The Nonprofit Fix
"The Nonprofit Fix" is a candid and insightful podcast that explores the challenges of the nonprofit sector and its potential to repair our broken world. Join hosts Pete York and Ken Berger, as they delve into the sector's issues, discussing solutions to foster a more effective and impactful nonprofit community.
Opinions expressed in this podcast are personal and not reflective of the hosts' employers.
The Nonprofit Fix
Collaborate or Compete: The Nonprofit's Dilemma
What if competition isn't just a for-profit phenomenon? Join us as we unravel the fierce yet often hidden competition within the nonprofit sector. Despite their mission-focused nature, nonprofits grapple with limited resources, funding, and grants, leading to a unique form of competition. We dissect the intricacies of this competitive landscape, explore the concept of "coopetition," and dive deep into how nonprofits navigate these challenges to achieve their goals.
Get ready to uncover the sophisticated revenue models and marketing strategies used by large nonprofits. From leveraging government contracts to hosting major fundraising events and iconic product sales, discover how organizations like the Girl Scouts balance broad marketing efforts with personalized interactions. Learn how these strategies are not just about maintaining visibility but also about ensuring sustainability and growth in a complex, competitive environment.
Collaboration is not as straightforward as it sounds in the nonprofit world. We explore why some partnerships thrive and others falter, analyzing the factors that contribute to successful program delivery, operational sharing, and systems change efforts. Dive into discussions on the importance of realistic funding, measuring impact, and the sophisticated dynamics that drive effective collaboration. Our episode provides valuable insights and practical strategies for nonprofits aiming to balance competition and collaboration for long-term success.
Welcome to the. Nonprofit Fix a podcast about the nonprofit sector where we talk openly and honestly about the many challenges that face the sector where we will discuss current and future solutions to those challenges where we explore how the nonprofit sector can have much more positive impact in the world. A podcast where we explore how the nonprofit sector can have much more positive impact in the world.
Speaker 2:A podcast where we believe that once we fix the nonprofit sector, we can much more dramatically help to fix our broken world.
Speaker 1:Okay, welcome to the Nonprofit Fix everyone. I'm Ken Berger, joined as always by my colleague and friend, peter York. Hello everybody, good day, good day. Today we're continuing our deep dive into the exhausted sector, which we've been covering for a while Episode 7, 8, 10, 11, 12, and now episode 13. We're getting close to the end of the exhausted sector topic, sixth episode in this series, exploring the challenges that are facing nonprofits, and we've covered a lot of ground. Today we're tackling a big one Collaborate or compete, so some even call it coopetition, but we will be examining how competition manifests in the nonprofit world, the unique challenges it presents and some potential solutions. But before we begin, one bit of brief housekeeping. Just a quick reminder we really value your rating our podcast, so if you're you know whatever app you're using, we'd really appreciate a five-star review and it really helps us and it helps for others to find us.
Speaker 1:So please, please, do that thank you, thank you yes, and we too are a non-profit, so, um, so I think one of the things you know, over over the years that I've been doing this work, I have been approached on multiple occasions to potentially consider how we compete and who we compete with, and so on and so forth. And I think it's really sometimes it's denied. I think some people think that competition is sort of like well, how could that be? You're nonprofits, you're noble organizations, what do you mean? You're competing, you're doing the Lord's work, and so forth. So I think sometimes there's even denial In the for-profit world, competition is seen as the driver of innovation and efficiency by some, and so if we don't have competition, what does that mean?
Speaker 1:I mean, what is the driver of nonprofits to get better? I think, as always, I think that the question of competition is. It's there. I think it's real. Any nonprofit has to to some degree run as a business, and any nonprofit, especially in many parts of the country where you have a lot of nonprofits they compete for dollars, they compete for grants, they compete for government funding, and so there is that element. And then there are situations where nonprofits are in an environment where there are nonprofits and for-profits that are competing for the provision of certain services.
Speaker 1:But I do think that competition is different because the way that a nonprofit operates is different, so its nature and its qualities can be different. For nonprofits than for profits there is no driver of profit maximization for most. One would hope it's maximizing impact, one would hope, uh, maximizing the mission. So it's a different model. So therefore, competition can come out in weird kind of ways and different kind of ways, um, depending on where you are. Um, so I, you know, and I and I think that when there's limited resources, which invariably there always are, there's always going to be this sort of pressure.
Speaker 1:And you know, some people argue that you know we don't compete, we collaborate. You know we cooperate. When you get into the details of it and the nitty gritty of it, in my opinion, there's a lot of competition out there, especially when you have an area where you have a number of nonprofits or a lot of nonprofits in the same area. I do think there are situations where there isn't any competition because there are no nonprofits, there are so few that the notion of competition almost becomes an absurdity. So I guess, in that sense it can depend. But in my experience where I've worked in areas where there are a fair amount of nonprofits in the Northeast New York and upper part of New Jersey. This is a constant reality in my experience. Maybe I'll pause there, peter, you want to?
Speaker 2:Yeah, I was just thinking of something as you were talking and this is going to. It really is, you know, part of what's important to talk about when we discuss competition in the nonprofit sector. You brought up the point that it's not the same as in the for-profit sector, and I think it's important to articulate why. I really do think that when you're in the for-profit sector and you're competing on products and services at a very specific level right, so when it comes down to it and there's all kinds of problems with that model as well but the bottom line is they're competing on very specific products and services. The challenge, I think, in the nonprofit sector is that a lot of times, what nonprofits are competing with each other, in spite of the fact that they may not even be implementing the same programs and services. You're competing for dollars that are constantly being kind of like. I'm not talking about like. There are two types of dollar flows, if you think about it. There's government funding for certain types of services, which is a big part of the sector education, human services, healthcare. That's more concrete. There you're competing in a very traditional sense. You're competing with others who are getting those healthcare dollars. You're competing with other organizations. In some cases you're competing also with the for-profits in those models as well, and so that's one type of nonprofit for which competition is a little bit more clear. In sense it's more straightforward, analogous to, if you will. But there's a whole lot of other nonprofits, a whole lot of other nonprofits that, when it comes down to it, they're not really competing on products or services. Because, at the end of the day, we have a problem in our sector that we often don't talk about but we do on the show, which is this proxy buyer syndrome episode. It was. It's the idea that when you're competing in the private sector, it's me who's buying the product. If I don't buy your product, the company's going to get direct feedback. But if I'm a funder or a donor on behalf of somebody else and I'm giving you a donation to serve somebody else, there's not a quid pro quo there. So it creates a very different kind of exchange, and so what ends up happening is you start to.
