Good Leaders Should Read Novels

I recently trailed one of my children on school visiting day and was struck by the relevance of the English lesson. The students were discussing difficult choices, using as their texts the novel “Tuck Everlasting” and Robert Frost’s poem “The Road Less Traveled.”  The lesson reminded me of why I love novels (aside from the fact that I was an English major), and why I think leaders should read them.

In an article earlier this year about CEO character traits, the New York Times’ Peter Brooks postulates that reading novels could offer these leaders “greater psychological insight, a feel for human relationships, a greater sensitivity toward their own emotional chords.”  He’s on to something. I would add to his list the following:

1. Perspective on Difficult Choices. As in life, the characters in novels rarely get black and white choices.  Tom Sawyer has to confront racial injustice as he considers his friendship with Huck. Edith Wharton’s Lily Barth in House of  Mirth tries to find a way to avoid the socially and financially correct marriage that society in her time demands. James Joyce’s Leopold Bloom struggles with the existential crises of the individual living in modern collective society in Ulysses. The list goes on.  By reading these novels we gain insight into our own dilemmas.
2. A View of Character.  “The Gravedigger’s Daughter” by Joyce Carol Oates was one of my favorite–yet difficult–reads this year. The way this brilliant novelist draws us into the protagonist’s shocking childhood helps a reader understand what can lie behind broken familial relationships and what it takes to be a survivor.
3. A View Into Other Cultures. Another favorite novel of mine is “The Piano Tuner,” a stunning first novel which provides a view into the unequal relationships within the British Colonial empire, and specifically in Myanmar, at the end of the 19^th century.  While set in a distant time and culture, some of the scenes are achingly heartbreaking, and can give us some context for the continuing struggles of the Burmese people.
4. An Ability to Change One’s Mind. I recently read “The French Lieutenant’s Woman” by literary power-house John Fowles, and had the pleasure to discuss it in a book club led by my wonderful former high school English teacher.  Over the course of reading the novel, I completely changed my mind about the “woman” of the title, Sarah.  Through Sarah, Fowles slowly brought me to a new perspective on all the characters in the book, as well as a view of modern relationships.  Being able to change one’s mind is something we are less and less able to do in our society, as we seem to be forced into clearly defined groups whose minds have been made up for us (by religious affiliation, by gender, by political party, neighborhood, school choices for our children, etc.).  Being able to think about perspective is the great gift of the novel.

So for all these reasons, I highly recommend that leaders read fiction, and specifically the novel. Try handing out a novel to your board and staff at your next meeting and then schedule a discussion of one or two of the topics above at a subsequent gathering.  It might just give you a new way to think about problems, people, and choices.

Do you have a great novel to recommend?

Raising Money, Talking About Money

The Chronicle of Philanthropy just reported in its June 4^th issue that the value of endowments held by all 229 organizations in its survey declined by a combined $29.1 billion from 2007 to 2008. This will come as no surprise to development directors.  Many organizations don’t want to talk much about the big drops they’ve seen in their endowments, other than to say they are “similar to what the rest of the market has seen.”

My view is that putting our heads in the sand about our financials is a failed approach, and one that will hinder future fundraising.

Why? Because donors understand that market failures are not the failure of the organization. But if they learn that the organization is not flexible to respond to challenges, if they feel it doesn’t communicate the bottom line, and if they don’t see transparency in fiscal governance, then donors may rethink where they are putting their next dollar.

So how do you communicate your finances to donors?

Really all stakeholders should have an understanding of your finances.  You should make at least annual presentations—albeit less detailed than what you show your board—of your inflows and outflows plus your major financial challenges.  This is not just a rehash of the annual report, which is more of a “look-back” document, but rather a clear indication of your strategies for the future.  Incorporated into this presentation should be an explanation of how past financial decisions have affected future mission-driven outcomes.   You should also include the ways in which you change the lives of the people you serve.   In other words, it’s not just a PowerPoint with numbers.

Some institutions find this a shocking idea. But your Form 990 is already out there for the world to see. The question is:  are you backing it up with good fiscal management policies?  Are you communicating the coming challenges as you see them? Are you outlining the staffing, programmatic and expense item changes you are making in response to an increase in need or a decrease in funds, or both? How are you still meeting your mission goals?

