What Makes a Great Organization?

Thursday, October 11, at 1 p.m., U.S. Eastern time

Leslie R. Crutchfield and Heather McLeod Grant, the authors of Forces for Good: The Six Practices of High-Impact Nonprofits, a new book published by John Wiley & Sons Inc.

Michael Brown, chief executive and co-founder of City Year, the national service organization in Boston.

Charles Kamasaki, executive vice president of the National Council of La Raza, a Washington charity that works nationwide to aid Hispanics.

A transcript of the chat follows.

Stacy Palmer (Moderator):
    Welcome to The Chronicle of Philanthropy's online discussion about the new book, Forces for Good: The Six Practices of High-Impact Nonprofits. I am Stacy Palmer, editor of The Chronicle of Philanthropy and I will be moderating today's conversation. We are pleased to be joined by the two authors, Heather McCleod Grant and Leslie R. Crutchield. Also joining us today are executives from two of the groups featured in the book, Michael Brown of City Year and Charles Kamasaki of National Council of La Raza. All four of them will be answering your questions throughout the hour. To send them your questions or comments, please click on the link on this page that says "ask a question." Let's begin the conversation.

Question from Lesa Lessard Pearson, nonprofit consultant, EMBA candidate:
    You mention that all 12 of the non-profits that achieved outstanding results did so in part because they work closely with businesses. I'm interested in learning more about how these partnerships were formed and for what purpose? How did each business and non-profit partnersip evaluate success? Thank you.

Heather McLeod Grant:
    We actually write about 3 ways that nonprofits harness market forces for social change -- and one of these ways is through corporate partnerships. The other two are running earned-income ventures, and creating market incentives for social change, as Environmental Defense has done with cap-and-trade. In terms of partnerships, they were formed for mutual benefit: the nonprofit works with the business to leverage resources for their cause (everything from financial donations to in-kind, product donations, or volunteers. In return the business often benefits in terms of cause-marketing, increased employee productivity, and being recognized for good corporate citizenship. The nonprofits evaluate success of these partnerships depending on their different goals -- some partnerships are more integrated and strategic, others are lower commitment. City Year and National Council of La Raza both have very strong corporate partnerships - and are best practice in this area.

Question from Stacy Palmer:
    Michael and Charles, can you tell us about how your organizations are responding to the observations in the book. Are their practices you will change or accelerate now that you have read more about what makes a difference, and what does not.

Charles Kamasaki:
    For the most part, the book's findings confirm things we might have done anyway, but the affirmation might accelerate the process in helpful ways. For example, in building a stronger relationship with our network of local affiliates, community organizations that for the most part provide services, we've been interested in building their advocacy and civic engagement capacity. The book's finding that linking advocacy and service may strengthen our resolve to do this. Similarly, we're hopeful that it might encourage funders of one type of activity to be more open to supporting the complementary work.

In other cases, it might also lead us to revisit things that the conventional texts say are "must-do's" for organizations like ours, like maintaining strict program-to-administration expense ratios that rating agencies tend to focus on, and instead perhaps to go ahead and invest funds in some institutional needs. So, for example, we might make some investments in resource development or press work that otherwise might be back-burnered for fear of getting the ratios out of whack.

Question from Edith Asibey, Asibey Consulting | Communication and Advocacy Strategies:
    Your study talks about the importance of focusing outside of the organization's own walls. Are you suggesting that nonprofits do not need to build internal capacity?

Leslie R. Crutchfield:
    We are suggesting that nonprofits need to both their build internal capacity AND focus on leveraging institutions outside their four walls to advance their cause. Of course, to be successful, nonprofits need to invest in the basics - develop a strong revenue model, build management systems, hire and retain great people. And for every nonprofit, even this is a huge challenge -- and we know how hard it is to raise money every year, compete for talent, and keep up with technology (we've been there, we've both run nonprofits ourselves). But even if you do all all of these things perfectly -- if you run the organization "like a business" --we believe that you won't maximize your impact. What we found in our research is that by tapping into the power of business and markets, influencing policy, building networks and sparking movements, the best nonprofits achieve far greater results than if they just focused internally.