Speaker 2:In the nonprofit sector, you have a lot of different providers and services that are yes, they're very specific, and if you actually look in many communities, but in most of the United States, you're only going to find maybe one type of nonprofit in most communities, if you find them at all, and the reality is what's happening is they're all competing with each other for a much larger, what I would call broader, kind of like messaging to get dollars, does the individual donor give it to your cause or some other cause, when that individual donor doesn't actually have a motivation because they're getting the service themselves. There's no quid pro quo, there's no kind of transaction. What you're actually doing is competing with a lot of other messages and they're broad impact messages. They're much more social cause messages and that creates a very different environment for how you have to compete for resources. So it's not like you're competing toe to toe.
Speaker 2:I know in many of the large, like I said, human service, health services, that's the case If you're in a large city and you're an arts organization, it's more straight up traditional in many ways from a competition standpoint. But even in big cities when you get beyond the bigs, you know big education, big healthcare, big human services, big arts. All of a sudden you get into all the other stuff the youth development, the recreation, the. You know all the little community and civic involvement, engagement. You're talking a lot of noise with not a lot of dollars that you're competing for, and you really can't compete in the same way, because the market is established very differently to market themselves, and whoever does the best marketing typically wins.
Speaker 1:When it comes to government and foundations, they are the name recognition and individual donors as well, and so they have. The bigger you are, the more likely you are to have the capacity to market yourself and to be even in the most competitive environments, to be on top, whereas, as you said, the smaller you get, the more noise there is, the harder it is for your message to get out there. I definitely 100% agree with you on that.
Speaker 2:Tell me what you mean by marketing. So what does marketing look like in the context of what you were just saying?
Speaker 1:the context of what you were just saying. Marketing can include everything, from wherever you tell your story and wherever you seek dollars. So, whether it's putting public service announcements in the media, in the social media, in whatever, whether it's in grant writing and seeking funds from government or foundations, whether it's sending out marketing materials to individuals for funds, whatever is an environment where you have to do storytelling about yourselves, to indicate the special nature of what you do and your mission. The bigger you are, the more dollars you have to do that and the more sophisticated, more likely the storytelling will be, the more sophisticated the grant writers will be, and you're more likely to even have a communications and marketing department within your organization, so you're more sophisticated in your capacity to get your message out there into the public domain.
Speaker 2:The reason I ask is because, yes, and that makes sense In my analysis of a lot of the data, the 990 data there's really two types of large nonprofits though. Nonprofits though, Okay, there are the large nonprofits that are large because they figured out how to do the marketing and direct individual donor kind of campaigns, major fundraising events, and they live on that Right. But then there are a lot of other very large and, I would argue, a lot of them that are funded through government contracts and you don't have to market to get government contracts. You have to sell in a different way. I know proposals and grants and relationships and that's where that stuff comes in. But it's interesting because, as you're sharing, I actually think that it's interesting because I don't know that all large nonprofits, I think a big chunk of the nonprofit sector, has actual contracts to provide services education services, healthcare services, human services. They're the only hospital or health clinic in their community. They happen to be nonprofit. Most people don't even know they are nonprofit. They take Medicare, medicaid, so they're being subsidized by the government or funded through third-party payers, by the government or funded through third-party payers.
Speaker 2:So at some point and they don't I get the marketing piece. But I just want to say it's very different. Whereas if you're a big organization like Girl Scouts or Big Brothers, big Sisters, you have to have other kinds of models. Girl Scout cookies you have to have other models for generating, which, as I recall, girl Scouts sometimes raise as much as 50% to 60% of their revenue through their cookie sales. So there you've got a very different marketing piece and, by the way, they're competing with a lot of the cookie manufacturers who have had different kind of scuffles around all that kind of stuff. But at the end of the day, when it comes down to it, I think a lot of the nonprofits that we see out there, the bigs, especially the ones funded by government I don't know how terribly sophisticated their marketing and communication really is, because a lot of it is wheeling and dealing on the contract side and trying to figure out exactly how to navigate those relationships with government.
Speaker 1:Well, so I mean, my exposure to the biggies is partly just being on boards and depending on how you define big, you know you could say that my organization is big and depending on how you define big, you can say that my organization is big. We do have somebody that is a department, small department of two people that is involved in communications and marketing, but the point being that I think in my experience it's usually both. When you get to a certain size, you don't. Yes, there's no question, you're absolutely right. The bulk of funds for certain kinds of nonprofits is government, but even then, some of the most precious dollars that nonprofits have are the unrestricted donor dollars, and so you're not, you know. So you have to have multiple capacities for marketing. Oh yeah, calls with government entities, with a bunch of other nonprofits. It's almost like there's a competition to see who can kiss up the most and present themselves in the most positive light and deferential light, and it's almost like you're constantly marketing yourself.
Speaker 2:Well, let me distinguish two things too, because in the space of the conversation around competition, I think it is important to distinguish between two things that we often blend, and that's marketing and sales. So I distinguish the following I think of marketing as broadcast. I think these are billboards, psas. There are even fundraising campaigns. That are billboards. That get on the radio, that get on the TV, that get on the news although I'm outdating myself that get on social media, linkedin feeds, whatever the case may be, and what you're doing in that case and that's a lot of organizations.
Speaker 2:Just like you said, if you've got an N of two as your development team, you're definitely going to be a government. You're going to be, you're a contractor, right, in which case, it's not actually marketing that you're doing. It's what I call sales. Sales is when you actually have to schmooze, you have to convince, you have to win over, you have to manipulate people who and I don't mean that in a bad way, so please don't hear it as a pejorative term when I say manipulate, I just mean literally you're manipulating your way into winning the contract.
