Monday, October 27, 2008

A win-win strategy - the graying of charities.

One of my happy memories early on in my career was working with a volunteer while I was at Homeless Solutions. She was a whirlwind of energy and in her role as my Administrative Assistant, she kept me organized and focused. She was a role model of professionalism and dedication to the mission. It so happened that she was around 85 years young at the time. Without volunteers like her, our fledgeling organization might have never gotten off the ground.

Not surprisingly, I have seen many of the best and brightest staff and volunteers within the charitable sector coming from the older crowd. Baby boomers are moving into "encore" careers at a growing rate according to a report from the Met Life Foundation entitled Civic Ventures Encore Career Survey. The New York Times has also noted the trend in a recent article (click here). Charities should seize the opportunity to take advantage of this trend.

As discussed previously on this blog, attracting and retaining good employees is frequently a challenge for charities. However, this “new” pool of workers may be able to help solve this long standing problem. Many of these individuals are either unwilling or financially unable to stay at home. So instead of working as greeters at Wal-Mart, they decide to do something that will satisfy their desire to make a difference while bringing in some extra cash, and perhaps some decent benefits. As a result, they are turning to the charity sector to seek out such opportunities, with positive results for the organizations and workers alike.

These individuals come equipped with significant real-world experience, proven skills, and perhaps most importantly, a determination to work. Frequently, they’ve already proven themselves in previous careers, so at least some of them can put their egos aside and are willing to do whatever it takes for the organization to be successful. Of course there is much to be said for employees who build their careers in public charities, but there is room for all types of people in our organizations. In the face of limited financial and talent resources, this is a win-win strategy for a charity to have access to more experienced talent without paying top dollar for it. And if the economy continues on this trend, there may be more and more retirement age workers who find they can no longer afford to retire, leading to even larger numbers of encore career seekers in the future. If your plan for an "encore" career includes volunteering your talents with a charity, then be sure to check out our Guide To Volunteering.

Note: The catalyst for this week's blog is my colleague Emily Navarro. Emily wrote a good portion of this entry and located the survey from the Met Life Foundation. She is not just a good writer, but a thoughtful person in general. Thanks!

Monday, October 20, 2008

Bad Charities with Heart

One quick and dirty way to define charities is the good, the bad and the ugly. The good charities are those three and four star agencies that have strong financial capacity and efficiency. They are also effective at performing their mission, day in and day out. The ugly are some of those charities that get into trouble due to poor ethical judgment and general mismanagement. We are frequently called upon to talk about these two groups of charities, but much less often about the other group - the bad charities.

The leaders of bad charities often have a heart for their mission, but they can not manage their way out of a paper bag. They have risen up within the ranks of the charitable sector due to their hard work and dedication to the cause. We have noted before that a CEO is not just a fundraiser, but they also are not supposed to be a social worker, psychotherapist or a case manager. If they function like that, you may see leadership who can speak passionately about the agency mission and little about financial matters. When the management of a public charity comprises people who are truly dedicated to the program but have little business acumen, they can easily become very, very good at not making a profit. That is to say, they lack the expertise to develop funding to enable the organization to maintain and grow its programs or save for the proverbial rainy day.

These agencies (along with the ugly ones mentioned above) are the kinds of places that we talked about a few weeks ago, that may end up going belly up in these bad economic times. Regardless, they are generally a royal pain in the neck to work in. Of course any organization can be hampered by hidebound procedures and lack of creative thinking on the part of management, but the problem seems particularly rife in charities. In the absence of pressure from stockholders and the inherent belief that the cause itself is all that matters, it’s very easy to settle into “business as usual” while the world changes around them and leaves them behind. When a creative employee or donor suggests a new way of doing things they will reply with phrases such as "we've always done it this way" and "we are a very good at what we do". Since some of them also tend to have an us against the world attitude and do not want to be measured on their performance, they may never realize that they have not been doing very well at anything.