Question from Stacy Palmer:
    Leslie and Heather, in the book you talk a lot about what makes a great leader, not just about what makes a high-impact organization. Can you tell us more about your findings?

Leslie R. Crutchfield:
    Our findings about what makes a great nonprofit leader turned out to be very similar to Jim Collins' "Level 5 Leader," which he writes about in Good to Great. At the core, great leaders put their egos aside and put the interests of the organization, and the cause, above all else. Collins describes it as great business leaders put the interest of the company ahead of their own individual ego needs. We actually think the best nonprofit leaders take this one step further, as they put the interests of the entire movement above even their own organization's interests at times. (We actually joked among our research team that we should call this the "Level 6" leader). For example, with City Year, the leaders weren't just solely focused on getting City Year's name in the paper or testifying before Congress, their larger vision was to build a national service MOVEMENT, so they often put other groups in the forefront so that the movement had many faces and many leaders.

Question from Deanna, small nonprofit:
    I'm the ED at a youth counseling agency in a mid-size county that has two other counseling agencies that serve youth, but not exclusively, as we do. As we develop programming, the other agencies duplicate our progams and because they are bigger, with bigger budgets, get a jump on advertising and our agency looks like the secondary option, not the original program - suggestions on ways to reinforce our position to the community (clients) and funders?

Michael Brown:
    You may want to consider writing op-eds and other policy writing opportunities that provide you with a platform to present the history and impact of your organization. Other opportunities for thought leadership include convening conferences with other leading organizations. Anniversaries also provide an organization with opportunities to tell their story and the way in which they have impacted lives and communities.

Question from R. Willis, independent consultant:
    The summary of your book's argument, as presented in the Chronicle, compares organizations that work "with" capitalists and are willing to do "anything" short of compromising "core" principles, versus organizations that would "rather be right than win" and in one degree or another shun capitalists. a preference is expressed for the former model. my question is, if what you are fighting against is, in effect, the destruction of human values wrought by the capitalist, consumerist culture, what will you actually accomplish by collaborating with the enemy?

Heather McLeod Grant:
    Basically the nonprofits in our book are fairly centrist (some are more to the political right, as Heritage, some more to the left, as Center for Budget.) They work within the system to change the system. So rather than seeing the world in terms of a black-and-white ideological battle between socialism and capitalism, as these issues were often framed in the past century, they recognize that capitalism is a reality and seek to mitigate against the harsher effects. In fact, many of them provide creative solutions to meet social needs that are unmet by the market. They recognize that markets aren't perfect but seek to make them function more effectively for everyone by working with corporations to increase their positive practices and decrease negative ones. We've found that these more centrist nonprofits are ultimately able to have larger impact on entire systems than smaller nonprofits that are ideologically extreme. To take one example, Earth First plays an important role in the environmental movement and protesting capitalism, but I dare say it would have a hard time garnering the level of individual support that Environmental Defense has done because it is seen by so many people as radical and extremist. Ultimately the "center" or majority wins under a free-market, democratic political system. These high-impact nonprofits have found a way to rise above partisanship and ideological extremes and hold the center.

Question from Chuck Bean, The Nonprofit Roundtable of Greater Washington:
     I want to follow-up on your response about “practices” and “leadership.” How do you relate your identification of the six practices of effective nonprofits to the importance of the leadership of these organizations? More specifically, I think it’s great to distill practices from the successful organizations, because “practices” can be replicated. But could you comment more about leadership, and any ideas you came across about how our sector can replicate strong leadership -- or at least support and develop leaders on a much broader scale?

