It’s time to stop defining ourselves negatively – with a label that only says what we aren’t.
It’s time to get rid of the old story of scarcity that says no matter how hard we try we will always lack the resources we need.
It’s time to reclaim our branding back from the Internal Revenue Service, to tell a new story and find a new name for our sector.
Here are eight ideas. I see them as an invitation to dialogue. I don’t have all the answers, but I am confident that we can find them if we work together. Collaboration has always been the strength of our sector and our best strategy for change.
Eight Steps to Rebrand Our Sector:
Change the name, change the narrative
Nonprofit describes a tax status, not the public-interest purpose of charitable organizations, nor their intent to improve people’s lives. I suggest scrapping the old nonprofit handle along with its scarcity connotation.
Over the years, board members, donors, and other stakeholders have come to believe that “nonprofits can’t make a profit”. This is erroneous. The reality is that nonprofits not only can make a profit, they should make a profit.
Nonprofits are tax-exempt. That means they are prohibited from distributing profits to any directors, shareholders, or trustees. Instead, these entities must invest their profits back into their organizations, their operations and their ability to serve the public good. So “tax-exempt” is an accurate description of what we do. However, it fails utterly to convey the mission-driven social impact our organizations are expected to deliver.
A number of new names have been suggested. I’ve heard colleagues use “charities”, “social purpose organizations”, or “impact organizations”, or “public benefit organizations”. The positive-connotation possibilities are unlimited.
So let’s start a dialogue (see Step 8) with the aim of generating naming options and creating a brand that focuses on impact (what we do) while offering adequate latitude to include all 501 (c) 3 organizations. Our identity doesn’t arise from the lack of a profit motive. Our identity comes from our work – through our efforts to improve the human condition, through our quest for change.
For the remainder of this article, I will use the term “for purpose” organizations in lieu of “nonprofit”, and offer that as my contribution to the dialogue of adopting a new term to describe tax-exempt charitable organizations.
Think money first
Purpose is the why. Service is the what. Income generation is the how.
All 501 ( c ) 3 organizations should adopt an economic model that provides for the support of their programs before they begin offering those programs. (See Huffington Post: “What Nonprofits Need Most.”)
Studies have shown there’s no “one-size-fits-all” when it comes to funding models (See Peter Kim, Gail Perreault, & William Foster, Stanford Social Innovation Review, Fall 2011 http://www.ssireview.org/articles/entry/finding_your_funding_model .) The important lesson here is that “for purpose” organizations must be able to identify their unique revenue drivers and determine how to invest in and grow these revenue streams. It’s also worth noting that many organizations have successfully scaled their work in the last 20 years due to this methodology.
Define – and enshrine – sustainability
Sustainable growth depends on the viability of the organizations leading the change. Funders and service providers should know what sustainability means in functional terms so they can adopt it as a chief operating principle. Here’s a draft definition for 501 (c) 3 organizations: Sustainability means maintaining operations – as well as financial good health – over the long-term through income generation and planning adequate to survive unexpected financial challenges. (Background Sources: Bowman, Woods, “Financial Capacity and Sustainability of Ordinary Nonprofits,” Nonprofit Management and Leadership, 2011; Sontag-Padilla, Staplefoote, Morganti, “Financial Sustainability for Nonprofit Organizations – A Review of the Literature”, Rand Corporation, 2012 )
“For purpose” organizations must ensure that revenues cover the full costs of doing business, including the creation of operating cash reserves, funding depreciation, and developing risk capital. This will help our organizations navigate through economic ups and downs and allow them to better capitalize on growth opportunities.
Size isn’t everything
What’s the most important financial goal? Many donors would say “scaling the work.” However, not every “for purpose” organization has a mission that correlates with broad growth of their services. Some local community service agencies (such as a Boys & Girls Club or a community garden) are valuable assets for a particular neighborhood or community, but “scale” is not a long-term strategic priority, nor should it be. These organizations often need to think about strength much more than growth. They need to ensure their programs, services, and finances are being operated and managed well so they can continue to serve a particular community.
Create new minimum requirements for leaders
Job definitions for 501 (c) 3 CEOs should require expertise in fundraising, finance, governance and programs. Board members – the individuals responsible for hiring and supporting the CEO – must provide an organizational culture and environment that is conducive to fundraising success, good management and the success of the CEO. (See next point.)
Offer more rigorous education and training for board leaders
There are an estimated 20 million board members in the US, serving 1.6 million “for purpose” organizations (BoardSource, 2012). But the majority of these board members are not actively governing their organizations : 71% are not actively fundraising, 68% are not actively monitoring programs, and 56% are not actively planning for the future (Urban Institute 2007).
“For purpose” organizations are legally required to have a board of directors that takes responsible for “ensuring resources for the organization.” But these volunteer directors must meet no legal requirement to demonstrate their knowledge and competency to serve. How can such a critical population of leaders, responsible for our sector’s financial strength and sustainability, not have required training or minimum competency standards to meet?
Study, after study, has shown the correlation between fundraising success and board member involvement. Why can’t board members earn an advanced degree in volunteer leadership even as they serve on boards? What about the idea of funders coming together to fund a nationally-recognized credential of board leadership with built-in incentives for board members to participate? We can do these things. What’s holding us back?
Make research accessible and actionable
One of key strengths of the for-purpose sector is our ability to fund and develop research – especially research that influences the way we carry out our own work. We are great at sharing lessons learned. But it’s probably safe to assume that much of this research doesn’t reach the 20 million for-purpose board members. How can we make this important information more accessible and actionable for them? What if we were to create a portal to disseminate this information – a portal to consolidate the various studies and research on fundraising, leadership, governance and sustainability, make the connections between these studies, and provide easy-to-understand synopses of the findings?
Begin a national dialogue to develop a new name and narrative
Representatives from 501 (c) 3s, philanthropy, government, academia and business should join together on-line and then in-person with the goal of mapping out a concrete plan to create a new and authentic public identity for our sector.
I offer this post to all people who work or volunteer for charitable organizations, to all donors, to all philanthropic, civic and academic groups, to all community-minded businesses, to everyone who has ever benefited from the efforts of civil society.
Some may see this invitation to dialogue as an act of hubris. I see it as an expression of faith in our sector. So don’t hesitate. Comment right here and now on this blog. Or if you prefer, email me with your ideas and whether or not you might like to be involved in convening to rebrand our sector.
I was fortunate to work with organization where the trustees of the Annenberg Foundation, or the Roy & Patricia Disney Family Foundation, made it a priority to invest in visionary leadership to improve our sector.
Our sector thrives on innovation. Let’s replace barriers to growth with innovative support and structure. Let’s inspire a new blossoming of community service and philanthropy. And let’s start by deciding together what we want to call ourselves.