When donors, staff, trustees and other stakeholders are included in the budget conversation, they are much less likely to pick on a particular item they hear about through the grapevine.

In his new book What Would Google Do?, Jeff Jarvis talks about how the internet has become not just a collection of information, but a conversation. In much the same way, the post Sarbanes-Oxley, new Form 990, GAAP accounting rules world of nonprofit fiscal management is also becoming more of a conversation. You can either put your head in the sand and pretend it’s not going on, or you can engage your stakeholders and understand their perspectives as together you create your future financial plan.

Measuring Impact

As the school year draws to a close, it’s common for many organizations that run on this calendar to assess how they’ve done.   Specifically, board and staff may do self-evaluations, and boards evaluate the executive, the one staff member for whom they are responsible.  But these assessments are just part of the picture of how an organization measures its effectiveness or shortfalls.

How are You Assessing Your Impact?

One of the tools now being used by the nonprofit and public sector worlds, and which has been around in the for-profit sector since its inception, is the concept of ROI, or Return on Investment.

What’s the definition of “Investment”? For nonprofits, foundations and public sector organizations, the investment is a simple equation:  Investment = Volunteer Time + Donor Dollars + Staff Time + Goods or Services Provided.  All of these combined reflect your investment in the communities you serve.

What about “Return”?  Some organizations measure impact by number of people served.  Some calculate the value of the volunteer hours they expend in a community if they had been paid in real dollars.  Some groups measure impact against a set of goals or outcomes determined at the start of a project or year.  But for the independent sector, this is always a tricky equation, because ultimately you are trying to change human lives.  And sometimes that impact can’t be easily measured.  And so you also need to find stories about the communities you have served, the families helped, the habitats rescued.  You need to find a way to merge hard data and benchmarks with a more nuanced picture of your impact and responsiveness to need.

Why Measuring Impact Matters

It’s a daunting task, yet public and nonprofit sector organizations must try.  One reason is that the accounting scandals of the recent past, the Congress’s response with the Sarbanes-Oxley Act, the country’s current economic crisis and the IRS’s new Form 990 have brought with them an enhanced focus on transparency and accountability.  Donors, volunteers and staff are all looking at these measures, too, to make important decisions about their own investments of time and money.  Now all nonprofits and federal sector agencies must find a way to demonstrate more tangibly how their work affects their outcomes.

Back in 2005, The Panel on the Nonprofit Sector (established by Independent Sector) made recommendations that as a best practice, charitable organizations should design procedures for measuring and evaluating their program accomplishments based on specific goals and objectives. Today the need for measuring outcomes becomes even more urgent.

Looking Towards the Future

Just last month, President Obama signed the landmark Edward M. Kennedy Serve America Act, which will enable millions of Americans to serve one to two years in a wide range of nonprofits. With this kind of influx of human capital “investment,” nonprofits will need to think boldly about how to measure the impact they have not only on the communities they serve, but also on the very individuals who are being added to their volunteer ranks.   In other words, they will need a way to track the “multiplier effect” of what these individuals learn inside their organizations but also bring back to other groups and communities when they leave.

How does your organization measure its mission impact or ROI?  Please share your benchmarking and evaluation ideas and stories.

© 2009 Amy DeLouise

Stress Test Your Nonprofit

This week, federal regulators plan to release the methods they are using for the “stress test” being applied to banks accepting TARP money. Non-profits should be developing their own stress test to assure soundness to funders, who are both private donors and the American taxpayer (by way of the gift of tax-exempt status).

Why should non-profits conduct a stress test of their own?

Despite signs that America’s economic engine may be coming out of a stall, non-profits have a long way to go before times get good again. There is a higher than ever demand for their services, especially in the social sector, as more and more people lose jobs and health care coverage. Donations continue to drop in many sectors. At the same time, new and existing donors must be assured that the charities they support can withstand more months of hardship.

Five Ways to Stress Test Your Nonprofit

1. Increase Transparency. Good governance is critical to success, but especially during lean times. Confirm that your board decision-making is fully transparent, documented and bench-marked. Especially decisions around executive compensation.

2. Ensure Sustainability. Confirm that your organization has sufficient cash-flow for ongoing operations. Some say have as much as one year’s operating capital on hand. This may not be realistic for smaller charities. Still, you should assess and update your working capital assumptions so that donors know you can deliver.

