Forces For Good Podcast

• Launch Podcast

Today’s podcast is with Heather McLeod Grant and Leslie Crutchfield, the authors of the new book Forces for Good: The Six Practices of High-Impact Nonprofits. Forces for Good examines the characteristics of nonprofits that are achieving high impact. Heather’s been an advisor to the Center for Social Innovation at Stanford, as well as to many nonprofits. She holds an MBA and worked at McKinsey, consulting with for-profit companies. Leslie is a managing director at Ashoka, a research grantee at the Aspen Institute, and a philanthropic advisor to foundations and high net worth individuals.

During the podcast Heather and Leslie discuss the importance of nonprofit groups engaging in political advocacy, the difficult in measuring impact (and the flaws in Charity Navigator’s system of measuring efficiency), the need for nonprofits to engage their volunteers, and the ways in which nonprofits can learn from Web 2.0 companies.

If you post comments and questions in the Comments section, Heather and Leslie will respond.

You can read some background about the book and both authors here.

• Launch Podcast

Click on the link below to read the transcript…

Sean Stannard-Stockton:

Hello, and welcome to the Tactical Philanthropy podcast. I’m Sean Stannard-Stockton, author of the Tactical Philanthropy Blog and Principal and Director of Tactical Philanthropy at Ensemble Capital. My guests today are Heather McLeod Grant and Leslie Crutchfield. Heather and Leslie are co-authors of the newly released book, “Forces for Good. The Six Practices of High-Impact Nonprofits.”

Heather’s been an advisor to the Center for Social Innovation, Stanford, as well as to many nonprofits. She holds an MBA and worked at McKinsey, Consulting for for-profit companies. Leslie is a managing director at Ashoka, a research grantee at the Aspen Institute, and a philanthropic advisor to foundations and high net worth individuals. Thank you both for taking the time to speak with us.

Heather: Thank you.

Leslie: Thank you Sean.

Sean: Heather, why don’t we start with you. Why don’t you tell us a little bit about the book? I’d especially like to hear your thoughts on why measuring nonprofit impact is still a new field. The nonprofit sector’s been around for a long time. Why is it that we are still trying to figure out what makes a nonprofit actually have an impact?

Heather: Sure. Well the book is really about the six practices that some of the best nonprofits in America have used to scale their impact. So when we set out to write it, we wanted to identify the highest performing social sector organizations that have gotten to scale in really the last 30 to 35 years. We deliberately went through a rigorous methodology and selected 12 groups that we studied for several years. And then, from our research, we distilled these six practices.

So the six practices are the things that we’ve identified that have helped these organizations increase their impact. We really think that they are practices that the rest of the sector can learn from. In particular, those social entrepreneurs, like the Ashoka Fellows, and other nonprofit leaders who want to understand how they can be much more effective in their work and really, again, increase their impact.

I think one of the big challenges in the field today, as you’ve pointed out and as you write about a lot in your blog, is this lack of measurement. We faced this in our research. When we first set out to identify the 12 organizations, we immediately came up against the problem of a sector that lacks a common metric, as the for-profit sector does. So Leslie and I joke that Jim Collins had it easy, because when he wrote “Good to Great,” he could go out and look at stock market performance as the agreed upon metric of success or effectiveness, if you will.

Well, in the social sector, we don’t have that single metric, so we ended up using a very different approach in our research to identify the high impact organizations, more of a crowdsourcing approach involving a peer survey and lots of in-depth expert interviews. What we realized is that there are a couple of challenges around measurement. One is this question of kind of apples to apples measures. So, when you’re looking at an organization in the environmental field, how they measure their impact or their success is going to be very different from how an organization in, say, the education field measures its success, or in the arts field, or in housing and community development. So, there’s this problem of relativism between fields in the sector.

