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Evolve or Die: Why and how nonprofits are thinking differently about our organizations

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Editor's Note: 

This is the second article in a multi-part content series that explores the shifting landscape and the move towards greater collaboration and shared services in the nonprofit sector. The first article, Thinking about sharing services? Don't assume it will save you money!, was published on July 29, 2012.  

Looking for more information? Download the special report on the topic entilted Friendship, Courtship, Partnership: Why Canadian Nonprofits need to think about working together differently. In addition, you can view a recorded one-hour webinar with Patricia Evans and Barbara Grantham. 

 

There are powerful winds of change blowing for the nonprofit sector in this country. Not so sure about that? Consider the following breezes:

  • Donor and funder expectations are changing, as they look for more engagement, involvement and accountability, and for more meaningful ways to measure outcomes and demonstrate impact. They are also looking for the projects? They fund to collaborate, partner, work together, find collective impact – or combinations of these.
  • There is more scrutiny of the sector, leading to calls for greater accountability. The March 2012 federal budget sent strong signals here, as the extent of the advocacy activity of charities is under the CRA microscope more than ever before. The historically important role of the nonprofit sector in advancing public policy and contributing to the wider public discourse is under the microscope.
  • Governments - from all jurisdictions and levels - are retreating from some areas of funding and service delivery. Collectively, we are in a period of austerity with respect to public resources - the purse strings are tight. And in many jurisdictions, the model through which government funds the sector is shifting away from grants and contributions, to competitive bidding for program contracts, with specific deliverables and outcomes.
  • An increasingly unpredictable economic climate has donors and citizens more cautious about their philanthropic decisions and is bringing more competition for the consumer's discretionary dollar.
  • Shifting demographics make it increasingly challenging for charitable organizations to attract and retain talented people, both paid and volunteer. This is particularly the case when it comes to senior managers, IT personnel and fund development staff.
  • Internally, nonprofits grapple with increasing expectations to use (and rely on) technology to do the work for daily transactions, communications, online giving, social media, in some cases service delivery, professional development, training and so on. This brings about cost pressures, legal and policy issues, training requirements and shifting work patterns.

And, as all of these forces play out, the underlying financial model for many nonprofits is shifting from "government and a little bit" to "some government, some philanthropic, some earned revenue/social enterprise, some individual and corporate support." This is forcing us to think about governance, staffing, infrastructure, marking and communications and other key organizational elements in a different way.

As nonprofits seek out new sources of revenue and diversify their revenue streams, the ways in which nonprofits structure and resource themselves is shifting. Current structures are becoming less capable of providing the capacity and infrastructure we need to meet our mission and tackle the opportunities and challenges of a shifting environment. This issue has been acknowledged and addressed, for example, by a number of Canadian and American community foundations.

In northern British Columbia for example, the Prince George Community Foundation provides back-office supports (database management, donations processing) to a number of smaller, northern BC community foundations. This same approach is also increasingly common in the US, with the types of back office supports varying depending on scale, culture, history, etc. A group of Canadian foundations within a common geographic area is considering joint back office platforms for audit, donations management, web site management, marketing and event management, while maintaining separate governance and public identities.

So in the face of these blustery conditions, how do we keep from being blown off course?

First, as a sector, we need to get past thinking about organizations and think about the mission we fulfill, the citizens we serve and the vision we aspire to achieve. Organizations are the means to through which we achieve these ends; they are secondary to these higher purposes. The way they were separately structured, and separately operated, may need to adapt to succeed. Next, we need to think very differently about our organizations – reconfigure, recalibrate, redefine - in order to use resources more efficiently and, more importantly, perform more effectively. Some organizations will not have a choice, if they want to thrive, much less survive. Others will have more options, and can choose to serve their stakeholders most effectively by asking if and how the choices can be posed in a spirit of curiosity, inquiry and genuine inquisitiveness.

Some new organizational models involve looking at innovative approaches internally: What do we really need to keep doing? What should we stop doing? What should we start doing in order to most effectively meet our mission? And how can we work differently with the resources we have? A trio of social service agencies in Western Canada has been looking at this very issue. They all provide a number of complementary services to vulnerable populations. Each struggles to create a human resources environment that can recruit and retain the best and the brightest in the field. They manage to do the 'transactional' human resources work well (payroll and benefits, etc) but the ability to be strategic in their HR practice is elusive due to a lack of capacity. These three organizations are considering the creation of a separate, co-owned shared management organization (SMO) that would, with their combined HR resources, be able to do strategic recruitment, training, retention improvement, professional and leadership development, succession planning and other hallmarks of excellent HR practice. It raises big questions - of trust, autonomy, risk, and so on - and their willingness to ask these questions, and seek new answers, is exciting.

At the same time, other organizations are looking externally, considering how to work differently with peers working in the same space - those with whom we share an area of service delivery, or mandate, mission, clients or donors - and looking for organizational pairings, clusters, collaborations and partnerships. Together, these potential partners are considering a wide continuum of ways to work together, ranging from sharing back end services (such as information systems), to explicit partnerships, to formal mergers and amalgamations.

The community foundation movement in Manitoba is one example. The Winnipeg Foundation, with funding support from Manitoba Hydro, provides a number of supports to Manitoba community foundations, including administrative support grants, service options (ranging from investment management, marketing, research and collaboration grants) and communications templates. Bottom line: they’re staying the course in rough weather by realizing that they need to evolve – fast – or risk irrelevancy.

