EP 24: Hard Choices, High Impact: Navigating Nonprofit Financial Viability

Tucker: Welcome to THRIVERS: Nonprofit Leadership for the Next Normal. I’m your host, Tucker Wannamaker, the CEO of THRIVE IMPACT, and our mission is to solve nonprofit leader burnout and to help right some of the injustices that are happening against nonprofit leaders. We know that burnout is the enemy of creating positive change, and we want to connect you with impactful mission-driven leaders and ideas so that you can grow, you can learn, and you can thrive in today’s nonprofit landscape. I’m joined by my Chief of Impact, Sarah Fanslow. Sarah, it is good to have you here on the podcast with me again.
Sarah: Hey, Tucker. Great to be here.
Tucker: And today we have a pretty operational type of topic.
That I think is one that we continue to grow in. In our learning around. Frankly how immensely valuable this type of process really is. And it really gets into the analysis around our revenue. And we call it… We just did a workshop with a United Way here in the country called the ROI and I workshop.
Which is also known as the return on investment and impact. And in fact, we also just did a similar workshop a little bit shorter. With another organization in Colorado as well. And we really had some fascinating learnings from these workshops, which we’ve done before. But now we want to bring them forward into this podcast and allow, and help. Hopefully, this will be beneficial to all of you who are really needing to figure out how do you understand what kind of a return you’re having, quite literally on your investment.
Into your programs and on the impact that those are having based upon that investment. And but Sarah, before we hop into that, I know that this is a big topic and I’m curious if you have any intro that you want to bring in before we start getting into some of the pains or the issues that we know that we’re experiencing and noticing nonprofit leaders are facing.
Sarah: I think for me it’s just that this is what we’re really hoping, is to share with y’all a little bit about what this is. What it can do for your organization and really how to do it. And hope that this is helpful for you nonprofit leaders out there who sometimes have to think about, What do I cut? What do I stop doing? What do I start doing? And this is a framework to help you have conversations with others around those topics. We love this workshop and I’m really excited to share it with all of you.
Tucker: And a lot of this is stemming. We have a shift in our work… in our THRIVE IMPACT 101 workshop around.
I know this is your favorite shift, which is to stop saying yes. It is the shift that nonprofit leaders… this workshop is the six shifts that nonprofit leaders need to make to lead in the next normal. But this shift, in particular, is one of those that really starts to get down into the nitty-gritties of not only how we stop saying yes at a high level, but when we really get down into the data of it. And especially for these, programs that are close to the heart and that we deeply care about but maybe aren’t in alignment, how do we get some objectivity to just understand what’s most important for us to stop saying yes to so that we can double down on our most unique value?
And I’m curious of all the listeners for just a reflection moment. How many of you feel like you’re doing too many things in your nonprofit? And I’m guessing if you’re like pretty much every other nonprofit that we ask this question to, you may be saying to yourself, “Yes, we’re doing too many things.” Usually too many programs, some that were brought forward by a donor once upon a time, or some wild idea that a board member had, or you just have been adding programs as you continue to see needs in the community, whatever. Most of the time nonprofits are not looking for programs to start.
They’re looking to figure out, how do we stop saying yes to things so that we can double down? But Sarah, what are some of the big pains that we’ve been noticing as we’ve gone through this workshop? That we’re noticing that nonprofit leaders are experiencing beyond having too many things to do.
What are some of the pains that we’re noticing or the issues that nonprofit leaders are facing around the return on their impact and investment and being able to actually even understand that in the first place?
Sarah: Yeah, Tucker, it’s a great question. So first I want to zoom out a little bit and, share with you what we do in this workshop and Tucker add in here. But this workshop that we’re talking about, return on investment and impact has a few key sections. The first is around really helping folks understand their culture of revenue and what is underneath the decisions they’re making about what they raise money for and how they raise money.
So that’s the first part. And the second part is really then going into the financial viability of programs. And in that, we look at a few key data points. One is around, how much revenue did that program bring in? How much expenses went out the door for that program? What is the average price per beneficiary and was there a net gain or loss?
Usually, we look at data for five years so that we are not just looking at a moment in time, but understanding a fuller picture. So that’s, the financial viability side. And then we’re saying, okay, let’s look at that financial viability in relation to the impact the program is having. And there again we.