Secondly, as Jim Collins points out, in the business sector money is both an input and an output. So — he writes about this in “Good to Great and the Social Sectors”, and we believe it’s true — in nonprofits, money is only and input, not an output. So in business, you put capital into the company and then you measure your return on investment by profit, or total return to shareholders. So money is both the input and the output. In nonprofits, you use the money to fund the organization’s work, but that’s not how you measure your impact, because obviously, these organizations are filling in for market gaps. There’s this challenge again around money being only an input in the nonprofit sector.

That’s why we think that groups like GuideStar and Charity Navigator — many of the metrics that we look to right now are well intentioned but misguided, because they are only looking at things like budget size or overhead ratios as the measure of success. Right? They’re looking at how much money you spend on your program versus your administration. What we’re saying is that doesn’t tell us anything useful about their effectiveness. It only tells us about their efficiency. Efficiency is not necessarily correlated with impact, as we found in our research.

So we write about this a lot more in the book, about this challenge of measurement, and about needing to shift the debate in the sector to really focusing on outcomes or impact, rather than just looking at efficiency.

I guess the last thing I would say is we realize this is a challenge. It’s particularly difficult because often times, as we discovered in our research, social change takes a long time to see or to appear. Sometimes you need to be looking at the success of an organization over a 10 to 15 year time period. It’s not as short a time span as quarterly returns or the time scale that the financial markets use to track.

Additionally, there’s an issue of causality, because many of the groups we studied are real leaders in their fields. They build coalitions. They advocate. They change business behaviors. It’s not necessarily — it’s sometimes difficult to separate out who in this field has been the leader. Nevertheless, we believe, despite all these challenges, we really do need to move in the direction of looking at impact as the right measurement, rather than efficiency.

Sean: I think, as you both know, I agree with you 100 percent on this issue of examining inputs as opposed to outputs. I wrote about that in a Financial Times column, in which I cited your article, and talked about Charity Navigator. One way to think about what they’re doing, and this is what you already touched on, is this idea that because input, the costs, are easier to measure, that therefore, that is where most of the focus has been on. And yet, I think that we all agree, that it’s really the output, the impact, that makes — that’s the whole reason a donor’s giving to an organization in the first place.

When you think about individual donors, or readers of the Tactical Philanthropy blog, who maybe can’t do the kind of survey methodology that you did in trying to identify who — where should I be giving? Who are the high impact nonprofits? How can an individual donor even begin to scratch the surface of this issue? Leslie, why don’t you take this question and just tell us, how can we — other than just simply looking at the 990 or the cost inputs — what can a donor do to funnel their money in the right direction?

Leslie: Sure. Well, we believe that donors, whether they’re billionaires giving away millions every year or just everyday citizens who are supporting charitable organizations through their churches, their synagogues, or their local community groups, can actually use the six practices that we identified in the book to guide their gift-making. We believe these six practices really are useful as a proxy for judging which organizations are having, or really have the potential to create very significant results.

So, for instance, one of the practices that we write about in the book in the first chapter, called Advocate and Serve. One of the most interesting things that we found among the nonprofits that we’ve studied is that they all eventually engaged in both providing direct services — giving food to the hungry, building houses for the poor — as well as advocating for policy and lobbying for larger awareness about their issues. So they sort of refused to choose between just being an advocacy group or just being a direct services group.

For instance, in the field of women’s issues, you see groups like the Junior League, which engage legions of volunteers to serve in battered women’s shelters and lead clothing drives, and on the other end of the spectrum, you have NOW — National Organization for Women — which fights for things like abortion rights and equal pay for women. They’re both trying to advance the cause of women, but they go about it in very different ways. The best nonprofits end up doing both. Donors and volunteers who give their time — which is in many ways as valuable as money — to nonprofits should look to see the ones that are leveraging their services and engaging in policy.

Frankly, a lot of people shy away from this, even in this country where we have an open democracy. It’s perfectly legal for nonprofits to lobby and advocate for policy reform. We encourage donors to look for it even if it could be confusing from the outside.

Another thing that readers of the “Financial Times” column can consider is, when they’re thinking about giving their time as volunteers — President Clinton writes about this in his recent book that just launched, “Giving.” We all have so many ways that we can give to charitable organizations. One in two Americans volunteer — American adults volunteer in this country. We found some really great success practices that sort of distinguish some of the great nonprofits from others. It really has to do with how they engage these volunteers.

