Nonprofits face moment of truth

By Todd Cohen

Nonprofits still see no exit from the financial whipping they are taking from the battered economy.

Stressed by rising demand for services from people hurt by the economic tailspin, and by shrinking resources to meet that demand, nonprofits are giving a gloomy forecast about their ability to stay financially afloat.

While nonprofits have taken steps to try to meet that rising demand, most expect 2010 to be as grim as 2009, or grimmer, according to a new survey by the Nonprofit Finance Fund, reported today in the Philanthropy Journal.

And most are operating with little if any financial buffer.

In a recent Philanthropy Journal special report on nonprofit finance, Clara Miller, president and CEO of the Nonprofit Finance Fund, says nonprofits need to focus like lasers on tracking their finances and identifying revenue that is likely to continue and distinguishing it from revenue that is based on special or one-time funding.

In the same special report, Judith Alnes, director of MAP for Nonprofits, says nonprofits need to be bold in making financial plans and changes, and in shedding programs and operations they cannot afford that are not critical to their mission.

Nonprofits are at a crossroads that is precarious yet filled with promise: Instead of running for cover, nonprofits should be taking stock of their finances, operations and programs.

They should be engaging their supporters with compelling stories about their impact on their communities and with brutal honesty about the impact of the economy on their ability to serve their communities.

And they should be making tough choices about what they can and cannot afford to be doing right now, while thinking big about what they can do in the future if they act smart and are willing to invest in securing the resources they need.

“Nonprofits aren’t rolling over in the face of economic strain,” says Miller of the Nonprofit Finance Fund.

“The sector is filled with determined individuals and inspiring organizations focused on the most critical issues we face as a society,” she says. “While the ‘coping mechanisms’ we’re seeing are encouraging, we also need to make fundamental changes to the way the sector is financed.”

Nonprofits need to make their case

By Todd Cohen

Already slammed by rising demand for services and greater reluctance by givers to give, nonprofits are taking a particularly harsh hit from state and local governments, and they need to speak up about the indispensable role they play in our communities and the economy.

That is the urgent message in a new report from the National Council of Nonprofits, reported today in the Philanthropy Journal.

Despite employing 13.5 million people, buying billions of dollars in goods and services, and providing services like job training, day care and elder care that make it easier for people to get and keep jobs, the report says, nonprofits operate off the radar screen.

Nonprofits, in short, do a lot of the heavy lifting in taking on the symptoms and causes of tough and deep-seated social and global problems, yet they often are taken for granted.

Adding insult to injury is the treatment nonprofits are getting from state and local governments, which are cutting funds for basic services, shifting the cost burden for those services to nonprofits, withholding payments they owe nonprofits for contractual services they already have delivered, and considering new fees and taxes on nonprofits that will reduce their operating funds.

The National Council for Nonprofits calls on government officials to educate themselves about nonprofits and give them a greater policymaking voice.

It also asks foundations to get community leaders together to better understand the role nonprofits play and the financial pain state and local government are inflicting on them.

And it urges nonprofits to speak up, champion their own cause and push for the resources and partnerships they need.

Nonprofits are indeed indispensable, and they should be smart and assertive about telling their story and making their case for support.

Advocacy funding pays off big

By Todd Cohen

A new report underscores the big impact giving organizations can make by investing their charitable dollars in advocacy, community organizing and civic engagement.

Seventy nonprofits in Los Angeles County, Minnesota, New Mexico and North Carolina that received charitable investment in policy work generated nearly $14 billion worth of benefits for their communities over five years, plus other monetary gains, says the National Committee for Responsive Philanthropy.

The return on each dollar of those investments ranged from $89 to $157, the report says.

“Foundation support turns indifference into democracy and the benefits of a thriving democracy are indeed substantial,” says Aaron Dorfman, executive director of the group.

In a new report on policy investment in Los Angeles County, the latest in a series of studies the group has made, it found 15 local nonprofits from 2004 to 2008 generated nearly $6.9 billion in benefits for local citizens from $75.5 million invested in their advocacy, organizing and civic-engagement work, or $91 in benefits for every $1 invested.

The benefits included $2.6 billion in higher wages, $2.2 billion in health-care savings, and over $2 billion in increased use of public transit, construction of new schools and expanded affordable housing.

Kafi Blumenfield, CEO and executive director of the Liberty Hill Foundation in Los Angles, says the research shows “foundations best serve their own objectives and generate the greatest impact on communities when we support advocacy and organizing at the grassroots level.”