Usually, folks have outputs, which are the number of people served, the number of events held, and things like that. But also where it is possible outcomes, right? The difference or the change that was made as a result of that. And we share or bring up data for each of those two sets, right?
One on the x, and one on the y-axis, and say, looking at these two things together. How would you rank the financial liability? Is it high? Is it medium, low? Same with impact. And then we chart those literally on a graph. And I think what we’ve seen when we’ve done this is a few core things. One is that people just don’t know.
People don’t know, right? Even people who are so integrated into an organization, they may not know the specific financial picture of a given program. They may also not know the specific impact picture of a given program, and I think one of the pains is just that so often we’re just so busy doing.
That we don’t take a minute to step back and say, let’s actually look at this thing, and let’s look at it together with the same information. And because we don’t do that, we then can’t make decisions together about what to do. So that’s one of the big pains I’ve seen. What about you?
Tucker: Oh, I feel like we can just dig into that specifically.
Like I think we overestimate what people know because we have a sense of what we understand based on our own, data points. Maybe our own intuition data, because we’ve been in deep in the programs for a while. But to your point, those are implicit understandings that may or may not be the same understandings that other people have, and I think we overestimate what others understand because maybe we have a sense of our own understanding, but we don’t… that doesn’t necessarily mean that’s what other people understand. And so I’m appreciating like what you’re sharing Sarah here is in a space too of… we talk a lot about co-creation in that at a very high level, co-creation is the next normal of nonprofit leadership.
It is not top-down approaches to leadership. It is bottom-up co-creative oriented approaches. There’s a lot of deep research on this from people like Peter Senge. And people like Dr. David Cooperrider and appreciative inquiry. But what this does is it actually lets us co-create quite literally where we’re cross-pollinating across departments.
That was the one thing from this last workshop that we invited them to reflect on saying, It was so helpful to hear voices from the program team and the marketing team and the development team, and the impact evaluation team. It was so helpful for all of us in one room to look at the same data.
And then share our understandings that made that, my implicit understanding, an explicit understanding for other people to be able to react against and to reflect on. And so I just wanted to keep going with what you were sharing because that’s a massive pain.
It’s like we don’t have a shared language, we don’t have a shared understanding, and that’s literally one of the foundational tenets of literally creating a learning organization or a co-created oriented type of organization is having a shared understanding in the first place.
Sarah: Yeah, totally. And I think we saw in that more recent workshop we did, we were helping an organization, and the board, in particular, think about where they wanted to go from a revenue perspective.
Now the board generally knew the revenue picture. But we put the data together in a spreadsheet that showed over the past five years what percent of income had come in from various revenue streams. And that deeper level of understanding really generated a new conversation.
And so I think the other thing that happens is we often provide roll-up data. Which I think we think is helpful because, People don’t want to get into the weeds of data and maybe they won’t understand it, but what I think, the other pain I’ve just seen is that sometimes that roll-up data doesn’t allow people the understanding they need in order to think about what to do as a result of it.
And so I think one of the other pains is just, not sharing data, not sharing the level of data that is helpful to drive decision-making. And I think that’s what we’ve really, one of the things we’ve really seen come true as a result of some of this work. Literally showing people the data in a spreadsheet, in a workshop, and saying, “What do you see? What opportunities can you see in this data and what strengths exist?”
Tucker: Yeah. To that point, I think another pain that I’m noticing is and I’m realizing this is a pain because of after the fact after we went through the ROI and I workshop and what people shared around their joy basically of this workshop was, it was so helpful to have this data in one place.
And that one of the pains, the other side of that is the data just all over the place and it’s not in one place. Now I think another pain that goes along with this is that to get that data into one place it takes some time. It’s not…
And so I think sometimes some of the pain is the psychological lift sometimes of is it worth it for us to go into this space and gather some of this data? But that lift is I’m just gonna keep doing the program.
Sarah: Totally. And figuring out how to organize it in a way that makes sense to other people.
I think, one of the things we’ve done is–and we’ll link a spreadsheet for y’all in the show notes in case you want to use it–but one of the things we’ve done is created a spreadsheet that has you list your programs and the outputs. But then says did you meet your success targets?