3. Assess Human Resources. Do you have the right people on the job? Evaluate staff capabilities through regular reviews, but also a build strong professional development program so that you are cultivating talents from within. Bringing along a promising staffer costs much less money than launching a search.

4. Engage the Board. During tough economic times, it’s also important to tap the talents on your board. And that means more than check-writing. Pair experienced board mentors with staff and newer board members. Leverage board connections wisely. Consider them a valuable resource for not only financial contacts, but also great volunteers, future board leaders, and important community connections. And most importantly, focus board members’ limited time on the tasks that will have the most impact for your mission.
5. Focus on Vision. When times are hard, it’s easy to get mired in the day-to-day and lose track of the overall vision of the institution. Whether your goal is a world without hunger, a river that is unpolluted, or a school where children thrive, keeping the vision front and center is critical to delivering results. Set up a regular “vision-checkup” for the organization so that staff and volunteers have a way to connect daily, weekly, monthly, and annually with the vision and know they are making a difference.

These are just a few ways the non-profit sector can ensure it uses donor funds wisely, including those of the American taxpayer.

Addressing Brand Threats

The peanut scare reminds about brand value.

The salmonella-in-peanuts debacle reminds us that brands built over a lifetime can be ruined in an instant—even for actions and outcomes for which those brands are not responsible. Sales of direct-to-consumer peanut butter—which does not contain the tainted Peanut Corporation of America nuts—are down 25%. Big names like Kelloggs (Keebler, Famous Amos), JM Smucker (Jif) and ConAgra Foods (Peter Pan) are reeling. Thousands of smaller companies have filed for bankruptcy. The lawn fertilizer giant Scotts even filed a law suit for damage to its bottom line and its good name against a supplier who failed to admit to Scotts that it had sold tainted peanut meal, used in the company’s wild bird seed. (The Washington Post, Sunday March 1st). Peanut farmers, who had nothing to do with the infected processing plant, said they are experiencing staggering losses and will plant 30% fewer crops this year (NPR, 2/10). The very brand of the peanut itself has been damaged.
One of the lessons to learn from this brand catastrophe is that if what’s known as the “brand promise” is broken, even if not by your organization, you may be punished anyway. Nonprofits learned this the hard way after the United Way and Red Cross accounting issues arose, and Congress, the IRS and donors large and small began asserting themselves with concerns about financial oversight at other 501(c)3’s.

So, how to deal with such brand threats?

Of course, you must actively push out the great stories of your organization and what it does in the world. Web-delivered success anecdotes, You-tube videos, and Facebook updates are all part of this package, and most nonprofits are already actively managing and updating this content in order to “tell their story” every day. But often overlooked is another component of brand management: defending your story, and your good name, from becoming tarnished by forces both internal and external.

Two excellent antidotes to brand threats are 1) good governance, and 2) good listening. In today’s climate of more rigorous oversight, small organizations must create better clarity, benchmarks and rules for how they run themselves. Larger ventures have a different challenge: peeling back the layers of programs, administration and large boards so that constituents–donors, staff, volunteers—can understand what you do and how you do it. Maintaining a high level of transparency and using governance best practices are part of the antidote for brand problems.

Engaging Critics

Intertwined with good governance must be a regular process for good listening. That means listening to those who are actively “marketing” against you. Maybe it’s an individual who was unhappy with an outcome at your hospital. Perhaps it’s a small but vocal group who disagrees with your organization’s position on a policy issue. Or someone who posts an anti-your-organization social networking page (case in point: the uproar over the new “Avatar” TV series’ lack of Asians in its lead cast, led by a Facebook group with more than 2,200 members as of today and causing the studio to recast at least one lead role.) Whatever the source—and this is critical–you need to be engaged with critics of your brand. Even when you think/know they are wrong. Even when it’s just one person. Because, in the world of 24 hour news cycles and the blogosphere, one person can be a very powerful voice.

Listening Gets Results

And if you listen, you will often find at the heart of the complaint a real issue you need to address—something that is showing a tear, if not a break, in your brand promise. Fixing it gives you the opportunity to improve your services and outcomes before a problem reaches crisis proportions. And then, be sure to tell everyone about those improvements. Rinse, repeat!