Leslie R. Crutchfield:
    Chuck, first let me say that we think the "practices" and the "leaders" are inextricably intertwined. These organizations each have great leaders who are phenomenally talented, although each has his or her own unique personality and style. What most of them share in common are a couple of key things: 1. Their ego-less/other-centered values, which enables them to shine the spotlight on and elevate others around them -- their senior mngmt teams, their boards, and their nonprofit peers. They see that by helping those around succeed, they themselves succeed in their ultimate vision, which is to change the world 2. Great nonprofit leaders realize that they need to build big, strong, diverse management teams, bringing on people with different backgrounds and skills from their own. And then they must GIVE POWER AWAY. They realize that they cannot continue to be the bottle-neck, and cede control to people they trust around them. we're all familiar with the founder-syndrome nonprofits where the CEO has to make every decision, from authorizing the annual budget to picking out which stamp goes on the annual mailing -- and everything in between. This is clearly not an effective use of the CEO's time or energy, but it is hard for many to let go. So I think the advice I'd give to nonprofits that aspire to expand their results is to look closely at their mngment teams, expand them, trust them, and then let go.

Question from Debra Natenshon, The Center for What Works:
    How integral to success do you think of an integrated measurement process?

Heather McLeod Grant:
    In the chapter on Mastering the Art of Adaptation we talk about how these high-impact nonprofits use evaluation as a tool to help them learn about what is working and what isn't working. They all have different ways of listening to their environment, seeking feedback from customers/ clients, and then constantly adapting and modifying their tactics to increase their impact. So it is important to pay attention to how well you are advancing your mission and succeeding at your goals. And these nonprofits are all obsessed with results. However, both Leslie and I argue in the book that the social sector as a whole has become too fixated on the WRONG metrics: things like overhead ratios, or budget size as indicators of success. These metrics tell us how efficient a nonprofit might be, in terms of internal operations, but they don't tell us much about how EFFECTIVE these nonprofits are at obtaining real results. In other words, they measure "inputs" (money) not "outputs" (social change) -- or what is accomplished for that investment. We believe the sector as a whole needs to find new ways to focus on impact, because that's what really matters, as we wrote in our Chronicle Op Ed. We recognize that it's not always easy to "measure" social change - it's hard to determine causality, it takes a long time to see results, etc. But that's no excuse for not trying. I love the Albert Einstein quote: "Not everything that can be counted counts, and not everything that counts can be counted."

Question from Desi, large nonprofit:
     How did you go about selecting the 12 nonprofits featured in the book?

Heather McLeod Grant:
    We had a very rigorous, lengthy methodological process to pick the 12 organizations -- modeled in part on Jim Collin's work in Good to Great and Built to Last. The methodology is described in great detail in the book, and in particular the appendix. To summarize briefly here: first we had to determine which nonprofits were having the most impact in their fields, so we surveyed 2800 leaders (executive directors) of nonprofits representative of the sector (including those from the Chronicle 400 list) in terms of size, age, issue area, and geographic distribution. This resulted in hundreds of peer nominations. Then we talked to 60+ field experts (academics, funders, journalists with broad knowledge) from 9 fields such as "environment," "Education" etc. to help us narrow the list and evaluate which metrics to use in which field. We then coupled all this data with public information from the "finalist" organizations - evaluation data, annual reports, etc. and selected 12 that met all of our criteria for impact: they had to have measurable, sustained results, and they had to have changed systems or fields. Then we spent nearly 2 years doing in-depth case study research at each organization and finally we looked for cross-cutting patterns, which became the 6 practices.

Question from Bruce Arbit, Independent Consultant:
    First, I want to commend your efforts to not only create a framework that is directly applicable to the not-for-profit sector but also demonstrates that the not-for-profit sector has many valuable lessons/experiences to teach, as well. One area your book seems to suggest looking at is financial sustainability, which I would agree with. I'd like to ask you to talk more about the concept of "make markets work" and specfically, where philanthropy and fundraising fits into this framework.