And so there’s a few ways. I think one of the problems often is that programs have different outcome measures, which makes it feel like you’re looking at oranges to apples, which then makes it hard to have a conversation. And one of the things we help folks do is look at some apples-to-apples in relation to outcome data from programs, which then makes it easier to say, okay all things considered, even though these programs do very different things, did they achieve measurable change? Did we even set out, to define measurable change before we started it? And then did we reach the targets that we sent out to meet? Yes or no? And all of a sudden, then you have some apples-to-apples even on programs that do vastly different things.
Tucker: That’s good. That’s good. So I guess with that, with these different pains, what is this next normal of nonprofit leadership look like? When we’re talking, people are dealing in that pain. They have too many programs, which was the first pain that we talked about, right? Too many things that they’re saying yes to.
And, how do we, when we’re so close to the work, right? Our hearts are connected to it. We’re so passionate as nonprofit leaders and we’re mission-driven, and we care about all the people. What is the next normal of nonprofit leadership look like? So that we don’t burn ourselves out. So that we can make wise data-driven decisions and the data…
Going back to one podcast I remember we shared about, which is around the Hippocratic Oath and “do no harm”. That we need to look at the viability and the impact of our programs. Otherwise, we could very well either be potentially hurting people and that could be the people that we’re serving or our own nonprofit leaders that are part of our team in the first place.
So what does this next normal really look like, Sarah, from your perspective around this kind of work?
Sarah: Yeah. I think for me, the first thing. Is the willingness to have the conversation and, open the windows as it were to what’s happening. And I will say this United Way we’re working with, one of the things we’ve been struck by, that we’ve talked about is just listen, no organization is perfect.
And no person, nothing is perfect, right? Nothing is perfect. But often I think the fear of looking under the covers and the judgment that other people may have based on what’s under there keeps us from doing that, keeps us from saying, let’s really look at this thing. And I think unless we do that, to your point, we can’t know.
We’re not harming folks and we can’t know that ultimately we’re, making a positive change. And so I think the first. New normal is saying, you know what? Like we need to open the windows. We need to look under the covers. We need to look under the bed. We need to do our due diligence on the work that we’re doing in order to make sure that what we’re here to do is actually what’s happening as a result of this work.
So I think that the first thing is just being open to the conversation and being open to the evaluation of what’s happening and what’s really going on.
Tucker: I want to be devil’s advocate here for just a minute. Okay, here I am. I’m an ED of a $2 million nonprofit. I’m a small community-based organization. And basically, that’s nice Sarah, but I ain’t got time for that.
That’s going to, that’s gonna take me too long. I don’t even know where to start. We got people who are knocking on our doors who are… if we take away from that it could very well be hurting somebody because I’m spending all this time on data. Like why is this really that important?
What’s made possible, maybe even just going there and getting the best that you can get done. Like why would I, why should I do that if I’m in that situation? Which is, frankly, probably most of our listeners.
Sarah: Yeah, totally. I think it comes down to two core things.
One is, especially as the world is changing, it is really hard to get foundation and grant dollars unless you are really able to prove measurable change. And so I think from a fundraising perspective, doing that work to understand the impact you are having. And where you are not sure what impact you are having, so you can.
Go and measure it is really important from a revenue perspective. I think secondly, if you don’t have these conversations, at least in my experience working in nonprofits, what happens is you just keep adding, and nothing ever gets taken away. And what that means is that staff get burned out and ultimately you’re able to deliver less value because you’re just doing too much.
And so I think any executive director sitting there worried about staffing, worried about retention, Concerned about the quality of their impact really has to spend time here. And I think over time it’s gonna generate a lot of value because it’s gonna allow you to have conversations about what you can stop doing and what your unique value is, which is where you want to be spending your time.
And so that’s what comes up for me, Tucker, But curious what’s coming up for you there?
Tucker: Yeah, I think to your point, this… It’s so funny when we share our mission with people around solving nonprofit leader burnout and some of the injustices that nonprofit leaders are facing.
Even when I say this to people who aren’t really connected to nonprofits, they’re like, “Oh yeah, that must be an issue.” It’s almost like a cultural norm that nonprofit leaders are burning out. That’s kinda what it is. I’m like, this should not be, this ought not to be.
