A fair day’s pay

You don’t need to study the history of organized labor to understand why it came to be such a force in society. It’s really about a very simple concept – a fair day’s pay for a fair day’s work.

To offer an extremely brief synopsis, the rise of the industrial revolution created large factories.  Workers were often exploited and conditions were not safe (or even humane).  It seemed like the owners of the factory viewed the workers the same way as the machinery – just another cog in the machine. In reality, the existence was not far removed from slavery.  Once labor began to organize and fight back, things changed.  Conditions improved, pay became more equitable.   Living standards rose and work related injuries declined. All in all, life got better.

Hold that picture in your mind while I tell you a story of a recent meeting I had with a young and rapidly growing nonprofit.  This organization has a lot going for it. First off, it has a hugely important mission to stamp out a horrible disease.  Second, a very strong fundraising effort, with all the modern elements – social media, sports based individual donor events, high profile lead donors who actively lend their names.  The executive director proudly took me over to introduce a new member of his team.  We’ll call him Billy.

Billy is very bright and extremely energetic, just a few years out of a very good college. He’s the manager of one of the newer campaigns in the shop, and doing an awesome job. Once we step into his office and close the door, I ask the E.D. to tell me more about Billy’s job.  Billy works about 60 hours a week, with a lot of weekends, late nights and early mornings.  His job does not include any benefits like health care, flexible savings or 401k. He gets two weeks paid vacation a year, 6 holidays and 6 sick days. Billy’s pay ? - $35,000 a year (just to save you the trouble, that’s less than $12 an hour –about equal to a floor worker at Home Depot). 

You may recall my last post, where I identified a major challenge facing the future of social entrepreneurship – The Nonprofit Martyrdom Syndrome (NMS).  First and foremost on the list of symptoms is the abysmal pay rates that are accepted as normal in social services. You may also recall that I used some information about fundraising professionals as the framework for my initial diagnosis. As you can see from Billy’s case, the problem goes far beyond fundraisers. And although I’m sure that your organization does much better than this, you probably know some colleagues who have this situation in their shop. Maybe you know Billy. Maybe you are (or were) Billy.

Leaving the moral arguments of Billy’s situation aside (as hard as that is to do in an industry that is focused on care for others), this practice of low pay and horrible hours is just bad business. And the sin is even more egregious when you apply it to the individuals charged with bringing revenue into the organization.

Remember from our last discussion that the average tenure of a fundraiser in an organization is 16 months – an incredibly short amount of time.  And that low pay and long hours was cited as one of the primary reasons for this high turnover rate.  Contrast that with the typical for profit venture, where the sales organization is usually the highest paid team in the shop. 

Now I’m not advocating for commission based fundraising, and I know that there are ethical challenges in pay for development officers; but it seems pretty clear that higher pay and better hours would reduce turnover. And I know that there are difficulties in just how to execute and structure higher pay in a way that it doesn't violate ethical standards. But it can be done. More importantly, the notion that one must sacrifice oneself on behalf of the cause is truly noble, but may cause unintended consequences that threaten the longevity of the organization. 


And I'm also not suggesting that Nonprofit Labor should start to organize, although there is some interesting movement around the idea of better organizing Nonprofits. If you want more on that,check out my friend Robert Egger's newest project - CForward. Nor am I insinuating that Nonprofit leaders are purposely exploiting their workers. What's happening is not being done intentionally. We all mean well,  yet we have a blind spot when it comes to our own team.

What I am suggesting is that this acceptance of low pay,long hours and a lack of benefits is a problem. We run organizations that deliver amazing support to those most in need, but  somehow find it acceptable to do that at the significant expense of those we depend on to deliver the service. This is the real issue, and it's the first sign of a larger illness - the dreaded NMS. 

Like any major disease, there are many factors that play into the development of NMS. However, the root cause for Billy’s situation is not as complex as you might think. More importantly, the cure is fairly simple. We’ll get right to that in our next installment.

The Cure for NMS

(part 1 of 6)

The Chronicle of Philanthropy recently reported that a high turnover rate in fundraising professionals is costing Nonprofits a lot of money. The article was based on a study by Penelope Burk, president of Cygnus Applied Research., In a presentation to the Association of Fundraising Professionals at their annual conference in Vancouver, Burk relayed the results of a survey she conducted with over 9,500 nonprofit professionals, where she determined that the average tenure of a fundraiser in a particular organization is 16 months – not even a year and a half – hardly time to even understand the mission, much less develop any real relationships with donors.

