Last week I wrote about the nonprofit FORGE, who’s executive director Kjerstin Erickson has been using her blog on the Social Edge website to chronicle the effect of the financial crisis on her organization. For FORGE, this isn’t just an experiment in radical transparency, they are in very real danger of going out of business. Admitting this publicly, might 1) attract attention to FORGE and bring in more donations, 2) scare donors away who don’t want to fund an organization who might not exist next year, 3) result in a totally unexpected outcome that could be positive or negative.
Yesterday, Kjerstin started sharing details of their fundraising year to date and how they are dealing with their failed direct mail campaign (which was mailed out in the midst of the meltdown in the financial markets). I don’t know Kjerstin, but as I mentioned last week she engineered a way to grab the money raised in my One Post Challange last year. After I blogged about FORGE last week, Kjerstin asked to meet with me to talk about her situation on Friday of this week. So today I’m asking the Tactical Philanthropy community what advice you have for FORGE. Leave a comment or shoot me an email. Is Kjerstin doing the right thing by blogging about their troubles? Is she out of her mind? They only need to raise $100,000 by the end of the year. How can they leverage their willingness to embrace radical transparency and their social media savvy to sidestep the financial crisis and continue pursuing their mission?
You raise a good question, Sean. Generally we teach the nonprofit staffers who take our classes NOT to focus on their need, but rather how funding them will have a positive impact on the community. Smart investors / funders care about the impact their dollars will “buy” not about how much you need their money.
The one exception are those who already buy into your mission and know the impact you are having in the community; these folks might be motivated to step up if there was danger of your work disappearing. But they don’t want to have to step up repeatedly. At some point they’ll start to question how you’re running your organization.
This is a great question, and I love that you tossed it out to your readers. I must admit that I am not convinced that FORGE’s transparency is going to help them. I think they should be honest when donors ask questions, but I am not sure that actively advertising this challenge is going to bring funding. I think in a way donors are like bankers – they only want to give you money if you don’t seem to need it. People see financial solvency as a measure of success and competency, and they want to give their money to competent successful organzations.
I’ve been reading about FORGE and Kjerstin and the whole thing perplexes me. Do they really only need $100,000? Where is her board in all of this? What about her most loyal donors? Could she not go to a couple of them and ask for an investment? Surely, 4 people at $25K is not too much to ask.
I’m also troubled by the four reasons she sees that led them to this situation. A badly timed direct mail is unfortunate, but to me that says that they need to diversify their funding base. And grow some major investors. Especially with such great results and a compelling story to tell, I would think those would be an easy sell. What about going to one of the many foundations in the Bay Area and asking for growth capital to help them fund a Development person?
It will be difficult, if not impossible, for them to fund a shortfall. No one wants to support a sinking ship. But if she can roll the shortfall into an argument for how they are going to transform the organization, build capacity and sustainability to ensure that not only does this not happen again, but that they continue to grow and gain more results like the ones they’ve seen. If she is truly committed to continuing the work of FORGE they have got to think long-term and find sustainability. And that has to be part of a larger vision and plan for how they build capacity and sustainability not just right now, but more importantly, for the long-term.
It seems very short sighted to have a fire sale to raise $100K. That’s not long-term, that’s not strategic, and that’s not sustainable. It has to be a larger conversation, a larger goal.
A couple of things spring to mind about FORGE. I’m just going to lay them out for your consideration.
1-Transparency is good. I’m a big fan of telling it like it is. However, I would want to know if FORGE was strategic in who they told. Just like there are different levels of givers to any organization, there are also different levels of engagement w/ a NFP (as I’m sure you know). The amount of money an individual gives is not always tied to the level of involvement they feel they have with an organization (think P.E.O.).
So, sending out an update is good but targeting certain donors is really important. Not everyone needs the same amount of “truth”, right? I’d be interested in knowing what the last few years of direct mail (I’m including ALL communication with donors under the DM umbrella for simplicities sake) was like and how FORGE kept track of responses. How did they care for their donors? Did they move them through P.E.O.?
2-I would ask FORGE who their wise counsel and advisers are. Do they have a board and if so, what has the relationship with the board been like? If it’s been less than outstanding have they had any other partners or foundations they could turn to for advice and counsel? Bottom line: Has FORGE been wearing too many hats and/or not had the benefit of more than one “head” to help with strategy and execution?
