Which Comes First, The Money Or The Outcomes?

By the latest IRS figures, there are 1.7 million nonprofits in the U.S. Of that number, 100,000 (6%) take in over 90% of the revenue …with just 3,000 getting 6 out of every 10 dollars. Of the $1.5 Trillion in annual revenues pouring into the nonprofit sector, nearly 70% comes from government and the rest from philanthropy.

Five decades ago, education organizations received just 5% of the philanthropy pie while  religion received 60% with the rest dispersed to a grab bag of other charities. Today, human service charities receive less than 10% of private giving, and education with 15% is now second only to religion at 35%. Of course, much voluntary action and charitable giving in America takes place ‘off the books’ and out of sight. We don’t have a good handle on the size of it all as these tend to be private matters of the American heart.

In his recent book, Charity Case, Dan Pallotta points out that charitable giving in the US has remained virtually flat for four decades amounting to 2% of GDP per annum. Despite the explosion in the number of nonprofits, the emergence of sophisticated fund development offices within these organizations and the endless series of high profile ‘causes’ endlessly flogged by popular culture, we’re still stuck at 2%.

As has been noted by many in the current debate, increasing giving to 2.5% or even 3% would result in a great expansion in the revenue of nonprofit organizations. The question remains if that new money would produce better outcomes. For despite a tidal wave of taxpayer money flooding into human services since the days of LBJ, we’re still stuck with a poverty rate in the 12-15% range. 

So I understand the need to discuss $$$, but let's not lose sight that for the people we serve, it's outcomes.

Nonprofits Should Lower Education Requirements For Some Jobs From "College Degree" to "High School Diploma"?

Guess which line represents student loan debt

America is in the midst of a debt super-cycle.  Whether  we muddle though to a period of expanded economic growth or descend into a disastrous run of debt-deflation coupled with hyper-inflation remains to be seen.   Possibly, as some economists suggest, we're in for two or more decades of anemic economic growth all the while burdened with expanding promises we've made to the retiring Baby Boomers.

But what we know right now is that many nonprofits (as well as certain local government agencies and small businesses) are having an increasing difficult time retaining entry level staff for certain entry level positions.  While some point to low salaries, the primary driver is the enormous debt burdens of young people entering the workforce.

Student Loan debt continues to skyrocket.  In just seven short years from 2005-2012, the average student debt load ballooned 58 percent -- from $17,233 to $27,253.   This is the only category of consumer debt which did not shrink/slow as a result of the financial meltdown of 2008.  The net result is that young adults are starting their careers with a $400 monthly payment or $4800/yr. In rural regions of Pennsylvania, starting salaries can be as low as $24,000, which after taxes means up to 1/4th of take home pay can be consumed by student loan payments.  It won't take a bright young mind long to figure out the need for a different career or even grad school. 

They won't pay off their balance on the salary you can afford

One way for nonprofits to deal with the problem is to reconsider the educational requirements for certain positions.  We know right now about 1/3rd of college grads are working in jobs which do not require a college degree.   What we need to be thinking about is if a lot of the jobs we have even need to require a college degree.   Think of it.  A high school grad with zero debt will be a lot more satisfied with a $24,000/yr salary than a college grad weighted down with massive debt coupled with an inflated sense of their value to your organization.

Integrity....such a quaint concept

As many know, I love to include thinking quizzes in my seminars/workshops.  One format I often use is providing participants with a list of options on a particular subject (i.e.: Most Valuable Brand Names) and have participants try to pick the top three.

One frequently used is 'Personal Qualities Employers Want From Employees'  which includes a selection such as 'Teachability', 'Curiosity', 'Dependability', etc.  Also on this list of choices is 'Integrity', and here is where I'm seeing a large generational divide.

Most research puts Integrity as #1 or #2 among the personal qualities employers want from staff.  When I play this game with Baby Boomers and Generation X, the vast majority put this quality in their top 3.  However, among Millennials 'Integrity' hardly gets a second look.   It happened again yesterday with a group of college students/recent grads.    They split up into teams of 2 and amongst the eight pairings, only two even mentioned Integrity anywhere among their top three.

The explanations went something along this line:  "Employers want to see results and don't particularly care how you get them".  I don't know if this is true of employers or not, but note that this is the way the next generation views the world.  Their deep cynicism about the workplace contains serious implications for the US economy in the coming decades.

The Four Critical Rights Of Board Members

In the past decade I've witnessed at least a dozen nonprofits where the Chairperson or a small cabal are running roughshod over the rest of the Board.  What's more puzzling is that the rest of the Board sits passively and lets this abuse continue.  Not only is that legally problematic, but it wastes the talents of the smart people sitting in the Board room.

Oftentimes I encounter Board members who do not understand they have legal rights and do not have to accept bad behavior.  Among the four critical rights are:

• You have a right to all relevant information needed to perform your duties.  This includes access to all staff and all documents necessary required to make sound judgments  in pursuit of the organization’s mission.

• You have a right to call special meetings.  If need be, file the request in writing.  The Board then has 60 days to hold the special meeting.

• You have the right to bring court action to challenge any behavior which affects your rights.