Another perspective I have heard often in the charitable sector is "we are a family". What a load of baloney that is! Families have very different boundaries and rules than the workplace. I could give countless examples to show the difference, but I think one will suffice. At one charity I worked for, we had to cut the budget by over a million dollars and lay off twenty plus staff due to the problems described above. When one of the long time managers at the agency reminded me that we were a family, I replied simply "Family does not fire their family!". Bad charities often want to deny the reality that they are a business that has a bottom line and requires a modicum of professionalism and a set of procedures that you do not hold your family to. When confronted with financial realities their eyes can glaze over as they remind you that they work in a non-profit as if that means they get a pass on all financial matters. Alternatively, they can look at you with disgust as heartless by concerning yourself with the bottom line.

In circumstances such as those described above, the stark reality of their denial becomes crystal clear. However, agency leaders in denial will continue to carry on the tired old rhetoric regardless of the shining realities staring them in the face. We believe that our rating system is particularly helpful in ferreting out these kinds of charities. Since they are often self-described as "all heart" (which means "no head"), financial management is usually out the window. Not all the charities below three stars fit this description, but we suspect that enough of them do as to cause donors to proceed with great caution in supporting them. You should insist upon seeing their reports on performance both programmatic and financial. If they do not supply the information or it appears unclear, consider donating to someone else. At the end of the day, we believe that the agencies with the healthiest hearts have good heads on their shoulders too!

Note: It is my pleasure to thank my colleague Vince Bogucki for generating the ideas that led to this blog entry. He has helped by giving me great feedback on drafts of virtually every blog I have written thus far and now I am happy to get to react to his good ideas!

Monday, October 13, 2008

The Front Line versus The Bottom Line

One large agency I used to work for had such a problem recruiting front line staff that they would basically hire anyone who applied. The philosophy was that you could sort out the good, the bad and the ugly while they were on the job. Otherwise, there would be a tremendous amount of vacant positions in the critical role of supervising hundreds of very troubled residents. At another agency, we feared that our legions of disgruntled front line staff would call in a union. If they did, it was likely the agency could end up being shut down, since we were already providing all the benefits and salary we could manage.

The problem of recruiting and retaining staff has always been a challenge for charities. On average, the typical non-profit employee makes about 53 percent of what a comparable government employee makes. So, when it comes to salary, we can not even begin to compete. When you compare benefit and pension plans with government entities, the story is often the same (thankfully, benefits tend to be equal to or better compared to for-profits). In addition, if you are fortunate enough to hire good staff, they often leave after only a year or two for those better paying positions. The charity invests all the resources to recruit and train the employee and then they move on!

If that isn’t bad enough, now we have a bad economy to kick us in the pants! This translates into fewer jobs in the sector as charities find it harder to pay their employees. Obviously this could have immensely damaging effects on the future talent pool for charities in general, as well as those they are committed to serve.

Charitable organizations require talented, dedicated, passionate individuals. When these gifted individuals assess the stability of the charitable sector overall, they can be discouraged from seeking employment within it. There should be no room for a talent drought in a vitally important sector that deals with critical, complex and sensitive social issues. However, the net effect of these challenges is that charities will have to work even harder to attract quality employees.

What is a charity to do in these trying times? There are many ways to sweeten the benefit package with low or no cost enhancements such as flex time. Those efforts are important, but I believe the most important thing a charity has to offer is its mission. Talented staff in the charitable sector are usually not in the field for the money anyway! However, they do expect a decent, living wage. If that is provided and staff have a sense of the important role they play in achieving the mission, we have a leg up over the competition from the other sectors. In addition, I have emphasized in another blog the importance of having core values that are truly embraced by the agency from top to bottom, which nurture staff and clients. Having a dynamic, transparent, creative, inclusive, team culture is a rare commodity that will help with staff retention even when the offers of higher pay come along. If the charity does not build this into its culture, the nightmare of recruitment and retention for charities will only keep getting worse.

Note: Once again the idea and some of the key content in this blog entry came from a Program Analyst here at Charity Naviagator - Kaitlin Woolf. She is one of our newest staff, but hopefully, (along the lines of this entry) we can maintain a culture that encourages her to stay for a long time to come!!!

