Donald Trump’s election as president created a quandary that people throughout the nonprofit world are wrestling with every day: How should they respond to a turn of events that revealed large, previously under-appreciated fissures in the American body politic?
Foundation leaders and philanthropy observers have issued calls to action that convey a strongly felt need to “resist” — to fight against policies of the new administration that violate ideals that many of us hold dear. That is essential work for organizations that focus on advocacy. But we believe that nonprofits of all types, along with their foundation and individual donors, face a broader task: In a time of social and political disarray, they must demonstrate their ability to sustain a diverse and robust civil society.
Nonprofits face an urgent need to operate in new ways as a new era unfolds.
Never in American history have the challenges posed to civil society been more striking, but never before has the potential of civil society organizations to create impact been greater. Still, in the years ahead, it will be crucial to ensure that much of the highly concentrated wealth that has accumulated over the past 25 years is channeled to truly significant investments in serving and transforming our society.
The need for increased giving is acute and will become more so in the coming decades. By 2025, we estimate, Americans will contribute between $500 billion and $600 billion annually to charities and foundations. Despite such growth, the scale of giving will be insufficient. By our calculation, nonprofits will require an extra $100 billion to $300 billion annually to serve anticipated needs. Neither government support nor the money that nonprofits earn from tuition, ticket sales, fees for service, and other means will be enough to close that gap.
The only solution, in our view, is more philanthropy.
Focusing on impact and avoiding mission creep are essential.
But it’s not just donors who need to step up in unprecedented ways. Together, everyone in the nonprofit world must learn to provide strategic leadership that meets the urgent needs of civil society organizations and the people they serve. (See more in a survey of 3,000 nonprofit leaders we produed to bolster our findngs.)
Strategic leadership means not just doing good work but also doing that work in a highly intentional and effective way. We believe that doing so entails seven measures:
- Pursue a clear and focused mission. No nonprofit can succeed if it loses sight of its core purpose or if it falls prey to mission creep. Organizations that are more focused tend to outperform those that are less focused.
- Develop and follow a comprehensive strategy that informs every program. Successful nonprofits translate their mission into a rigorous plan of action based on what’s needed to create change.
- Consistently undertake rigorous impact evaluation. High-performing nonprofit organizations conduct regular evaluations (including randomized controlled trials when appropriate) to assess results, and rely on a feedback loop so that data can continuously inform and shape strategy.
- Exhibit insight and courage in reckoning with challenges and opportunities. The heart and soul of leaders and their organizations — their ability to see what others don’t and to go where others won’t — are often the essential starting points on the road to building high- impact nonprofits.
- Build and manage an effective organization. Sustaining a high-impact nonprofit requires leaders to place the right people on the right teams. An organization’s people, however good, will thrive only in a strong organization with wise and responsive leadership.
- Generate adequate funding to meet both program needs and operational needs. By targeting the right donors in the right way, nonprofits can break the “starvation cycle” that has long hampered such organizations.
- Cultivate an approach to board governance that reinforces the key elements of strategic leadership. Governance is one of the most challenging areas for nonprofits to get right, but any organization can improve its board’s performance. To do so, board members must be willing to confront the people, processes, and behavioral challenges that can drag a board down.
To make a significant and lasting impact, nonprofit leaders must pursue every aspect of strategic leadership in an integrated and comprehensive way.
In particular, they must do an outstanding job of both strategic thinking (which encompasses mission, strategy, impact evaluation, and insight and courage) and strategic management (which involves funding, talent and organization, and board governance).
Strategic thinking requires a commitment to fact-based problem solving. Strategic management involves a keen-eyed focus on execution.
We have every reason to be confident that nonprofits can embrace strategic leadership to advance social progress.
But we need a plan of action to help ensure that nonprofits will earn the right to grow and maximize their impact.
Here is what key players can do to meet the needs of nonprofits at this challenging time.
Nonprofit Executives
Top nonprofit leaders must abide by the time-tested principles of strategic leadership. They must embrace those principles wholeheartedly so that their organizations can earn the right to benefit from more philanthropy.
