Nonprofit Transformation: 100 Keys to Breakthrough Results for Every Board and Chief Executive

By Christopher DiCarlo

There are over one million nonprofit organizations, in the U.S. , but very few are reaching their full potential.

Nonprofit Transformation offers a fresh perspective on the prevailing challenges in the nonprofit sector. Throughout the book, author Chris DiCarlo identifies and offers solutions to common issues that all nonprofits face, while at the same time reframing the nonprofit efficiency conversation in order to enact much-needed improvements. As DiCarlo writes, Given the number of social issues that continue and fester, anything short of 100% potential filled is not good enough.

In a no-nonsense style, DiCarlo discusses those difficult and chronic impediments that are on the minds of many nonprofit leaders but are rarely addressed. More importantly, this book offers pragmatic advice on how to push through barriers, illuminating a path to exponentially increased impact for both individual organizations and the nonprofit sector overall.

Specific topics include dealing with sacred cows, clarifying the role of a board of directors, mergers, creating a truly strategic plan, and overcoming internal obstacles to fundraising success.

Insightful and courageous, Nonprofit Transformation is a must-read for sector leaders, staff, and volunteers who aspire to lead their organization to breakthrough results.

• Language: English
• Publisher: Archway Publishing
• Release date: Mar 29, 2016
• ISBN: 9781480824188

Christopher DiCarlo

Chris DiCarlo is a recognized leader in the international and U.S. nonprofit sectors. A former corporate banking executive and veteran CEO specializing in improving organizations, he has a cross-cultural mindset developed though work across five continents. He has a BA from Dartmouth College and holds MBA and MPP degrees from the University of Chicago. For more information about the book, go to christopherdicarlo.com.

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Copyright © 2016 Christopher P. DiCarlo.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

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Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

The information provided within this book is derived from the author’s general and collective experience only. The methods and advice described within are the author’s personal thoughts and opinions. They are not intended to be seen as case studies or depict any one particular organization, group or individual.

Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

ISBN: 978-1-4808-2417-1 (sc)

ISBN: 978-1-4808-2416-4 (hc)

ISBN: 978-1-4808-2418-8 (e)

Library of Congress Control Number: 2016904719

Archway Publishing rev. date: 3/28/2016

CONTENTS

INTRODUCTION Why This Book Is Different

CHAPTER 1 Rethinking SWOT Analysis

CHAPTER 2 The Risks of Risk Aversion

CHAPTER 3 Put Your Sacred Cows Out to Pasture

CHAPTER 4 Fundraisability

CHAPTER 5 To Grow or Not to Grow

CHAPTER 6 Mergers and Vertical Integration

CHAPTER 7 Board Self-Governance

CHAPTER 8 Corporate Partnerships Revisited

CHAPTER 9 A New Planning Paradigm

CHAPTER 10 Advancing Mission through Opportunity

CHAPTER 11 Towards Transformation

The 100 Keys to Nonprofit Transformation

Checklists

Figures

APPENDIX A Examples of Nonprofit Economies of Scale

APPENDIX B Ethics Officer Job Description

APPENDIX C Illustrations of Next Level Nonprofit and Corporate Partnership Areas

APPENDIX D Mission Relevancy

APPENDIX E Updating Your Mission

APPENDIX F Gathering Stakeholder Input

Endnotes

INTRODUCTION

Why This Book Is Different

IF YOU PERUSE THE SHELVES OF ANY BOOKSTORE OR BROWSE the Internet, you will find hundreds (or even thousands) of different volumes espousing singular planning theories and trends of the day. One can certainly find many guides that will be useful in framing decisions and helping the reader with whatever management task is needed to move forward and deliver the incremental evolutionary change that is sought. What Nonprofit Transformation: 100 Keys to Breakthrough Results for Every Board and Chief Executive instead tries to accomplish is to deliver ways that will reframe conversations on strategic planning and bring about revolutionary change, when it is transformational results that are called for and necessary.

Throughout the following eleven chapters, I propose, discuss, and analyze an original framework for decision-making that can drive any nonprofit forward in the context of the twenty-first century. This framework includes the manner in which a nonprofit determines success, works with donors, hires employees, decides on programming, and even evaluates the performance of its board of directors. What is more, the book attempts to identify and then solve crucial issues holding the nonprofit sector back.

My interest in specifically targeting boards and chief executives (or future ones) has, at its core, an understanding that the nonprofit sector requires a particular and unique set of strategies, directional initiatives, policies, ideas, and themes. Today’s nonprofit leaders are charged with initiating this transformation. This book is a blueprint that will assist these leaders in driving their organizations forward.

