Tag Archives: Nonprofits

Nonprofit executive directors have to be paid market rate salaries

I was talking to a friend and mentioned that nonprofit executive directors routinely make six figures—and sometimes well into the six figures. My friend was outraged: Aren’t the executive directors working for charitable organizations? Shouldn’t they make less money?

Maybe he’s right in some virtue-filled alternative universe, but, in the real world, nonprofit executive directors have lots of responsibilities and need diverse skill sets. When you say “nonprofit” to most civilians, they imagine a relatively small organization like the local Boys and Girls Club or afternoon program for at-risk youth, usually run by a true believer executive director who only needs local knowledge and maybe some common sense (whatever that is). In reality, many nonprofits are large, with hundreds of highly trained and specialized staff delivering complex services. For example, a Federally Qualified Health Center (FQHC) might easily have an annual operating budget north of $50M, with tens of thousands of patients and hundreds of employees. In effect, larger FQHCs resemble small HMOs and provide about the same services, except for inpatient care. Large substance use disorder (SUD) treatment providers can be similarly large and complex. In both cases, the lives of the patients/clients literally depend on the quality of the services provided. So, executive director salaries mirror those of CEOs of for-profit health care providers and can easily be over $300K—which they should be, given the advanced degrees, years of experience, technical skills needed, along with the heavy responsibilities.

Many civilians also don’t understand how even simple human services are delivered: through good organizational skills and hard work. Some of the skills nonprofit executive directors increasingly need are not easily mastered:

  • Sufficient technological expertise to supervise IT staff, vendors, etc. Just about every enterprise today is also a tech business, whether we want it to be or not. At S + A, tech-related stuff probably accounts for about 25% of management time.
  • Managerial expertise (good management looks invisible when it’s done well and is all too visible when it’s done poorly) in both supervising the management team and line staff, as well as wrangling the Board of Directors. In a nonprofit, there are no “shareholders” and the Board sets policy, including hiring and firing the executive director. Over the years, we’ve discovered variations on the following nonprofit “coup” all too often: True believer sets up a new nonprofit and hand-picks the board; as grants and donations grow to support ever-expanding operations, the board begins to morph from true believers to professionals without a direct connect to the executive director (you can call them “competent experts” or “mercenaries” depending on how you want to shade the situation). Tensions mount, and the executive director is booted out of their own nonprofit, sometimes in a public and professionally humiliating way.
  • Ability to connect with diverse stakeholders. Many nonprofits mostly serve the poorest and most marginalized persons in our society, and ideally all staff in a given organization will be able to connect with and understand such persons. But executive directors must also frequently connect with and understand white-collar donors, funders, board members, etc.
  • Ability to get things done. We have all worked with people who are better at meetings than execution, or who seem not to really do much of anything, and that can’t be true of effective executive directors.
  • Ability to cultivate donor relationships.
  • Grant management expertise, including tracking funds, submitting timely and complete reports, and keeping the funder Program Officers happy.
  • Accounting expertise.

There are probably other skills, beyond these, which are just from me thinking about the problem domain at the moment—I’m not trying to be comprehensive here, but the point is that modern nonprofit executive directors need a wide range of skills and abilities that only rarely exist in a single individual. When a set of skills is rare, the market rate for it rises. Most nonprofits, with the exception of nonprofit hospital chains, aren’t as large as even mid-size corporations, but they have become large and complex enough that the solo charismatics of an untrained and inexperienced person usually aren’t sufficient to manage a staff of dozens or hundreds of people and to maintain complex service delivery systems.

Today, small sole-proprietor shops are much less common than small or large chain stores, and something similar and analogous is happening to nonprofits. You may not like that it’s happening, but it’s happening for many reasons. Similar things are happening in business as a whole, as Tyler Cowen describes in Big Business: A Love Letter to an American Anti-Hero—a book that nonprofit leaders should be reading, even if they’re not engaged in profit-taking and -distributing enterprises. Nonprofits are more like businesses than is commonly realized, although I’m sure most regular GWC readers get this.

Many people will take some pay cut to work in and around nonprofits, but few people will take a 50% pay cut, relative to the salaries in their industry. Somewhere between 5% and 50%, the ability to acquire and retain functional people drops off. Nonprofits are competing against other kinds of organizations for qualified people.

