NGO Connection Day keynote: Dan McCormick

Seeing in the Dark NGO Connection Day – a Nonprofit Summit April 21, 2010 Washington, DC Dan McCormick www.mcc-group.com

Difficult 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 Down Financial Volunteers Brand Value Mission Effectiveness Assets Under Management

NGOs Global Position
7 th 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 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 Crisis developed by the Nonprofit Finance Fund (NFF)

How are we Coping?
26% reducing programs and services
Waiting “it” out
Using reserves
Cutting staff
Redoubling fund raising efforts

Major 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 Management

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

Organizational 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 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 Gone
The New Organizational Life Cycle:
Start Up Growth and Development

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

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

Singing 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 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 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 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?
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 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.”

“ 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 Collaborate Memo of Understanding Shared Service (Joint Venture) Merge Domescapes

It’s About Mission not Money!

DomeScapes

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)
DomeScapes

Domescape
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 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?
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 Growth
From 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 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
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

NGO Connection Day keynote: Dan McCormick

by Lisa Malone

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