Ken Goldstein, MPPA

Ken Goldstein has been working in nonprofits and local government agencies from Santa Cruz, to Sacramento, and back to Silicon Valley, since 1989. He's been staff, volunteer, board member, executive director, and, since 2003, a consultant to local nonprofit organizations. For more on Ken's background, click here. If you are interested in retaining Ken's services, you may contact him at ken at

Saturday, August 28, 2010

Nonprofits, Foundations, And Capital Formation

 On Sean Stannard-Stockton's Tactical Philanthropy blog, he commented that "One of the most bizarre criticisms of the Giving Pledge is the idea that it will hurt the economy." He quotes Forbes columnist John Tamny, who wrote:
“But while it’s exciting to contemplate the giving nature of Gates and Buffett, if their true desire is to help their fellow man, they should hoard every penny of their significant wealth..."
Stannard-Stockton's  response is demonstrate how nonprofits contribute to the economy, saying, in part:
"Nonprofits employ people, nonprofits buy goods and services from for-profits, nonprofits are an important economic engine of the US economy. In fact, nonprofits are a bigger portion of the economy than many other industries."
Certainly, for all the reasons mentioned in his post, nonprofits contribute to and benefit the economy of our nation and our individual communities.

But, in relation to the Gates-Buffett pledge, there's another "dirty little secret" of why the Forbes readers (assumed captains of industry) should support philanthropy of this scale: Endowments.

Of the money pledged by the 40+ billionaires, most of it will not be heading directly to our community service organizations; it will be sitting in foundation endowments, being granted out at a rate of 5% each year.

With that 5% barely being the earnings on the endowment, where's the principal of that endowment going? It's being invested. It's purchasing stocks and shares of mutual funds. It's in long-term bank accounts, giving banks the capital to loan to small businesses.

If John Tamny (and Forbes Magazine) is sincere when he says that "money saved and invested constitutes capital... and... capital formation... naturally stimulates job creation" then he should be encouraging more billionaires to tie up their wealth in foundation endowments.

Yes, nonprofits help build the economy, both through our direct actions assisting in our communities with job training, treating addiction, feeding the hungry, distributing gently used clothing, and offering counseling, support, and affordable housing (not to mention enriching our lives through the arts, cleaning our environment, protecting our children, etc.), but our sector is also responsible for the creation of dedicated capital for investment, something that our nation desperately need right now.

Stand up for the nonprofit sector; the most productive sector of all.

Thursday, August 19, 2010

The Engaged Board Member

Here's a bit from a twitter exchange between @npmaven, @alexandrapeters, and @GailPerrync:
"A perpetual question! ... but I always wonder, what does "engaged" mean for a board?"
Unfortunately, my answer takes a little more than 140 characters, so it will have to be a blog post.

My first thought on "engagement" is that it is demonstrated by involvement beyond speaking up at board meetings: committee work, volunteering for tedious tasks (envelope stuffing anybody?), sending out minutes on time...

But that's simply activity. To some extent, it's busy work. Engagement goes beyond that, to less tangible, but far more critical, elements.

For board members to be fully engaged, they should not just care about the organization, but about the cause. The nonprofit's mission must be something that touches them. Even if they weren't on your board, they would still be reading articles about the issues you work on, and discussing them with their friends, and doing so in a way that demonstrates both knowledge and understanding.

An engaged board member doesn't need to be asked twice to solicit their friends for a donation, and doesn't shrink and hide when asked to speak to the press or elected officials on behalf of your cause.

The engaged board member is an activist, an advocate, and a leader, as well as a hard worker who shows up on time having read the board packet before the meeting.

What does "engaged board member" mean to you? Post a comment here, or join in the conversation at twitter: I'm there as "NonprofitKenG."

Monday, August 16, 2010

The Power of Zilch: An interview with Nancy Lublin

One of my pet peeves has always been when well-meaning, but somewhat clueless outsiders tell us in the nonprofit sector that we need to be "more businesslike." Yes, there's much that each sector can learn from the best examples in other sectors of the economy, but I've always believed that the corporate sector should be learning from us when it comes to efficiency and getting the most out of limited resources.

