Next Stage - Social Impact Services

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Thought Leadership

Deepening, Expanding and Evolving: The Nonprofit Growth Mandate

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On Tuesday, February 19, I had the opportunity to facilitate a workshop for the Arts & Science Council on a provocative topic – “Deepening, Expanding and Evolving: The Nonprofit Growth Mandate.” So what was it about?

Organizations are apt to find themselves in a conundrum. Grantmakers tell them they want to primarily fund new initiatives and programming, with the goal of increasing mission impact. But they are unwilling to fund that growth entirely themselves, or else want to realign their giving to focus on growth instead of core operations and programming. We call the expectation of area funders “the nonprofit growth mandate,” with the idea that nonprofits are not able to stay in place for too long before they are encouraged to grow impact.

While this is typically a complaint directed at funders, it is also an expectation of plenty of boards, volunteers and other types of donors that “need drives response,” and with increased need comes the expectation of increasing programming to meet that need. In effect, nonprofits are meant to grow. As one participant said the other night, “if you aren’t growing, you’re dying.”

But what does that look like for different types of organizations? Not every organization is going to have a linear growth strategy that suggests increasingly higher budgets, larger staffs and increased impact through more programming. That may be appropriate for some, but for others, growth may look somewhat different.

This was the goal of the workshop – to explore growth through three lenses:

  • Deepening – Programmatic growth for an organization may not mean serving more people, but rather increasing impact for individuals already being served. The workshop explored methods of increasing impact by augmenting or extending the experience of engagement, elevating the understanding of program participants, challenging thought and action, and encouraging response. This is an ideal growth strategy for organizations that may be limited by space or human resources to continually increase the number of people served, and can be a cost-effective way to demonstrate increased impact through growth.
  • Expanding – We also covered the classic definition of growth, with an increased number of participants in programming as a goal. Methods we explored included increasing capacity to grow participants, planting a seed of engagement, aligning offerings to target audiences, and marketing to activate growth. For many workshop participants, it was clear barriers to expansion centered on facility, human resources and financial resources, which can be challenging issues to work through.
  • Evolving – This workshop also looked at a number of trends impacting nonprofits in the Charlotte area, with factors such as the overall growth of the nonprofit sector, the mix of how revenue is allocated and the impacts of generational change suggesting that current business models may not be sufficient in the future. The final topic of the workshop focused on evolving to shift delivery of mission and how evolution may be a different form of growth. We discussed redefining what success looks like, how new tools may be needed, and the importance of collaboration and sustainability.

In the end, workshop participants left feeling (I hope) Inspired by the possibilities but also grounded with tools and how-to supports to aid them as they engaged their boards and other key stakeholders in the topic of growth.

As a new topic for us, the “Nonprofit Growth Mandate” is a compelling frame for discussing the best practices all organizations should be engaged in – regular needs assessments and asset inventories to explore opportunities to deepen, expand and evolve mission delivery.

#NonprofitBookClub: Social Startup Success

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2019 is off to the races, everyone. How are you doing on your resolutions?

Me? Work in progress. I made the resolution to read more books on things I feel passionate about. I even created a reading list of books that will help me get smarter on topics like affordable housing, notions of “community” and “belonging” and (shocking) nonprofits.

But man, it can be hard to find the time! Josh and I talk all the time about how to stay on top of all of the great thinking coming out of the nonprofit sector – both locally and in other communities. We listen to podcasts (On Life and Meaning, BrandBuilders and the Charlotte Podcast have all featured great local nonprofits lately) and read online publications like SSIR, yet I have been watching as my “to read” stack of nonprofit literature grows taller and taller on my bookshelf.

In late January, hundreds of nonprofits gathered together at Project 658 for SHARE Charlotte’s 2019 Nonprofit Summit. It was a packed day, with two panels featuring local nonprofit, philanthropic and corporate leaders and a keynote address by Kathleen Kelly Janus, social entrepreneur and author of Social Startup Success: How the Best Nonprofits Launch, Scale Up and Make A Difference. Which just so happens to be one of those books in my stack…

I took that as a sign from the universe – “Get to reading, Caylin.”