Tuesday, October 7, 2008

Jalapenos and Yogurt

Today I am launching this blog site, called Ken's Commentary, as the President & CEO of Charity Navigator. The purpose of this site is to provide commentary on issues in the charitable non-profit sector that are of concern to donors, policy makers, public charities and their clients. For a few months now, I have been providing this commentary (with occasional help from my colleagues at Charity Navigator), within the Charity Navigator blog. However, I have come to realize, with help from some of our staff, that it was time to have a separate identity for this purpose.

The Charity Navigator web site provides fact based information. It is independent and objective in its analysis. Before I joined the agency, the Charity Navigator blog site also had this approach. However, my commentary is very clearly my opinion. I do not claim to always be objective in my pronouncements, but rather make my comments based on my experience during roughly thirty years of working for and observing various charities.

The analogy I have used to explain this decision is with jalapenos and yogurt. Yogurt (the Charity Navigator web site and blog) is very good for you and has lots of healthy ingredients. Jalapenos (my commentaries) are spicy and can burn! They do not mix well with yogurt. Anyway, I am hopeful that this new blog site will focus further attention on the issues impacting the charitable sector today, as well as direct more donors to the wonderful information on the Charity Navigator web site.

To get us started, I have plucked all of the spicy jalapenos from Charity Navigator's blog (all 13 of them) and have posted them here. They are as follows:

1. Transparency – A Tale of Two Nonprofits
2. The Media Calls – A Week in the Life
3. God and Money – The Church and the IRS
4. The Church and the IRS – Part 2
5. CEO Compensation – Donor Frustration
6. Core Values are Not Just a Sign on the Wall
7. Ten Rules for Public Charity Work
8. Ten More Rules for Public Charity Work
9. A CEO is not a Rainmaker
10. Who profits from a non-profit?
11. What do you do when the CEO is only in it for the money?
12, Give until it hurts
13, Good News in a Bad Economy

I hope you find these entries, as well as those to come, as thought provoking and informative as they are both satisfying and a privilege for me to write them.

All the Best,

Thursday, October 2, 2008

Good News in the Bad Economy

At this point the economic downturn has affected just about every single person in our country. The housing market has collapsed, investments are dwindling fast, jobs are disappearing, and a bailout plan is being hotly debated. As we have mentioned previously on this blog, charitable organizations are suffering as a result. Not only have a majority of organizations seen private contributions, government funding and other revenue drop, but simultaneously, demands for services have increased. The impact this has on charities will change the shape of the non profit world.

We have noted in the past that the IRS has a tendency to give out non-profit charity approvals "like candy". The current number of charities registered in the U.S. is over 900,000. In the midst of a suffering US economy, where it is anticipated that donations will be down in all categories, the competition for dollars will be fiercer than ever. Furthermore, the incredible number of charities that are soliciting donors can be overwhelming and confusing. So what is the good news in this?

We do think some positive changes for donors will occur as a result of the bad economy. We may finally see some poorly operated agencies close, and some providing redundant services merge. In other words, in some cases, there are more charities that are working on an issue than are necessary, and usually some are bad at it. This leads to an inefficient allocation of resources and by extension, a less effective impact. As agencies go through retrenchment, the smaller and less financially efficient charities will not be able to cut back enough to survive. This will leave more room for other, well prepared organizations to step in. These organizations should be able to expand their services, since there will be less competition for their donations. It is also conceivable that similar minded organizations will consider merging their operations, thereby cutting down on overhead costs and creating more efficient and leaner organizations.

This is not to minimize the down side. As we have noted elsewhere, the bad news in the bad economy is that vitally important services may be closed or downsized. However, the good news is that some of the worst-run organizations will no longer be competing for donations and it will be easier for donors to choose which organization to support. Also, due to mergers, more efficient organizations will be operating. This is good for donors and for the causes we care about.

Note: It is my pleasure to have collaborated on this blog entry with my colleague Leonie Giles who is a Program Analyst here at Charity Navigator. It was her idea to do this week’s entry and much of the content is in her own words. Thanks for your wonderful insights Leonie!