This is a bit like people who bemoan the lack of computer science and other qualified teachers: in most districts, teachers in high-demand subjects like computer science can’t be paid any more than teachers in lower-demand subjects, like art or PE. As a result, there are major shortages of computer science teachers, and, arguably, surpluses of teachers in areas like art. Unless computer science teachers can be paid something that approaches their market values, most qualified computer science teachers will go work for software companies instead of school districts. (Incidentally, I’ve thought about teaching high school at various points, but I haven’t, in part due to the income ceiling.)

Some callers have also argued that Seliger + Associates charges too much, and, while this is a fine view, when prospective clients tell us this we always respond the same way: they can hire us; they can hire someone else; they can write it themselves; or they can not submit the proposal. Each of these outcomes has costs and benefits, and any given organization should choose the best outcome for them. But when there hundreds of thousands or millions of grant dollars are on the line, as is frequently the case for proposals we write, we begin to look like a bargain by comparison, since our fees range between $5,000 and $15,000 for typical proposals, regardless of the grant amount being sought. Paying $8,000 to us to write a million-dollar grant is a very good cost versus potential benefit analysis. And, if we’re hired, the executive director frees up time that can be deployed to other tasks.

In terms of executive director salaries, it’s important to remember that a bunch of stakeholders must be satisfied, including Boards of Directors, donors, grant-making entities, and others. If donors become overly obsessed with how much an executive director (or other senior managers) makes, they may wind up with organizations that are less effective than donors who are less obsessed with that exact issue. Many grant-making entities want functional organizations above all else, and are more likely to make grants to organizations with better executive directors. In the real world, better usually included higher paid.

Right now, many high-quality nonprofit management professionals also face the same toxic mix of rising costs we all do—healthcare, college education (their own student loans and the likely future student loans of their kids), and housing. The latter is really important for nonprofits in places like NYC, NY, SF, and Seattle, where the cost of even a modest housing unit can easily exceed $1M. One way to help moderate salaries in the nonprofit and public agency world is to support comprehensive zoning reform that will lower the cost of housing by increasing supply. This has (finally) become a national political issue, because costs are so outrageous that make stakeholders and voters are finally realizing that something must be done. As housing costs rise, so does pressure on every part of the US economy. Consider the crazy numbers from “Housing Constraints and Spatial Misallocation,” by Chang-Tai Hsieh and Enrico Moretti:

In particular, we calculate that increasing housing supply in New York, San Jose, and San Francisco by relaxing land use restrictions to the level of the median US city would increase the growth rate of aggregate output by 36.3 percent. In this scenario, US GDP in 2009 would be 3.7 percent higher, which translates into an additional $3,685 in average annual earnings.

If just the Bay Area and NYC removed many arbitrary building restrictions, we’d all be making the equivalent of $3,600 more per year. If all cities relaxed arbitrary zoning, “US GDP in 2009 would be 8.9 percent higher under this counterfactual, which translates into an additional $8,775 in average wages for all workers.” Imagine how labor markets, including ones for nonprofit workers like teachers and executive directors, would change with almost $9,000 in implied boosted salaries! We can do this, but we’ve chosen not to as a society.

An executive director in a given market must often choose between being able to pay the high rent/purchase price or being able to stay in the nonprofit sector. Nonprofits that want to stay alive must pay those rates. You may disagree with the “have to” in the title of this post. If you think you can run a nonprofit and pay below-market rates, go ahead and do it.

“How Jeff Bezos Turned Narrative into Amazon’s Competitive Advantage”

How Jeff Bezos Turned Narrative into Amazon’s Competitive Advantage” should be mandatory reading for anyone in nonprofit and public agencies, because narrative is probably more important for nonprofits than conventional businesses; conventional businesses can succeed by pointing to product-market fit, but nonprofits typically don’t have that metric. Nonprofits have to get their stories out in other ways than profit-loss statements or sales.

Bezos is Amazon’s chief writing evangelist, and his advocacy for the art of long-form writing as a motivational tool and idea-generation technique has been ordering how people think and work at Amazon for the last two decades—most importantly, in how the company creates new ideas, how it shares them, and how it gets support for them from the wider world.