The report recommends foundations step up grant for advocacy and organizing; help donors understand the benefits of advocacy funding; back collaboration among community groups; pool resources with other grantmakers; and invest over the long term in the capacity of grassroots groups.

By investing in policy and community work, and in building nonprofits’ capacity, foundations and other giving organizations can spur progress in addressing the symptoms and causes of urgent social and global problems.

Time to shatter negative nonprofit stereotype

By Todd Cohen

Nonprofits have taken a bad rap for way too long, and they need to be much more aggressive about telling their story.

The latest blow is new research that says their nonprofit status makes them seem less than competent.

And that perception makes people less likely to “buy” the products and services nonprofits provide, say researchers at Stanford University, the University of Minnesota and the University of Pennsylvania.

However unfair those findings may seem to a sector that continually is asked to do more with less, they reflect a much deeper problem for nonprofits.

They are overworked, underpaid, taken for granted, and expected to work miracles cleaning up our messiest social and global problems.

Despite the obstacles they face and the resources they lack, nonprofits still manage to employ people who are smart, work hard and care about making a difference.

Yet too few nonprofit boards have even a clue their job is to set a vision for the organization, and to help strengthen it and raise money to help it run and grow.

And while nonprofits urgently need funds to support their operations and build their capacity, many charitable foundations and corporate-giving programs prefer to support their own pet programs and projects, and they expect nonprofits to invest time and money they cannot afford tracking their impact and effectiveness.

As the icing on their cake, nonprofits also are expected to take a vow of poverty, with the media and other disengaged critics quick to raise a stink if nonprofit professionals actually get pay and compensation that even begins to value their work and worth.

And now they are told their very status as nonprofits makes them seem less than competent.

While they struggle to keep on keeping on, nonprofits also need to start speaking up and making clear who they are, what they do, their impact and their needs.

Instead of groveling to funders and givers, nonprofits need to act as equal partners in working to engage their supporters.

And instead of trying to parrot the technical and philanthropically-correct jargon of funders, trade groups and consultants, nonprofits need to be clear, passionate and authentic in telling their stories, and using the forms of media best suited to reach the audiences they need to reach.

Nonprofits are heroes, not unskilled hired help, and they need to start owning their role and championing their worth.

Corporate giving needs better metrics

By Todd Cohen

Corporate philanthropy plays a key role in society and business but needs to be a better job showing it is worth the cost and in sync with the corporate bottom line.

That is the conclusion of a new report from the Committee Encouraging Corporate Philanthropy.

The report, Measuring the Value of Corporate Philanthropy, looks at practices and measurement trends in corporate giving, at demands for evidence about its impact, and at new ways of gauging its social and business benefit.

“To realize meaningful benefits, corporate philanthropy must be managed no less professionally, proactively and strategically than any other core business activity,” the report says.

“Systematic measurement of the value of giving,” it says, can make “a more persuasive case for why companies should engage in philanthropic initiatives.”

And it says corporate CEO’s, the investor community and giving professionals “need to understand more comprehensively the many mechanisms by which philanthropic investments can be measured and managed to achieve long-term business value and solve critical societal problems.”

In talking with the investor community, for example, CEOs have a chance to distinguish themselves “through disclosures about their philanthropic strategies” and by leading the charge for stronger standards, the report says.

And in making the case to CEOs for corporate giving, it says, corporate giving officers need to show not only its social impact but also its business impact.

“Philanthropy can provide novel pathways towards meeting strategic business needs, such as improving employee engagement, customer loyalty, reputational risk, and opportunities for innovation,” it says.

And in demanding that grant recipients show whether they are achieving intended results with corporate support, metrics that measure only output “offer little indication whether social improvement actually is occurring – or, for that matter, whether unintentional harm is being caused,” the report says.

“Developing a theory of change and explaining how the program will achieve its intended impact,” it says, “are critical preparatory elements of measurement.

To celebrate International Corporate Philanthropy Day on Feb. 22, President Barack Obama sent a letter to business leaders saying current challenges “demand solutions that come not only from government, but also from entrepreneurs and business leaders around the world.”

Through their “skills, ingenuity, financial support and dedication,” the letter says, “corporate philanthropists and their employees have answered the call to serve, giving back in meaningful ways that help those in need and improve our communities.”

Corporate giving plays an essential role in helping to address both the symptoms and causes of social and global problems.

At a time of unprecedented financial stress, corporations must develop better metrics to track the impact of corporate giving and to show its value to their businesses and to the communities they serve.