change the world”; they are advocates committed to a political or social cause; they want to make connections, associate with “the right people” or those who share their interests; their lives have been marked by a personal or family challenge captured in the organization’s charter.  The passion that powers nonprofits has equal power to handicap them.

Then there are the intersecting roles of volunteerism, fund raising and governance…rarely kept in balance and frequently distorted by history, circumstances and the complex mix of motives and assumptions cataloged above.  The net impact is that board members struggle between leaning back and leaning in.  It takes time and experience to grasp that governance is a form of ownership—an idea worthy of closer examination since the success, significance, and even survival of nonprofits depends so heavily upon the quality of their “owners”.

Directors are not managers.  Governance should not be a substitute for staff deficiencies.  Weak boards should never be tolerated with the excuse that “…after all, we’re just volunteers; we’ve got real jobs, you know…” Nor should board members “dial down” in deference to the “professionals” as sometimes happens in treatment settings with doctors, educational environments with teachers, associations with legacy members, and within the sub-industries that grow up around services to special needs populations. This kind of self-effacement engenders passivity and sets the stage for specialized employees to determine policy and even set aspirations on behalf of their “owners”. The reality is that while they may be highly trained, well-motivated, and in command of the expertise to pursue the mission, the organization is not theirs to govern.

Continue reading ‘Road to the Conference: Featured Presenter, Michael Kipp’

This post is the second installment of a weekly series previewing the topics that will be discussed at CNM’s May 18th Nonprofit Conference: Bridge to Excellence. Click here to register for this exciting day long learning event featuring keynote speaker Dan Pallotta, author of Uncharitable .

Brian Williams  is Executive Director of Hands On Nashville, a recognized leader in programs, partnerships and services that maximize volunteer impact for youth, adult, corporate, and nonprofit constituencies in the greater Nashville community. Each year, Hands On Nashville refers or places 34,000 volunteers to projects in more than 300 area service agencies and schools. He will be conducting a breakout session entitled “The Successful Use of Volunteers” at the conference.

Road to the Conference: Featured Presenter, Brian Williams

Effectively Utilizing Volunteers

“Their niceness will let you recruit a volunteer

but only your competence will let you keep them.” – Anonymous

 2010 has been declared the year of the volunteer.  Interest in and a desire to “engage” in all aspects of volunteerism and service is on the rise nationally, and we are no different here in the Volunteer State.  People in our communities are seeking volunteer placements, but are we prepared?  Are we investing our resources, time, talent, and finances in a manner to support the interest?  And, are we willing to allow ourselves, our agencies and our services to be stretched to allow volunteerism into all aspects of our agencies?

While we won’t solve these issues here hopefully the following will serve as building blocks for our collective and individual volunteer utilization success.

 Assess your commitment to utilizing volunteers

 - Have you invested in a volunteer coordinator or other volunteer management resource?

When organizations invest in a volunteer coordinator or volunteer management resource like Hands On Nashville, they build their capacity to effectively utilize volunteers and improve their ability to retain volunteers.

- Have you considered different activities that volunteers can perform within your organization?

Developing “volunteer position descriptions” is one of the best practices for volunteer management. These descriptions can help you recruit the right volunteers for your organization.

When organizations provide a variety of opportunities that allow volunteers to utilize existing skills and develop new ones, they are more likely to engage individuals in rewarding volunteer

experiences.

- Do you have buy-in from your staff for incorporating volunteers into different aspects of your organization?

- Does everyone understand that volunteers can be used not only for mailings but also for IT resources, public relations, strategic planning, or any number of skilled tasks?

Continue reading ‘Road to the Conference: Featured Presenter, Brian Williams’

This post is the first installment of a weekly series previewing the topics that will be discussed at CNM’s May 18th Nonprofit Conference: Bridge to Excellence. Click here to register for this exciting day long learning event featuring keynote speaker Dan Pallotta, author of Uncharitable .

Kim Carpenter Drake is a CNM Consultant with over 20 years of experience in fundraising, cause marketing and community and donor relationship building. From symphony performances and art exhibitions to land conservation and care for newborns, Kim Carpenter Drake has worked with a wide range of organizations during her career to lead successful fundraising and community support programs. Kim is conducting the conference breakout session, “Funding Your Existing Programs: A Formula for Success” at CNM’s Conference.

Road to the Conference: Featured Presenter, Kim Carpenter Drake

Sponsorship Packaging: A New Perspective on Current Programs

 If you have ever received a gift wrapped in beautiful paper and ribbons in just your favorite colors, you will know what I’m talking about. Of course, the enclosed item is also important but the way in which it is presented says even more about your thoughtfulness and understanding of the recipient.

 Thoughtful consideration is exactly what our potential sponsors hope to find when they review a proposal for support and partnership. Your “package” is the way in which you create a unique identity for yourself and your sponsor. It means learning about your new partner and their interests. It is your way of saying, “I found the perfect thing – just for you.”

 We may be tempted to create some new, special thing but it almost every case there is something already there, right in the middle of your mission-driven work, that is just right. The challenge is to see your work through a new lens. For example, an NPO that provides after care programs for elementary age children can define sponsorable components in locations, age groups, types of activities and even days of the week.  This may seem trivial but our relationships with donors are based on connections. These connections are much more apparent and compelling when they have a clear identity. Townhouse Realty might not relate to a big, difficult to understand after-care philosophy but they might just connect with “Townhouse Tuesdays.”

 At this year’s conference, we will take a new look at programming and even general operating expenses as potential relationship building and funding tools. We all have that perfect package – it is just a matter of finding the right trimmings to make it memorable.

That’s the argument that author Dan Palotta is making in a recent article posted on the blog for Harvard University’s School of Business. The article argues that nonprofit employees are often expected to trade a competitive salary for the “psychic benefits” of nonprofit work. Palotta turns that argument on its head with the following points:

1. People in other industries also feel good about the work they do: Palotta gives the example of a people that build environmentally friendly cars, medical researchers, and book publishers that all feel they are giving back to the world and are not asked to sacrifice quality of life.

2. Nonprofit employees are in cubicles just like everyone else: Palotta argues that nonprofit employees are often working in typical office environments and are not the volunteers on the front lines helping the community. Therefore, the majority of nonprofit employees are not getting the feel-good benefits of daily service.

3. Volunteers from the for-profit world have the opportunity to be philanthropists: Board members have considerable power over nonprofits while they have for-profit employment. They are getting to experience service without sacrificing their income.

This article is part of a larger picture that Dan Palotta paints for the future of the nonprofit community in his book, Uncharitable: How Restraints on Nonprofits Undermine Their Potential. The book questions the separation of capitalism and the nonprofit sector and how that business model is harming nonprofits, and the communities they serve.

Let’s Talk About it!

Let us know what you think in the comments section and save the date for CNM’s Bridge to Excellence conference on May 18th where you can hear conference keynote Dan Palotta in person! Stay tuned for more information on this exciting event.