Consulting

Management Lessons from SpongeBob SquarePant


An episode of SpongeBob SquarePants highlights a trend that seems to envelope the nonprofit sector during the economic downturns. Best I can tell this change is driven by the fear of revenue/fundraising shortfalls. I have watched well designed and competent organizations throw away their trusted playbook and ‘strategically’ address the economic crisis with the same appearance of a Kindergarten class scattering across a playground at the start of recess.

Back to my epiphany as I watched Sunday morning cartoons and I took in the management styling of Eugene Krabs, CEO of the Krusty Crab who becomes mesmerized with the sudden appearance of a single patron at the Chum Bucket (home of Mr. Krab’s evil enemy and ineffective proprietor Plankton). The Krusty Crab is functioning with its usual base of customers and apparently meeting a basic level of profitability as Mr. Krabs continues to employee SpongeBob and Squidward. The appearance of a new customer who develops a taste for the fare at the Chum Bucket causes Mr. Krabs to abandon his business plan and attempt the usual assortment of hilarious antics to win-over the Chum Bucket’s sole customer. I will not give away the ending for those of you lucky enough to be casual observers of SpongeBob but the results are predictable.

Although the comic version is humorous and entertaining in the eyes of the intended audience, sophisticated nonprofit organizations seem to posses a uncanny ability to reproducing the plot of this Nickelodeon show as if they bought the production rights to the script. Fundraising plans are abandoned, strategic plans are tossed (if they are not already covered in dust), board votes are ignored or overturned within days of their approval. The reports of fundraising goals being missed by 20, 40, 60% in the past month or quarter are encouraging a new type of planning- one presented to me as the ‘burning platform’. Apparently, years ago an oil platform caught on fire in the North Sea. Workers on drilling platforms are trained to never abandon the platform. The reason being that jumping hundreds of feet off the platform into the North Sea is considered deadly and survivors of the fall will succumb quickly to the near freezing waters. With fire reaching the crew cabins the choice was to stay and face the inferno or to risk death by jumping into the sea. A sole survivor made the jump but obviously against all training and only with flames at his back. Many nonprofits find themselves headed into a year-end fundraising campaign and wonder if they should pay for the mailing or just start holding out a hat by their front door and save the stamp. This is truly a moment when nonprofit boards and staffs can come together and make wise decisions or run a bucket brigade worthy of a Three Stooges episode.

Borrowing from the comedic mantra of well know performer, I suggest that you might be showing signs of being a dysfunctional nonprofit organization if:

• Your organization starts to chase the ‘big money’ even when they have no existing relationship with a major funder. Organizations seem to gather the annual reports of other nonprofit organizations in the community and start looking for anyone of capacity not on their current donor list. Desperation is usually not a driving force for donors and in a year like 2008 you have plenty of competition. Holder your existing donors close, be transparent, communicate actively, share the difficult decisions you are facing and make them aware of the great decisions you have made already. Few donors and funders are going to be surprised by your request to maintain last year’s giving level but few will respond to the panic of an unknown organization (think the recent bailout debate taking place in the corporate world).

• Abandon all principals within the strategic plan. If your vision, mission and core values reflect what your organization does best in the world then they should be celebrated and serve as lighthouses during the storm to guide you. Too many organizations consider tossing everything overboard in order to survive. Does it matter which port you are sailing to if you just tossed out all the passengers and cargo? Who invests in vessel that has lost all purpose? What if you are more certain than ever that the mission of your organization is appropriate and delivering a service that your organization is uniquely qualified to deliver. These are the times when we rally around the ‘best’ first and foremost because we cannot imagine our community without those services.

• Program and service decisions are made using the single metric of potential revenue generation. Those programs that are profitable stay and those that are not get cut. Many organizations find themselves removing their very own foundation with this approach and then wondering why the whole structure collapsed. Hard choices are required when a budget needs to be reduced but these decisions need more detail than revenue projections. What if you asked your organization what the most important initiative was that needs to be achieved under the tenure of this current board? What is your organization’s competitive advantage? What does your organization do best in the world? If your mission and vision are appropriate, what commitments do you need to make before all others? I would argue these are equally important questions to be used along with the balance sheet.

