Friday, March 30, 2007

Before I go....

My wife and I are headed east to southern Virginia for a week, working on our house at Smith Mountain Lake, near Roanoke. We move there permanently in August. Thus, not much posting for a week, I suspect.

Before I go, my April newsletter is up, a bit early due to my travels. The subject this month?
New Tech Uses for Nonprofits. Enjoy and I'll see you in a week or so.

Tuesday, March 27, 2007

Exec Pay

Ugh. I get so sick of this. Some nonprofit executive excess makes the news and sure as the sun rises, the politicians will jump on a need to provide even more regulation for nonprofits.

Today, it's the Smithsonian's head honcho, who "resigned" after $90,000 in unauthorized expenses on private jets and the like. So he's gone, but his legacy will remain.

And, focusing on executive pay in the sector is yet another example of the policymakers going for the popular easy fix. First, the vast, vast, VAST majority of nonprofit execs are way, way, WAY underpaid. You never hear about bringing their pay up to a fair amount, do you? Hey, there's an idea. Let's bring the stratospheric pay down and the underpaid up....

But of course, what's stratospheric? Should ED pay be a percentage of annual revenue? A fee based on outcomes? No more than 14 times his or her lowest paid employee? And, what about cost of living? A dollar goes farther in my town (Springfield, IL) than in Chicago, or New York, or D.C.

I've heard politicians propose that no nonprofit exec be paid more than $100,000 a year. Talk about simplistic, clueless solutions. That would be terrific for many, but a bit of an unhappy surprise for hospital CEO's or most senior administrators at major private universities.

Of course, the truth of the matter is that, to get good people with the high-end mix of ethics, management, leadership, finance, fund-raising and communications skills that are required for most ED/CEO posts, you have to pay them. Even at what seem to be high salaries, these people often work for a small fraction of what they could bring in the for-profit sector, and no one ever seems to mention that.

Anyway, the buzz around the flagrant abusers doesn't help this discussion; it just hardens the perspective of the policymakers that we're all corrupt.

Monday, March 26, 2007

Inquiring minds...

The Philadelphia Inquirer is on the story.

For the second time in two days, Jane M. Von Bergen has written a great piece on the issue of nonprofit management's impending boomer rush for the door.

This time the article is titled: Gun For Hire, and it's about a former turnaround specialist who has found a second career doing the same for nonprofits in crisis.

This is a great option for many nonprofits who are in serious financial jeopardy or who have had an ethical or legal crisis. A good read.

Sunday, March 25, 2007

More on boomer retirement....

A great story on boomer retirement and its effects on nonprofits from the Philadelphia Enquirer. No surprises, but an effective part of the story is on the inability of younger staff to work for nonprofits given their college debts. So sad, so true.

Speaking of sad but true, I'm in Ann Arbor for the next to last time while my son is a student here. Graduation next month!

Thursday, March 22, 2007

A book in the hand....

My new book arrived from my publisher, Fieldstone Alliance, yesterday.

I rarely look at my books after they show up. People ask me what it feels like to read my own book, and I tell them..."I rarely read them in the first year or two. I might go back for a reference quote, but not often". They are astonished...and of course, what they don't realize is that by the time the book shows up, I have not only written it, but read the thing four or five times in the proofing, editing, etc stages. Frankly, I'm sick of it.

Not this book, though.

I immediately dove into it to see whether, having finished writing it 10 months ago, I still felt good about it. Why? Because the area of Generation Change is so, so dynamic and on everyone's list of big issues. I'm going to be speaking on this issue all over the place the remainder of this year, and am working with a foundation to assess generational readiness in their community. I've had inquiries from overseas, and everyone I've talked to about generation change is interested/worried/concerned/a bit freaked about the subject.

Should be fun to see what happens. If you're interested in looking at the book in more depth, there's a link on the right.

Friday, March 16, 2007

More trends to consider

Thanks to all the people for their great comments on my inquiry on the big challenges facing nonprofits. If you haven't weighed in on that, please do. Great discussion!

I'm working on the April edition of the Mission-Based Management Newsletter, which will be about the new uses of technology.

At this point, I'm focusing on these six things as changes in the tech world and their implications for nonprofits:

1. Peer Review/participation. Peer review and participation is one of the huge strengths of the web. Nonprofits in the main have not grasped this yet--but need to, and quickly. Wikis are a great way to allow for participation as well.

2. Podcasts: Incredibly cheap to develop, podcasts have revolutionized marketing and education. I think we're on the edge of thousands of nonprofits doing podcasts to educate, to train staff and volunteers, and to market better.

3. Instant Net feedback. If you want to be aware of what's going on online (about your organization, your issue, your mission, your funding) there are a number of free tools to do that. Whether it's Google Alerts or RSS feeds, search has never been easier, and more timely.