• You have the right to dissent.  You have the right to have your dissent officially registered in the meeting minutes.  Furthermore, you have the right to submit a written dissent to be attached to the regular meeting minutes or otherwise registered with the Secretary of the Board. (NOTE: You cannot vote in favor of an action then register a dissent.  Also, if you fail to register dissent you may be judged to have concurred in the decision of the Board)  

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What The Next Generation Leader Will Look Like

We're walking into uncertain times

What type of talent should The Next Generation Executive Director cultivate in current staff?  What should they look for in new hires? The answer is critical to understanding the changes taking place in our current expectation of the Executive Director’s role and what tomorrow's leader should posses.  If you are running a nonprofit, this will impact your  effectiveness, the effectiveness of your organization and ultimately your career. The qualities that an ED values most in their team sets a standard that affects everything from program development, fundraising, collaboration and the long-term success of nonprofit.

Employer surveys over the past four decades document the growing emphasis upon those “soft” skills: communication, dependability, tenacity.  In fact, the transformation is now so complete that basic technical skills requirement no longer rank in the top five of what employers seek.  As one Director explains, “I can teach them what they need to do a good job, but they need those soft skills like persistence in order to do a great job and add real value to this organization.”

There is also data suggesting that priorities in rudimentary job skill requirements are changing in important ways.  In the public, private and nonprofit sectors it is creativity and teachability which dominate over the basic technical competencies in determining success on the job.

Note it doesn’t say administrative skill, passion or even commitment to mission. In the Age of Austerity, this is an interesting shift.  Thus as the economic environment changes, the threat to traditional nonprofit leaders is titanic.  Retrenchment of government budgets, private household debt burdens, the expansion of venture philanthropy, an emerging legal framework for public benefit corporations all represent fundamental core challenges to traditional nonprofits.  Uncertainty is confronting today’s ED, many of who sense a wave of change coming at them and thus generating a concern about the ability of their staff to deal with it.

This is why The Next Generation Executive Director views creativity and teachability as the essential leadership asset that must saturate a nonprofit.

Might As Well Break Your Business Model Before The World Does It For You

The Great Recession has shaken many of the assumptions held by those in charge. Since half of the EDs in America are 55 and older, this means the majority of our leaders cut their management teeth back in the 70s and early 80s, an age which valued basic administrative skill and virtually ignored creative leadership.  When you consider that 40% of human service nonprofits still conduct client intake via pen and paper, you get a sense that even before the recession we were a few decades behind the curve.

It’s not the technical hardware we’re talking about, but the interconnected mindset.  Most nonprofits just use technology to digitize existing systems, sometimes described by management author Tom Peters as ‘paving the cowpaths’. Today the world is massively interconnected — economically, socially, and politically — and operating as a system of systems. For too many Executive Directors, the answer is that their stakeholders are plugged into their individual social networks, but not to the nonprofit. So what does this look like for The New Nonprofit?  

In a networked age of connection and complexity, emerging nonprofit leaders are stressing fresh thinking and continuous innovation at all levels of the organization. The Next Generation Executive Directors are seizing upon innovation as the necessary element for nonprofits get nimble, reinvent themselves and thus remain significant players in the funding and service community.

Kill Your Sacred Cows

So you’re looking for creative talent and innovative thinking.  What does this do for the nonprofit?

• Question your status quo. Most nonprofits have legacy programs that are sacred cows. Often the need to perpetuate the ‘success’ of these efforts stifles creativity within the organization and thus leaving exciting new options open for other nonprofits to advance competing innovations.  The Next Generation Executive Director understands that new revenues will have to come from new sources, and thus be open to disrupt current programs to create mental space for new thinking.

• Rethink your business model. Directors who prioritize creativity as a need in their staff are more likely to pursue innovation by changing their business model. In an age of change, they surround themselves with talent that can think on their feet and move tactically rather than await direction from the laborious traditional strategy/planning sessions so beloved these past few decades.  Strategic Thinking matters more than Strategic Planning.  The Next Generation Executive Director builds staff capacity to favor continuous, rapid-fire shifts and adjustments to their business models.

• Destroy your institutional lethargy. The Next Generation Executive Director will not await certainty…nor near certainty. Nor will they tolerate it in their staff.  Creative leaders will develop a team that fights the bult-in status quo which urges going slow in the name of ‘considering all options’ or ‘waiting for more information’ before making decisions.  Staff must have strong analytical skills to sift through mountains of data and decide what is relevant. These talents drive decision making that is faster, more precise, and even more predictable.  Creating this type of staff environment takes a combination of vision, strategic awareness and intuitive confidence.  It also requires a certain tolerance of failure as innovation brings risk.  However, in an era of rapid change innovation brings far less risk than maintaining the status quo.  

Any questions?

The Next Generation Executive Director must create a culture which is far more transparent and entrepreneurial. The people in the organization must believe that the changing economy is an opportunity, not a threat. The New Nonprofit understands that risk is to be managed, not avoided. The Next Generation Executive Director is one who can build a fluid business model which gives staff the space to innovate and create.

Something significant is happening to the American economy and to the nonprofit sector. In response to powerful external pressures and the opportunities that accompany them, The Next Generation Executive Directors are redefining the job. They are leading the sector in showing to the rest of us that in an age of uncertainty that there is a creative path forward.  There is a new generation emerging. Is that you?