So, I did. Here’s what I learned, organized by four ideas Kathleen presented during her keynote:

Nonprofits Must Invest in Themselves – This, I would argue, is the crux of the book – and just so happens to be one of Next Stage’s organizing philosophies, too. Too often, organizations are subject to the nonprofit starvation cycle, in which nonprofits underspend and underreport on overhead expenses due to unrealistic funder expectations.

In her book, Kathleen presents five core strategies for nonprofit success: testing ideas, measuring impact, funding experimentation, leading collaboratively and telling compelling stories. Each of these strategies requires deep investment – of time, resources and brand.

Nonprofits Must Harness the Passion of the Next Generation – According to Kathleen’s research, 55% of millennials say that they choose companies to work for because of their commitment to social good. Other research shows that 75% of millennials would even take a pay cut to work for a more socially responsible company. As Next Stage’s resident millennial, I feel like I can vouch for this: the next generation really cares about engaging in social good.

But we are also discerning in how we engage with nonprofits, in a way that diverges from the generations that have preceded us. While donors have zeroed in on evidence and efficiency in recent decades, the next generation has demonstrated an appetite for risk-taking, ambitious vision and bold story-telling. Nonprofits have to shift data collection and analysis, fundraising and communication strategies to meet these changing priorities, testing new strategies to harness the support of next-gen volunteers and donors.

Nonprofits Must Cultivate More Diversity, Equity and Inclusion – This is an unfortunate truth in the nonprofit sector: philanthropy often presents an inherent bias toward a nonprofit’s pedigree of leadership over an authentic representation of the community it serves. And due to the unique nature of the nonprofit structure, the sector tends to organically organize itself around philanthropic demand.

This means that the most successful nonprofits are typically the ones most aligned with this bias – organizations headed by well-connected, well-resourced and credentialed leaders. But in recent years, there has been increasing emphasis on the importance of cultivating diversity, equity and inclusion in the nonprofit sector both from nonprofits themselves and from funders. While this topic was a huge theme of Kathleen’s keynote address, I was disappointed to see that it does not play a central role in her recommendations related to cultivating collective leadership in Social Startup Success.

Donors Must Invest in Nonprofits – Nonprofit leaders have long championed efforts to reframe the way donors understand “overhead” and instead highlight capacity building – not program funding – as the key to unlocking more sustainable nonprofit business models. Frequently, donors will pair an investment with specific, restrictive expectations about its usage and impact. Kathleen calls this “donor entitlement,” and if you’ve spent any time working for a nonprofit, I bet you’ve run into it.

While the tides of donor attitude toward capacity building are slowly changing, many nonprofits develop alternative fundraising strategies to cover operating costs. As Josh explored in a recent article for his Breaking Good column in the Biscuit, Forget “Charity.” Think Like a Business, earned income is an underutilized method of revenue generation for many nonprofits. Kathleen leans into this notion, dedicating two chapters within the theme of funding experimentation to an exploration of how to build successful earned income strategies.

In sum, Social Startup Success was full of well-researched strategies for organizational strengthening, and was a great kick-off for my new monthly series on the Next Stage blog: #NonprofitBookClub. What should I read next?

P.S. I have to give a shout out to our friends at SHARE Charlotte for all that they do to champion local nonprofits – their leadership has done so much to strengthen our community’s supportive infrastructure through the encouragement of philanthropic giving, volunteer engagement and other forms of charitable involvement. Facilitating conversations about topics like the ones presented in Social Startup Success will make all of our work more effective. If your nonprofit has not yet joined their online platform, I encourage you to check it out.

Our Firm’s Next Stage

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We are proud to announce that our firm is rebranding… err, sort of…

Going forward, we will be known simply as Next Stage, dropping the word Consulting. Our new(ish) logo is above.

In truth, I never thought I would become a consultant. When I moved to Charlotte from New York City a decade ago, I wasn’t sure what I wanted to do when I grew up. I felt I had climbed the mountain of fundraising for the performing arts and was prepared to run an organization. And I was pretty sure it wouldn’t be a cultural nonprofit. I had (and have) so many passions.

In 2008, Charlotte was a very different place than it is now. This was Charlotte just before the onset of the Great Recession and being a new guy from out of town rendered me persona non grata. “But who do you know locally?” I knew very few people. What I did know was process and strategy – I had learned best practices from some of the strongest nonprofit executives I will ever meet. But without a local network, I was going to have a tough road ahead. Indeed, people who turned me down for positions then are now friends and colleagues.