New ideas often emerge from writing—virtually everyone who has ever written anything substantive understands this, yet it remains misunderstood among non-writers. Want to generate new ideas? Require writing. And no, “Powerpoint” does not count:

“The reason writing a good 4 page memo is harder than ‘writing’ a 20 page powerpoint is because the narrative structure of a good memo forces better thought and better understanding of what’s more important than what, and how things are related,” he writes, “Powerpoint-style presentations somehow give permission to gloss over ideas, flatten out any sense of relative importance, and ignore the interconnectedness of ideas.”

I’m not totally anti-Powerpoint—I have seen books about how to do it well—but Powerpoint does not substitute for narrative (in most cases). Most people doing Powerpoint have not read Edward Tufte or adequately thought through their rationale for choosing Powerpoint over some other communications genre, like the memo. The other day I did an online grant-writing training session for the state of California for 400 people, and the guy organizing it expected me to do a Powerpoint. I said that using a Powerpoint presentation to teach writing is largely useless (he seemed surprised). Instead, I did a screencast, using a text editor as my main window, in which I solicited project ideas and RFPs germane to the viewers. I picked a couple and began working through the major parts of a typical proposal, showing how I would construct an abstract using the 5Ws and H, and then how I would use those answers to begin fleshing out typical narrative sections in the proposal. Because it was screencast, participants can re-watch sections they find useful. I think having a text document and working with actual sentences is much closer to the real writing process than babbling on about a prepared set of slides with bullet points. The talk was less polished than it would have been if I’d prepared it in advance, but writing is inherently messy and I wanted to deliberately show its messiness. There is no way to avoid this messiness; it’s part of the writing process on a perceptual level. It seems linked to speech and to consciousness itself.

To return to the written narrative point, written narrative also allows the correct tension between individual creativity and group feedback, in a way that brainstorming sessions don’t, as the article explains. Most human endeavors involving group activity require some tension between the individual acting and thinking alone versus being part of a pair or larger group acting in concert. If you are always alone, you lose the advantage of another mind at work. If you are always in a group, you lack the solitude necessary for thinking and never get other people out of your head. Ideal environments typically include some “closed door” space and some “open door” serendipitous interaction. Written narrative usually allows for both.

Nonprofit and public agencies that can’t or won’t produce coherent written documents are not going to be as successful as those that do. They aren’t going to ensure key stakeholders understand their purpose and they’re not going to be able to execute as effectively. That’s not just true in grant writing terms; it’s true in organizational terms. Reading remains at present, the fastest way to transmit information. If you’re not hiring people who can produce good stuff for reading, you’re not effectively generating and using information within your organization.

Coding school is becoming everyone’s favorite form of job training

For many years, construction skills training (often but not always in the form of YouthBuild) was every funder’s and every nonprofit’s favorite form of job training, often supplemented by entry-level healthcare work, but today the skill de jour has switched to software, programming, and/or coding. Case in point: this NYT article with the seductive headline, “Income Before: $18,000. After: $85,000. Does Tiny Nonprofit Pursuit Hold a Key to the Middle Class?” While the article is overwhelming positive, it’s not clear how many people are going to make it through Pursuit-like programs: “Max Rosado heard about the Pursuit program from a friend. Intrigued, he filled out an online form, and made it through a written test in math and logic…” (emphasis added). In addition, “Pursuit, by design, seeks people with the ‘highest need’ and potential, but it is selective, accepting only 10 percent of its applicants.” So the organization is cherry-picking its participants.

There’s nothing wrong with cherry-picking participants and most social and human service programs do just that, in the real world. As grant writers who live in the proposal world, we always state in job training proposals that the applicant (our client) will never cherry-pick trainees, even though they do. In the article, important details about cherry-picking are stuck in the middle, below the tantalizing lead, so most people will miss them. I’m highlighting them because they bring to the fore an important fact in many social and human service programs: there is a tension between access and success. Truly open-access programs tend to have much lower success rates; if everyone can enter, many of those who do will not have the skills or conscientiousness necessary to succeed. If an organization cherry-picks applicants, like Pursuit does, it will generally get better success metrics, but at the cost of selectivity.