Burk give several causes for this problem; including low pay rates, lack of internal promotional opportunities, and overly taxing professional schedules. From where I sit, each of these issues are symptoms of a larger disease, one that infects not just fundraisers but the entire operation. I call it the Nonprofit Martyrdom Syndrome (Henceforth to be known as NMS). It’s a horrible and virulent disease that has plagued mission driven organizations for a long time.

We all know the signs of stress in our efforts to make the word a better place – donations are down, the economy is struggling and government is in gridlock. All of the usual paths for funding are worn thin. Ms. Burk offers basic prescriptions for her identified concern – higher pay, more flexible schedules, a more direct path to senior management. To me, each of those remedies is like cough syrup. They’ll moderate the symptom, but they won’t cure the disease. But there is good news.  Recent successful trials show that there may be a cure on the horizon for this debilitating ailment. And it comes from the gathering storm that is Social Entrepreneurship.

A few weeks ago in Oxford, over 1,000 leaders in this growing movement gathered for the 9^th annual Skoll World Forum on Social Entrepreneurship. Jason Saul recently reported on this year’s gathering, observing that in his opinion,a new brand of social entrepreneurship is emerging – he calls it version 2.0. In this second wave, there is an open understanding that it’s ok to expect an economic return for a social good, that metrics and measurement are no longer optional, and a program that meets a social need is not enough. While attending this amazing event, I even one voice in this field loudly calling for every social benefit organization to aim to be out of business within 30 years of its founding. His point was that if you can’t fix a social problem after 30 years in a community, you should be ashamed of yourself. A huge challenge, and one of the many signs of a creeping case of NMS.

Just like any other disease, NMS comes in many forms. In the same way, specific treatments need to be adjusted to the specific symptoms of the disease. So there is no single cure-all for NMS. Nonetheless, these new ideas may present a course of for the struggling nonprofit.

As an aside, you may have noticed that I use two different terms – nonprofit and social benefit organization. That’s on purpose. Nonprofits are major industry, representing upwards of 10% of the economy and under significant pressure. Social benefit organizations are a new breed that is smaller, less fully formed but perhaps more resistant to the debilitating effects of NMS. It’s also important to note that not every nonprofit suffers from NMS. And even if the disease is present, much good work can still be done. But imagine how much more good we could do if we were healthy and free of NMS.

Over the next few weeks I’ll take each of these symptoms in turn. I’ll show you specific signs of the various strains of NMS, and then provide concrete steps you can take to cure each of them without sacrificing your mission focus.

Modern medicine has made great strides in our lifetime. Cancer, to name one of thousands of examples,  is no longer an automatic death sentence. The means by which we care for each other in society are poised to make a similar leap forward. It can be done. We can cure NMS in our lifetime. Help is on the way.

Piercing the silos

Ok, I'll admit to a little bit of bandwagon jumping, but it really is time to tear down the walls and get on with the work at hand. The new economy is in our grasp. God grant us the strength and courage to take hold.

In the past month I've had the pleasure to attend 3 different gatherings all focused on social change. One was coming at the issue from a faith based perspective, one was using arts and cultural districts as the platform, and one was a "global forum" on Social entrepreneurship. All good stuff. Inspiring speakers, great workshops, and a whole fistful of new contacts. Personally and professionally a very invigorating time. But as someone who is also interested in larger themes and the movement of society, the experience left me less than fulfilled. The problem? Despite a compete alignment on goals and desires, there was very little cross population between these gatherings.

Shortly before the first conference, i was able to gather a meeting of a few thought leaders from various innovation efforts here in Baltimore. Great minds, great leaders, and a truly shared focus. My intent was to ask them to combine their focus on an issue that I saw developing on the horizon. We spent 90 minutes talking and never got to my ask. Why? Because they had never met.

They spent the entire time on introductions and descriptions of their programs. And at the end, they were amazed to find that there was much synergy and many opportunities for collaboration. And while that's great and good, it's also a bit concerning, particularly when you understand just how small a town Baltimore really is.

Now I'm no sociologist, so I won't try to explain all the human psychology issues about why we as people don't want to share our toys and play well together. And I'm certainly not going to go into the whole mess that is the debate on trust and faith that is at the core of many turf wars. Most certainly, I'm not going to step on the third rail of entrenched bureaucracies. But the folks I'm talking about at these conferences and meetings are brilliant and motivated and pure in intent, so they should be past all that anyway.