Speaker 2:Right, you're saying the right things. You're saying you've got the capacity, you've got the bandwidth, you got to show the finances. You got to do all that kind of stuff, and then you got to have the right connections with the right people who pull the purse strings. It's not really just, it's not just being able to like, and that's the other thing. You got to have a Rolodex. So I think of sales very differently than marketing, and there's no doubt that sales is a big part of what everybody does. Oftentimes, though, that's not your development staff, it's usually your, like other leaders that are basically got the networks, the Rolodexes and everything to make that happen.
Speaker 1:So, according to my handy dandy, sales focuses on closing deals and generating revenue. Marketing encompasses a broader set of trying to generate revenue, and then you have the marketing department. That also they have to work hand in hand with each other. Oh sure, but you know, sure? I definitely think you've clarified. I was talking more broadly, using marketing as an encompassing term for both. But you're absolutely right.
Speaker 2:The reason I'm saying this is because, in the conversation we're having around competition, one of the challenges we have in our sector is it's very complicated. We're not, and it's because of the fact that we are a nonprofit sector. I would say we're much more complicated and complex than the for-profit sector. I would say we're much more complicated and complex than the for-profit sector. I think the for-profit sector doesn't have all these other factors Many business models requiring basically fundraising events and the charity of wealthy people, showing up at some dinner to be able to fund your efforts, going after private philanthropic grants at the same time government contracts at the same time, sales the same time marketing. It's just all the things we're talking about. It's such a multi-pronged approach to be able to do that, and so then, when we step back for a minute, let's have the conversation now about what does that mean in the sector? If it's so complicated it is and it's laced and there's all kinds of like if, thens, if you're big organization with human services and you're relying on third party payers, you have a very different model than if you're a big arts organization or a big, you know, big brothers, big sisters or girl scouts. It's very different models. So there's implications for that, because you know who are your competitors, right. Also, that's it. The other complexity is it's not as straightforward In the private sector. You're pretty aware of who your competitors are because you're literally at the product level. You're at the service level, right, you're competing only with those that provide your product and service specifically. You're not competing with all the wealthy people who choose a cause at the end of the year to get a tax break, right, and so it's very, very different.
Speaker 2:So what does that now do? Let's transition the conversation. What does that do to? Hey, nonprofits? You're supposed to be cooperating. You're all in it for good. We're all here to strengthen communities together. We were going to talk about the coopetition that you brought up at the introduction of our piece here Collaboration. I spent years evaluating like over a decade of years evaluating community building initiatives, collaborations. I even strategic restructuring, merger types of efforts, things like that, and I, you know, I'd love to hear what your thoughts are on kind of that whole, that whole area which is like what does collaboration, cooperation, mean, and is it really fair to expect that as much?
Speaker 1:as people do in our sector. So in in the, in the time I've been doing this in the sectors of education, healthcare, human services, the collaborations that have been successful have been where there's a tremendous amount of mutual self-interest and minimal lift in terms of coordination between the agencies. And so the most common example of that are trade associations that advocate for the collective before government, and it also has the added. In addition to having the order of magnitude, it also has the benefit of shielding the individual agencies. So if they advocate for something that pisses off government or somebody else, they have a shield, because it's not them, it's the trade association as a whole that does the advocacy and all of that sort of stuff.
Speaker 1:But when it comes to other types of collaboration, again, as with mergers and other kinds of things, the tendency is to failure. Answer, off the top of my head, is to have the humility. When there are so many egos in the room and so many different self-interests and vying for position, it's really hard to get people to consistently collaborate on many other things. So you know, example is you know sharing financial, you know sharing an HR office or sharing a financial office or those kind of back office things. The only time that I've seen those things work quote unquote is when there is a merger, where it's you know, that's been, you know.
Speaker 1:So there are certain agencies that the way they sell themselves is some of the big ones is oh you know, you'll stay independent and you can have your own board, but we'll do the back office for you, and we all collectively, you know, your agencies won't have to have your own HR department, you won't have to have your own this department, we'll take care of that and the economies of scale of that will be good for all of us.
Speaker 1:But even that typically only happens when there is a merger, which, by the way, is the correct term for nonprofits, because technically you can't really acquire if it's a nonprofit, but I think it in fact is an acquisition in the sense that the reality invariably, almost universally, is there's a bigger and a smaller, and the bigger, no matter what they say, no matter what they promise, eventually in most cases will gobble up the smaller one and will, you know, basically their culture, their control, their leadership, management will ultimately take over. So I know I'm sort of blending mergers and collaborations, but that you know. I guess what I'm saying is collaboration other than trade associations. In my experience doesn't really happen that much.
Speaker 2:I think, as we've really had these conversations, what I've become to realize is that hold on one second that you brought up trade associations, which is interesting to me because I'm those lines. When I say government, I mean a little different than like contracted government kind of work. Of course I'm an evaluator, so I sit in a very different kind of space and I think about collaboration. I think about collaboration that is funded to bring nonprofits together to try to accomplish something bigger than they could do alone, and and so it's not always about what I think you're referencing, which is much more about, like when you got into back office, consolidations, mergers, these are all strategic restructuring at an operational level. So you're very much framing your conversation around operational collaboration, right, functional collaboration, which is so a part. I totally know that that's a part, but there's a whole another beast out there which is, you know, all these initiatives that are being run to try to create way bigger impact by, you know, bringing organizations together to create systems change or policy change or other types of stuff. And those collaborations they do come with dollars. I've evaluated them for multiple years and everything from community building initiatives to collective impact efforts, including currently doing some of that work and in those, in my experiences there, just like operational collaboration and mergers and things that you're talking about, those collaboration efforts also really struggle to achieve the impact. It still is a lot of the leader relationship, rolodex who's there, there's a lot of just basically. You know, it's not that there's not good intent, there's good intent there really is. It's not that there's not good intent, there's good intent there really is. And and there are some sophisticated efforts out there to try to do this smarter, better, including some of the work that came out around collective impact and having backbone organizations that kind of do the measurement and all of that. But I think at the end of the day, it's very difficult to be running a non-profit organization.
Speaker 2:I used to say part of the day it's very difficult to be running a nonprofit organization. I used to say part of the problem we had with a lot of the collaboration work that was being facilitated by and funded by the philanthropic sector was at risk of being a little bit of a challenge if you don't let these organizations achieve a certain level of maturity, because what's happening is you rope them all into these collaboration activities by putting dollars in there. It's the promise of dollars and the promise to advance their mission in a way they couldn't. But the problem is that when you put these dollars out there and you start to do this, you start to realize how much it becomes a distraction and what you're describing right now.