They don’t just treat volunteers as a source of free labor or a check; they really engage them in the mission of their organizations. Probably lots of your readers, people in this country, have participated in a Habitat for Humanity house build or a similar type of event. Great nonprofits really try and find ways to create meaningful experiences. If the nonprofits that you work with or care about aren’t doing that, you could go back to them and say, “Let’s find ways so that I can have a more meaningful engagement.”

Sean: You know, the last guest on this podcast was Robert Egger, who is kind of pushing the nonprofit primary project.

Leslie: Sure, we know Robert. In fact, he was a field expert for our panel of experts in the hunger area.

Sean. Sure, and just looking at the various ways that — the various approaches that the nonprofits you identified work with, DC Central Kitchen seems to line up with many of those. I was interested by this idea that you have that the best nonprofits are going to engage in policy advocacy. That’s something that Robert is pushing for on a field-wide basis. Yet, there’s a lot of resistance to it, that, “Well, we all don’t have things in common. And we really shouldn’t be sticking our nose into these political issues.” Why is it that you think that nonprofits who do this are more effective? Shouldn’t they just be focused on their specific issue and really on the nuts and bolts of getting things done?

Leslie: Well, it’s interesting. What you’re pointing out, with the challenge with DC Central Kitchen and it is endemic to the entire sector. There’s a lot of confusion, and frankly, uncertainty and fear around lobbying and policy and advocacy. It — you know, there’s a lot of stereotypes that go along with it. You have this image of fat cat lobbyists on K Street doing big lunches with politicians. It has sort of a sleazy aura to it.

And yet, whether you’re a corporation or a nonprofit, if you believe in the causes you’re involved with than you sort of have — we believe you have a responsibility to go and engage in the debate. We have a free, an open country and many of the nonprofits that we studied really overcame the same fears and uncertainties that lots of charitable organizations have today.

Just one example, America’s Second Harvest, which is the nation’s network of food banks, so DC Central Kitchen is a member of America’s Second Harvest. That organization and all their member food banks, for decades, really didn’t engage officially in policy advocacy at all. And then what happened was, in the 1990s under welfare reform under President Clinton, you saw a movement to eliminate many of the programs that really sustain hungry people in this country, food stamps, EITC, and other programs.

So America’s Second Harvest had this huge network of food banks and all the volunteers and supporters that fund and work with the organization. They said, “We have to get involved with this. Otherwise, we’re going to see food stamps zeroed out. We’ll see the EITC cut.” That’s the Earned Income Tax Credit program cut. ‘We’re not going to be able to do our job of feeding hungry people.” Instead, they fought to just not only keep those programs but expand them. Since America’s Second Harvest — and many of the other groups involved with fighting against hunger, like FRAC and like The Center on Budget and Policy Priorities — they worked together in coalition to protect and actually expand these programs so that more hungry people could be served. Now, across the America’s Second Harvest network, it’s taken for granted that they’re going to be involved in policy advocacy, because on the ground, they saw more food, more agricultural products — pasta, beans, rice — coming through their doors so they could do their jobs better.

We write a little bit in the book about how some of these organizations were able to change their mindset. But we will say, it’s a common issue. We believe it can be overcome even if an organization didn’t start out thinking that way.

Sean: We have time for one last question, and Heather, I’d like to direct it to you, with your background in consulting to both nonprofits and for profits. One of the things that I run across, and myself coming from the business side of investment management, is a that a lot of times people who have their entire careers, or most of their careers, in the nonprofit sector have, what I think is a misperception, that for-profit businesses are run through very extensive data analysis or financial management. But in fact, when you think about really outstanding companies like Apple or Starbucks or Google, I’d argue that their success is really predicated on their focus on mission, not so much through number crunching or bottom line analysis. When you think about the characteristics of success that you identify in your book, how and why are they different from just the best run for-profit companies?