I spent a couple days in the caverns of the Grand Hyatt in Washington DC attending the BoardSource Leadership Conference., a gathering of members of the nonprofit community. I attended the usual mix of wonderfully enlightening and informative presentations that make you want to change the world today and the occasional presentation worthy of downloading a new iPhone application just to pass the time (if the cell signal had reached three stories underground). Although I uncovered a couple chapter’s worth of information worth sharing and hyperlinks to add to a future posts, one of the themes that resonated deeply with me was the role of social networking. I will note that lots of focus was given to the topic of donor retention and surviving the economic downturn. In case it is keeping you awake at night I offer a synopsis of a keynote speech made by the Pew Trust’s (www.pewtrusts.org) Executive Director Rebeccal Rimel who said that a reduction from donors and foundations is certain and any group with fore-thought should be preparing a worst case, mid case and best case scenario for their immediate future. Rebecca went on to urge all nonprofit organization’s to be transparent and advise your donors about your challenges and engage them as partners as you plan for the future. On a more optimistic note, I offer some observation about our future leaders.

What grabbed my attention most was the role of social networking and its current impact on the social sector. Cause related community building and peer-to-peer giving weaved its way into every Q&A session. As somebody who was not an early adopter of all the leading social networking sites and a firm member of Generation X I feel a bit like I am painting by numbers. The always connected Millennial generation appears to be playing on a blank canvass with completely original compositions and the rest of us are trying to evolve as quickly (or sometime resistantly) as possible. The first presentation worthy of mention was lead by Paul Schmitz and David McKinney of Public Allies who did a great parody of the PC and Mac media campaign. Paul, complete withe bow tie and jacket took on the role of a stuffy, old-school, traditional 501(c)3 organization attempting to recruit members of the younger generation to its board. Channeling the best of PC’s persona, C3 as Paul referred to himself explained that trustees at his nonprofit organization held board meetings and ate lunch at an exclusive private club, built friendships with a round of golf after their meetings and apparently never spoke of the impact of their nonprofit’s work. Playing the equivalent of the Mac in this playhouse skit, David was a younger, more vibrant, cause related organization attempting to connect with generation X and Y by inviting them to join a community committed to solving a problem and making a difference. Taking a much more active grassroots approach, board members interfaced with the organization’s clients on a regular basis, voted on Bylaw changes via email, worked in a variety of task force settings, measured the success of the organization on multiple platforms and were constantly connected to an ever expanding group of community and online advocates. The skit ended with the question: Is your board a Mac or PC? Highlights from the remainder of the presentation included data from BoardSource revealing that 2% of nonprofits organizations report having members under 30 years of age on their boards and 36% report having board members between the ages of 30-49. With an untapped demographic some great opportunities present themselves in the form of programs like AmeriCorps where 500,000 younger adults have participated (a greater number than those that have served Peace Corp over its 40 year history). So what are the central themes to engaging younger talent? Look at your Board Culture, Organizational Culture and Diversity. The culture of the organization tends to be the biggest challenge for most organizations when it comes to attracting younger leaders. Invest in diversity and inclusion realizing this initiative it is an action and not as an ideal. At the end of the day, the next generation provides a greater chance of increased sustainability for most organizations.

The second transformational presentation was done by Tom Watson who wrote the book Causewired. Tom’s is a true early adopter, from his days on Usernet in the 1980’s he has been in the middle of the technological and social network hub ever since. The central focus of Tom’s presentation and book focus on the role social networking sites play as a younger generation focuses on changing the world. The research presented show the power and reach of the social networking community. Looking specifically at Facebook and its Causes application which currently has 13.5 million users, the biggest cause is currently represented by the 3.7 million individuals that have joined Eric Ding’s Campaign for Cancer Research and raised $75,000. Tom spoke about the viral impact of the Causes application. Anyone can launch a cause for free and develop a global following with a laptop and online access. Imagine the cost of reaching the 3.7 million followers involved in Eric Ding’s model if we used the techniques of a traditional nonprofit marketing and advocay campaign? 3.7 million followers is a commodity that provides instantaneous relevancy- you have my attention when you speak for that many members. The undeveloped potential of many of theses cause comes when you consider the financial contributions made by the group. Is 2 cents per member (as an average when you divide members by the amount donated) a great return on investment? Would your organization be able to survive on such a fundraising ratio? What would your organization do with 3.7 million members? What potential opportunities exist with a massive membership base? At the same time, how committed is the membership for a cause when the only barrier is ‘one-click advocacy’? I click and therefore I show my support but nothing else is required of me. Is this more of an American Idol form of global change, the ultimate in popularity contests? How do we take individuals from being members, wearing the causes logo on theei Facebook homepages to truly committed advocates? The most successful social networking campaigns have demonstrated the ability to attract massive amounts of traffic willing to join a cause but less certain is the impact. A few highlighted organizations Tom considered successful early adopters and great examples of tapping into the network. Save Darfur, the Nature Conservancy, Stop Global Warming. Check out more about Tom at www.causewired.com.

