Preparing and Responding to a Changing Environment

1. Preparing and Responding to a Changing Environment Diana A. Bucco President, The Forbes Funds A Presentation to the Emerging Philanthropy Conference 26 April 2012

2. The Forbes FundsThe Changing Funding Formula Impact of Shrinking Government Funds for Human Service Nonprofits In the mid-1980s, government grants accounted for 53% of nonprofit revenue, and fees-for-services accounted for 19%. By 2009, government grants accounted for 22% of nonprofit revenue, and fees-for-services accounted for 7%.

3. The Economic ClimatePittsburgh Residents • From 2000 to 2008, costs of basic goods and services rose sharply, while the percentage increase in wages fell significantly short of compensating for the price increases. • In 2010, uncertain economic times created unprecedented demands on the sector in its role as community safety net. Agencies were reporting a 73% increase in “first-time” households seeking support and a 33% increase in individuals seeking help that did not qualify for public assistance. • Residents are in crisis and turning at even higher levels to the nonprofit sector.

4. The Economic Climate Agency Preparedness • Agencies that survive this economic downturn will: • Require sound business models in addition to solid delivery of services. • Stay focused on core competencies that are rooted in mission. • Monitor cash flow twelve months out and beyond fiscal year. • Be prepared to make cuts in staff and services, know the threshold for their organization. • Strengthen and nurture relationships with key stakeholders and supporters. • Seek out partners and eliminate potential duplication of services. • Tell their story – well. Must be relevant and based on outcomes. • Minimize vulnerabilities - limit debt and use of a line of credit. • Monitor staff workload and performance.

5. The Economic Climate Agency Preparedness • Savvy nonprofit leaders have a clear vision and are: • Planning contingencies and helping their boards act decisively and quickly • Revisiting operating assumptions and external trends • Identifying their strongest performers and rethinking the way the organization is shaped and operates, working smart • Communicating lots- internally and externally • Maintaining morale in creative ways • Proactively looking at mergers and alliances while still an attractive partner • Proactively inviting mergers and alliances to better serve through “acquiring knowledge” rather than “starting from scratch” • Staying on top of the issues and their funding

6. The Economic Climate Agency Preparedness • Organizations that are the most vulnerable: • Don’t have a game plan or long term vision • Consistently operate at the margins • Are uncertain which of their programs and services have the greatest impact on those they serve and the demands on organizational infrastructure to support them • Don’t have a handle on their financials • Have an unengaged board • Take a “wait and see” stance • Deplete their reserves without action • Resist change • Are disconnected from their funders and key external relationships • Are seen as disinterested or difficult to collaborate with

7. The Forbes Funds:What do we now know about investing in capacity building? • Capacity building is about Change Management • Successful capacity building must be explicitly mission-driven • Effective capacity building does not simply correct weaknesses but creates systemic change • Capacity building cannot be imposed upon an organization or a field • Successful capacity building begins with thorough assessments • Effective capacity building takes time

8. About Capacity Building:From the Literature – “Sound Building Blocks” Characteristics of a High-Capacity Organization: • A clearly defined mission • Capable and motivated leadership • Results-oriented programs • Ability to access talent, networks, and information • Creativity to adapt • Management support systems • Diverse resources

9. The Forbes Funds:Core Components of Effective Capacity Building (Backer/Kearns) • Comprehensive “systems” approach • Customized to an organization’s place in its life cycle • Competence-based (smart consumers, well-trained providers) • Timely • Peer-connected • Assessment-based (pre- and post-) • Readiness-based • Contextualized (“What’s going on?”)

10. The Forbes Funds:How do we invest in capacity building? And how might you? • Build Trust: engage agencies in genuine conversations about fiscal health, board governance, succession planning, etc. • Provide $$$ for infrastructure • Promote lots of learning: conferences, subscriptions, publications, peer-learning networks, formal educational opportunities • Use research and data; eschew anecdotal experience • Educate the community about the important role of charities in our lives and the resultant need for giving, volunteering, and advocacy

11. The Forbes FundsSupporting Change About our Nonprofit Leadership • They’re smart • They Practice Good Management • They Need to Reinvent Themselves • We Need to Listen

12. The Forbes Funds’ Collaboration FundSupported by The Heinz Endowments • Collaboration is defined as a mutually beneficial relationship between two or more organizations that includes: • A commitment to shared relationships and goals • A jointly developed structure with shared responsibility • Mutual authority and accountability for success • Sharing of resources and rewards • In contrast, a merger is the process by which at least two nonprofit corporations join to form one legal entity

13. The Forbes Funds’ Collaboration FundSupported by The Heinz Endowments Exploring Strategic Alliances: • Program Based Partnerships: • Two organizations collaborate to do outreach. • Back Office Consolidation or Shared Services: • Three organizations share one human resource professional. • Restructuring/Merger: • Two organizations come together to provide expanded continuum of care. A new name is created combining both their names. They use one of the corporate shells and dissolve the others.