Most well-marketed schools succeed in “improving” their students primarily through selection effects. That’s why the college-bribery scandal is so comedic: no one involved is worried about their kid flunking out of school. Schools are extremely selective in admissions and not so selective in curriculum or grading. Studies have consistently suggested that where you go to school matters much less than who you are and what you learn. Such studies don’t stop people from treating degrees as status markers and consumption goods, but it does imply that highly priced schools are often not worth it. Thorstein Veblen tells us a lot more about the current market for “competitive” education than anyone else.

My digs at well-marketed schools are not gratuitous to the main point: I favor Pursuit and Pursuit-like organizations and we have worked for some of them. In addition, it’s clear to pretty much anyone who has spent time teaching in non-elite schools that the way the current post-secondary education system is set up is nuts and makes little sense; we need a wider array of ways for people to learn the skills they need to thrive. If Pursuit and Pursuit-like programs are going to yield those skills, we should work towards supporting more of them.

It is almost certainly not existing schools that are going to boost more people into the middle class, as they’ve become overly bureaucratic, complacent, and sclerotic; see also Bryan Caplan’s book The Case Against Education on this subject. While many individuals within those systems may want change, they cannot align all the stakeholders to create change from within. Some schools, especially in the community-college sector, are re-making themselves, but many are not. In the face of slowness, however, nimble nonprofits and businesses should move where this grant wave is going.

When you hire consultants, you’re hiring them for all the mistakes they’ve ever seen (and made)

When you hire a lawyer, part of who you’re hiring is someone who has made thousands of mistakes in law school and as a young lawyer. Lawyers, like doctors and other professionals, learn in an apprentice-style system that incorporates the mistakes made by their mentors. Proto-lawyers also make some mistakes of their own—and, ideally, have those mistakes corrected by senior lawyers, and learn to not make those mistakes in the future. Most people don’t think about hiring a person or team specifically for their mistakes, yet this is a useful way to think about most professional services, including our personal favorite: grant writing consultants.

When you’re hiring a grant writer, you’re really hiring the experience that grant writer has. It isn’t impossible to hire a college intern or recent journalism grad and get funded; we’ve seen it happen and heard stories from clients. But the intern and inexperienced writers will make mistakes more experienced people won’t. We’ve written numerous posts about subtle mistakes that are easy to make in all aspects of the grant pipeline, from the needs assessment to the program design to the submission process. It’s also possible to get a competent junior person to write a couple of proposals, but grant writing is very hard and over time they tend to demand more money—or leave. That’s why you have trouble hiring grant writers. Many interns will write a proposal or two, but when they learn how hard and under-appreciated the job is, they often want money commensurate with difficulty. The inexperienced tend to make mistakes; the experienced grant writers tend to charge accordingly.

We are still not perfect (no one is; if anyone think they are, refer to “the perils of perfectionism“). But we have learned, through trial and error, how to make many fewer mistakes than novice or somewhat experienced grant writers. It’s not conceptually possible to eliminate all errors, but it is possible to avoid many errors that scupper most would-be grant writers.

If your organization can get a recent English major to write successful proposals for little or nothing, you should do that. But we’ve also heard from a lot of organizations that have “whoever is around” write, or attempt to write, their proposals, only to fail. Experience matters. You can get the magic intern, but more often you get someone who is overwhelmed by the complexity of a given writing assignment, who doesn’t understand human services or technical projects, is simply terrified by absolute deadlines, etc.

Let’s take as an example a common error that we’ve seen in a spate of recent old proposals provided by clients. Most include some variation, made by inexperienced writers, who want to write that “we are wonderful,” “we really care,” and the like in their proposals. This is a violation of the writing principle “Show, don’t tell.” Most of the time, you don’t want to tell people you’re wonderful—you want to show them that you are. “We are wonderful” statements are empty. “We served 500 youth with ten hours of service per week, and those services include x, y, and z” statements have objective content. It’s also harder to accurately describe what specific services an organization is providing than it is to say subjectively, “We are wonderful and we care.” Whatever is rare is more valuable than that which is common.

The above paragraph is just one example of the kind of errors novices make that experts tend not to. Attempting to enumerate all errors would be book-length if not longer. Experienced grant writers will avoid errors and offer quality almost instinctively, without always being able to articulate every aspect of error vs. optimality.

Links: Elon Musk’s secret sauce, philanthropy and controversy, healthcare, fashion, electric cars, maternal morality, and more!