A paradigm shift is taking place. Is it a tremor or a magnitude 8.0 earthquake? Some of what was spoken about at the conference feels much like the technology bubble of the late 90’s when you saw meteoric rise of multiple companies. Books like Jim Clark’s New New Thing felt new and innovative and yet ancient history at the same time. What platform do we use to invest our time and energy is certainly an on-going debate. Perhpas it is time for me to eat some Halloween candy and checkout my Facebook page and consider the future.

Thank you for reading-

What-if economic times keep you from making a charitable donation?

There is a moment when the reality of decreased charitable giving hits each of us individually. It may be that you experience a reduction in the level or number of services provided by a nonprofit organization. Or when you see the number of clients of a social sector organization increase dramatically. Perhaps it comes when you receive an email or letter requesting an additional donation to help a favorite charity weather hard times. With end of the year solicitation letters on their way and holiday campaign preparing to go into full swing, challenging decisions lay in front of all of us. Whatever our unique place in the world, each one of us has or is about to cross the threshold of being effected by tough economic times.

I found myself at a table this week as a funding organization confronting the issue of preserving the future of the foundation’s value or distributing funds in response to the grant requests being made by important organizations. The foundation had already exceeded its 5% payout requirements for the year. So there the Directors sat, listening to the investment advisor discuss our strategy for the coming months and politely acknowledging that no accurate forecast of the broader markets exists. With a significant reduction in the foundation’s value and the prospect of uncertain times in the future, the conversation turned to self-preservation or entering a grant making death spiral. Clearly the prudent decision was to conserve the foundation’s financial value and position its resources for a sustainable future. No grants awarded, discussions about annual grant reductions, and excess distribution carry-forward balances were the order of the day. Save dry powder for the next round.

For the first time in my association with this funding organization, no grants were made. It felt a bit like a Fourth of July without fireworks or a Christmas without Santa Claus. How could we not fund those who were in more need of assistance than ever before? Upon reflection, many of the grant requests were for capital campaign initiatives and probably will not impact the organization’s operations in 2008 or 2009. But I wondered what set of dominoes are being aligned for the future? A series of unfunded grant requests that will likely roll-over to the next grant meeting in 2009 coupled with the usual flow of returning grantees plus a new mix of those who are making a play for funding in hard times. The longer the economic downturn the more frightening the prospects become of the potential backlog. Like holiday catalogues piling up at the post office, the line of organization’s seeking grants looms larger and more daunting.

And now I look at the first letters soliciting year-end giving support that have come to my mailbox or email account. Many were crafted prior to the financial drama of the last couple of weeks. These communications were sent just before the outer bands of the hurricane came ashore. The organizations speak of rosier times and the impact of their great work. No doubt almost all are worthy of a donation. But as I circle my personal economic resources, I am now weighing the donor’s dilemma. Do I give a little to as many organizations as possible. For some organizations this would be welcomed. A donor retained from last year, I avoid becoming a LYBNT (last year but not this year), the very type of person that an organization will spend additional dollars to communicate with using the theory that asking for a repeat gift from a recent donors has a higher probability of success than getting a lapsed donor who has not contributed in years to consider a gift. Do I communicate to those organizations that I do not give to that they should save their precious resources and we will talk in 2009 but please do not spend more time and money trying to secure my 2008 gift (I just cannot give at this moment in these times)? How about the scope of my giving? Do I circle the inner circle and give what I have to those core institutions? Do I reward them for the place they hold in my heart or the service and programs they provide that I deem most essential? Or do I adopt a conservation mindset like the foundation and preserve financial value for a future day and refrain from making any gift until the storm has passed?

Clearly this is just the start of a debate involving my core values and wallet. I have reached what looks like a philanthropic draw bridge and the platforms are being raised.