By Megan Coolidge, John Kern and Amy Farley
In a year filled with uncertainty, many social sector organizations are asking how they might successfully sustain their impact in the coming years. Changes to the federal budget are expected to increase need among vulnerable populations in the U.S. while simultaneously reducing federal funding for nonprofits delivering critical services. At the same time, individual activism is rising and the line between donor, volunteer and activist is blurring as individuals seek opportunities to get involved with the causes they care deeply about.
Add to this two key trends: a shift from sustaining incremental change to achieving transformational, scaled impact, and a growing understanding of what it takes to create resilient organizations and networks capable of sustaining the work required to make change. These colliding factors have left nonprofits questioning how they can scale their impact in a sustainable way.
When we talk about sustainability, we mean much more than financial sustainability. At Community Wealth Partners, we think of sustainability as an organization’s ability to create long-lasting, transformational impact. This requires funding, sure, but also a focused business strategy, a culture of adaptability and learning, strong partnerships, and the personal sustainability of individuals within that organization.
As organizations adopt new strategies and test ways to scale their impact, we are seeing three emerging themes across our work with partners and the field in general:
1. Creating a culture of innovation
Agility and innovation are key characteristics of successful organizations, regardless of tax status or sector. For commercial businesses, the ability to grow and meet financial goals depends on their ability to provide a unique, valuable service or product to customers. Doing so requires predicting how emerging trends will shift customer needs or upend the landscape of competitors.
The same principal applies for nonprofits and their ability to sustain their impact. As a recent Bridgespan survey highlights, nonprofit leaders feel urgency to innovate, yet also feel limited in their ability to do so. The most successful nonprofits can adapt to changes in the policy environment, rapidly capture new types and sources of funding, embrace and influence emerging social movements, and continuously build new partnerships and pathways to achieving impact. Cultivating an innovative culture, as we’ve found is the case with any culture, requires changing mindsets and behaviors across an organization.
We recently visited AARP’s innovation laboratory, The Hatchery, a start-up incubator and accelerator housed in a physical collaborative workspace, to get an inside look at how the organization is scaling transformative ideas that drive revenue while accelerating AARP’s mission to disrupt aging.
The innovation lab incubates up to three home-grown startups, including a website to help small businesses understand and select 401(k) options. Each new business idea goes through a rapid but rigorous process of coming up with ideas, modeling those ideas, and testing them in the market. Most importantly, The Hatchery and AARP follow a disciplined process to assess and shelve ideas within months if evidence doesn’t suggest they can rapidly grow into independent business opportunities that leverage market forces to drive impact at scale and generate significant earned revenue. The Hatchery also selects a few later-stage, mission-aligned technology startups—like a company developing a virtual reality–based system for remotely conducting physical therapy—and provides them with access to experts, potential customers or partners, and other resources on aging.
Beyond its role as an incubator, The Hatchery is designed to be the center of an innovation revolution within AARP. The open, creative space helps spur new ideas during meetings, and the team trains “Innovation Champions” from various departments across AARP in human-centered design and rapid prototyping methods so each department can apply those skills to their team’s work. The goal is to accelerate a culture of innovation across the entire AARP enterprise, enabling the organization to sustain its impact by staying ahead of emerging trends and designing solutions that meet society’s evolving aging needs.
2. Engaging donors as activists
Over the past year, many of our nonprofit partners have described a shift in their relationships with supporters and donors. Many donors are seeking a more active and engaged role in helping an organization deliver its mission. This is partially driven by the rise of technology that makes it easier for individuals to connect to, engage with and donate to organizations. It is also a result of increased competition for resources among nonprofits and the changing profile of donors—from baby boomers who are often interested in issue-focused membership organizations to millennials who more commonly seek opportunities to directly support specific causes. These factors, combined with a dramatic rise in civic activism, create opportunities for nonprofits to rethink the role donors play in their sustainability.