The challenge shouldn’t be minimized: this is NOT an easy task. For boards, management and staff there are a lot of things to think about, issues that require leadership, time and resources. A 2011 study for the American Council on Foundations poses some key questions for nonprofits to consider:

First, what is the impetus driving the change?

  • Why are we considering a change to our operating model?
  • Is a structural change the best path for us? Have we considered other options?
  • What is the central issue we would like a new structure to solve?
  • Why is now the right time for us to consider a change?

Second, what is the vision that we are seeking to achieve in looking at new organizational models and approaches?

  • What are key considerations – such as the identity, strategy, or leadership of the organization – that might direct us toward a new kind of structure?
  • How must a structural change help to reflect our mission, core values, goals and strategies?
  • What would a successful structure look like?
  • What is our ideal time frame for arriving at a new structure?

Third, be clear and specific about:

  • What are our non-negotiables?
  • What types of assurances would we need to consider a new structure?
  • What level of financial resources and staff time are we willing to invest in due diligence and integration processes? Do we have these resources available to us now, and if not, how do we go about ensuring we do?

And finally, what are the key risks and opportunities at the operational, organizational, and stakeholder levels?

  • How would our community, clients, funders, donors, employees, volunteers and others benefit from a new structure?
  • What are the risks presented by a new structure for these stakeholders?
  • How would our organization benefit from the unique circumstances and expertise of another organization — for example, gaining community knowledge and expertise, increasing the potential donor base, addressing a leadership need, building up skills and assets, or developing more sophisticated infrastructure?
  • What could we imagine would prevent us from moving forward with a new structural arrangement—whether a new alliance, affiliation, or merger?

Even if we are open as an organization to looking at new ways of configuring ourselves in order to better achieve our mission, with or without partners, there’s no one clear path to success. In fact, we’ll want to consider a growing number of examples set by the sector’s innovation pioneers, including:

  • Community services cooperatives
  • Combining back end services, such as finance, accounting, IT or human resources
  • Sharing professional development and training resources
  • Co-location with shared infrastructure
  • Shared risk and investment pools
  • Shared management organizations
  • Purchase of services from a larger nonprofit, such as web hosting or donations processing
  • Merging with an organization that offers complementary services (with or without merging brand/identity)
  • Joint funding proposals

The US study also offers some key factors for success based on American experience, including:

  • Trust and honesty, including attention to relationships and interpersonal factors;
  • Shared clarity regarding anticipated outcomes: A common understanding and agreement on the problem to be solved and on the desired direction to address the problem, shared among relevant stakeholders;
  • Legitimacy of the initiative in the community: Stakeholders’ recognition of the longer term benefits to be achieved;
  • Partners’ capacity to engage, including capability, time and resources;
  • Impact of past experience (both positive or negative);
  • Readiness for detecting and addressing environmental and organizational changes that may impact the success of the effort;
  • Creation of a governance structure, if necessary, with clear roles, responsibilities and accountabilities;
  • Communication, communication, communication: Commitment to a clearly articulated change process whereby those impacted are informed and mobilized to commit to the joint process;
  • Awareness of the many differences amongst the parties and how they may affect its unfolding and shape (“one size does not fit all”);
  • Having a pre-defined mechanism for dispute resolution and an agreement on the need to find collaborative solutions to problems; and
  • Agreement on a measurement framework and monitoring process to assess progress and challenges and course-correct.

As this long list suggests, it’s not easy to stand tall and strong in the face of the winds of change. Taking a hard look at organizational structure is challenging for all nonprofits, perhaps more difficult for us than for our counterparts in the private sector. Due to the very nature of our work, we have deeply held beliefs about the difference we want to make in the world. We can become very deeply attached to organizational structures and frameworks about how we do the work, conflating the means with the end.

But we cling to these structures and habits at our peril. As the environments for funding, regulation, technology and talent continue to change, as the economy remains sluggish, and as long-held rules of engagement about the role of the sector evolve in new ways, so too must the sector evolve in how we are structured, governed, financed, managed and administered. The future belongs to those who believe in the power of their mission and have the courage, ability and commitment to look at every best option to achieve it.

 

Companion Resource: Collaboration 101: An Annotated Bibliography (PDF)

Thinking about collaborating with other nonprofit organizations, and want to avoid “reinventing the wheel”? Here’s a selection of resources you may want to consult. They range from anecdotes to formal studies, all published before 2011. Most are from US sources, but the list reflects best efforts to find information from Canada.

 

Barbara Grantham has been the Principal of Barbara Grantham Consulting Services Inc. for the past several years. As of July 2012, she is joining the VGH/UBC Hospital Foundation in Vancouver as Senior Vice President, Strategic Initiatives and Philanthropy. In addition to her solo practice, from time to time Barbara has provided services in collaboration with Patricia Evans. Patricia is Principal Consultant with Patricia Evans & Associates Inc. in Vancouver, providing strategic planning and facilitation services to clients in the social profit and public sectors. To learn more about her work to enhance clients’ ability to achieve great things for their communities, connect with Pat on LinkedIn.

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jane@garthsonleadership.ca jane@garthsonleadership.ca
Excellent summary, Barbara. I would have placed far more emphasis on the ethical values when making choices, and find those along with vision the key to staying true to our purpose regardless of structure.

Also, along with changing expectations, all grant-makers should be undergoing the same hard thinking and hard choices about how they make grants. Many could be doing far more to promote real community impact and true collaboration, and that means a move away from competitive grant processes.
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