Now, to our rescue, has come Nancy Lublin, CEO of Do Something and founder of Dress for Success. Nancy has just published Zilch: The Power of Zero in Business, with eleven practical lessons for business leaders on how the not-for-profit sector manages to leverage the power of Zilch into mission success, by doing more with our brands, our external people, our customers, our boards, our staff, our finances, and our stories (and all with no budget).

After reading this great book this summer, I had the opportunity to speak with Nancy by phone this morning. Her lessons and leadership are great examples, not just for business leaders, but also for our peers in the nonprofit world.

Ken Goldstein: First off, thank you! It's about time somebody stood up for our sector and told the simple truth that our managers know how to do more with nothing than most corporate managers can do with million dollar budgets. So, I hope the folks in the marble-lined corporate boardrooms listen. But my readers are all in the nonprofit sector. What lesson or takeaway do you want them to get from your book?

Nancy Lublin: It applies quite well to small not-for-profit start-ups and entrepreneurial organizations, because they've got less to begin with. The good news is that there's many ways to leverage. The book is about leveraging everything. Like external people. Who delivers your mail? Who are your neighbors? Do you know if everybody you come into contact with is marketing for you? Are they communicating your mission to the people they meet, or are they saying you don't know what's going on in your office? Is your purpose clear enough that they can help with word of mouth marketing and spread the word to the people in their circles?

Many in our sector are saying, "We've already gotten by on Zilch, now we have less than Zero." In the current economic crisis, is there any additional advice you have for nonprofits, or is it "do more of what we've always done"?

I think they've been doing this really well for along time, my one piece of advice for nonprofits is to remain focused on your purpose, don't flirt outside your space. People say, "I'll fund you to do this other thing," and it's easy to get tempted, but it ultimately leads to disaster. It's called following the money and it's not a good idea.

Your advice on partnerships, to choose partners that fit your brand, is great. A lot of smaller nonprofits are under pressure these days to enter into mergers and alliances based on dollar considerations only. How much consideration should branding receive in merger talks?

I'm a big fan of M&A activity, and would like to see more of it happen. There is a lot of duplication in the not-for-profit sector. What I'd like to see is that it's the strongest, not necessarily the biggest, that survives. Often it's the shiniest star that survives, and that's not necessarily the best. There are lots of organizations that are beloved that are actually lousy. I think that what needs to happen in the nonprofit space is what happens in the venture capital space, they look at an entire sector see what works best before picking a winner to invest in. I keep encouraging funders and organizations to look at an entire space before making a decision.

I can't tell you how many times I've had to grit my teeth and not lash out at those who think they're helpful by telling us to "be more businesslike" - How do you handle that?

We've heard that so long, and there are some things they're right about... Some things... But there's ways they can be more like more nonprofits, and not by being soft and cuddly, but by adopting some of our business practices. Like incentivizing employees without throwing ridiculous paychecks at them.

When you talk about "doing more with external people" and turning every contact into "brand ambassadors" what are some of the creative ways you've seen small, grassroots nonprofits do this?

I think the most important thing to start with is a clear, focused purpose. Are you saying you're going to end all homelessness? You're not going to do it. Pick something you can achieve, like reducing homelessness by 20% in a specific area: something achievable and measurable. Something people can say "I want to be a part of this," and get on board. This is the first thing. Simplifying your organization to make it easier for people to get on board.

You have a great story in the book with the lesson of not confusing business with friendship, where a donor was basically paying you to be her buddy and listen to her problems. This can often be a very fine line to walk. Do you see it being crossed by many fundraisers?

Apparently there was a study that the Chronicle of Philanthropy put out a month ago about sexual harassment of fundraisers; it's apparently pretty common.

So what can nonprofit managers and fundraisers do, other than just be aware of the problem?

Taking meetings in an office is a good place to start. We've always assumed that you've got to "establish the relationship" with a lunch or dinner, but it's easier to say "no" to a friend. In an office, they may say "yes" just to get you out of the office.

In the chapter on "doing more with your staff" you're very clear about hiring people who are passionate for the cause and that job interviews should include personal questions to determine that. Personally, I love interviews like that, but I find more and more organizations that have been scared by lawyers into only asking standard, dry, job-duty-and-skill related questions. What reassurance can we give nonprofits that asking about hobbies is legal?