* Elon Musk’s secret sauce, and what makes him such an effective human being. I wonder about the extent to which his methods and philosophies are teachable to others.

* Philanthropy Should Be Controversial.

* “Police violence in Alabama:” note: “there’s no law that allows cops to beat or shock you because they don’t like your attitude.” Why do cops not realize this, or still behave this way if they do? Cops beat people for the sake of it. They are sometimes out of control and a virtually unchecked power unto themselves.

* Fresh Climate Data Confirms 2015 Is Hotter Than Any Other Year in Human History.

* Charities Givewell.org would like to see.

* A history of men’s boots and shoes, and why modern ones are so good; the piece is fascinating but in a way that’s hard to describe effectively.

* “Many Say High Deductibles Make Their Health Law Insurance All but Useless;” alternately, one could read this as “At the margin, revealed preferences show that people don’t want as much healthcare as many eggheads imagined.” The reporter of course chooses not to explore this possibility.

* “Saudi Arabia, an ISIS that has made it.” In political discussions I often point out that Saudi Arabia’s tone, values, and policies are diametrically opposed to the ones espoused by the American and European governments that often support it.

* California’s DOT Admits [the obvious:] That More Roads Mean More Traffic.

* Why car dealers are reluctant to sell electric cars, a bit of ill news.

* Dream of New Kind of Credit Union Is Extinguished by Bureaucracy.

* What happens to countries that vote for socialists.

* Why is the maternal mortality rate going up in the United States? Paging Healthy Start Initiative grantees.

* Why Chris Blattman worries that experimental social science is headed in the wrong direction. This is important for nonprofit and public agencies and echoes, lightly, some points we’ve made in, for example, “Studying Programs is Hard to Do: Why It’s Difficult to Write a Compelling Evaluation.”

* Is There a Future for the Professions?

* “Leaving it behind: How to rescue people from deep poverty—and why the best methods work.” This is less America-centric than most pieces we link to but is interesting, or should be interesting, to all.

* “Think Systems When You Write You Prepare Your Proposal, and a Tale From the Medical Trenches.”

Seliger + Associates enters grant writing oral history (or something like that)

Seliger + Associates has been toiling away in the grant writing salt mines for over two decades, and last week we got hired to review and edit a new client’s draft proposal for a federal program we’ve been writing for years.* They emailed their draft and we were delighted to see that it’s actually based on a proposal we wrote for some forgotten client ten to fifteen years ago. While the proposal has morphed over the years, we could easily find passages I likely wrote when Jake was in middle school.

We’ve encountered sections of our old proposals before, but this example is particularly obvious. The draft was also written to an archaic version of the RFP, so it included ideas that were important many years ago but that have since been removed or de-emphasized. We of course fixed those issues, along with others, but we also left some our our golden historic phrases intact for the ages. This version will undoubtedly also linger on into the future.

We’re part of what might best termed the “oral history” of grant writing. We’re the Homer of the grant world, which is a particularly apt comparison because “Homer” may have been more than one person. For the first ten years or so of being in business, our drafts were most sent by fax, but we sent final files on CDs. For the past decade we’ve been emailing Word versions of all narratives and Excel budgets. Our proposals have probably been traded by nonprofits all over the country like Magic: The Gathering Cards.** Still, unlike some other grant writers who will remain nameless, we never post or sell our proposals. But it seems that the digital age has caught up with us anyway.

In some ways, seeing shades of our old proposals makes me feel proud, as our impact will likely last as long as there are RFPs—which is another way of saying forever.

We don’t know what strange ways brought the proposal we wrote to our current client. We’ve had hundreds of clients and written many more proposals of all stripes, and even if we wanted to trace its lineage we couldn’t.

As we’ve written before, grant writing at its most basic level is story telling. Now our stories have assumed a digital afterlife of their own. While Titanic is not my favorite film or movie theme, I’ll paraphrase Celine Dion, as it does seem that . . .”our proposal words will go on and on.”


* Faithful readers will probably know which program I’m discussing, but we’ll keep it on the down low to protect the guilty and and punish the innocent.

** When Jake was about 11, and just before his unfortunate discovery of video games, he was a huge Magic player and was always after me to buy yet more cards. As I recall, he and his little pals endlessly traded Magic cards for “value” that completely eluded me, a classic clueless dad. Eventually Jake grew up and lost interest, at which point the value of the cards became zero for him.