Speaker 2:Imagine if a big philanthropy came to you and said hey, ken, we'd like your organization to collaborate around trying to address systemic problems at the federal level with respect to how, you know, children are educated, children are educated who have different kinds of needs, and we want you, your organization, to be one of 10 organizations.
Speaker 2:We're going to give you, you know, a couple $150,000 a year and we want you, your organization, to be one of 10 organizations. We're going to give you, you know, a couple hundred $50,000 a year, but we really want your organization to work on systems reform and systems change. If you're operationally not not, okay and and, by the way, I don't want you to respond personally to your organization, but it is where, like an archetypical CEO hat instead can. But what I want to say is like, if your organization is not ready, it's a big issue too. So this is a very different kind of collaboration. It's a collaboration where there's a lot in philanthropy that are trying to really spark, catalyze and move, almost like movements that go beyond what your organization is supposed to do, and there's a lot of dollars going in that direction.
Speaker 1:So, if I can just jump in there, this does sort of circle back to my time at Charity Navigator and the big, big takeaway for me that many of the thought leaders and major foundation leaders out there. It struck me that they had these great visionary ideas as to what they wanted to do collaborative system change and whatnot and that it was great in theory but in practice on the ground it was kind of disconnected. And so there is a parallel between what you're describing and what I'm describing, in the sense that nine times out of ten these things just don't seem to go the way that one hopes that they will go. And I think part of that in some of these cases is it's just somewhat and I say with all due respect, they're really smart, but they're also not grounded. They're kind of naive about what the day-to-day is and some of the other dynamics like ego and power and control issues and the fact that all of these agencies are going to kiss up to them and it's like oh, you want us to collaborate and do system change together and you're willing to give us $200,000? Yes, yes, yes, we'll join you in this, we'll take that $200,000. And yes, absolutely, this is going to work because you are our funder and you've never said anything that wasn't brilliant. And here we come, and so we do this kabuki dance for the money. We do the dance, we go through the process and then we come to the end and if we have really talented, objective evaluators come in that bring the truth as to the outcome, it's like's like oh gosh, this didn't quite work out quite as robustly as we had hoped it would and I think it.
Speaker 1:So part of this I think I guess what I'm saying to you is part of it is a power dynamic that the, that the non-profits are afraid to be frank with the funders to say come on, that's not that you know you're that's, that's just not, that's not, you know, that's just not going to work on the ground for us.
Speaker 1:There's too many other issues here and you know you're coming from up there and telling us that you want this, as opposed to our sort of from the ground up, telling you what the realities are and what we think is viable. That dynamic is part of the problem and I guess it relates back to the competition. We're all competing for dollars and we're marketing, we're doing sales for dollars, and if it means that we have to be somewhat disingenuous to get those dollars. We will be, and so that's part of the parallel of it just doesn't seem to work because we're not being frank. And that's where the nonprofit fix comes in, where we want to have these sort of frank conversations about the underbelly of things that often are not discussed in the sector frankly and openly.
Speaker 2:It's, by the way, this has been going on for decades. I'm now like close to 30 years in the consulting business and it is remarkably not changed significantly. I have my own theories as to why, probably more than theories, some evidence to back it up. At the end of the day, part of the problem is that I do know when collaboration works. It works when you've got organizations that are truly ready and it's a part of their already, a part of their mission work to do what you're saying and I always like to frame about collaboration in three levels. You can collaborate on program delivery. So, in other words, let's say you have a program we're going to collaborate with another organization to provide transportation. Right, you provide the education, they provide the transportation as complimentary. You know there's all kinds of wonderful collaborations out there that are just like joint programming right, where you can, you know, collaborate on programs. Even that requires a certain level of maturity with respect to both of your programs. If one of your programs does not got the resources to do it, you're not going to be able to hold up your partnership end. Okay, but that's collaboration for program. The second level is collaboration for operations. That's the kind of stuff where we talk about strategic restructuring, but I'm not just talking about mergers or acquisitions not acquisitions, but mergers. What we're really talking about is there is a lot of interest, and I've always. This is an area where I always thought there should be better mechanisms for back office consolidation. Not even don't even call it consolidation. I just think that there there could be intermediaries, and there are. There are organizations throughout the country who essentially service, provide financial services or provide marketing services or fundraising services to groups of nonprofits. And, by the way, can I know there's many cases where, like those kind of, let's not call it back office consolidation, let's just call it a shared service, just a shared operational service. Right, it's just a way to outsource so you can focus on your programmatic work. And if that's what you really want to do, I think that's probably the most realistic pathway to try to get to a place where we can, like start to affect some change, because I think too many nonprofits are trying to grow themselves operationally so that they can just continue to grow their programs and once they get to a certain level, it becomes that you enter that competitive space for all those operational dollars, you start to have to fight for contracts or you have to fight with philanthropy or individual donors. You're now tapping the same wealthy donors of everybody else and it's not fair competition. You get in this whole space If. Imagine, instead you could just say, hey, listen, I want to do my programs. I'm happy to outsource, you know, or share with some kind of a resource, and it should be a nonprofit. It could be a nonprofit resource that just serves as an intermediary. And we have these. We do have these organizations, these management organizations that support the management of nonprofits, and I think it's a great model, a potentially great model. I'm not talking, ken, about like the really bigs, because by the time you get to the bigs and your own organizations are in a different place.
Speaker 2:There's a third type of collaboration and that's the kind of collaboration that's being pushed a lot by philanthropy. Sometimes it works Most of the time. In my experience and I've done decades of evaluation work of these collaborations collective impact efforts, things like that when the funding's there, some good things happen. When the funding goes away, five years later, 10 years later, I don't know that. It's sustaining this stuff, right, and their goal is systems change, right. They're trying to tackle a big problem and really it's only philanthropy that tackles these problems, which is good on one hand because, uh, government kind of pays for services, if you will. Um, it's not only philanthropy, but for the most part philanthropy is where the opportunity to try to experiment with dollars and ways that we can start to try to make these changes. So I've always appreciated that philanthropy is willing to really try to push the needle on this. I just think the whole systems change, collaboration for systems change, requires very, very sophisticated, ready, mature organizations to do what you're asking.