Why Is Transformation Necessary?

A fundamental question is whether nonprofits really need transformation. To be sure, many lives are positively impacted or even saved because of U.S. nonprofits or international NGOs (this book focuses on the former but its lessons can certainly be applied to the latter). Millions of volunteers and staff members dedicate their lives to countless causes and movements. Isn’t this enough?

My answer is no, it is not. Despite our collective efforts, structural flaws exist and permeate throughout the sector—flaws that prevent organizations from reaching their true potential. Given the number of social issues that continue to fester, anything short of 100 percent potential reached is just not good enough. Moreover, these flaws are correctable with the right approach and mindset. Please find below a description of some of the most salient issues prevalent in the nonprofit sector today that habitually encroach upon our ability to maximize impact:

• Prioritizing keeping the doors open over achieving mission. Ideally, nonprofit organizations, particularly those in the health and human services, should have two overarching goals. The first of these is to solve and eradicate a particular social problem, not just tend to it. This means that going out of business because you have completely resolved the issue stated in your mission should explicitly be the long-term aspiration of your work. The second goal is uncovering the latest evolving or growing issues related to your initial mission before they have reached critical mass or epidemic levels. This may be obvious to many people reading this, but tackling issues before they have reached scale is a strategy rarely applied in today’s nonprofit world.

• Simplistic and outdated measures of success. While many donors continue to look at traditional statistics such as overhead rates and percentage of expenses dedicated to program delivery, it is incumbent on nonprofit leadership to design and agree on performance metrics that truly determine whether or not an organization is solving the issues outlined in its mission and how it does in comparison to its peers. Over the past twenty-five years, nonprofit leaders have discussed and have more or less failed to come to a consensus on an overarching nonprofit equivalent to ROI (Return on Investment) that is predominant in the private sector.¹ Moreover, in a world with growing choices of where to place charitable dollars, standardization of this concept is critical in allocating scarce resources to ever-increasing social issues.

• Even the best-managed and most self-aware nonprofit organizations fall victim to issues of turf protection and office politics beyond what you would normally see in the private sector. All of us working in the field would agree that such issues not only prevent us from fulfilling our missions but also lead to work environments that are less personally fulfilling than they could be. While these types of issues are not exclusive to not-for-profits, with other incentives often taking priority in the private sector (e.g., compensation), they are particularly germane to the charitable services.² Self-examination in an honest and frank manner is critical in overcoming these issues.

• Nonprofits settle for partnership when consolidation is what is necessary. Collaboration has long been part of the way nonprofits operate, especially those organizations offering similar programs. Shared relationships and networks lend themselves to parties working together for the common good. What is missing in this equation is consolidation. There is a very different modus operandi for nonprofits than in the private sector, as mergers and consolidation in the nonprofit world are almost always seen as a measure of last resort, brought on by financial issues or some significant event.³ Even more than this, nonprofit consolidation often starts and ends with horizontal integration, i.e., organizations offering nearly identical services across neighboring geographic locations. As shown later in Chapter 6, it is my contention that vertical integration offers a much wider range of possibilities, as well as room for greater performance improvement, cost savings, and innovation, than horizontal integration does.

• Nonprofits are not nearly flexible enough. Even though most nonprofits are small in nature, the inherent degree of inflexibility shown by many organizations is alarming. Of course, adjustment is difficult in any workplace environment. Yet the unwillingness to consider tactics outside normal parameters remains a significant barrier to achieving even greater results throughout the nonprofit sector.

• Nonprofits are too self-congratulatory. The majority of a typical nonprofit’s revenues come from grants and other voluntary donations. In order to stay in business, nonprofits must justify their existence and sell their value to interested third parties. This differs substantially from private businesses, which for the most part, need to sell their products or services to direct customers. It is therefore understandable that nonprofits have become well versed in positively conveying their worth to society and do not necessarily advertise their weaker points. The problem is that, over time, these same nonprofits begin to believe that they are perfect and infallible. Consequently, there is little interest in self-criticism or honest evaluation. Self-promotion quickly turns into self-aggrandizement. Because results are inherently difficult to measure throughout the sector, believing and reinforcing your own spin is a phenomenon particular to nonprofits. This directly translates into both a disinterest in taking necessary corrective action and settling on an impact level far below a nonprofit’s potential.