And yet, we're not. And I'll be darned if I can figure out why. What I can say is that the reasons that collaboration makes sense are so strong that whatever it is that's holding us back must be pretty big.

Collaboration is certainly energizing. The extensive energy around coworking, collaborative software development, scientific communities and artist colonies all speak to the the human desire to share and interact.

Even more compelling, it's also a lot cheaper. This notion is no more complex than what your parents always told you - two can live as cheaply as one. When each project has its own budget, it's own project manager, and it's own fundraising efforts, there is a lot of money going to overhead that is simply duplicative and does nothing to move an effort forward. When we link arms, we can do a a whole lot e more with a whole lot less, without having to skimp on all the vitally important back office functions that any successful enterprise must have to be able to meet its mission.

Last, but far from least, it produces a better output. Any student of the process of innovation will tell you that a well focused team will always outperform a single visionary. The entire body of knowledge in product development supports notions like rapid prototyping and crowd sourcing as proven ways to test an idea and get solid feedback.

A friend of mine theorizes that the real issue is bandwidth. That we're all just so damned busy that we just don't have time to build the bridges that we should. And I know that there are days that feel that way.

But if we really care about building communities, about economic development, about social empowerment, about reducing poverty and improving the human condition; we need to do better. We just do.

A Well Oiled Machine

“Begin with the end in mind” is the second of Stephen Covey’s 7 Habits of Highly Effective People. Too bad that more folks – particularly those leading mission oriented enterprises – don’t follow Covey’s advice.

People who run really good programs get a lot of complements. One you hear quite often is that "the place runs like a well-oiled machine".  What we mean when we say that is that each of the components of the operation fit together well, that each member of the team knows their role (and knows what is NOT their role), and that everybody has a clear sense of the overall objective of the enterprise.

Several times a year I have the distinct pleasure of stepping to the front of a classroom and working with folks who are speaking to build new ventures. One of the first things we cover is the basic business model. Any easy way to see this is to think of a pizza oven. The basic ingredients are dough, tomato sauce and cheese ( add pepperoni and mushroom if you're making it for me, please).  The process is: roll out the dough, put the sauce and cheese on top, and bake. The output is pizza. Simple, easy.  From there, it's not a big jump to an automotive assembly line. After you get that in your head, you start to understand more about how a successful venture is built mostly on how you execute.

The next big leap is to move from outputs (what you make), to outcomes (what difference you make because of what you produce).  The outcomes of pizza are a full belly and a happy kid. Depending on the kind of car, outputs can range from not being late to work, to impressing your beau or neighbor, to being on the cover of QG.

Now we move to my calling, the social benefit organization. And all of the sudden this becomes rather murky. The good news is that much of the haze is unnecessary and can be cleared with some good, basic logic (why that logic is not applied more often is a subject for another day).

The interesting thing is that just about every social entrepreneur can clearly articulate the problem that intends to be solved - far more readily and with much greater passion than the typical commercial venture.  Hunger, homelessness, literacy and thousands more basic human needs are easy to see. And the short term fixes are just as easy – Food, blankets, tutors – you get the idea. But most folks involved in these missions don’t spend a lot of time working through the mechanics of how the process flows. The social benefit organization that looks at how to deliver the service more efficiently is a rare bird indeed. Even rarer is the one that can talk about how the work makes a difference over time. But if we are to truly achieve the promise of social entrepreneurship, we need to be able to point to outcomes, just like the commercial entrepreneur.

The academics call this a program logic model (a concept adapted in part from the IT industry, which goes to show that there really is nothing new under the sun). At its most basic, it’s really just the notion that there is a distinct difference between giving a person a fish and teaching them how to fish (or if you’re really bold – how you revolutionize the fishing industry). At its most valuable and complete state, it’s a clear pathway from inputs to process to outputs to outcomes – outcomes, by the way,  that can be used to attract investors in ways that help you actually grow the mission. And while I certainly recognize the value of a warm blanket and a hot meal, I’d like to suggest that thinking more about how we can get folks to long term self-sufficiency may be a nobler endeavor.

The best news of all is that developing such a model is actually lot easier than you think. The tool is called “backwards mapping” (a curriculum development technique commonly used in education, brought forward to the social benefit space).  If you’re getting the feeling that what I’m advocating is a much more systematic approach to social benefit organizations, you’re correct.  In the end, it’s nothing more complex than Covey’s 2^nd habit.  And the time to begin is right now. 

Funeral for a Friend?