I share this because working as a consultant was not in my mind when I arrived in Charlotte. Without other options, and honestly without a clear direction of what I wanted to be in the nonprofit sector anyway, I reluctantly took up the title. And during my 10,000 hours learning the profession, a seed was planted that germinated as Next Stage.

It took a while – in fact, it took years – but nonprofits in Charlotte finally did wake up to the need for stronger leadership and resource development regardless of local footprint. Now, a talented professional from out of town is a coveted executive in our nonprofit sector. I was asked recently to assist with a nonprofit search where the preference was for someone not from Charlotte. Let that sink in for a minute.

My firm started in January 2014 with the charge to change what consulting could be. We sought to partner deeply with the nonprofits we serve, doing the homework needed to earn the right to offer assistance. We recalibrated the high cost of local consulting purposefully, to make strategy help affordable for many more types of organizations. And we sought out innovators and big thinkers – people who would be willing to invest in the partnership as deeply as we do.

The result? Another 10,000 hours and more than 100 nonprofit engagements later, Next Stage is reborn. While we have always seen ourselves as a social entrepreneurship company serving as a tool of community leaders on both sides of the philanthropic divide, we now understand the true nature of work. We see real gaps in our community – gaps that we feel called to help fill. Following last year’s addition of Caylin Haldeman as Next Stage’s Project Development Manager, we are expanding our model to serve Charlotte’s nonprofit and philanthropic communities by building out capacities that allow us to explore local challenges to our sector.

We feel we have already redefined what consulting can be, but it is a word that will always conjure different things for different people. We remain deeply committed to consulting with nonprofits – what we now call client partnerships – but we see a new horizon for our work.

Going forward, we are committing to three distinct lines of business:

  • Client Partnerships – We are extraordinarily proud of our 100+ engagements with nonprofits across the Carolinas, with a concentration in our hometown of Charlotte, NC. We believe that area nonprofits benefit from our efforts to dive deeply into organizational strengthening and resource development. As we look to the future, our goal is to serve as Charlotte’s go-to firm for vision-centric planning and implementation, and we welcome your help connecting with organizations seeking stellar counsel.
  • CULTIVATE – Our incubator for emerging nonprofits launched as a pilot in 2018 with participants including Charlotte is Creative, Promising Pages and Learning Help Centers of Charlotte. Early returns have been extremely positive, with each of these organizations taking substantial steps toward deepening impact and increasing sustainability. Next Stage is planning to expand the program in 2019. The application will be available beginning in early September 2018, so please help us source amazing founder-led organizations.
  • Thought Leadership – In early 2019, Next Stage will be publishing a research-informed report examining the challenges and opportunities of talent recruitment and retention in Charlotte’s nonprofit sector. Helping improve the ability of local nonprofits to source and keep talent is emerging as a leading issue facing our community, and Next Stage sees a need for leadership on this topic. This research begins in summer 2018, and we hope you will help us by responding to our requests for survey participation and interviews.

It’s a new day at Next Stage. We look forward to serving you – all of you.

Blue Chip Organizations: The Community Social Impact Portfolio

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The Glass is Half Empty: My Humble Beginnings with the Blue Chips

When I launched Next Stage in late 2013, the stated goal was to work with “small-to-midsize organizations” looking to “get to the next stage.”  The reason for this focus was as much a passion for social entrepreneurs as it was the solution to a challenge – larger organizations were simply less interested in the firm’s approach to organizational development.  And frankly, I was less interested in working with them as well. It was a two-way street.

Early in my consulting career, I often worked with large, well-established organizations that said they were interested in strategic planning, but rarely altogether committed to the process.  Too often, it was clear that the organization’s leadership already knew what it wanted to do, and hiring a consultant was the last step in making sure the rest of the board heard it from an outside voice.

I started Next Stage because I felt strongly that I couldn’t continue working in that environment, taking fees out of the nonprofit sector without feeling I was having some defined impact. More often, I was creating strategic plans that “gathered dust on the shelf,” or else simply kicked the can on the big strategic needs for lack of leadership will-building. I had my first real-deal Charlotte “come to Jesus” moment one night, staying up until dawn writing my version of the Jerry McGuire manifesto.  Those early scribblings became the basis for Next Stage.