4. Blogs. A terrific way to get engaged with the community, to find out what the community is saying about your issue

5. Software. There is a ton of good stuff out there now--and this includes open source applications.

6. Fundraising. Sites like DonorsChoose and Kiva have changed the game: they are P2P fundraisers. Here's the future right in your face.

What am I missing? Which of these is not important? Or most important?
Let us hear from you!

Wednesday, March 14, 2007

Generational issues in the news....

A very, very good set of stories in the current issue of the Chronicle of Philanthropy about using older workers (paid workers, not volunteers) and how to adjust to them.
I've been meeting these people for years. They are boomers who are in their 50's and trying to get back to their more radical/philanthropic roots...they have tons of skills and want to help. I deal with this very issue in Generations, and it's great to see others realizing the potential these people have. The Chronicle will be running a series on this issue, called "Regeneration". I look forward to it.

Oh, and while you are at the Chronicle, check out two other disturbing updates:
First, an article on boomer volunteers not sticking with it and, second, an article on the dissatisfaction of work conditions among younger nonprofit workers.

We need to pay attention to this stuff. It's really important

Tuesday, March 13, 2007

Who Will Lead?

A really good article on the nonprofit leadership challenge from

The article covers the basic information about boomer retirement (and its skeptics) and then discusses a survey showing that many younger nonprofit managers don't necessarily want to move up.

This is no surprise to me: it confirms what I'm hearing everywhere.

"Why would I want her/his job?" asks a 20 something manager referring to the ED. "I see how they have no life at all."

Can't blame them:
Boomer refrain: "Live to Work!"
GenX and Gen@ refrain: "Work to Live!"

I think the younger generations have it right.....

Sunday, March 11, 2007

What are the big challenges?

I've got to put together a presentation for a gig coming up in a few months. It's about the biggest trends/issues/challenges that nonprofits face in the next five years. I've been thinking about this issue on and off for 10 years. It shows up in my books, in my other writings and in presentations, but my list has just slowly evolved, and I've never really started it from scratch.

Additionally, I was wondering what my blog readers think.

So, let's collaborate. Take a look at my list and post a comment or two. Do you agree? Disagree? Do you have issues to add? Some that we should remove? It's not a wiki, but by providing us your list, we can learn, comment and amend our own.

Here's mine--in priority order.

The Big Issues of the Next 10 Years

1. Funding.
Same old same old, but we're getting to a critical point which I think will lead to my issue #4. Government's ability to help is saddled with debt, direct fund raising is incredibly competitive and foundations and corporations often put so many restrictions on funding that it's a loss to take their money.

2. Accountability/Transparency/Outcome measurement.
We have to get even better at proving that our mission is worthy and that our way of accomplishing that mission works.

3. Generational Transition.
Our management teams are mostly over 55 and will move out. Who will be there to move in?

4.Unpaid Professionals.
I believe we're going to need to use more and more unpaid professionals (think: super-volunteers) to be able to afford to deliver services. With waning funding and more and more requirements for outcome measurement, this may be our only option.

5. Technology as a Mission-Accelerator. How do we incorporate technology in ways that make us more mission-effective?

6. Diversity. Ethnically, generationally, economically, culturally, and in terms of families, we're more diverse than ever. How can/will we respond with our services, our employees, our volunteers, and our technology?

Whew, that's enough. Think about these and tell me what I missed, what priorities are of order, what you would add or subtract.

Post away!

Sunday, March 04, 2007

Why "Who Really Cares" matters

In a post two weeks ago, I told you my preliminary thoughts about Who Really Cares, by Arthur C Brooks. I finished the book shortly afterwards, but wanted to take a couple of weeks to let it sink in before sounding off about it again. Here are my thoughts, about why it is a terribly important book for our sector, one that needs to make it to the top of your reading list, and quickly.

First, Brooks is an economist. He focuses on the data, and I don't believe he has a political agenda. (Whoever designed his cover seems to, but, as an author myself, I can assure you that's not Brooks' fault.)

I spent some considerable time with the date (that makes up perhaps the last 15-20% of the book) and felt comfortable that Brooks was telling it like it is, not the spun version. I might have chosen a different term here or there, but in the main, the tale he tells is told fairly.

Second, the tale he tells is really, really interesting, and a bit counterintuitive to our pre-conceived notions about people's generosity or lack thereof.

Not to steal the thunder from the book, Brooks data shows that people are more likely to give (time, money, blood, etc.) if they are from a strong family, go to religious services regularly at some point in their life, earn their own money, and don't think that government has all the answers. Now, combine least two of those characteristics (religious attendance and scepticism about government) and you get a rough description of a conservative. At least a trend to the right. Huh. Aren't liberals more generous? Wouldn't that be your first thought?

Brooks shows (and I did go into the data for a long, long time) that the opposite is true. He does not say that liberals are selfish or the modern incarnation of Scrooge, but that in the main, conservatives give significantly more; more time, more treasure, more of everything, to charities than liberals do.