Speaker 1:How many of them are there?
Speaker 2:How many what?
Speaker 1:Sophisticated ready agencies are there.
Speaker 2:Exactly. I mean that's part of the problem is. So to me, being a data person and being an evaluator and an assessor, I've spent years evaluating and assessing nonprofit organizations or financial, health or capabilities, everything else from developing tools like the you know, the core capacity assessment tool, to the iCat, to all the work we're doing with equip. And the one thing I can tell you is a lot fewer than we realize, and part of it is part of it is there are plenty of organizations that seem sophisticated because they have, they're in your Rolodex and you have a relationship with them person to person, but that does not necessarily mean they actually are. And just because they could talk to talk doesn't realize.
Speaker 2:I don't think we've figured out how to walk the walk when it comes to policy change and I think it really requires some sophistication. And I think if I were running a nonprofit like if I were in your position or anything else and someone came to me and said, hey, we can change the world, we're going to throw a quarter million dollars to everybody for the next five years per year, come, join us and make a change. Don't you care about the kids you're serving? Don't you want to create a voice at the national table, blah, blah, blah. I would tell you, ken, like 99% of the time I'd say I would pass on that, yeah, yeah.
Speaker 2:So, unless you really really can resource it and, by the way, you'd have to, in my opinion, have twice as much money in liquid money that you don't need to basically fund what you're going to have to do. That 250 is going to require another $500,000 in effort from you to be able to do it. I mean, I'm just being I'm kind of tongue in cheek a little bit, but I think that's one of the challenges too is really it often takes three to five times more money and, by the way, by what is money? It's not money, it's people. Okay, cause this is a big distraction. Imagine you can. They're asking for your time, they're asking for your leadership's time, they're asking for all that work and therefore, strategically where you, you to be in a whole different place, wouldn't you?
Speaker 1:Yeah, so I completely agree with that. I think I did say 90% of the time these collaborative efforts fail. But there is that 10% and I agree with you. It's that small number of agencies that really genuinely have it built into their DNA and they are at a level of ability and competency. And also, on the other side, funders, who have the humility to actually listen to the nonprofits so that if they've got an idea and the nonprofit leaders have the seasoned expertise and the nerve to speak bluntly and openly with the funders, those are the kind of magical efforts that are much more likely to succeed. But the other thing and I agree, and also no-transcript, back to your point about outsourcing. So again, I think in theory it makes a whole lot of sense. Yeah, I think in theory it makes a whole lot of sense and especially for smaller agencies it makes an exceptionally great amount of sense. However, I mean, I can just tell you from my experience with some of these efforts and I admit that we're larger than some of these agencies we're talking about a lot of times outsourcing is expensive, even if it's in some collective, and there is a belief that sometimes is true, and I have had this experience where, if you reach a scale where you can afford it, it can be done more cheaply internally than with an outsourcing, if you can get to that point, and so I think that can also be one of the drivers for organizations to try to get larger.
Speaker 1:I think I mentioned to you before we started that we've had a conversation here at my agency, where we use a lot of attorneys, and we've had conversations like wouldn't it be great if we had the financial wherewithal to have in-house legal counsel, and belief that we could cut those costs significantly. I don't know if it's entirely true, but why wouldn't you have a contract? Why wouldn't our go-to person? What is typically the case is there's two scenarios. One is they'll charge you by the hour or because you're ongoing, there's a monthly fee. But even with a monthly fee, that attorney knows how many hours they're typically spending and so they know what their per hour is in the rest of their world. And so if it turns out that you're pulling from them and pulling from them and pulling from them, those monthly costs are going to continue to go up.
Speaker 1:To say, you know, I have to increase my retainer. Yeah, it's anything you want every month, but because of the number of hours I got to bring up. So at the end of the day, when you have in-house counsel, it's a fixed cost, it's like you know, whereas outsourcing it's like squeezing a balloon it can go differently. And then you also hope that sometimes, in those experiences I've had where we actually have hired attorneys, they understand if they're coming to work full-time for a nonprofit. There's a certain understanding that what they're going to make is going to be different than if they had their own practice, that this is a nonprofit and that the salary scales are not the same as what they might make out there in the world on their own, and so it can get to a point. I mean, that's just one example.
Speaker 2:I mean, I'm very curious about that because I see your point and I understand the fixed cost point. You have the other problem, though, and that is, if you hired a lawyer and the work was sporadic, okay, I wish. Well, it depends. It depends on your circumstances. But the point being is well, look, if you've got the need for eight hours a day, 40 hours a week, 1,880 hours a year, whatever it is right, at the end of the day it's like okay then, then that's a position.
Speaker 2:My, my point is, until you get to that level where you literally have that kind of need, there's a lot of waste. If you have staff members twiddling their thumbs, sure, and so it's a delicate balancing act, and it's one. Once again, you got to drive by data, you know. You got to add your costs up, total those hours of what your external lawyers are giving you, like how many hours are they saying they're billing for you, put those against the time clock and start to run the numbers.
Speaker 2:I mean, there's some just basic numbers you can do, but at the end of the day, all I'm trying to say is that I think there are a lot of in between organizations. They're not, they don't have full time work for for somebody, and there's nothing wrong. And, by the way, I think the economy general economy that's going on in the United States and across the world is such that more and more people are going to be looking for gigs, not jobs, and I think that's where things are going. I think it's getting to a place where you're going to basically say I don't want to work for a big law firm, I'm just going to be on my own and I'll pick up five nonprofits, three, four profits, I fill my hours and I'm good folks, I'm good, I'm done, and the world is kind of going in this direction, I agree with you.
Speaker 1:I agree with you, and I think that's going to bring a whole new ripple of complexity and challenge. Listen the other thing I'll just say about. So that's a whole other thing. But I think in the current environment, the traditional environment of outsourcing, one of the other things that happens is again these realities of power and control and who gets what.