The current political and social climate has called the world of investing into serious question, with issues from moral to economic to pragmatic being actively examined and debated. One of the main dialogues centers around an examination of the creative destruction that occurs when firms merge or are acquired. While generally viewed as a good thing from a business perspective, the current social debate is asking if the jobs lost and lives disrupted may be too high a cost to pay for the increased efficiency that mergers and acquisitions typically create. But hidden in this issue is another key distinction that social entrepreneurs can leverage to bring about the change they seek.


The reasons that business merge are really pretty simple, and the benefits are quite clear. Two organizations can operate more efficiently if they can share the back office costs that are an essential part of any venture. The aggregated talents of the two leadership teams can bring even more expertise to the markets the firm serves, allowing for increased value to be delivered to the customer. Often, the two firms serve complimentary markets or products that can be combined to make a broader or deeper offering, which then attracts a wider range of customers. It can also be a great way for an owner who has put his or life into the business to get the cash they need to retire comfortably. From just about every business angle, it’s a good thing. So good, in fact, that it often is the cause for significant celebration. And some of the folks involved in the transaction make a pretty good paycheck advising in these matters (In fact, one of my best friends, and one of the most honorable people I know, is an attorney working in this space – so I know first-hand that not everyone in M&A is abhorrent). In a commercial context, mergers and acquisitions are a good thing.

As I made the transition from commercial to social entrepreneurship, I was amazed to find that in the social benefit space, the exact opposite is true. Most of the time, when two nonprofits merge, or one is acquired by another, we don’t hold a party – we hold a funeral. There a lot of anxiety and wringing of hands and the general sense is that “we’ve lost another great program”. The same facts that are almost reflexive in business – greater efficiency, broader service base, deeper reach – are rarely mentioned or even though of. And yet, isn’t that exactly what we want for all these mission based ventures that we love so much? How many fundraisers, charity balls, silent auctions or phone –a-thons have you been involved in where the goal of the funding is to enhance the mission’s ability to serve by buying equipment that will make is more efficient? Why are we not considering the possibility that this very same equipment might already be owned and sitting underused in a brother or sister organization with a similar mission? And that this same organization might be struggling to meet budget in part because they’re struggling to pay off the blankety-blank equipment?

So here’s the part that is really frustrating. When a commercial M&A transaction is completed, the economic benefit goes to a few - mostly the owners and investors in the entities involved (which is why folks like the occupiers are so stirred up). When a similar transaction occurs in a social benefit context, the value can be plowed back into the mission – effectively doubling or tripling the increase created by improved operations.

Maybe instead of blaming the tools, we should start to talk about the motives of the carpenters. Just like a hammer can be used to build a house or break a kneecap, the tools and techniques that are common in commercial enterprise can be used to even greater good in a social benefit context. By combining forces, leveraging key resources, forming joint ventures, building strategic alliances and yes – even merging and acquiring synergistic firms, we can redeem the process and restore capitalism to its original honest intent. Who knows, we might even convert some of the great minds working in the commercial sector to our cause. At the very least, we’ll have a much stronger social sector, more celebrations - and a lot less funerals.

Let the angels be angels

"The fault, dear Brutus, is not in our stars, but in ourselves"

Whenever the holidays roll around, I always have to pull out the VHS player and pop in my ancient copy of "It's a Wonderful Life" (I've seen it so many times now, I cry at the opening credits). No matter how cold and cynical you are, you gotta love the end, when little Zuzu tells her father that "teacher says every time a bell rings, an angel gets its wings".  Now, in venture capital, the term "angel investor" refers to those early stage folks who see passion and vision and are willing to put money into an unproven idea to see if the wild eyed dreamer can pull the idea together (And this kind of angel doesn't get wings, he gives them). It's a key role at a critical time in the growth of a new venture.

So what has all this got to do with social benefit organizations? Well, quite simply, there is a hole in the funding cycle for social innovation, and we need to let the angels be angels. Allow me to explain.

Most old school non-profits are primarily funded by grants. And they depend on that critical relationship with a local foundation to feed them, year after year. But then one year, the foundation comes to them and starts to talk about sustainability - which the nonprofit correctly interprets as a signal that the gravy train is about to come to a halt. So there is much wringing of hands, and pleading, and maybe the grant is cut but they get another year - mostly because they are good and decent folks who hate like h**l to kick a good program to the curb. But nobody's really happy, because we're not letting the angels be angels.

What foundations really want is to spark new ideas, help build new models and drive change. It's also something they're very good at. But the need to fund the ongoing operations of projects they already support becomes a significant limitation, hampering their ability to seed new projects - and (sorry but it's true) it’s the nonprofits that are to blame for this.