I give you this background because I have stated bias when it comes to blue chip organizations (what we call large nonprofits with expansive missions), as I have seen many of them from the inside and they often frustrate me.  But not because of malfeasance or a lack of solid outcomes, but for the missed opportunities.  There are so many ways to “leverage their bigness” to be even more impactful, but it requires a culture shift that is both daunting and absolutely necessary.  I love them for their sturdiness, but I also believe that sturdiness breeds complacency and risk intolerance, which are the death of forward progress.

<deep sigh> I wear this all on my sleeve because I know how critically important it is that we maximize the potential of our blue chip institutions, to harness their resources and aim them at the toughest social challenges our city faces day-in and day-out.  We need them to think about the long game and make bold moves in service to our community’s needs.

The Glass is Half Full: Promise for the Future

The good news is that the answer lies in our hands, as the constituents of these organizations.  Large blue chip institutions are usually resistant to change less because they are wired that way and more often because they believe their donors and volunteer leaders want them to be.

So much has changed in recent years on this front, and we can thank Dan Pallotta for that.  His transformative original TED Talk is required viewing for anyone, and his ongoing advocacy through the Charity Defense Council has informed a more recent TED Talk entitled “The dream we haven’t dared to dream.”  He was just in Charlotte for a talk on “Unleashing the Potential of Nonprofits.”

Before his original talk in 2013, nonprofit assessment websites like Charity Navigator focused more prominently on percentage of overhead and fundraising costs than they did on whether the organization was actually moving the needle on their cause.  These tools created a culture of seeing spending by nonprofits as bad, of believing that pushing the envelope through innovation as a poor use of contributions.  These tools trained donors to demand direct impact for every dollar contributed and to demonize dreaded “overhead.”

The net effect was to constrict our largest charities, never allowing them to leverage their assets to try new things and be allowed to fail. And yet, this is an essential strength of large businesses like Microsoft and Coca Cola.  We expect our corporations to have robust research and design functions, but scoff at the idea that our local charities would do the same. Why?

And this is why I am optimistic, because the answer to “unleashing the potential of nonprofits” is in our hands. We hold the key to our future, and if our largest blue chip organizations are empowered to do what they are capable of doing, the results could be game-changing.

The Checklist: Blue Chip Organizations

So, are you pumped up? Did my pep talk get you excited about the potential of our largest and most influential nonprofit institutions? I hope so! Because we need you to be advocates to bring about the sort of change that leads to sizable positive outcomes.  Donors and volunteers can use the following five evaluation areas:

  • Budgeting for R&D – Big surprise. Next Stage believes that all nonprofits deserve the right to try new things in all facets of their business models.  We believe in building pilots to test concepts, learning from those pilots as a means to inform next steps.  We believe an organization should be encouraged to try something new and fail, because the learnings from those failures are just as important as the successes.  We believe R&D is not a “nice to have” budget line item but a mandatory one.
  • Mining Data – The fuel for R&D is when the organization can mine its own data to learn and inform future activities.  Large blue chip organizations are typically awash in data, all living is separate databases and rarely viewed as an enterprise platform.  Tell that to Red Ventures or Bank of America. Smart blue chip organizations see their own data as a unique asset and go beyond what is required by funders in normal assessment to find the hidden learnings that could unlock future potential. Does your favorite blue chip institution employ anyone with the word “Data” in the job title?
  • Diversity of Funding – Some of the largest nonprofits in Charlotte are surprisingly on shaky ground, and it is almost always due to over-reliance on a single source of funding.  For many that is government fee-for-service contracts, and as recent history demonstrates, they can be dramatically curbed or unrenewed.  Still other organizations look to a handful of foundations or a few influential donors to do the heavy lifting.  This makes an organization less likely to rock the boat and more likely to be satisfied in just stewarding their largest sources of funding.  A strong blue chip organization has robust earned revenue and a sturdy base of support from many individuals as the capital to drive evolutionary activities.
  • Authentic Partnering with Emerging & Niche Organizations – Funders and donors want nonprofits to collaborate, but that can be difficult to achieve when one organization is so much larger than another.  “My way or the highway” thinking tends to have a chilling effect on the potential for nonprofit collaboration.  And yet, emerging and niche organizations can often serve in the R&D function for the blue chip organizations, allowing them to try new things without the threat of being judged harshly for it. This means setting up a different sort of financial relationship, with the larger organization providing more than just lip service and meager investment.  A smart blue chip organization actively seeks relationships with smaller organizations to test assumptions and challenge the status quo.
  • Courage of Leadership – To achieve all of this takes real guts.  Courageous volunteer and staff leadership is steeped in an emotional connection to the cause and recognizes that the risks are worth the rewards if it can radically change the lives of people in need. More than ever, we need nonprofit leaders who can set ambitious long-term vision and build the will of others to go on that often challenging journey.  For the best blue chip nonprofits, the easy path is most likely the wrong path if it fails to meet an ambition to one day put itself out of business.