Again, this is part of our whole mission here and this is why we continue to realize our work is a social justice mission. Because so much of our work and systemically, I was thinking of a… I was listening to a video from Peter Senge and he had this joke about what are fish gonna be… What do fish talk about? It’s really hard to understand what fish talk about, but I can be for damn sure that it’s not, they’re not gonna be talking about the water. I just love that joke, which is this is the water we swim in. Like we don’t realize when we start to recognize an underlying assumption of what’s really going on here.
This specifically Sarah, I think is one of the most powerful pieces. To help us to not burn out. We are just doing too many things and we can’t do it. We are not machines. Our whole management structure is built around the industrial age. This is a lot of what Peter Sangay, who really coined the term the learning organization, and this is what I mean.
He literally said this in this video. He said, “Our existing management style is destroying people.” And one of those is and I think one of the management styles from a nonprofit perspective is sacrificing ourselves on the altar of the mission. And which ultimately means doing more, more, more, more.
And we just need to get more efficient, efficient, efficient. And I think what’s so powerful about what this is. It really does allow for us to say no to things. And I’ve noticed when people do that, I remember we did this workshop for an organization a couple of years ago.
And we had this matrix. You’ve talked about this a little bit, but there’s this matrix of impact, high impact on the y-axis, up and down, high impact at the top, and low impact at the bottom. And financial viability on the left side. Low financial viability and high financial viability on the right side.
And we’re looking for those, like what’s viable, literally what’s allows us to be sustainable financially. And I remember in the room the first time, that this organization in a collective way, was able to put one of their programs into basically the one that we have as a big question mark, or really it’s the heck no category.
The first time they were able to put, just, literally just put it there collectively. It was like this weight lifted off their shoulders. It was fascinating to watch in the room happening. Just to be able to go to that space and realize that. We don’t have to be doing everything.
Sarah: Totally. Yeah. I love… I’m sure some of you know Adam Grant he’s a pretty well-known speaker on things like organizational development and psychology, and he has this quote that I love, which is, “Balance rarely comes from increasing efficiency. It usually involves reducing responsibility. The more priorities we have, the harder they are to juggle. It’s better to do a few things well than be overwhelmed by many. A key to avoiding burnout is deciding what doesn’t matter.” What doesn’t matter. And I think that’s exactly what we’re talking about here.
Tucker: Yes. Yeah. And that’s where, to that point, this is what, as I’ve been learning more deeply about, the water we swim in.
We come from a world of the industrial age and the primary metaphor around the industrial age is the machine. And what are ultimately all of us in the form of is we’re almost like machines. Like we’re put in this management structure and these top-down leadership models that are about us being machines.
And just more efficiency. And that’s what Adam’s hitting on, which is, no more efficiency is not the point. More humanity and more learning and more, space and pause for us to double down on the most unique things is really the next normal.
Sarah: It is, and it’s hard to do. I’ll say even with this, this organization who brought us in to do this work with them, they had a really hard time saying, “No”s.
Really hard time saying, “No”s. And it’s because they care. Saying no to a program means stopping working with people. It has a real impact. And though, We can’t be our highest and best if we’re serving everyone. It’s just impossible. And I think this matrix makes it clearer maybe what we need to do, but it doesn’t make it easier to say no.
It doesn’t make it easier, because it’s still gonna be hard. But I think that’s the discipline, that’s the next normal is deciding something really matters, but that you may not be the one. For whom it’s a unique value. Or you may not be the organization best placed to deliver that value. And that doesn’t mean that the work isn’t important or the people being served aren’t being helped, but that it’s not your highest and best. And I think that is the next normal
Tucker: And even this United Way, I loved what they were doing that “No” Has color to it. “No,” can be a pause. “No,” can be… In fact, I remember one of the programs that they brought up were like, “Wait, this is something that one of our partners can do.” Literally, they were like, “Wait a second. A no doesn’t mean we’re cutting things off.” Even if… I was thinking about a story that I brought forward once from Kevin, our co-founder at THRIVE IMPACT.
When he was the CEO of Feed the Children, he had this really close-to-the-chest orphanage that they loved and worked with. And his program officer came to him and said, “This program the impact we’re having on those kids costs about $2,500 per kid. We have a similar program that does the same impact and costs about $50 per kid.”
