Seeing in the DarkSeeing in the Dark

NGO Connection Day – a Nonprofit SummitApril 21, 2010

Washington, DCDan McCormick

www.mcc-group.com

Difficult Times – Unique SolutionsDifficult Times – Unique Solutions

• Recent downward trends date back long before fall of 2008

• Some organizations have tracking data showing significant losses for almost 10 years in a row

• NPOs frequently ignore data trends• Reaction time of NPOs is often slow

Trending DownTrending Down

Financial Financial

VolunteersVolunteers

Brand ValueBrand Value

Mission EffectivenessMission Effectiveness

Assets Under ManagementAssets Under Management

NGOs Global PositionNGOs Global Position

• 7th largest economy in the world– Larger than Brazil, Russia and Canada

• 21.8 million paid staff and 12.6 million full time volunteer equivalents– As many as 190 million volunteers

Source – John Hopkins Center for Civil Societies Studies

How We Look TodayHow We Look Today• 90% say 2010 will be a more difficult year than

2009• 80% expect an increase in demand for their

mission services• Less than half say they will be able to meet

demand and many of those will use reserves• 18% estimate they will break even or better in

2010• 61% have less than 3 months operating capital on

hand and 12% have none Source: Guide to Navigating the Financial Crisisdeveloped by the Nonprofit Finance Fund (NFF)

How are we Coping?How are we Coping?

• 26% reducing programs and services• Waiting “it” out• Using reserves• Cutting staff• Redoubling fund raising efforts

Major ChangeMajor Change

• A few are seriously working on major structural changes including:– Modifying core business strategies– Reconfiguring existing structures– Creating new corporate structures and sub-

structures– Merger

Measure and ManagementMeasure and Management

What is really Happening?What is really Happening?

• Current difficult times combined with years of flat or downward trends, compressed the time frame for normal organic change

• Making changes to components and adjusting to the changing environment is results in organizations considering major structural change to stabilize and survive

• Increased the timetable for change

Organizational Life CycleOrganizational Life Cycle

• Newborn– Full of enthusiasm– Great charismatic leadership– Small infrastructure– Most funding going to mission

Organizational Life CyclesOrganizational Life Cycles

• Mid Life– Infrastructure grows– Sophistication in operations grow– Begin to explore more advanced technology– Charismatic entrepreneurial leadership

gives way to growth leaders– Financial platforms stabilize– Mission delivery refined

Organizational Life CycleOrganizational Life Cycle• Mature Organization

– Infrastructure stabilizes with a manageable range– Growth leaders give way to sustaining leadership– Boards become more influential and sophisticated– Information becomes more critical to the business

model– Staff becomes more specialized– Time is spent on maintaining funding relationships

at the expense of innovation

Those Days are GoneThose Days are Gone

The New Organizational Life Cycle:

Start Up Growth and DevelopmentStart Up Growth and Development

New Life Cycle: Start UpNew Life Cycle: Start Up

• 1 to 2 years to gain footing through media and establishing mission relevance

• Articulate mission and work on brand value• Deliver a message that resonates with funders• Efficient methodology to get money in the

door

New Life Cycle: DevelopingNew Life Cycle: Developing• Creating competitive funding strategies• Clearly defining market segment• Mining markets carefully and efficiently• Maintaining constant communication and touch

through social media and other methods• Keeping overhead cost low• Recruiting highly skilled less specialized staff• Finding capable conservative entrepreneurial

leadership

The Real Story not the SpinThe Real Story not the Spin

• Gather and accurately assess data• Be open to constant change• Dedicate some portion of the work to creative

ventures• Stay contemporary, relevant and fresh

The Successful Contemporary NGOThe Successful Contemporary NGO

• Agile• Scalable• Operational Costs Tracked to $ per FTE• Measurable Mission Outcomes • Data Driven Decisions• Transparent• Visionary• Actively Seeking Partnerships

Cultural ShiftCultural Shift

• Yesterday's NGO– Owned everything– All operations were under the tent– Preserve and protect culture and tradition

• We have all spent a lot of time trying to demonstrate our uniqueness to constituents

• We are intentionally competitive with other NGOs

Today’s NGO is…Today’s NGO is…

• Looking for and becoming a strategic partner• Seeking collaboration opportunities• Consolidating back room functions with others• Sharing services and capacities• Merging

Singing to the ChoirSinging to the Choir

• Information technology has crossed this bridge long before their respective organizations

• Sharing is second nature• Natural to adopt innovative and multi-source

solutions for unique needs

Helping Your Organization GrowHelping Your Organization Grow

• By demonstrating successful collaborations in IT you can actually help your organization be more open to consolidations and structural shifts in other areas

• NGOs are not inclined to consolidate or merge

Major BarriersMajor Barriers

• CEO’s – reluctant to engage because of loss of status, title and autonomy

• Volunteers reluctant to engage because of seeing their organization as unique and feeling they have in some way failed the organization on their watch

The Gains are Potentially HugeThe Gains are Potentially Huge• Increased capacities• Gains associated with consistent and clear brand

promotion across the market• Less confusion among donors• Reducing fund request burden on regional charities

and agencies• Financial stability• Competitive and stable human resource models• Taking advantage of larger partner capacities • Economies associated with scale• Reduction of redundant functions

How Much is In Play?How Much is In Play?