We believe in the potential (and the sheer size) of the largest blue chip nonprofits to dramatically move the needle for all of us as Charlotteans.  Do you?  Please share your thoughts on Facebook: www.facebook.com/NextStageConsultingNC/

Next week, Caylin Viales will share her thoughts on charitable foundations, our final category in the Community Social Impact Portfolio.

Just starting this series? Read the previous installments here:

Overview: The Community Social Impact Portfolio
Emerging Organizations
Niche Organizations
Imported Organizations
Blue Chip Organizations

Josh

Josh Jacobson is Managing Director of Next Stage Consulting, a Charlotte-based firm focused on organizational development and fund development for the nonprofit sector. Next Stage Consulting provides organizations access to affordable, high-quality consulting services to help them “get to the next level.” Josh is a Certified Fundraising Executive (CFRE) and is President Elect for the Charlotte Chapter of the Association of Fundraising Professionals.

Image Copyright: Evan Carmichael

Imported Organizations: The Community Social Impact Portfolio

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“Importing” nonprofit organizations can be a tricky thing to talk about.

In fact, I don’t even really like using the word “importing” to describe nonprofit scale. It evokes a mental picture of a cargo ship stacked with hundreds of identical shipping containers full of indistinguishable goods and materials – which is not the imagery I want to be in your head when we are talking about the strategic, pointed replication of proven nonprofits. It’s too easy to assume defensive positions:

“We have organizations that could do that here.”

“That won’t work in our community.”

“Why are we creating even more competition for our already limited funding sources?”

“Weren’t you guys just talking about how there are too many nonprofits in Charlotte?”

Those are good questions, but they miss the point. When Charlotte lacks an effective solution to a pressing community need, we have a few options. Well-meaning residents could go out and start multiple new grassroots programs. An established organization could try to develop a new program that addresses the issue. A blue-ribbon panel could be formed to study the best practices in addressing this type of community need. Or, we could look at proven solutions cultivated in other communities, adapting and replicating either the organization or the program locally to achieve similar results.

I don’t see anything necessarily wrong with any of the four options. But I think the last one, when executed well, holds the most potential for success. The challenge is that, unlike commercial markets, there is no automatic growth mechanism to help successful nonprofit organizations scale, and current funding models are inefficient and ineffective at bubbling up top performers. Consequently, it can be extremely difficult to identify and scale the best social innovations and proven nonprofit programs.

Full disclosure: before I moved to Charlotte, I spent the majority of my early career working with the GreenLight Fund, a philanthropic organization that does exactly this. GreenLight selects national nonprofit organizations with proven solutions and helps them scale their programs to the cities that need them most. The model builds community demand for these proven programs, alleviating the many roadblocks national organizations face when trying to expand to new markets while building the local partnerships necessary for long-term success. (More full disclosure: GreenLight announced in May 2017 that it is launching a site in Charlotte.)

Because my role focused on researching and assessing organizations from across the country, I know for a fact that there are brilliant nonprofits implementing effective and entrepreneurial programs in other communities that could make a huge difference in Charlotte, if only they could find a way to get here.

But far too often, our time and resources are directed toward recreating the wheel instead of developing the capacity and growing the reach of organizations that have already proven their impact elsewhere, or conversely, local organizations that are prepared for and deserving of regional or national scale.

So, the question is: how do we, as a community, identify which nonprofits could address our most pressing needs, and how do we evaluate which of those organizations have the capacity and infrastructure needed for success in our city? Perhaps even more important: How do we ensure these organizations find long-term sustainability in our community – even when they are no longer the new, shiny penny that Charlotte loves to love?