So Kevin was like, “Okay, what do we do about that?” So they ended up sunsetting and literally… but that was a conscious choice that they made. That was the no that they made was, let’s sunset this program over the next two to three years.
And make sure that it’s not cutting people off. It’s just finding the right place for them to be, and so that’s where the word no can feel very psychologically heavy. Literally the word “decide” means to kill choice. And that feels very, almost like it could steal our agency.
But this is one of those things that I think if you can, any nonprofit can get into that space. As your quote says, “Your ‘no’s give power to your most important ‘yes’s.” This is one of the most important, one of the most psychologically hard ones to do, but man, when you do it, the freedom that comes on the back end of this and the culture shifts that’s gonna happen within your organization.
That’s what’s made possible and why this is important to do this. Well Sarah, I know this is a short one today. We gotta get going because we got things. I think you got kids. I got kids we got… but we wanted to record just some of this learning really quick that we’ve been having from this experience.
Sarah, I know that you mentioned, from a practical steps perspective, we’re gonna put a survey, or not survey, but a spreadsheet example. For some of you, if you’re not spreadsheet people, it might look a little daunting. We may also put it down in just a simple way too, that just start to go down this path.
We obviously do this type of workshop with organizations too around understanding your culture of revenue and what are the underlying paradigms, what water are you swimming in that you don’t realize you’re swimming in? And as well help you to go into this path, because sometimes people need coaches along the way.
But what are some practical steps you see a nonprofit leader can take to really move this forward?
Sarah: Yeah, absolutely. I think the first thing is really just to be open to looking at your programs from a financial viability and outcome perspective. It’s gonna be scary and it’s really important.
So the first is to be open to doing that work. The second thing is, I think just start where you’re at. As you said, Tucker, maybe you only have output data, not outcome data. That’s fine. Get started looking at what it costs to do a thing versus what you’re bringing in and overall what that price per beneficiary is.
Against the change, it’s producing. Just get started there and as Tucker said, we will have the spreadsheet in the show notes, and you can take a look at how to do that. And then I think the final thing is, consider bringing in help. It is hard to have these conversations and it can be hard to lead them yourself, especially if you’re the one doing the programs and I’ve been in that seat.
Where you’re the one doing the programs, and you feel so much tension around sharing your baby and getting feedback on it. Consider bringing in help to have a conversation and facilitate the conversation as Tucker said. We do this all the time, we’re happy to be that guide. There are others that do it as well, but I think bringing in a third-party facilitator can really help to craft the conversation in a way that can move it from shame into change, which is where I think you want to go.
Tucker, what about you? What are your thoughts here?
Tucker: I just am sitting with that quote you just said, moving from shame to change. I was like, that’s a good one. That’s a good one. Cause that’s exactly what’s going on, right? You nailed it. I think the last thing, just to add very briefly to what you shared is don’t overestimate what you think people understand.
It’s not because they’re stupid or you’re stupid, it’s because we just, generally speaking, think other people have more understanding than they do, or they think that they have the same understanding that we have and that’s regularly not the case. Test those assumptions. Bring that out and say, here’s my understanding, but what’s your understanding?
And be genuinely curious. About what other people’s perspective is on some particular data points or whatever. Stay in that space of curiosity and challenge your own assumptions. And overestimating how much people don’t understand versus overestimating how much people do understand.
That’s what I would say about frankly anything, but this is one of those key pieces, so that’s what I would say.
Sarah: Love it. Yeah. Make the implicit explicit.
Tucker: Make the implicit explicit. Awesome. Sarah, thanks for this quick podcast today. I know we’re about at 30 minutes and grateful to be able to debrief this a little bit here.
And we’re gonna have quite a few things in the show notes. So take a look at that. You can always go check them out at thriveimpact.org/podcast. Also, if this is supportive for you we’d invite you to leave a review, which I think the only place you can leave reviews is on Apple. So go up there in the Apple podcast section and leave a review if this is helpful for you.
Love to know and hear from you. In terms of what’s benefiting you. So otherwise, see you on the next podcast on THRIVERS: Nonprofit Leadership for the Next Normal.