A leader in understanding and promoting new practices in nonprofit fundraising, The Evelyn and Walter Haas Jr. Fund has begun to define and elevate the concept of a “culture of philanthropy”—an organizational culture in which everyone has a part to play in raising resources for the organization. In their paper “Beyond Fundraising: What does it mean to build a culture of philanthropy?” The Haas Jr. Fund and author Cynthia M. Gibson explain that donors are looking to give to organizations not just because of the work these organizations do, but also because donors aspire to the same goals and want to engage with the organization to achieve those aspirations. The paper highlights four core, interrelated components of a culture of philanthropy:
- Shared responsibility for development
- Integration and alignment with mission
- A focus on fundraising as engagement
- Strong donor relationships
For example, another of The Haas Jr. Fund’s papers, “Fundraising Bright Spots,” highlights Fierce, a membership-based organization building the leadership and power of LGBTQ youth of color in New York City. Fierce’s former executive director, Angela Moreno, explains that when the organization’s donors attend its top fundraising event, the donors “feel connected to each other even though they’ve never met before.… The history and purpose of our organization is so clear and so deeply meaningful that it’s really easy for donors to say yes to us.”
Passive donors are becoming fewer and fewer. Creating authentic opportunities for donors to experience and contribute to the causes they care about most is essential to sustainability over the long run.
3. Adopting market-driven business models to accelerate impact and diversify funding
Shifts in the ways organizations bring in revenue and encouragement from grantmakers to diversify funding has led nonprofits to explore market-driven approaches and business models to achieving and sustaining their impact. One example of an organization experimenting with a new, market-driven model is the Center for Children’s Law and Policy (CCLP), an organization committed to ensuring the response to youth who get in trouble with the law is developmentally appropriate, free of racial and ethnic bias, and focused on building strengths that help youth avoid further involvement with the justice system.
Since its founding, CCLP has worked in counties, cities and states, delivering trainings, providing technical assistance and advocating on topics such as eliminating racial and ethnic disparities in the juvenile justice system, reducing unnecessary incarceration of youth, and improving the conditions of confinement for youth. Since its work was funded by grantmakers, the organization offered programs to populations and geographies that were priority for funders. When philanthropic and government funding streams changed, CCLP saw an opportunity to use their existing expertise and services and create a new business model to market their expertise directly to jurisdictions through trainings and consultation, regardless of whether those jurisdictions are a priority geography or population for grantmakers. Not only does this strategy generate revenue through a new source, but CCLP hopes it also creates stronger results and buy-in from stakeholders since they are putting more “skin in the game.”
Adopting this new model requires some organizational shifts. To respond to changing market needs, CCLP is adopting new cultural norms: nimbleness, flexibility and entrepreneurialism. As CCLP markets directly to jurisdictions, it is having new types of conversations that highlight the organization’s unique value. It also is creating business processes for more effective staff planning. While the new model requires new approaches, CCLP is already seeing the benefits: it has greater autonomy, it is better able to sustain its work, and it is now able to serve more young people across the country.
Prepared for the Unforeseeable
The only constant, as the saying goes, is change. To survive and thrive amidst changes, nonprofits and foundations must change the way they operate. In addition to AARP, The Haas Jr. Fund and CCLP, we see another great example of this in NeighborWorks America. The affordable housing and community development organization has invested heavily in equipping its network members to become market-driven, innovative organizations able to seize opportunities and weather changes. As profiled in the upcoming Winter 2017 issue of the Stanford Social Innovation Review, NeighborWorks America is in the midst of implementing a multi-year pilot designed to cultivate innovation throughout its network, helping member organizations diversify revenue by adopting new, technology-enabled sustainable business practices.
As these organizations recognize, nonprofits and foundations must adopt new ways of working. We encourage all social sector organizations to explore new approaches to sustainability to ensure sustained impact over the coming years.
About the Authors
As a Senior Associate, Megan Coolidge supports strategic client partnerships by developing a broad range of solutions for clients through analysis and research, designing client deliverables and supporting overall project management. Learn more about Megan and send her an email.
As Vice President, John Kern engages in strategic partnerships with leadership teams, provides client engagement oversight and supports the overall growth and development of the firm. Learn more about John and send him an email.
In her role as Director, Amy Farley leads client relationships and engagements by facilitating diverse leadership teams in bold decision making and supporting the execution of transformational new ideas. Amy has a unique blend of business, nonprofit and foundation experience, with a proven record of leading cross-functional teams and driving creative solutions that have delivered stronger collective solutions while increasing revenue and organizational growth. Learn more about Amy and send her an email.