The Imported Organization

As Josh and I have deepened our discussions about the Community Social Impact Portfolio, I have become somewhat of an advocate within our firm for the imported organization and its vital role in the community. By leveraging established national infrastructure, developing and implementing proven programs and (often) unlocking national philanthropic dollars, these organizations fill important gaps in a region’s nonprofit sector.

In my experience, I have found that imported nonprofits can actually strengthen the work of emerging, niche and blue-chip organizations through both formal and informal collaborations that encourage capacity building activities in leadership development, program fidelity, data collection and evaluation.

There are some great examples of imported organizations already operating in Charlotte, including: Nurse-Family Partnership (managed by Care Ring), Reach Out and Read (in partnership with Read Charlotte), and Reading Partners (launched in early 2016). Each of these programs have a robust evidence base demonstrating long-term impacts and strong partnerships with local nonprofits and/or Charlotte-Mecklenburg Schools, and they address known local needs in health and early literacy.

In addition to supporting imported models like the three cited above, though, we must begin think strategically about how we can help our most promising social entrepreneurs, emerging organizations and niche organizations create strong business models that can one day support scale beyond Charlotte. As we build infrastructure that embraces proven programs from other communities, we are also creating pathways for our own homegrown organizations to someday navigate those complex replication strategies and actualize their own ambitions for scale.

As Charlotte continues to grapple with increasingly complex social and economic issues through initiatives like Leading on Opportunity and Read Charlotte, there will be many opportunities to both embrace proven strategies from other communities and grow our own best-in-class organizations to strengthen our sector and move our city forward.

The Checklist: Imported Organizations

The nonprofit sector, nationally, is becoming more and more entrepreneurial and growth-focused. It is up to us, as stewards of our community’s nonprofits, to create the local infrastructure necessary to evaluate opportunities to import and sustain proven models, while avoiding potential program duplication and excessive competition for funding. It is also up to us to support our local organizations as they work toward achieving their own growth aspirations.

Next Stage believes that imported organizations (and local nonprofits that hope to scale to new communities) must build a strong organizational and programmatic foundation before exploring growth opportunities. Replication is challenging and requires financial stability, program fidelity, significant resources and deep commitment – and organizations should be carefully evaluated for capacity for long-term success. Donors seeking to support organizations that bring proven solutions from other communities can use the following criteria for evaluating the long-term sustainability and impact of an imported nonprofit: 

  • Differentiated Model that Meets a Local Need: Next Stage believes market research is a core component of any planning process, and is uniquely significant for organizations considering launching sites in new communities. Imported organizations must be engaged in consistent local landscape analyses and needs assessments, making sure their programs are aligned with community needs. Programs should also be clearly differentiated from anything in the local market, avoiding duplication or excessive competition with other established organizations.
  • Demonstrated Impact and Robust Evidence Base: Organizations should establish a base of evidence through constant data collection, longitudinal output and outcome tracking, and internal and external evaluations. This evidence should support a well-developed logic model that speaks to the intended impacts of the organization’s different programs. Ideally, an organization would report similar results across multiple sites, indicating fidelity to the model.
  • Locally-Informed Programming and Partnerships: Imported organizations cannot enter new communities and maintain long-term impact and sustainability in isolation. As shown in the examples referenced above, many imported organizations form partnerships with local nonprofits to quickly access target populations and benefit from positive brand association. Organizations should also be responsive to community needs and cultural differences in program implementation, ensuring that all programs are locally-informed.
  • Capacity and Infrastructure that Supports Scale: National organizations that are actively growing must develop a comprehensive plan that allows them to develop the systems and human and financial resources to continue to scale while maintaining financial stability. Policies and procedures should be standardized across sites, and there should be protocol in place for succession planning, new site development and scaling culture and decision-making practices. Data management infrastructure including collaboration, file management, program data collection and customer relationship management should be functional and actively used.
  • Sustainable Business Model with Diverse Revenue Streams: To ensure long-term financial sustainability, imported nonprofits should have a revenue model that utilizes earned revenue streams (e.g. fee-for-service programs), receives significant funding from private and/or public partners, and leverages new philanthropic dollars through national funding relationships.

When replicated thoughtfully, we believe that imported organizations can successfully fill gaps, address local needs and support the work of existing local organizations. These five criteria create a suggested framework for assessing imported organizations and evaluating their potential for long-term impact. Do you agree?