As a social liberal, this bothers me no end. And I've been thinking about the implications to our sector. The fund raising outcomes are obvious: go where the people are who are committed to your cause, but then beyond that trend in targeting to people who fit into Brooks' major catagories. Same for volunteers.

But what about our employees? We need charitable employees. Brooks argues that parenting is a charitable act (and is in itself a predicator of later generosity). I would say the same about choosing to work in a nonprofit. You are sacrificing income (without question) to do something that needs doing, something you are hopefully passionate about.

We're in the middle of a huge turnover in employees in our sector. Perhaps Brooks is on to a way to target our HR staffs as they look for better odds in the hiring game. You gotta go where the data show you, and here the data is pretty impressive.

Anyway, read the book, and then post a comment.

Friday, March 02, 2007

Admin Percentage is a Dumb Metric

The March issue of the Mission-Based Management Newsletter is available. This month's topic is on Administrative costs. Regular readers know my feelings on this, but here's the Management Tip from the newsletter:

"Get ready. This is a subject that makes me almost literally froth at the mouth. So, straight to the question: Are Admin costs Important? Yes, but they shouldn't be. Administrative costs are a stupid and ineffective metric by which to value or even worse, compare, nonprofits.

Can you hear me now? The nearly obsessive emphasis on this one statistic drives me nuts. Comparing nonprofits by admin % is like comparing 5 cars you might buy by weight. It's interesting, but not of much value. And, it indicates laziness to me. If you want to find out what's going on from reading the financials, you have to drill down and do the work More on that later.

First, NO ONE can tell you what a "good" admin percentage is, although that hasn't stopped people from showing their ignorance by declaring that 12% or 13% is good and anything higher is bad. Nonprofits are so diverse, have such varying capital structures, that declaring one number the right one do I say this nicely? Naive. Of course, we compound this error with the prevailing assumption (particularly among funders and large donors) is that less admin is always better.

Or not. The National Center for Charitable Statistics has a great brief "Getting What We Pay For: Low Overhead Limits Nonprofit Effectiveness" , which talks about the damage low overhead does. Why would a nonprofit cut overhead to a damaging level? Because every funder harps on this and the ED and board simply follow the funders' guidelines. And it hurts organizations, sometimes to the point of killing them. Read "How I Cooked the Books", if you don't believe me.

I see this damage all the time in my work. And, as we transition from Boomer ED's to GenX ED's over the next ten years, we'll see more damage--our admin costs are held so low that we have no management "bench", no cadre of mid managers who are being groomed for top spots. What else gets cut in the quest to meet the admin % expectations of funders, press and public? Leadership development, training, continuing education. Sounds like a formula for crappy services to me. I recently was told of a community foundation that sponsored (and posted on their website) a contest to see who could have the lowest admin costs. A race to the bottom if I ever heard of one.

Anyone think that FedEx is poorly run? No, they are a lean, profitable organization. How about Southwest Airlines? One of my MBA students ran a comparative analysis on FedEx's financials, and found that FedEx's "admin costs" were over 30%, and that Southwest's were 31%. Hmmm. And why is it that this admin obsession pertains only to smaller nonprofits? Most universities have admin % add-ons of over 100% on research grants, and the feds OK them without blinking...again: Hmmm.

If you think I'm exaggerating about the witch hunt mentality about admin costs, try this. Go to Google, type in the search string "Nonprofit Administrative Costs" and hit "enter". What do you see? Ads for "Find The Best Charities", and "100 Best Charities". Why? Because these online watchdogs use admin costs as a key metric in their rating system. Here's another fact: CPA firms don't all account for admin the same way...yet another reason that using admin to compare the effectiveness of different organizations is like comparing apples to watermelons.

One more thing. When I talk about administrative costs I am not talking about fund raising costs. That's a different measure, and usually more valuable, if it's used with full disclosure on how it was calculated.

Am I contending that admin costs are always a bad measure? No, not in one particular case: Year-over-year data for the same organization that is measuring admin costs the same way, is a good metric, if it is used as a gateway to deeper examination. I use this with my clients regularly. If I see four year's of data and admin costs as a percentage of total revenue go way up or way down, I raise my hand and ask why. I do the same thing with an organization that I want to donate to....I examine three year's 990's and look for any big variations in administrative and other costs. But absent this one use (which is, as I say, a good warning flag) I'm much more concerned about quality of services, or increased output of services, etc. than I am about an artificial percentage that may or may not indicate something amiss.

Remember, good quality usually requires more training, more infrastructure, etc. Such valid expenditures add to admin costs just as much as the much taunted "Excess executive pay". Finding the real cause requires a little work to drill down to examine the actual contributors to the total administrative line.

NOTE TO THE PRESS, PUBLIC, DONORS AND FUNDERS: Think, and do your homework before you rant about an organization's "ineffectiveness" because its admin % rises to the unbearable level of 13.2735%."