Remember this mantra: Simplify and focus. Avoid both complexity and mission creep. Actively resist any distractions that take you away from your mission.
In the Stanford Survey on Nonprofit Leadership and Management, which we conducted as part of our research for our book, we asked nonprofit executives, staff, and board members about various aspects of their organization’s performance.
Our analysis of their responses led us to conclude that most nonprofits struggle with a least one essential component of strategic leadership.
This analysis also revealed that board governance, funding, and impact evaluation are the most challenging components of strategic leadership for nonprofit organizations.
In each of those areas, more than half of respondents indicated that their organizations struggle to perform well.
Board Members
The responsibility of board members is to ensure that the nonprofits they serve maximize their impact and do so cost-effectively.
To be sure, not every board member will command the details of strategic leadership. So here is a useful starting point for conversation. Board members of nonprofits can ask the people on their teams these three questions:
- What is our organization’s mission? Is it clear and focused?
- How does our organization advance change and what strategy makes sense to deliver that change? Is that approach logically sound? Is it supported by empirical evidence?
- What do our own evaluation efforts tell us about our impact? Are we operating effectively and efficiently?
In most cases, incisive and persistent questioning will start a hugely productive assessment and discussion. That process often results in a profound shift in how an organization approaches the fundamentals of strategic thinking, including mission, strategy, and impact evaluation.
Once everyone is clear on those fundamentals, board members must embrace the critical role of helping their nonprofits master the essentials of strategic management: organization building, fundraising, and, especially, excellent governance.
Everyday Donors
As integral members of civil society, we everyday donors must recognize that our giving matters. The donations of small and medium-size givers (those with incomes of less than $200,000 per year) account for half of all charitable contributions. The recipe for those of us in this group is the same as the recipe for major donors, albeit in smaller batches.
By understanding strategic leadership and what constitutes a high-performing charitable organization, we have the power to direct our checks to the most effective organizations.
Some of us will need help to identify high-impact organizations, while others can gather and analyze data on our own, which is no longer hard to do. Indeed, over the past few decades, reams of data have become available at the click of a mouse.
Unfortunately, most individuals make little use of this valuable information. Instead, they still give largely in response to a friendly schmooze from a development professional, a request by a social peer, or a heart-tugging photo of a starving child.
Most of us have minimal understanding of how our donations are spent or what impact those donations have. But that situation is changing.
Philanthropists and Major Donors
In the next few decades, the U.S. economy will unleash more potential philanthropic resources than ever before, but it is hardly a fait accompli that nonprofits will benefit from the flow of those resources to ensure maximum societal impact. We urge those who are capable of writing very large checks to open their hearts and minds to the possibility of giving at a historically ambitious level.
Foundation leaders should consider distributing all of their endowments fast (instead of sustaining them in perpetuity) when doing so matches their missions. Likewise, wealthy individuals should consider donating the spoils of their generation while they are still living, by giving away not just 50 percent of their wealth but, say, 90 percent of it. Our motto for donors in this category: “Your kids will be fine.”
Donors also need to focus not just on gaining recognition for their generosity but also on achieving real impact by making their decisions based on the facts. Philanthropists and major donors need to actively direct their funds to the most effective organizations. And they need to help build the capacity of nonprofits to excel at strategic leadership. For example, by demanding and paying for impact evaluation, large donors can have a significant effect on the performance of the nonprofits they support.
The only way nonprofits can meet society’s demands is to achieve unity among the people who keep the nonprofit world running — a group that encompasses donors, nonprofit executives, staff, board members, and many others. All of them have a role to play in strategic leadership that transforms the world.n
William F. Meehan III is a lecturer in strategic management at Stanford Graduate School of Business and a director emeritus of McKinsey & Company. Kim Starkey Jonker is chief executive of King Philanthropies and a lecturer in management at Stanford’s business school. This article is adapted from their new book, “Engine of Impact: Essentials of Strategic Leadership in the Nonprofit Sector” (Stanford Business Books, November 2017).