Next week, Josh will be back to explore the role of Blue-Chip Organizations in the Community Social Impact Portfolio. As always, please join the conversation with us on Facebook and Twitter.

Just starting this series? Read the other installments here:

Overview: The Community Social Impact Portfolio
Emerging Organizations
Niche Organizations
Imported Organizations
Blue Chip Organizations

Caylin Viales is Project Development Manager for Next Stage Consulting. Before relocating to Charlotte, Caylin worked as a Program Associate with the GreenLight Fund, a philanthropic organization with roots in the venture capital community. Over a three-year tenure, she supported the selection and launch of five high-performing national organizations in Philadelphia. Prior to GreenLight, Caylin spent six months as a fellow at the national consulting firm Frontline Solutions, working with the Philadelphia office in their efforts to enhance the impact of nonprofit and public sector programs.

Copyright: kenishirotie / 123RF Stock Photo

Niche Organizations: The Community Social Impact Portfolio

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The alternative title of this post could be “Sustainable Growth – Is It an Oxymoron?” (Answer: No, but it ain’t easy.)

A lesson learned early in my consulting career came in the form of a longtime board member for a stable, no-frills human services organization. As a part of a strategic planning process, board members posited a number of ideas for how the organization could leverage its position in the community to create positive impacts.  Some of the ideas were pretty out there, but most were rooted in the mission.  I felt at the time that my job was to encourage more risk-taking by a nonprofit that was somewhat risk-adverse.

The response of that board member: “That’s just not who we are.”

There is a lot of wisdom in those words.  Knowing when not to explore expansion is as important, or even more important, than the brainstorming that comes up with innovative solutions.  While Next Stage has social innovation as a tenet of its work, we know that the key is to right-size that for individual organizations.

The challenge is that it is difficult for nonprofits to stand still.  There is a built-in expectation of growth that has only become more pronounced in donor audiences over the last ten years.  Whereas the Greatest Generation was satisfied to see stability and “regular returns” as a case for support, each successive generation has tended to seek a dynamic vision of future impact.

And in reality, it’s a somewhat unfair expectation that is unique to nonprofits.

I love the bagels at a certain shop near my home.  We visit often and know the owners fairly well.  Their bagels are delicious and the homemade cream cheese is top-notch. I patronize this bagel shop because I love their product.  My willingness to shop there is not predicated on the bagel shop’s plan for growth and increased impact.  I have self-interest baked (literally) into my reason for visiting.

Nonprofits are different.  For many donors, it is not enough to have built a sustainable business model that serves a set number of people each year, or is focused on one specific outcome.  Constituents expect a dynamic vision that inspires them to be involved, and that vision almost always speaks to how the organization will have even more impact in the future.

Whether we like it or not, this trend is only becoming more pronounced.  And yet with growth comes the challenge of continued sustainability.  Foundations and savvy donors want to see diversified revenue streams that reflect a stability that can weather change.

Such is the challenge of nonprofits, to both grow in impact while also demonstrating sustainable operations.

The Niche Organization

I think often about that board member who educated me about his nonprofit’s identity based on a set of values that inform the creation of guiding principles.  Those principles help an organization’s leadership make decisions about how to move forward.

As I mentioned in the post introducing the Community Social Impact Portfolio, those guiding principles should result in a goal of “leading in our space” for the vast majority of nonprofits.  While there are many large agencies in the Charlotte region that have evolved over time to include a diversity of programming, there are simply too many nonprofit organizations in existence now for any organization to aspire to that level of institutional capacity.

Leading in your space means that no one would even think of creating another nonprofit in your city with a similar mission.  It means “owning” your mission in such a way that you are the go-to organization and considered a thought-leader.  It also typically means narrowing your organization’s focus to ensure that it can continue to claim that mantle as it scales.

An organization seeking niche status must start with evaluating its mission, which is often too expansive.  Missions are not meant to be locked forever in time, but instead should evolve to meet the needs of a community.  Next Stage suggests conducting a needs assessment married with competition analysis to better understand where a nonprofit fits.  Whereas an organization may have claimed a wider berth 20 years ago when there were fewer organizations, the changing environment likely requires making changes to mission to reflect today’s realities.

“What do you want to own?”