Speaker 1:If we all collectively pool our resources to hire a firm to do a particular function, there's always a sense of am I getting my fair share of that? How do I know that this agency over here let's take outside legal counsel, let's pretend a group of agencies share that? Well, how do I know that I'm getting the number of hours that I deserve for my share of that, as opposed to this one over here? And so my organization. I'm very proud of my organization. We run very efficiently and effectively. That organization over there. They're a mess and I hear through the grapevine they're a mess. They need so much legal counsel and I don't want to pool resources with them because it's like I'm putting my money into them in this collective. I don't trust them. So that kind of trust dynamic Along those lines.
Speaker 2:I don't blame you From that standpoint, that's fine. But what it comes down to is that's an anecdote. If there were four or five different organizations you could go to who could serve your intermediary roles and they were competing with each other and yes, nonprofits, first of all. I'm not in agreement by the way, I will come back to this in a moment about that. They shouldn't compete. But if you had three, four, five management support types of organizations I'm talking like back office, they take care of your finances, whatever it is If you had options on the table and, by the way, throw some for-profits in there too, I don't care. Whatever the case may be, if you're not getting your needs met or you're not getting your value, you should be able to go to another one and say what can you offer me? Right, competition, competition, competition is not a bad thing.
Speaker 2:The problem in the nonprofit sector with competition. So this is a good segue, because you mentioned something before and we haven't talked about it, but we talked about it before. You alluded to it, but we talked about it on previous episodes. I actually do think that it's interesting. When it comes to competition we don't often talk about in the nonprofit sector there's also competition for two types of resources. In the nonprofit sector there's also competition for two types of resources. There's competitions for resources that you must use the way the funder tells you to, depending on how big of a check they write. But at the end of the day, one of the things that creates, I think, a big problem is this whole overhead problem. I do think there are funders out there that are trying more now to just invest in general operating support and say here's the check, ken, we trust you just go ahead and use it for what you want, as opposed to here's a check, you must use it for X, y and Z most of the time program.
Speaker 2:I think this dimension of the nonprofit sector is another big part of the problem. I think this whole delegated kind of you must use it for this, a dollar can't go for anything else is another big, monstrous part of this whole problem. Because then what it does is it creates this like everybody is now fighting for the flexible dollars which are all those individual donors. There's only some, only so many wealthy donors in a community right, and if you're all fighting for them, regardless of your product or services not a fair competition. You either have a good fundraising shop who knows, he's got all the Rolodex, he's got the sales, the marketing, everything's in place and clicking and you get those flexible dollars, which is you said it earlier in this conversation right, those dollars are golden. The dollars that are not allocated for something that you can't do anything with it right, that is a monstrous elephant in the room, in my opinion.
Speaker 2:The whole competitive space that just creates all kinds of challenges in our sector. We did a previous episode on the overhead problem, but I think that also rears its ugly head in the competition area as well. And I think and the reason I say all that is because, as you were talking, I kept thinking to myself okay, I'm going to come out with a little bit of a different kind of perspective. I'm going to come out and say I think competition would be really good. Okay, I'm just gonna be devil's advocate, I think it's really good.
Speaker 2:And the problem we have right now is in our sector there's no good data, no reliable ways of measuring what people are doing, of accounting for what's good, what's not. We can't assess organizations, we don't know their finances, other programs making a difference, is that output, an outcome? We have no way. It's like apples and oranges for anybody to sort of like see what the dollars are really going towards. It comes back to something you and I talk about all the time, which is we've got to start getting better at measuring outcomes that you produce right Look at cost per outcome and the reason because if we don't get some standardization on that, we're never going to get true what I call healthy competition Until there's healthy competition. I'm not all this gung-ho on competition in the sector because of the fact that it's not a fair playing field. It's just not.
Speaker 2:But if you actually said to everybody hey, listen, field it's just not. But if you actually said to everybody hey, listen, there's a few bottom lines. Cost per outcomes covers both program and operations. If you don't operate efficiently, you're not going to have the. Your cost is going to be too high If you can't get the outcomes. So when we talked about collaboration at three levels program, operations and kind of policy or systems change the first two levels. We could start to actually create a better competitive metric. If we just did cost per outcome and at the end of the day, in that case and I think we have the tools and technologies to do this we could push the field in the direction of being like look, I would be a big champion of no, I want competition If your organization is not good at what you say you're going to be doing and you can slice off what you want to do.
Speaker 1:But if you can't get a general standard of cost per outcome, whatever that outcome may be, it doesn't have to be grandiose, it could be modest. If you can't measure and get that, then I don't want you to be competitively in the space if there's others that can. Yeah, I agree with that, but let me go back a space. So one of the things that was going on and is still going on now, that has been going on for over a decade or so now, is a certain number of funders, like you say, who have said okay, we've heard your feedback nonprofits, we're going to give you general operating support. We're not going to get into the minutia, we're not going to micromanage you, we're not going to say you have to use the money for this, we're going to give you general operating support because we trust you right.
Speaker 1:I think that's wrong, and I think it's wrong for the reason that you just said, which is well, I guess it depends. Let me put it to you this way In other words, the only reason that I think a funder should give a nonprofit money for general operating support, the only trust that I think justifies that, is what you just said, that that nonprofit needs to be able to measurably prove that they're having meaningful outcomes and that there's a track record of that. That's the trust. In other words, if that's the trust, then yeah, give them general operating support. But if it's some good marketing, we know the leadership, we like the. So that's why some of this it gets mushy again. In theory it sounds great and I like the idea in theory, but it really needs to be baked into this notion of outcomes.
Speaker 2:Yeah, so, ken, in theory, in principle, you and I agree. The one thing I'm going to disagree with you on is this is until we get to cost per outcome, which is really, at this point, still a pie in the sky. Okay, I think we can get there. The technology's there. Anybody listening to this podcast, please share it with everybody else, because, at the end of the day, we now have the tools, technology and everything to get to this. If we would just apply all the lessons we've learned and just pay attention to some of the tech and stuff that's out there, and some of the tools and stuff like that, feel free to reach get to cost per outcome. Now that I've made my little soapbox point again and again, let me come back to something you said, though, which is basically funders saying we only pay for programs and, by the way, it's program outputs we pay for, and you can only use our dollars to produce your outputs right For programs. That's option one, that's the norm. Option two, ken, is for the organizations that have been around a long time, and I don't just mean they're big, I mean they've been around a long time. The community believes in them. There's a trust of these organizations. Until we get to cost per outcome.