• Most charitable organizations do not truly consider the private sector for additional ideas that have application to their work—instead, they just pay lip service to the concept. Boards of directors, staff, volunteers, donors, and all sorts of diverse participants often debate whether to run a nonprofit like a corporation.⁴ More often than not, individuals, even those with significant business experience and success, address the management decisions of a nonprofit organization with different frames of reference than they would apply in a corporate context. This is not to say that the needs of the nonprofit sector are the same as in industry; the conditions prevailing in the not-for-profit world are often more complex, requiring interaction with more diverse sets of stakeholders consisting of competing interests and without the clarity of bottom-line profitability that one finds in the corporate world.⁵ There is no doubt that the goals of nonprofits are not the same as the goals of for-profit businesses. However, there is an existing notion, whether stated or implied, that certain strategies and ideas commonly accepted in the private sector ought to be anathema in the realm of the social services.

All of us who work at nonprofits for a living are passionate about the causes we serve. So are millions of volunteers. My contention is that as we all move forward in trying to alleviate and battle against negative externalities⁶ that are unfortunately all too commonplace in society (not to mention future externalities that are certain to spring up from increased modernity), we owe it to our constituencies to consider many different paths to the greater results that our world desperately needs. The sentiment that we just do not do things that way at XYZ Nonprofit Inc. is simply unacceptable. If you can leave behind your preconceived notions of what a nonprofit is about, or should be about, improved results will surely follow. And while the ultimate success of any nonprofit organization is determined by its ability to deliver results furthering its mission, extracting and interpreting parallel tactics used in the business world must not be considered wrong or inappropriate. It is the responsibility of boards and senior management to examine the competitive landscape and make decisions with the same precision that the private sector uses.

• Risk is a dirty word for most nonprofits. There, I said it. In so much of the work in the nonprofit world, playing it safe has become a large part of what we do, day in and day out. In many ways, this is understandable. Resources are scarce. Boards and senior management are stewards of public and private donor contributions. This is a principal charge and it should never be forgotten. Still, it is particularly interesting that nonprofit organizations often choose risk-averse and traditional ways of approaching problems, instead of taking risks that correlate to the difficult and often intractable social problems they are attempting to solve. Finding a precise risk/reward balance point is key for any nonprofit, especially those working with vulnerable populations.

• Risk is a dirty word for most donors. There is a herd mentality among donors. Proven results matter a great deal. It is outcomes that are funded. This makes much sense, as we do not want to waste dollars on ineffectual or unproven programs.

But what about innovation and the latest ideas? Where are the breakthrough results going to come from if all we fund are existing projects and known quantities?

As an illustrative example, consider when you choose a financial advisor. Do you necessarily want that individual or firm to pick the safest path that will yield trivial returns, e.g., to place the money in a savings account or money market fund? Or in some instances are you willing to take more risk and expect the experienced professional that you have hired to tend to your investments to make qualified decisions in your best interest? The thinking here is that, like in the world of financial investments, a spectrum of varying risk levels ought to exist amid nonprofit programming. Furthermore, these programs should be judged and evaluated according to their level of risk. If we do not assess nonprofits according to risk level, are we not then merely favoring those whose main objective is to just stay the course over the risk-taking innovators? Without risk, and without the acceptance of the failure that necessarily accompanies it, we will never have true innovation. Let us consider a way to normalize nonprofit investing in the same way we make financial investment decisions.

• Even when nonprofits conduct strategic planning, the results are so simplistic and watered-down that the plans are ineffective. As practiced today, strategic planning in the nonprofit sector is inherently different from much of the planning done in the private sector. Many books, manuals, and concept papers focus on the required consensus-building nature of nonprofit decision-making. While it is undeniable that nonprofits have a deep and diverse pool of stakeholders, finding and crafting a plan that satisfies all participants involved frequently leads to excruciatingly elongated and complicated planning timelines. In fact, such strategic planning processes regularly deliver plans that, by the time their organizations adopt them, are outdated and obsolete. The desire for consensus can directly lead to a plan that is completely diluted and is often nothing more than a simple list of goals lacking any specificity on how they are going to be achieved.

Why Transformation Now?

So now we know that structural impediments exist throughout the entire nonprofit sector. To go one step further, I believe that we need to embark immediately upon a corrective course for the following reasons:

• Our results have been good, but not great. There are many paths to incremental growth and many strategies currently in place across the nonprofit sector that embody perfectly fine ideas and that work well across a variety of settings. Still, despite the existence of hundreds of thousands of amazing organizations, and the superhuman efforts of millions of individuals (many of them volunteers), significant chronic problems persist in our society. For example, in the United States, homelessness endures, domestic violence remains, and at-risk youth still face many of the same problems they have faced for decades. The list goes on and on. In order to reverse the course, rather than just stem the tide, contemporary practices and a special approach to doing business will have to be part of the solution. I do not pretend to have all the answers. The suggestions and recommendations contained in the following pages will be difficult to achieve. Friction will be inevitable. Frustration and even anger will be part of the mix. Transformation is hard, yet coming out on the other side with groundbreaking results will make the pain and struggles seem like a piece of cake. Moreover, this more difficult path is the one that is absolutely necessary if we are to achieve great results (and not merely mediocre ones).