Collaboration Again: A Story From the Trenches

We’re working on a project for a client who needs two things: a lot of data that isn’t easily publicly available and the dreaded letters of collaboration from other local providers (which we’ve written about in the context of Susan G. Komen, Mark Zuckerberg, and Community-Based Job Training). We have to be vague on the details, but our client initially planned to serve a reasonable service area, and we wrote a draft proposal reflecting our client’s plan.

The plan didn’t survive contact with the enemy, however. Our client’s so-called “collaborators” sabotaged the proposed project service area: They refused to sign letters of collaboration unless our client reduced the proposed service area to stay off their “turf.” So much for collaboration among nonprofits. The overall concept of collaboration, as required in most proposals these days, is ludicrous. It’s the equivalent of Burger King getting to veto a McDonald’s location. Alternately, it’s the equivalent of the contemporary market for broadband Internet access, which is totally broken, as demonstrated by the link.

Still, our client can’t effectively get the grant without letters offered by the client’s competitors, who ganged up on our client. She had to change the proposed service and we had to revise the draft to reflect this. The losers are of course the low-income and underserved residents of the removed part of the service area, who will have one fewer option for help and who don’t get a voice in this process, which is occurring entirely behind closed doors.

We’ve said it before and we’ll say it again: forcing nonprofits to “collaborate” makes no more sense than forcing businesses to collaborate.

In Forming a Nonprofit Board, Think “Goldilocks”

When forming a new nonprofit, one of the first issues confronting the sponsor as they apply for a state charter and draft articles of incorporation and bylaws is: How many board members should the new organization have? As with most things relating to nonprofits and grant writing, while there’s no definitive right answer, there are some good answers.

Some states will approve a new profit with just a single board member—and the inherent simplicity and control of a single board member often appeals to a founder—this is a fast way to the exit when you apply for IRS 501(c)(3) tax-exempt status. Other founders, particularly true believers, will think they should have huge boards, perhaps as many as 25 or 30. Unless you’re really good at herding cats, this is an equally bad idea. The care and feeding of 15 or 20 board members is an enormous task and raises the real potential that you might get booted out of your own nonprofit in a coup* when grant money finally arrives. In addition, more opinions does not necessarily result in a better outcome and often results in a worse outcome than fewer. Whatever number of board members you pick, it’s critical that you be able to maintain control of the board.

If one board member is too few and twenty five too many, what’s the Goldilocks number? When we used to set up nonprofits in an earlier incarnation of Seliger + Associates**, we always recommended five, seven or nine members. An odd number of board members prevents tie votes. Five is generally enough to pass the IRS believability test. Also, IRS regs require that not more than half the board be “interested parties,” so you have to go beyond your mother-in-law for members and getting five can be a challenge. With a five member board, only two can be interested parties. Any number of board members more than nine will get unmanageable very fast. In this case, bigger is definitely not better.

Moving beyond the size issue, consider the quality of the members. It’s good if the majority of board does not have the same last name. Many foundation and some government funders will request board member affiliations. Having well-respected, un-indicted business leaders, clergy, public officials and so on is usually better than having all average Joes and Josephines. Still, it’s good grant PR to have one or two potential consumers of whatever service you’re providing. For example, if the organization will be providing affordable health care, have one or two potential patients on the board. Unless you’re forming a national/regional organization or one with a highly specific purpose like research for a obscure medical condition, claim that the board is “community-based,” and plausible evidence of that claim is an advantage. Local residents are usually better than distant “experts,” even in situations where that makes no sense.

One effective approach is to have a small, community-based, but still “respected” board of five members and a much larger “advisory board” of big shots that look good on letterhead and your website. The advisory board doesn’t actually have any power and doesn’t do much except lend their credibility and hopefully a donation every year. The advisory board idea is very common in Los Angeles, as there are many has-been actors and other entertainment industry types who’re willing to serve on advisory boards, as long as they don’t have to do anything. New York has ladies who lunch.


* It’s not uncommon for founders to get booted off their own board or for some board members to be kicked by other members in a putsch. I know because it happened to me when I was in my early 20s and still starry-eyed. I’ve heard lots of similar horror stories from clients over the years. Nonprofit boards can be intensely political, especially because the stakes are often so small.