Speaker 2:I stand up and applaud the general operating support, and the reason I say that is because, again, you have to do your due diligence. But most of these things, if you look at what Mackenzie, scott and others and some of the general operating support, the Ford Foundation, some of the stuff that they're doing, look, they're doing their due diligence and everything else. I will applaud this and I'll tell you why. And the reason I applaud it is because there really are organizations, ken, that are long time trusted. You know community partners. They've been able to hang in there.
Speaker 2:And my point is this I think the way I first presented is not effective. I would much rather funders just write the darn check right and just get out of the way, because you shouldn't be in their program kitchens, okay, and if you don't, I'm with you can 100 if we've got the metrics and everything else. But for well-established, well-trusted, multiple funders, multiple years, people know them, trust them, including the community, I feel like get out of their way and just write them a check. I just really feel like they'll do what they need to do.
Speaker 1:So let me explain what may appear to be contradictory and hopefully, if I explain it, it'll sound like it makes at least a little more sense. So, look, I said earlier on that I think the whole idea that we do these kabuki dances to get funds and that the funders have things that they are earmarked and you have to do this, that and the other thing, is not the right way, right? So I'm saying that, and then, on the other hand, I'm saying, well, we shouldn't give general operating support. So how do you slice this to make sense out of those two seemingly contradictory things? And I think the answer is something that you've said before, which is any time you get funding baked into that funding is having the funding for impact measurement. And so don't just give general operating support. Maybe that could be a lot of it, but you damn well better give a significant amount that is earmarked for impact measurement. So I don't give it. I have to say I don't care about how long Well, let me clarify outcome measurement.
Speaker 2:Outcome measurement, because sometimes we say getting the impact is like.
Speaker 2:I want to distinguish the two, because oftentimes we get into these traps of talking about these, what I call the impact delusions of grandeur. We're talking about outcomes that you control. You should get into measurement To funding community government, philanthropy and everything else to please fund the infrastructure. It's now there with cloud technology, analytics algorithms, machine learning Call me if you want to learn more. The end of the day, it's all possible to start to scale out these kind of systems across organizations providing the same kind of programs that are unique, even some cases as well but at the end of the day, if we really wanted to build a good infrastructure that would get us where we're talking about and address, I think, so many of the problems, please start investing in this. When you fund a nonprofit, if you really want to help them out whether it's a program grant or general operating support do insist that they pump some of that money into effective outcome measurement and I would go as far as to say start to leverage the technology. It needs to include things where we'll talk about some sessions later on about how you got to do causal modeling, administrative data and there's all kinds of ways to do it, but it is cost effective and it's a way to do it. And so I would argue that we keep coming back in every episode, ken, to this point over and over again. It's like if there was and I think it's a theme if we had this cost per outcome. And we know we've got the methods, tools and tech. You know, machine learning, everything else is coming on board. Ai is making things you know really advanced as well.
Speaker 2:There's no reason we can't start doing this, except a resistance of an entrenched system that, on some level, what we're talking about on this episode with respect to competition, we almost have. You almost like, do some soul searching and look in the mirror and say do I perhaps like this status quo, even though I complain about it, or do I really want to change things? Okay, because at the end of the day, I think there's a lot of people that are if your organization's fine, you're like, don't rock the boat. Don't rock the boat. My organization's fine and unfortunately, in the nonprofit sector, fine is just barely breathing, right In too many cases. But if you're breathing, you feel like you're happy. I just would challenge you to like, realize, like there is other opportunities and, yes, you might find out, your programs don't work, but guess what? You'll get an answer as to why, and you be you can figure out how to fix it, and I think we all, and the community and everybody you're trying to help, needs it.
Speaker 1:So. So I wonder if we could. I have no problem with any of that, so I wonder if we could pivot to one other subject, maybe in the remaining time, and that's on the subject of competition and the question. You know, separate from this collaboration and outsourcing is the question of getting bigger, whether it's on your own energy or through merging with other agencies, and the argument that you're in a stronger competitive position as you get bigger. And is that a worthwhile undertaking?
Speaker 1:One of the answers is that the only times that these things typically happen is when an agency is no longer able to compete anymore. They're in fiscal crisis and they have no choice but to be acquired, and so it's really not for a competitive advantage, it's for survival. I suppose that I guess as I rambled, I guess I sort of answered my own question that nine times out of 10, or even more than that, maybe 10 times out of 10, that seems to be the typical model of how these things happen. It's really not, for. I guess it's for the bigger agencies that are gobbling up these agencies in crisis. There is a belief on their part that it makes them more able to be competitive. It's like the bigger a dinosaur you become if somebody lops off your pinky? You're a dinosaur, so you can lumber along, whereas if you're a smaller agency, they're cutting off the bottom half of your body, and so the bigger you get, the more impervious you are to the ups and downs of funding, and therefore you have a competitive advantage. Is that true?
Speaker 2:I don't know Because.
Speaker 1:I don't know that you are impervious.
Speaker 2:I don't know that. The bigger means impervious because I have to tell you, there's a lot of big organizations that I've worked with that are in terrible shape and even after they acquire another organization they actually go downhill. It gets worse.
Speaker 1:Again, I don't know that there's that much research out there on this, but I do know that at least some of the agencies that are the oldest are some of the biggest. So, whether it's the Salvation Army or Elwynn or United Way, which was the community chest, some of these really large Red Cross, they've been around for a long time and, by the way, I am not in any way saying that they're better or they operate better or they're more effective. That's a whole other question, that is-.
Speaker 2:No, but if you look at those that you were just describing, I do come back to a point we were talking about earlier, which is most of the business models of the bigs that have been around a long time and got bigger and bigger. Most of them, in one way, shape or form, are fee-for-service, meaning people buy products or services. They pay for those, whether it's through their insurance companies, whether it's through Medicaid, whatever it is. They are growing on the backs of payers. That are the people coming for the services, okay, or the government paying on behalf for you to provide those services. That's a business model that, by the way, is very close to the for-profit business model and, by the way, you're competing with a lot of the for-profits. I mean, at the end of the day, I don't know as much about the Salvation Army, but things like a lot of these agencies that we're talking about. They have a business, they have a business that they're running. There are earned income type of strategies. I do think.