When a social benefit organization clings to old funding models instead of embracing new ways of capturing value created by awesome programs, they tie the hands of the very folks who could help set them free. And the answer is right in front of us.

"I freed a thousand slaves - I could have freed a thousand more if only they knew they were slaves"

Any commercial entrepreneur can tell you what each stage of funding is for, what it can do and how it works. A vision that needs to be fleshed out? That's either bootstrapping (you use your own money) or the three Fs (friends, family and fools). Once the idea has some solid thinking behind it, then it's time for proof of concept (can we make this thing work?), and  that's when you need an angel.   Once the concept it proven, then more sophisticated investors will be involved - debt instruments to fund acquisition of capital for assets, for example (and by the way - if you consider yourself a social entrepreneur and you're not hip to what's happening in impact investing, you're just not hip).

In the social benefit space, that same continuum doesn't yet exist. It takes a much more sophisticated and determined effort to piece such a process together - it's still a ladder with several rungs missing. But despite the protestations of our peers and colleagues, it's not the philanthropic community that's holding us back. Even though this is entrepreneurial finance 101, the vast majority of socials entrepreneurs (doing an amazing job of driving social innovation btw) still think of foundations as the best source for ongoing operating income. And as long as we keep behaving this way, we'll keep having the results. On the other hand, if a few brave folks break free, it makes it much easier for others to follow suit.  Program related investments, social impact bonds, pay for performance are all efforts that are moving us in the right direction. But we need more - much more.

Casuis was right - it is a problem of our own making. The good news is that means it is also a problem that we have the power to solve. We just need the courage.

"But I could show my prowess, be a lion not a mou-ess; if I only had the nerve"

A Sane New Year

There’s an old saw that says that Sigmund Freud defined insanity as “doing the same thing over again and expecting it to come out differently”. Now with a little spin around the interwebs, it turns out that maybe it was Benjamin Franklin, or Mark Twain, or nobody at all. And maybe it doesn’t really define insanity after all. Maybe it defines the way we as Humans learn to change behaviors over time. Like the way that you learn as a child that holding your hand over a candle will burn your hand, so you don’t do it again. Regardless of the source, or the condition it describes, it seems pretty easy to see that the rational adult would seek a new mode or method when the old one no longer works. Too bad that most of us are not nearly that mature.

All of this came to my mind the other day while meeting with an organization that wanted me to volunteer to help with fundraising. It’s a local mission that I care about and have personally benefited from, so I was happy to have the conversation (actually two separate conversations of about 90 minutes each as it turned out). There was a lot of social value being produced by these folks, and a lot of potential interested parties. There were significant opportunities for commercial partners, any number of ways to monetize the social benefits they were producing.

Our discussions were very interesting. We talked about the incredibly low return on investment that most programs accrue from the typical fund raising gala. We spent a lot of time talking about how the traditional grant-seeking process is not working particularly well these days. We even talked about how little time many folks spend in working with a grant maker before they submit the proposal, and that the real source of philanthropic support is the private donor (a source they have not even begin to tap – even though the membership roles were filled with people of means). They asked a lot of good questions. We wrapped up the conversations with a commitment to follow up in a few weeks.

About 10 days later I got an email from the primary contact thanking me for my time and telling me that the board had decided to pursue a strategy of grant writing and “maybe a few fundraising events”. So here’s a group of folks that are openly admitting that the exact methods that haven’t worked for them before are the ones that they are going to use going forward. Why? Well, as they said to me, it was because all of this earned income and social benefit stuff was kind of new and hadn’t really been proven to work. So rather than take a shot with something that might work, they chose to stick with something familiar, even if it didn’t work.

So maybe that quote from Freud (or Franklin or Twain or whoever) isn’t really the right fit for this problem. Maybe the better notion is that “Change happens when the pain of holding on becomes greater than the fear of letting go” (attributed to Spencer Johnson but with an equally checkered pedigree). And while I certainly understand how an organization can come to the conclusion made by my friends (who – by the way, received my membership renewal and a small donation), my hope for all of us in the coming year is that we will have the courage to step out into this new world of funding freedom, where social benefit organizations are recognized and rewarded for our ability to create value far beyond that recognized in the commercial world.

That we won’t wait until the pain of the old model becomes so bad that we are forced to try something new. That we, as social innovators, can model mature and sane behavior, learn from the past, and make great change happen. That we make a resolution – to try.