Nonprofit Starvation Cycle - What's That?
The term “starvation cycle” for nonprofits refers to a chronic underfunding of programs due to a fear that funders will find the program too costly, a reluctance by funders to cover salaries - often the bulk of agencies’ operating budgets, and a belief that nonprofits can easily make up this deficit through general fundraising.
For more, turn to the content developed by the Bridgespan Group and posted on the 9/4/19 issue of the Chronicle of Philanthropy.
Even though temperatures in Dallas remain in the 90s and it feels more like summer than fall, I know cooler days are coming as students are back in school and football season is in full force. With the new season comes a renewed effort on my part to share and create posts I believe are relevant to the world of philanthropy and are appropriate for nonprofits and funders alike.
A passion area for me is opening the dialogue between nonprofits and funders, not just around current programming but around those wild and crazy ideas that just might work. The nonprofits, their program staff, and clients know what it takes to be successful. They have ideas for twists to the “tried and true” but implementing changes takes funding - it also takes a willingness on the part of funders to listen, ask questions, and to walk alongside their grantees on what could be a risky journey.
One place to start this dialogue is for funders to do something they, ironically shy away from - talk about money. Funders should start asking grantees about the true cost of their programs including operations and revenue generation (development) and nonprofits should be calculating these figures. All too often project based funding does not fully cover the cost of the project thus leaving a deficit for the agency to make up.
This deficit situation occurs for three reasons:
1. A reluctance to reveal that program costs don’t fit nicely within the prescribed 70%, 20%, 10% ratios for program, operations, and fundraising that has been considered a “best practice” far too long; coupled with a reluctance on the part of nonprofits to dig through the numbers and come face-to-face with the true cost of their work.
2. A reluctance to fund salaries - if you don’t pay people to deliver a program how else will clients benefit? For most agencies salaries can be as much as 80% or more of their operating budget.
3. The belief that agencies should and can make up this deficit through their general fundraising thus putting a huge strain on the executive director and development staff to supplement programs that are chronically underfunded by donors.
I’m heartened by the recent work of the Bridgespan Group and others to call out what is being termed the “starvation cycle” of nonprofits, a situation brought about by chronic underfunding of indirect costs.
I encourage you to take a look at content prepared by the Bridgespan Group and posted on the 9/4/19 issue of the Chronicle of Philanthropy - it just may change the way you view your grant making and may open new pathways for conversations with grantees.
For Nonprofit ED’s - A Ray of Sunshine
Are you feeling overwhelmed in your role as executive director? Vu Le’s latest post on his Nonprofit AF blog may provide a ray of sunshine on this June day - “10 reasons why being an executive director is awesome.”
As we head into the summer months many executive directors of nonprofits are heaving a sigh of relief that along with summer comes a time when schedules are a bit less hectic and there may even be a few hours to set aside for planning and building strategy with their staff and board. On the other hand, summer may also highlight the reality that there are never enough hours in the week to cross off all of the items on the “to-do” list. For those who are feeling what can sometimes be overwhelming pressures of the position, this post by Vu Le may offer a boost and reaffirmation of why you said “yes” to this role and its inherent challenges. “10 Reasons why being and executive director is awesome.”
Happy reading - happy summer.
The Foellinger Foundation Introduces a New Evaluation System
The Indiana based Foellinger Foundation redesigned their evaluation system to better align with the outputs and outcomes measured and reported by their grantees. More food for thought. What is your reaction to this work? Have you been involved in a similar project? If so, tell us about it.
For over 60 years, the Foellinger Foundation has been providing resources to support residents of Allen County, Indiana to increase their self-reliance by moving from dependence to independence. A challenge faced by the foundation and their grantees is measuring how clients make this transition and creating a common system of measurement.
The Foellinger Foundation wanted input from the individuals working directly with children and families in creating this new system, so they turned to program staff for ideas. The system took two years to develop and the Foundation landed upon the Independence Continuum as the tool used visualize the system. The Continuum represents the setbacks and triumphs of individuals who receive services from grantee organizations.
Take a look at the Foellinger Foundation and the Independence Continuum. What do you think? As a nonprofit, how do you feel about working with a funder to develop a common measurement tool? As a funder, what are your thoughts regarding building relationships with grantees beyond grant dollars? Have either of you been involved in similar work? If so, tell us about it.
Which Comes First? Procrastination or Fear?
Big thanks to my colleague, Jessica, who encouraged me to, “simply start” regular blog posts. There is no time like the present, so I am taking one small step to stop procrastinating overcome my fears. Sound familiar? Here goes…
Laura Duty with Jessica Dunn, VP of Philanthropy, the LiftFund.
Oh the joys of resolutions. One of mine for the New Year was to publish a regular blog on topics relevant to nonprofits and funders. While having lunch with a colleague, I was lamenting my procrastination. Her advice, “simply start.” Just because the first post isn’t in January doesn’t mean the effort is blown for the whole year. Jessica, at last I am heeding your advice!
I also got to thinking about the root causes behind my foot dragging and realized I can point my procrastination to one word…fear. Fear that a post would simply be one more thing to land in the inbox. Fear that a post would not have relevance. Fear that a post would be meaningless. And yes, fear of rejection.
Then I realized one of the reasons I am in the business of working with nonprofit leaders and with funders is to help them overcome the very thing holding me back…fear. Publishing a regular blog is part of a strategy I developed to advance my consulting work. Based on marketing research and conversations, I realize these communications are key.
Because I had already missed early deliverables, I found my plan collecting dust as it sat on a shelf. It took talking with a colleague to put me on the path of actively working my business strategy.
Does this mindset sound familiar? Do you have ideas for strengthening your organization that may seem far-fetched? Do you have designs for developing strategies that are aligned throughout your organization from program to operating staff to the board? Are you looking for a neutral and confidential sounding board to toss ideas?
Coaches, consultants, mentors, and peers offer a safe space as you navigate the twists and turns of your work. Just as my colleague helped me I am here for you to listen, offer insights, connect you with resources, and support you as you overcome your own fears of walking down new paths. Let’s get started…
A Modern Day Definition of Poverty is Eye Opening
Half of Dallas households are struggling to make ends meet according to United Way’s newly released ALICE report.
Half of Dallas households are struggling to make ends meet according to United Way’s newly released ALICE report. ALICE stands for asset limited, income constrained, employed. These people and families earn more than the limits to qualify for federal benefits, but who struggle to provide for their family in ways that many of us take for granted. (I’m typing this note from the local coffee shop after enjoying a homemade slice of toast with peanut butter and honey.) The report further states more than 60% of jobs in Texas pay less than $20 an hour.
Serving Communities Better Through a Collaborative Data Lens
Here’s an example of funders and nonprofits working together for the common good.
An excellent example of collaborative philanthropy taking place in Frederick County, MD. The local community foundation, United Way, county government, and private funders are walking side by side with nonprofit organizations to simplify grant applications and to piece together a common set of outcomes and analysis to showcase the impact of their work. Thank you to Exponent Philanthropy and Foundant Technologies for sharing these efforts including the pivotal role of Foundant’s software for grantmakers and grantseekers in this work.