What particularly struck me was the difference in the revenue types of these small organizations. Small public charities rely heavily on private contributions ( 52.7%) while the sector as a whole depends largely on fee for service revenues (67.1%).
If institutional funders want to see significant increases in an organization’s philanthropic revenues, they’ve got to have a much bigger picture of the scale of needed capacity in fund development. Funding just one development director, with no other support, doesn’t really help organizations make the big leaps, in my opinion. But funding an entire staff in development, that would be a great take-away from this study.
Here’s a new must read if you care about small nonprofits: “Outsourcing back office services in small nonprofits: Pitfalls and Possibilities.”
Thank you so to my colleague and friend Jane Arsenault of FioPartners for forwarding this report. (If you are interested in nonprofit alliances and haven’t read through Jane’s 1998 book Forging Nonprofit Alliances, you’ve been missing one of the pioneering works on this topic).
“Outsourcing back-office services…” is a study conducted by the Management Assistance Group for the Eugene and Agnes E. Meyer Foundation of Washington, D.C. It confirms through a study of Meyer grantees, industry experts and other literature what many of us have been thinking about, wishing for and experimenting with for a number of years.
Among the findings:
- Outsourcing may present an opportunity for small organizations to improve their back office.
- There may be new for-profit business opportunities in providing these services.
- Because of their small size and lack of spending on any back office, outsourcing doesn’t offer immediate cost savings for most small organizations. But the report goes on to say that it could help free time for more focus on program and strategy.
- Outsourcing needs to be approached cautiously by both organizations and their funders.
Large nonprofits and nonprofit networks have been outsourcing many back office functions for years. In our experience, small nonprofits haven’t been profitable enough for for-profit businesses to service. The lack of money to be made providing these functions has been a real barrier to the development of many services from which small organizations could benefit.
And small organizations simply haven’t had the time, expertise or money to solve this problem for themselves.
Across the country, larger nonprofits are stepping up to provide some of these services. All types of creative arrangements have been developed that don’t force small organizations to merge and thereby dissolve the important, close constituency and localized advocacy work that so many of our smallest nonprofits provide.
With the current economic crisis and a renewed interest in exploring nonprofit joint ventures, the time may finally be right for a thousand flowers to bloom in this area.
I regularly encounter individuals, usually good hearted souls, who have done so little searching for best practices about nonprofits or the issues they are addressing. I’m always curious which, when there is such great stuff out there, largely for free, they didn’t take the time to look.
I’m just amazed at the hubris of GiveWell, an unknown self-described nonprofit outcome evaluator, to believe that they have the credibility to issue the ratings they have and, by doing so, to tell donors not to give to these organizations. If this is the quality of analysis that we can expect from the type of “intermediary” organization being promoted by the Hewlett study, then it is hopeless to expect any real forward motion in understanding what works and what doesn’t.
Don Griesmann reminded me today in his blog about one of my pet year end peeves… the charity ratings that pop up in magazines like Forbes or are published on self-proclaimed watchdog sites like Charity Navigator. (I get particularly incensed at a business magazine editor claiming to know what the most effective charities are — give me a break.) With just under a million public charities in the US, there is no way that anyone could possibly know of every charity that is doing a great job.
One enormous hole in these rating systems is the lack of a handy report to measure societal impact. And you know that these raters are not investigating each and every charity firsthand. So these rating systems are mostly based on the information that can be gleaned from the Form 990. This results in too much attention on finances, in particular the ratio of program vs management/fundraising expenditures.
While it is a noble pursuit to try to help the public make more informed decisions about the charities they donate to, unfortunately, there is no easy rating system for measuring community benefit.? Here’s the problem with using low overhead as the determinate of effectiveness: Read more
I spent an hour yesterday in a lively phone conversation with the drafters of “Drowning in Paperwork, Distracted from Purpose” a report on the challenges and opportunities in improving grant application and reporting. The call was hosted by the Association of Fundraising Professionals which is one of the partner organizations participating in Project Streamline, a collaborative initiative of the Grants Managers Network.
Though I’ve already referenced this effort in an earlier posting, I wanted to remind you to go the the website of Project Streamline, download a copy of the report and its recommendations, and add your feedback to the discussion.
Some of the things we talked about on our conference call:
The need to rightsize the application process to the amount of the grant.
The need to focus proposal writing on the right stuff, (program and results), and not take up time with excessive paperwork.
The need for better online application processes (ones where you can save your document, copy and paste, print out versions to check, etc).
The need for open source final reports so that our colleagues can learn from our experiences (rather than reports locked in a file cabinet that no one pays attention to).
The report is a good read. It may confirm all of your frustrations. If a fair amount of your revenues come through private foundation grants, it’s well worth your involvement, especially if you have recommended solutions to the problems addressed.
Unfortunately, the vast majority of grants and contracts which nonprofits receive come through the government … which isn’t a beneficiary of this study. But the project sponsors were urged to share the report with government grantmakers anyway as they may benefit from its recommendations.
An interesting statistic about online fundraising: In the 21 non profits participating in the study, the average email fundraising response rate was 0.13% in 2007 with an average gift of $87.
Sitting in the file cabinets of most foundations are hundreds of thousands of final reports from grantees on projects funded by those foundations.
For some time I’ve been thinking that it is a shame that all that great learning is locked away, inaccessible from others who might put those lessons to good use.