Leslie R. Crutchfield:
    The "make markets work" concept has 3 basic parts: We found that great nonprofits work with, and through, the private sector to advance social change by 1. partnering with business, 2. launching and running their own revenue-generating businesses, and/or 3. harnessing market mechanisms to advance the greater good (as Environmental Defense did by advocating for the "cap-in-trade" pollution credit trading system that enable coal industry players to reduce their emissions by trading pollution "credits." The advice I'd give to philanthropists is this: Don't shy away from funding organizations that have strong relationships with business. A lot of donors might say, well NCLR or City Year have a great corporate advisory board and appear to receive a lot of corporate donations, so they might not "need" our money. To the contrary, high-impact nonprofits are successful BECAUSE they work with and through business, and change business practices as a result of their relationships. So we'd advise donors to double-down and invest MORE in organizations that have figured out how to harness the power of business to social change. You'll get more bang for your buck that way. As for fundraisers, the biggest challenge here is to be clear about the line between your revenue needs and your core principles. NCLR has a very clear set of guidelines for their corporate parntership agreements. They say: We'd like you to join our cause, and appreciate your support. But we're an advocacy organiztion first that advances rights and opportunities for Latinos. So if your company does something that is detrimental to our cause, we will walk away, because mission comes first.

Question from Stacy Palmer:
    Charles, can you tell us more about how you work with corporations to spread your impact?

Charles Kamasaki,:
    We have several types of partnerships. Some are conventional social responsibility efforts, like encouraging companies to improve their diversity and/or strengthen wages & working conditions for employees.

Some involve advancing shared interests. So we've partnered with financial institutions to increase lending to Latinos and developing new mortgage products. We've also worked with corporations to advanced shared policy goals, like affirmative action, voting rights, and immigration reform.

Some involve more traditional philanthropic efforts, as well.

But the book's finding goes beyond just corporate partnerships; it involves trying to understand how markets work, and how the can be shaped to advance our interests. And that can involve both public policy considerations, where we might try and set the market "ground rules," or trying to encourage or incent companies to fill market gaps.

Question from Stacy Palmer:
    Michael, can you talk to us about how your group has handled the challenge of fast growth?

Michael Brown:
    After we had grown to ten sites, we conducted a strategic planning process and a fundraising campaign to allow us to invest in core capacities that are vital for maintaining a strong organization including human resources, training, and other programmatic and organizational investments. The Atlantic Philanthropies provided us with a transformational $10 million challenge grant that catalyzed this process, and allowed us to continue to grow to new communities that asked us to start City Year programs following this capacity-building period. In addition, we developed a set of guideposts for developing new sites that includes ensuring there is strong local support and four years of capitalization. Our capacity building initiatives and these guideposts for new site development have greatly strengthened our ability to continue to grow to new communities. Utilizing these new capacities and guideposts, we just opened our 18th program in Los Angeles.

Question from Stacy Palmer:
    Heather and Leslie, can you talk more about the importance of advocacy to being a high-impact nonprofit. So many groups shy away from advocacy -- should they be more willing to get involved in influencing public policy?

Leslie R. Crutchfield:
    This is Leslie responding. Yes, its true many groups shy away from advocacy. Some don't see it as part of their mission -- it's enough to get food to a hungry person or medical care to a sick child. Others see lobbying as "unseemly", and politics as dirty. Others just don't know how to do it - the laws the govern how much lobbying is allowed can be confusing. But the high-impact nonprofits in our book overcame these challenges. They did so because they were concerned not only with addressing the symptoms, but also tackling the root causes of problems. And often, policy change is an effective way to change dysfunctional systems. I should say that it's not easy -- it's very difficult to succeed. NCLR had a really tough time maintaining footholds in both programs and policy. Funders at times wanted them to focus on one or the other, but not both (and it is true that funders' resistance is another reason why nonprofits don't pursue advocacy). But they stayed the course, because they realized that this is how they could have the most impact, and acheive the greatest results.

Stacy Palmer (Moderator):
    Thank you for all the good conversation today. We appreciate all the questions from readers, and thank you to all of our guests for helping us learn more about what makes nonprofit groups effective. If you have additional comments for me or my colleagues at the Chronicle please send them to editor@philanthropy.com.