Obviously, you want to check with your HR and legal department, but everything [a potential new hire] puts out publicly is fair game, so I check their facebook and twitter feeds. You're hiring a complete person, not a robot. I wouldn't hire somebody with less than 500 facebook friends. I want their networks. If you're hiring somebody who won't pull in all those people, hire somebody else who will. We've gone a bit overboard with lawyers telling us how our businesses should be run. And that's spoken as somebody who's been to law school.

Should all nonprofits be using social media (twitter, blogging, facebook, etc.)?

Absolutely, everybody, yes, yeah!

When I teach grant writing and fund development, I always try to emphasize how important storytelling is - that numbers served or in need can help build a case, but that it's putting faces on those numbers that gets signatures on checks. Your chapter on "doing more with your story" really shows the power of that. What's your favorite story from a small, community nonprofit?

I think at Dress for Success my story of my great-grandfather [leaving me the money that started the organization] really resonated with people. It was really hopeful, it was about making a success in a new place, and it really related to the mission of welfare to work. And I hadn't planned on it, it happened organically.

How can my readers help spread your message?

One thing you can do to do learn how to do more with less is to buy a copy [of Zilch] for yourself, and buy one for a friend. The fact that every chapter ends with practical questions really helps. It's just a real smart, savvy business book.

Yes, each chapter ends with eleven self-evaluation questions, and there are eleven chapters. What's up with you and eleven?

The end of each chapter has eleven practical questions that should really make you think about your own work place and help you evaluate how you can do more with it. The reason it's eleven is to go one further, because we at not-for-profits always have to go above and beyond. That, and I'm obsessed with Spinal Tap.

Friday, August 06, 2010

What's Better than 40 Billionaires?

There's been a lot of media attention this past week for the Giving Pledge, an effort organized by Warren Buffett and Bill & Melinda Gates "to encourage the world's wealthiest individuals and families to commit to giving the majority of their wealth to philanthropy." The publicity and many of the news stories focused on the first forty billionaires to sign the pledge, and the approximate dollar value of those pledges (at least $120 billion).

Of course, this is wonderful news, and we all applaud each of the billionaires signing on to the pledge. but, as Jeremy MacKechnie points out on, Small Change Adds Up to More Than a Billionaire's Bucks. Jeremy writes,
"While some of the money will go directly to nonprofit organizations, the majority will end up in the private foundations that the donors started themselves, like The Bill & Melinda Gates Foundation, and will then be funneled into other nonprofits through grants or used to support the foundations' programmatic work."
Of course, the full potential of $120 billion won't be donated to those foundations at one time, and once endowed, the actual payout of it as grants may be over the course of many decades. So, yes, this may increase over-all foundation spending ever-so-slightly, but it's not the immediate cure-all donation that some of the media hype is implying. In the idealist article, Jeremy has another important reminder:
"Individual donations (like yours) currently make up 75% of U.S. philanthropy while foundations make up only 12%. Collectively, individual donations are more than six times larger than those of our friends in the billionaires' club."
So, what does that mean for you and your nonprofit, and more to the point, does it mean that the Billionaires Pledge is worthless to us?

No, the Pledge is still of great value to all of us in the nonprofit sector, if we put the appropriate spin on it when asked by our donors or the media how it will effect us.

The key is that Gates and Buffett never intended for the billionaires to cure all our problems. Their intention was to lead by example and to encourage giving by all, not just billionaires. As Larry Ellison said in his statement, "Warren Buffett personally asked me to write this letter because he said I would be 'setting an example' and 'influencing others' to give... I hope he's right."

So, when you get those questions about whether your organization will benefit from the Pledge, remember its purpose: "To encourage giving." Your message must be a positive one thanking all your small donors, and recognizing that they're your strength, not bemoaning that you can't get your hands on all that billionaire cash.

Of course, even without the prodding from Buffett and Gates, research has borne out that regular folks have always been more generous than the wealthy when it comes to charitable giving. So, with a little more encouragement from the Billionaires Club, who knows what you can do with your individual giving plan this coming year!

Bottom line, 40 billionaires pledging to give half of it away is really very nice, but small, individual donors are still the backbone of any fund development plan. Of course, if you need help with the fund development plan, you can check out my book on the subject ;^)

Reminder, I'm now on twitter under the name NonprofitKenG.