14. The Forbes Funds’ Collaboration FundSupported by The Heinz Endowments The Collaboration Fund (a pooled fund): • Share best practices in financial management and strategic alliances that strengthen nonprofit service delivery; and • Provide financial and technical support to promising collaborative efforts and mergers among nonprofit organizations. • Pooled Funds from The Heinz Endowments, • Buhl Foundation, BNY/Mellon Foundation, McCune Foundation.

15. The Forbes Funds’ Collaboration FundSupported by The Heinz Endowments • Grantmakers • Take a long-term view • Think systemically • Be an agent of change • Create Pooled Funds • Share the risk and success

16. National Trends in Nonprofit Collaboration(Foundation Center and Lodestar Foundation) *This and the following analyses examine the entire contents of the database. Red bars indicate TFF proposals received for last round of Collaboration Funding.

17. The Nonprofit Collaboration Database: Collaboration Focus Area(Foundation Center and Lodestar Foundation)

18. The Nonprofit Collaboration Database: Circumstances Prompting CollaborationProvided by The Lodestar Foundation Percentages will not add up to 100% because nominees were able to select more than one category.

19. Nonprofit Collaboration Outcomes: Community ImpactProvided by The Lodestar Foundation Percentages will not add up to 100% because nominees were able to select more than one category.

20. Nonprofit Collaboration Outcomes: Organizational Efficiencies and Effectiveness(Provided by The Lodestar Foundation) Percentages will not add up to 100% because nominees were able to select more than one category.

21. The Nonprofit Collaboration Database: Initiators of Nonprofit Collaborations(Provided by The Lodestar Foundation) Percentages will not add up to 100% because nominees were able to select more than one category.

22. Lessons Learned(Foundation Center and Lodestar Foundation) • Innovative models of nonprofit collaboration exist • Collaboration takes time and resources • Funders have a critical role to play in the collaboration process • Provide resources • Create an environment that encourages collaboration • Educate • Language of collaboration is confusing • Collaboration is an effective capacity-building tool • Collaboration is easier when all parties focus on mission rather than operations

23. The Collaboration Fund – A Pittsburgh ModelSupported by The Heinz Endowments • Purpose: • Share best practices in financial management and strategic alliances that strengthen nonprofit service delivery; and • Provide financial and technical support to promising collaborative efforts and mergers among nonprofit organizations. • Methodology: • A three pronged approach to help agencies adapt and adjust in this economy: • Informational Workshop, • Grantmaking, and • Technical Assistance Provider Training.

24. The Collaboration Fund – A Pittsburgh ModelSupported by The Heinz Endowments • Desired Outcomes: • Support a management infrastructure that will assure that we do not fail the end user • Encourage good leadership • Create a space for agencies to have these conversations • Provide resources for agencies to explore new models

25. The Collaboration Fund – A Pittsburgh ModelSupported by The Heinz Endowments • Community Approach to Capacity Building: • Convening • Cohorts • Grants • Implementation

26. The Collaboration Fund – A Pittsburgh ModelSupported by The Heinz Endowments • Convening • Strategic Alliances Seminar, 8/30/11 • 149 attendees, 102 agencies represented • Finance Matters Series, 10/6 & 20?11 • 136 attendees, 44 different organizations • 41% Executive Management, 37% staff, 22% Board members • Grantmaking • Strategic Alliance and Financial Management Cohort • Strategic Alliance Mini Grants – 18 proposals totaling $350,000 • Training • Financial Management Series • 25 consultants selected to attend • 62% of consultants noted no experience in mergers

27. Formal Grant Requests March 21, 2007- March 21, 2011 (does not include Innovation Requests) The Collaboration Fund – Impact on Management Assistance Grant RequestsSupported by The Heinz Endowments

28. The Collaboration Fund – A Pittsburgh ModelSupported by The Heinz Endowments Impact • 40+ strategic alliances in 4 years • Only two presented at a time of crisis • Redefined the vision for strategic restructuring among community leadership (nonprofit, board and civic) • Significant cost savings to the community • Deeper, more strategic service delivery in a time of shrinking delivery.

29. The Forbes Funds “The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty and we must rise with the occasion. As our case is new, we must think anew and act anew. We must disenthrall ourselves, and then we shall save our country.” ― Abraham Lincoln