• On average, the organization that we merge or consolidate all or most of their business functions will realize an immediate “savings” of about 4%

• Organizations that take a deep dive into operational restructure will move that metric to 8% to 12%

What are the Experts SayingWhat are the Experts Saying Tom Peters – In Search of Excellence Jim Collins – Good to Great Peter Senge – Learning Organizations Thomas Friedman – The World is Flat Peter Drucker – The Organization of the Future James Austin –Collaboration Challenge

“If your organization is not seeking formal partnerships, alliances and relationships with likeminded entities – you are falling behind and your potential for future success is limited.”

“If your organization is not seeking formal partnerships, alliances and relationships with likeminded entities – you are falling behind and your potential for future success is limited.”

“The twenty-first century will be the age of alliances. In these complex times, no organization can succeed on its own.”

Harvard Business Professor and Author James Austin, The Collaboration Challenge

“The twenty-first century will be the age of alliances. In these complex times, no organization can succeed on its own.”

Harvard Business Professor and Author James Austin, The Collaboration Challenge

CollaborateCollaborate

Memo of UnderstandingMemo of Understanding

Shared Service (Joint Venture)Shared Service (Joint Venture)

MergeMerge

DomescapesDomescapes

It’s About Mission not Money!It’s About Mission not Money!

DomeScapesDomeScapes

• Housing infrastructure in a centralized fashion with multiple facets that reflect to constituents a personal or direct NGO image

• In other words, as constituents approach the “organization” what they see reflected is the organization that is meaningful and shows value to them

• What is going on behind the scenes? Multiple organizations consolidated or merged into a single business enterprise

(almost like a holding company but with consolidated infrastructure)

DomeScapesDomeScapes

DomescapeDomescape• Our culture keeps us out of Domescapes,

collaborations and mergers• IT is about the easiest thing (philosophically) to

centralize because it’s viewed as mission supporting – not mission primary

• We tend to want to own and control everything that is mission primary

• Housing back office functions in a Domescape is a great start but won’t get you the agility and strategic mission impact you need to really make quantum leaps in capacity

• To grow and sustain optimally, you must be able to move the entire organization with agility and data driven decisions toward directed strategic goals

Domescape

Looking AheadLooking Ahead• We continue to look for ways to respond to the

economic difficulties that are still upon us• What’s next…

– More than 20 years since the last major tax law revision – one must be in the works soon

– The Government is looking closer at NGOs and varying levels of shifts in traditional tax advantage

– Certain types of charitable deductions will gradually come under more pressure

– I-Giving will continue to increase and require organizations to find their way into aggressive social network funding models

– Its not going to get any easier

Is Bigger Better?Is Bigger Better?

• Big and Medium Charities have more consistent income growth than smaller charities reflecting greater stability of income

• Smaller charities struggle to show real term income growth and are more likely to lose money than big and medium sized charities

• Bigger charities pay better and attract and keep a more experienced workforce

Charitable GrowthFrom 1980 – 2008

• Charities from $2M - $20M grew 8.5%• Charities under $2M grew 3.5%

Charitable GrowthFrom 1980 – 2008

• Charities from $2M - $20M grew 8.5%• Charities under $2M grew 3.5%

SOURCE: 2-6 Tenter Ground, Spitalfields, London, E1 7NH, UK Telephone: (020) 7426 8888Fax: 020 7426 8888 email: jonathan.baker@nfpsynergy.net

The Real MessageThe Real Message• Collaboration is a must for organizations that

want to thrive going forward

• Its not too late to start

• The more sophisticated you become, the more real data you will need to make appropriate organizational choices and decisions

• You will need one version of the truth!

A few lessons learned about consolidation and merger

A few lessons learned about consolidation and merger

• Don’t reject the idea of restructure• Have an open mind about what can be achieved• Focus on the vision of what a new entity might

become• financial capacity and stability is a huge advantage in

planning, execution and budget line item impact (ACS model)

• Don’t confuse issues of management with the opportunity to redefine a more impactful organizational structure

Download this white paper Visible But Unseen: Forces and Opportunities

Impacting Non-Profit Organizations www.mcc-group.com/White%20Paper.pdf

For more information, visit: www.mcc-group.com