Heather: I think that’s a really interesting question and I think, in particular in my work, I’m very interested in this question about what we can learn from the other sectors. I think we’re seeing those lines begin to blur and break down as more nonprofits start for-profit subsidiaries or social enterprises, as more for-profits become concerned about social responsibility. Certainly, this is the focus of the Center for Social Innovation at Stanford, where I work.

What’s interesting to me, when we set out to look at these organizations, we had sort of — we had our — Leslie and I joke, we had our MBA slash consultant hats on. We went in looking for the classic management silos, if you will, around marketing and financial efficiency and brand, and in the nonprofit sector, things like building your board and so on. These kinds of myths of for-profit management applied to the nonprofit sector, if you will, don’t always hold up. So if you just took the kind of business school textbooks around what makes for a well-managed company, and applied it to nonprofits, you’d be missing half the picture.

What we found is actually something quite different and quite interesting. We actually think that the nonprofits we studied in many ways have more in common with Web 2.0 businesses, for example, then they do with the IBMs or Microsofts. For one thing, these organizations are all incredibly mission-led, as you’ve already pointed out, that the mission is front and central. They are about a cause. They are also about building movements, or networks. So they build social networks, as we explore in the “Inspiring Evangelist” chapter, where people get really involved and care about the cause of this organization so that they become advocates for the cause. So these nonprofits are really empowering people to take action on their own.

Additionally, they build nonprofit networks. They work through a kind of network structure rather than a kind of more traditional corporate command and control structure.

In addition to working with businesses, I think another great example of these nonprofit organizations actually engage the corporate sector in helping change their behaviors and making markets work more efficiently. What we found was quite surprising, that these nonprofits are actually very leading edge, that they are showing us new forms of managing, engaging people, and having impact that are not really textbook examples we’ve inherited from the corporate sector.

In many ways, I think it would be interesting to have a Google or an Apple, as you suggested, sit down and talk to some of these nonprofits, or even a FaceBook or Wikipedia, and explore some of the commonalities there. I think these nonprofits really are showing us a new way, not just for the private sector, and how the private sector can be more socially responsible, but they’re also showing us a new way and coming up with innovative examples for government. We think policy leaders in government need to be looking to these most innovative nonprofits for new solutions to problems that have plagued us for decades.

Leslie: You mentioned companies like Apples and Starbucks and Googles. All those companies are led by quintessential entrepreneurs, right? Steve Jobs, Howard Schultz, Larry Paige and Sergey Brin. Entrepreneurs, in the end, really aren’t driven by profit either. The true entrepreneurs want to build things. They want to see great companies grow. Steve Case, the founder of America Online, who wrote the forward to our book, they didn’t get in it necessarily for the profit. They got in it because they love the technology. They’re revolutionaries in their fields.

It’s the same thing with nonprofit leaders. All or the leaders that we write about in “Forces for Good,” they’re social entrepreneurs, whether they would call themselves that or not. They’re entrepreneurs, but they just put themselves in the charitable sector. They have social purpose organizations. You’re point about those companies being mission driven. Our nonprofits are obviously mission driven.

We actually think they take it a step further. In “Good to Great” Jim Collins writes about the level five leader, right? Great corporate leaders put the interest of their company even above their own individual ego needs. Well, in the nonprofit sector, we see it kind of layer out — we joke it’s the level six leader. Great nonprofit leaders not only put the interest of their company or organization ahead of their own ego, they put the entire cause ahead of their individual organization.

Sean: Right.

Leslie: So, for instance, with the Heritage Foundation, it wasn’t about necessarily getting Heritage’s name out there, it was about building this conservative movement, which led to the Republican takeover in Congress in the ‘90s, and a number of other wins for the Right.

Sean: That certainly makes a lot of sense. And so the entrepreneurialism may be what makes mission focus.

This has been the Tactical Philanthropy podcast. You can visit us at tacticalphilanthropy.com. You can learn more about Heather and Leslie, and buy a copy of their book at forcesforgood.net. Thanks so much for listening.