** We no longer form nonprofits in most circumstances. As we’ve written before, it’s best to use an attorney or accountant who is familiar with nonprofits to help with the paperwork and approvals needed to form a new nonprofit.

Issues Facing Old-Line Nonprofits Differ from Those Facing New Nonprofits: Think Bambi Meets Godzilla

We’ve written various posts on the challenges of starting a new nonprofit (like this one), mostly because we get lots of calls from fairly new nonprofits or folks trying to get one off the ground. Last week, however, I got a call from an agency in a large east coast city that’s been operating for about 200 years. I’m not making this up. The nonprofit originally was an orphanage that morphed into a broad-based children’s services agency.*

Though the caller was delighted to recite the exceptional history of his nonprofit, I didn’t get excited, as we we’ve worked for many nonprofits that have been around for decades—including one in a big Midwestern city that started in 1860s as a “settlement house” in the vein of Jane Adams’s Hull House. By now Seliger + Associates is older than many nonprofits.

While the caller was interested in a standard-issue federal RFP that’s on the street, we also talked over the challenges of keeping an Ancien Régime agency going in the face of an endless onslaught of Nouveau Riche competitors. Nonprofits face the innovator’s dilemma too. They must evolve over time and not get stuck in the “these are the services we provide” trap. It helps that most long-established nonprofits have contracts to provide capitated services or services with handy third-party payers (e.g., foster care, family reunification, residential care, primary health care, substance abuse treatment, etc.). Capitated-service agencies have a base cash flow, which they supplement with fundraising and grants (that’s were we come in).

Unlike new agencies, which are struggling for recognition and any funding scraps they can find, the main challenges old-line agencies face are relevance, ossification, and the inevitable disputes that arise with donors and funders.

Old-line agency must meet emerging needs. For example, there is apparently an astounding, sudden and unexplained surge of unaccompanied Central American children crossing into Texas this year, and they are essentially begging to be “caught” by the Border Patrol. This could reach as many as 100,000 random kids this year, who will overwhelm the current residential care capacity in the border states. The border patrol turns these kids over to Immigration and Customs Enforcement (ICE), which then hands them off to DHHS for transportation and temporary or permanent—depending on your interpretation of immigration laws—resettlement in small and big cities across America.

Not surprisingly, the Obama administration is requesting $2 billion in new funding to address this human tidal wave or humanitarian crisis, once again depending on your point of view. I’m confident much of this money will end up as competitive grant opportunities from the DHHS Office of Refugee Resettlement (ORR). As the former White House Chief of Staff and current Chicago Mayor, Rahm Emanuel put it, “you never want a serious crisis to go to waste.”

Say you’re our former midwestern client and have been around since the Civil War. You provide family and child support services but not residential care, so it’s essential to develop this capacity; thousands of Central American refugee children are likely to be dumped into your service area. You should meet this new crisis, as part of your mandate and mission, while at the same time bolstering your revenue with tidy ORR grants. This is a basic “win-win.”

Regarding ossification, old agencies are usually larger and bureaucratic, mimicking the funders that support them. It’s easy for a large, established nonprofit to become moribund, not only in the services they deliver, but also in the way in which services are delivered. Old agencies are less likely to adopt new technology and cultural practices—like contacting clients and conducing outreach through social media—because they do things the way they’ve always done things. Change is hard and inertia is seductive. This phenomenon is not limited to the nonprofit sector. Examples in business are common: huge companies like Motorola, Sears and IBM (before IBM reinvented itself under the remarkable CEO, Louis Gerstner) rise, lose focus or miss market shifts, and fall.

Finally, old-line nonprofits will often become embroiled in disputes with donors and funders. This can range from rich Mrs. Himmelfarb, who makes $100,000 annual donations, getting pissed off because she got seated at the wrong table at the nonprofit’s annual gala to the agency failing to submit required reports to the DOL for the agency’s YouthBuild grant. Once donors and/or funder program officers get annoyed with a large nonprofit, the organization may suddenly find itself in financial trouble.