It is a question we will ask the leadership of an organization with a murky mix of programming or overly broad ambitions.  I have seen organizations clarifying their pursuit of a niche as the missing ingredient to their success.  That decision is clarifying and provides leadership with a vision platform that greatly informs decision-making.  It allows organizational leaders to have more productive dialogue and unleashes creativity in service to specific goals.

The Checklist: Niche Organizations

Niche organizations (and those that aspire to such a designation) must continually conduct internal and external analysis to stay on track – this is not a “set it and forget it” effort.  Donors and volunteers seeking an organization to engage with can use the following top-five evaluation areas when considering the health and worthiness of a niche nonprofit:

  • Logic Model – According to the W.K. Kellogg Foundation, a program logic model is defined as “a picture of how your organization does its work – the theory and assumptions underlying the program.  A program logic model links outcomes (both short- and long-term) with program activities/processes and the theoretical assumptions/principles of the program.”  The Foundation has a very good development guide available, and it is a framework that not only results in optimization of operations and programming, but also makes for a great case for support.  For niche organizations, creating your own version of “how a bill becomes a law” is critical as the organization zeros in on (and narrows) its value proposition.  As a donor or volunteer, it should be clear how your time and support translates into impact.
  • Theory of Growth & Change – As discussed previously, X-Gens and Millennials crave an understanding of the underlying business model of a nonprofit to better understand its potential for future impact.  Sturdy niche organizations have developed a theory of growth and change that serves as an important messaging platform.  Next Stage champions the development of a ten-year vision with a clear three-year roadmap and optimized one-year action plan.  Ten years is a long time, and no one has a crystal ball.  Still, an organization should have some overarching time-limited “theory of growth and change” that outlines an idea of where it is going.  And that theory should note how the organization intends to lead in its space.
  • Ten-Year Pro Forma – Alongside that ten-year plan should be a pro forma budget that suggests the income and expenses need for that decade-long ambition.  This is the difference between lip service and having an articulated business plan in support of that overarching goal.  Some donors and most funders start their exploration of a nonprofit with the income and expense statement, long before they read a narrative or conduct a site visit.  How you express your current and future impact through the numbers is a differentiator, with strong organizations pursuing niche status able to express financial need not only as a function of today but tomorrow as well.
  • Strong Branding – A common refrain for each of these checklists will be marketing, which is badly needed to ensure any sort of sustainable growth.  This is particularly true for niche organizations (and those pursuing it), which must clearly articulate their reason for being.  Organizations like Crisis Assistance Ministry, Charlotte Toolbank, and Catawba Riverkeepers have strong, clearly-articulated brands that allow them to lead in their space.  That branding is about more than a great logo or informative website.  It is about creating consistency in the mind’s eye of Charlotteans, who understand why a nonprofit exists and what it does to strengthen the community.  If an organization’s brand is poorly formed, the chances of it ever truly owning its space are weak.
  • Pipeline of Individual Giving – Over-reliance on institutional support (government and foundations) is the primary challenge for niche organizations, particularly in Charlotte.  The city’s institutional philanthropy has a bit of a reputation of “shiny penny” funding – supporting new initiatives for several years and then cutting funding before the organization can achieve sustainable support in favor of the next new idea.  Organizations planning to grow programming with grant funding must develop a pipeline of individual giving from a variety of sources since that grant funding is likely to disappear.  That means getting smart about donor acquisition and retention – two terms that should be daily affirmations for the niche organization.

We love niche organizations at Next Stage – we believe strongly that a robust community of nonprofits that lead in their space has a much better opportunity of actually moving the needle than a hodge-podge of groups chasing funding.  Do you agree?  Please share your thoughts on Facebook: www.facebook.com/NextStageConsultingNC/

Next week, Caylin Viales will tackle Imported Nonprofits.  Stay tuned!

Just starting this series? Read the other installments here:

Overview: The Community Social Impact Portfolio
Emerging Organizations
Niche Organizations
Imported Organizations
Blue Chip Organizations

Josh

Josh Jacobson is Managing Director of Next Stage Consulting, a Charlotte-based firm focused on organizational development and fund development for the nonprofit sector. Next Stage Consulting provides organizations access to affordable, high-quality consulting services to help them “get to the next level.” Josh is a Certified Fundraising Executive (CFRE) and is President Elect for the Charlotte Chapter of the Association of Fundraising Professionals.

Image Copyright : Mike Nellums