Speaker 2:I do think there needs to be, when we talk about competition, there needs to be a sophisticated conversation around. What kind of an archetype of a nonprofit are we talking about? Are you talking about somebody who, basically is getting paid fees for service. In the 990 data you have, like fees for service income and you have grants and then you have donations, right, I'm being really crude, but those are very different business models.
Speaker 2:If you're a primarily grant by the way, a government grant is not the same thing as a government contract. Government contract is a little different there, right? So if you're getting a philanthropic grant or a government grant, that's very different. And if you're going after those, you're a very specific type of organization. If you're selling products and services, right, that's different. So it really depends on your business model. As to what the competition situation is, the challenge we have in our sector is we just have so much that you know it's not a straight up. It's not, as it's not a consumer transaction in the same way, with the exception of healthcare, like I said, the for for profit, healthcare competes with the nonprofit, etc. Anyway, so well, this has been a rich discussion. There's probably so much more we can unpack. We probably will, on future episodes, dig even further into some of this stuff.
Speaker 1:But anything, ken, that you wanted to do in our episodes is spend a portion of the time on the problems and then have a number of suggested solutions.
Speaker 1:And on this one I think and it may just be the reality that solution-wise I think we are still in the early stages of you know what's the best way for you, as a nonprofit, to view the issue of competition and where you stand in that and how you handle that sort of thing.
Speaker 1:But you know, I do think there is value in trade associations. For sure, if you're a smaller agency, you know, looking into ways to, into ways to outsource, it's worth a look, I think. Being frank with your funders when you can, when you feel safe enough to do so, and being wary of the temptations of contracts for things that are really not making good sense to you, being mindful of the fact that you are in some cases depending on the kind of agency you are, being mindful of the fact that issues of ego and such can be an obstacle and the cultural differences between agencies can be a big deal. I think those are some of the things to be mindful of as you navigate this. But competition is real in the nonprofit sector and needs to be a part of your thinking as you move forward to try to meet your mission and, hopefully, to have meaningful outcomes.
Speaker 2:And the only thing on the solution side I would also add to this. Well, two things. One is the data-driven point. We keep going back over and over again. Everybody needs to start really measuring the things. That matter is you know for what you can control, what are the results you're getting, the outcomes you're getting for those you serve and they might not be people, you may be serving organizations or communities, but at any level, you should be measuring that and paying attention to that.
Speaker 2:Another thing I will just say from a solutioning standpoint is we have been doing a lot of research on the 990 data and what we're coming to the conclusion of is this soon is really start to examine and benchmark your organizations with respect to the balance. Find organizations like your organization. So, if you're a large-scale human services, large-scale education, small-scale policy advocacy, grassroots organization whatever it is take your size of organization and take the programs and services you provide. Find 10, 20, 30 organizations like your organization. Go, do the work in terms of finding the IRS data we're going to come out with tools like this soon and do yourself a favor and look at the benchmarking of what's the balance of individual donors, fundraising campaigns, grants, private like. Look at the balance of revenue for those that seem to be, year after year, very sustainable, growing and looking at stuff the data is all there for you Grow to pro-publican nonprofit, et cetera. So if you can hire, if you're doing some planning or you've got some consultants, get them to do some benchmarking for you, Because part of what you may need to do in this very competitive environment is you may need to really examine what are the most successful organizations, like your organization, doing with respect to the balance of how they generate their revenue.
Speaker 2:You might be surprised to learn that you are way over emphasizing, for example, grant writing and grant getting, when most of them are actually in the business of doing fundraising and that's how they're sustaining. So now you've got to sort of shift gears but find the benchmarks. That's another way to really help, and we will have some research from BCT and equip our equitable impact platform with the 990 coming out along these lines. But I would just encourage you in the meantime, just do some benchmarking, because you may be surprised that you're being held back in a space and not competing, because you're trying to compete on something too much that actually your peers don't do to survive. So there we go.
Speaker 1:All right, well, so I think that brings us to the end of this episode, and I just want to point out uh, we have now come to what I think is the end of our first year. The august will be uh, we started in august of 2023, so we've been going at it now for a whole year and achieved 13 episodes on a budget of 0.0,. Truly a nonprofit We've formed, but we've now incorporated and we're slowly planning to build a website and continuing this. We're only going to continue and increase our doing this work together and hopefully keeping you interested and engaged and hopefully finding ways to engage you even more.
Speaker 1:I don't know if you all caught, but earlier on in the episode, peter even said that you should call him if you wanted to hear more. So you know, we're going to try to find other ways to get to interact back and forth with you as we go forward. But I just want to say, peter, I thank you. This has really been a pleasure to do for this first year and I'm looking forward to doing it with you for a long time to come.
Speaker 2:Me too, me too, and hopefully we can beat the one per month and come out maybe once every couple weeks. We both are very crazy busy, but one thing we do hope we do hope you're all enjoying it. Please do share. Um, uh, give us those ratings that were you know, let us know, Um, and please share with your peers colleagues. Um, we do a lot of posting on LinkedIn. Follow Ken Berger and myself, Pete York, on on Ken uh, on LinkedIn. Um, you will hear our posts and see our posts there. We also do some writing on the topics that we discuss on here. So feel free to do that and please do share with everybody. We really want to spread the word on this podcast and we appreciate those who listen. We do have some frequent listeners, clearly, because we do see, kind of, where our listeners are coming from, all the way down to different cities all over the world. So, thank you so much and we're going to keep going. We're going to keep rocking you so much and we're going to keep going.
Speaker 1:We're going to keep rocking, actually. So that's one thing you can do if you haven't already. If you are on LinkedIn, please let us know, and if we're not linked together, reach out and suggest that we become linked with you. And just let us know that you're listening to the podcast, because sometimes you get people asking to link in with you because they just want to sell you something for competition or whatever. But we'd love to hear from you and we really look forward to continuing to have these dialogues.
Speaker 2:Well, another episode. Thank you so much, ken. This was great. All right, take care. Take care, we'll talk to you all next time.