Beneath the feet of every lumbering old-line dinosaur nonprofit are tiny new mammal nonprofits scouring around and trying to meet new community needs, provide nimble services in innovative ways, and eventually take away the big boy’s donations and grants.** The old-line nonprofit needs to address these upstarts by acting like Godzilla in Bambi Meets Godzilla, perhaps the best short film ever made.


* Fun fact: although it may be moving against the conventional wisdom to defend orphanages, Richard McKenzie explains why they’re often better than foster-style systems in “The Best Thing About Orphanages.” Saying “They’re better than the alternative” is not equivalent to saying, “They’re great!”

** Some grant programs are explicitly designed to provide challengers to incumbents; Community Health Centers (CHCs), for example, are eligible for “Service Area Competition” (SAC) grants. As readers of our e-mail newsletter know, the last two weeks have seen more than $150 million in SAC grants. Every geographic area in the U.S. is supposed to be covered by a SAC-funded agency, and every time a competition arises, new CHCs can try to wrest the grant from the existing grantee.

Sometimes Technology Makes Things Harder: Foundation Proposal Submission Edition

In ye olden days when dragons flew the sky and grain was still milled with water wheels, most foundations only accepted paper submissions. Most also had relatively straightforward instructions that were reasonably simple; since the submissions were done through paper, applicants could create an attractive, well-formatted submission document.

Today things are different. Amazon delivery drones fly the sky and human-like creatures wear Google glasses on the streets, which make them look like Borg extras from Star Trek. Foundations, meanwhile, have created far more work and hassle for applicants by deploying online proposal submission systems that are harder to use and more time-consuming than paper-based submission.

Technology is supposed to make our lives easier. Sometimes it does: Facebook now makes it simple to stalk former lovers and discover that, yes, they have indeed gotten fat. But technology doesn’t automatically make our lives easier. Foundations have used technology to take what used to be a reasonably coherent exercise—like “write a three- to five-page proposal”—but they’ve chopped it up and made it incoherent. Now most foundation submissions mandate tiny input boxes with lots of arbitrary character or word limitations.

There are numerous problems with the new systems. Their space limitations are frequently absurd. They might say, “two thousand characters for the needs assessment.” But is that two thousand characters with or without spaces? Different systems use different counting conventions and sometimes don’t say whether they count spaces. The length itself is absurd: two thousand characters is a third of a page. If there are five detailed questions from the foundation about the applicant and project concept, the funder is going to get disjointed, unsatisfying answers that attempt to hit all the questions.

Since none of this can be formatted, it looks like a ransom note when printed—the sort of thing that you’d receive from a Nigerian Prince who has a bank account he can’t access. A lot of systems also won’t let applicants move forward without a value in the input box. So you have to put a placeholder there to move forward and see the whole application (we like “Jack Bauer,” “Tony Almeida,” and “Chloe O’Brien” from 24 as placeholders. But then applicants must make sure that there are no placeholders left in by accident in the upload. Question: “Who is the CEO?” Answer: “Jack Bauer,” could be a problem.

In addition, each foundation has a different system with different questions and restrictions. It’s always been true that foundation submission requirements vary; since they have the gold they make the rules. But while there used to be length variations and some oddball questions (“Do any employees of the corporation sponsoring the foundation volunteer with the applicant nonprofit?”), applications were more similar than different. The Himmelfarb Family Foundation wanted three pages and the Worcester Community Foundation wanted five, but the overall structure was similar.

Now foundations are more different than similar and their online systems present all kinds of roadblocks. With almost all these online systems, applicants start by answering a bunch of questions (“Are you a 501(c)3?”). Fair enough, we guess. Then when an applicant logs out and returns, they have to answer the same questions again! Once isn’t enough! Applicants have to answer five different times.

We’ve been doing foundation proposals for over twenty years. The current trend is making things worse, not better. Technology does not automatically make things better. The best foundation submission is about five single-spaced pages with reasonable headers that explain clearly and concisely the “Who, What, Where, When, Why and How” of a project. A project that can’t be explained in five pages is probably too complicated. We call the initial foundation submission document we recommend a “foundation letter proposal.”

We get it: foundations want to be hip and say they have an online system. But the systems they implement are usually terrible and counterproductive. Virtually every person submitting a foundation proposal is getting paid from somewhere. Every minute they spend fiddling with the foundation’s online system is a minute they’re not spending on service provision. Do foundations care? Probably not, but they should.