• The nonprofit landscape has shifted significantly over the past twenty-five years. There are exponentially more organizations today than there were fifty years ago or even at the end of the millennium. Donors are more sophisticated, seeking more choice, demanding more interaction, and are looking for results of a more immediate nature.⁷ The nonprofit organizations that dominated the social service landscape in the latter part of the twentieth century hold a very different place in the sector today. Funding sources have shifted dramatically. Manners and modes of giving rely more and more on technology. Clearly, there is no sign that this trend will do anything but continue. The landscape has been altered, and the winners of the past twenty-five years are those that have been able to stay out in front.

• What is more, if other types of industries and sectors are any sort of guide, the nonprofit sector is in line for many more changes and perhaps even revolutionsin the years ahead. This book contends that nonprofits do not entirely comprise an independent sector like many purport. Governments are intrinsically involved in deciding which nonprofits receive tax-exempt status and are substantial funders of these same organizations. Like comparable industries that were recently in a similar position (such as utilities, airlines, and healthcare) the nonprofit sector is due for a wave of consolidation, cost-cutting, modifications in business models, and revenue sourcing.⁸ Perceptive nonprofits will recognize this inevitable new world and look for ways to carve out roles as thought leaders and pioneers into the future.

• Nonprofits are not taking advantage of movements in their communities, countries, and society overall. While most organizations understand the possibilities offered by technology, only a few are taking advantage of the many opportunities that present themselves. There are many exciting prospects brought on by modern technology, albeit often less obvious or one-off, that could improve the way nonprofits do business. Among these are the abundance of free data and information, increased wealth in certain sectors, global connectedness, open markets, targeted media, decentralized decision-making with regard to charitable giving, and increased interest in up-to-the-minute ideas.

A Call to Action

Nonprofit Transformation is a book that aims to assist nonprofit leaders in taking an objective and careful look at certain strategies and tactics that, while not necessarily obvious or popular, have the inherent capability to overcome the issues outlined above. While the following ideas might be in existence at a minority of organizations, they surely will be resisted in the majority of boardrooms. Nevertheless, alternative approaches that have the possibility of delivering breakthrough results require reflection beyond generally accepted practices. It is my hope that these types of ideas will be considered, especially within the stated goals of mission accomplishment.

This book is action-oriented. It is not enough to talk about transformative behavior; we need to enact it. To this end, these resulting chapters should be seen as a roadmap for all types of nonprofit organizations. Included in the book is a mix of advice about how to better the nonprofit sector overall and about improving individual organizations in particular.

It is my true desire that the nonprofit sector will rid itself of its self-imposed shackles so it can reach its full potential. In this light, the book seeks to stimulate discussion and inspire. I hope you enjoy reading it.

CHAPTER 1

Rethinking SWOT Analysis

ANALYSIS IS THE FIRST STEP OF ANY TRANSFORMATION PROCESS. How could any organization recognize the need to transform if it does not systematically perform detached and unbiased analysis on itself?

Regular SWOT Is Not Enough

Most nonprofit organizations of any significant size engage in some sort of strategic planning. Quite often, a SWOT analysis (strengths, weaknesses, opportunities, and threats) is a principal part of the process and is the underpinning of the decisions made. Usually, this analysis results from a brainstorming session (possibly at a planned one-day retreat) held by the organization’s key stakeholders and, depending on perspective, will include a varying mix of board members, volunteers, and staff.

The principal contention of this chapter is to argue that such strategic planning processes and related analyses are plainly not sufficient in order to maximize mission accomplishment, as they are often too simplistic and intrinsically self-perpetuating. Specifically, SWOT analysis can easily fall short in the following areas:

Objectivity

Most board members and volunteers of nonprofit organizations dedicate their free time to this work because they are extremely passionate about the specific cause or mission. Clearly, this can be a great advantage to nonprofits as passionate volunteers are great ambassadors and this passion can be contagious. To be frank, volunteers are almost always in love with their particular nonprofit. In such a situation, however, it is next to impossible for an organization’s volunteers to be objective about the group they serve. It should be self-evident, then, that such passion can lead to obvious weaknesses in the objective assessment of an organization.⁹ The same can be said