3-Is there a follow up plan in place in case the money doesn’t come in? Do they have a contingency budget? If the money doesn’t come in, how long will FORGE last? How long will it take to close its doors? Will they have to close their doors or do they have a backup/bare bones plan that they can use to keep serving their target population? Not all donors will give or can give in the time frame FORGE has given. Crucial in my mind as a giver would be feasibility. IF I knew I would be able to give or IF I thought I might want to become a partner with them, BUT, I wanted to ease into it, knowing FORGE would still be able to stay on mission would be paramount for me. I would understand if they had to radically downsize (not that they don’t already operate lean and mean) but I would want to know, to be able to SEE in detailed, written plans, that FORGE would still be serving. IF, because of lack of money, they simply shut their doors and move on to the next thing, that would be a strong indicator in lack of passion/commitment to the cause FORGE is asking me to support. Mind you, I GET where they are at because the NFP I work for is facing the same thing, but our constituents are also being kept up to date about our back up plans and are being given as much notice as possible as to what our level of service might look like during these rocky financial times. I would urge FORGE to see if they can do the same, even if it’s to let donors know that they will be operating out of a cardboard box and backpack in a youth hostel in order to ride this storm out. (Extreme, I know, but you get the point.)
4-What plans have been put in place to diversify funding streams? How will I, as a donor, know that FORGE won’t be back in the same situation next year?
5-Does FORGE have any partners? Would they consider combining forces with another ministry to leverage resources be they time, talent or treasure?
6-Who does Kjerstin have-in her corner- to support her? Who do her fellow workers have to support them? If the money doesn’t come in, what would the FORGE employees do for their livelihood? There’s a common phrase in Christianity when those who feel called to serve in ministry don’t have the funds or support to do so full time. “Tentmaker” is the word that is often used and it is a good one, if you ask me. It means working at a job to bring in a paycheck while working in your calling, part time. The idea is that in time, you’ll be able to step into full time ministry in a few years. In the case of FORGE, would Kjerstin and the others be able to be “tentmakers”? If I were a donor who could give but maybe not immediately and/or in large amounts, it would give me a sense of trust/safety if I knew that FORGE could still support themselves even if it meant they had to scale back on their outreach or plans for growth.
Thanks for what you do, Sean.
(I wrote this response before seeing the second 2 comments, so will respond to their thoughts separately)
Hi Kim and Alanna,
Thanks for providing your feedback. I have to admit, I have the same doubts as you do about whether ‘going public’ will end up helping or hurting. It certainly adds a new dimension to the equation that donors have to consider, and one that potentially prove to work against us more often than not. The problem that we realized we were confronting is that we simply had not built a large enough network of supporters and donors and to communicate with in the first place, and didn’t realize it until it was too late to build the traditional way. To put it simply, we had neglected our public presence and found ourselves paying the price.
Does this show weakness? Absolutely. We (I take most of the responsibility) made some pretty naive/inaccurate assumptions about the way funding would work under our new model, and that says something about FORGE and my judgment. What I am hoping is that those that are out there listening are able to decouple strength in marketing and fundraising with strength in strategy, programming, and impact management. Maybe that is too much to ask, and some people will probably decide that the two fundamentally require similar skillsets and focuses rather than different ones. The fact is that we built the strength of our programming and model on a willingness to seek out and admit weaknesses, faults, and shortcomings, and we know little other way through this financial crisis than to do the same. We failed to build the proper brand and network to get through these times comfortably, and we can only hope that the awareness generated by being forthright about our struggle will expand that network.
I have been following along and just want to let you know that I think you’re doing fine.
Definitely a fan of your transparency, and these days my feeling is that being different can only help.
However, I do agree with many of the other posts. You may already have answers to all these questions, but since you’ve now been public about the problems you’ll be forced to have good answers. What are the strengths of your organization? Why are you the best investment for my money? What specifically are you going to do with the $100k? And what got you into this predicament – do you need to re-constitute your Board? What’s your plan to not be in the same boat next year?
I second David. You’ve done an admirable job of explaining the problems. Now I’d like to hear you explain why your program is great and then layout what kind of capital you need, not just to make this year work, but to make your new model work. It seems that under your old model, you had the operations in place to run sustainably (at least for a time). But your new model, while increasing impact (according to you), seems to require a more organizational capacity. It seems to me that your fundraising capabilities need to be enhanced (you don’t just need more donations, you need the capital in order to increase your future ability to raise money).
So tell us why your new model is delivering high impact and what you need in terms of capital to build the internal capacity to not run into the same problem next year.
You’re right – I do have a lot to answer for! I started compiling the questions/answers and realized that there was too much to just post in a comment, so I broke the questions into two types and will be posting my responses on my blog. The first types were the “why is FORGE worth our attention” questions, and the second types were the “how did you miss your target by this much and how are you going to avoid doing it again” type-questions. The first part, on why FORGE is worth investing in, is already up at http://www.socialedge.org/blogs/forging-ahead. The rest of the questions I will be tackling tonight when I get back from a series of meetings.
I just want to say that I very excited and grateful for the dialogue here and the people who have taken their time to ask the tough questions. I hope that I will be able to answer most of them satisfactorily, and that if I dont, you’ll let me know! I’m still young, and I’ve made my share of mistakes, but I think that I’m a quick enough study to turn things around for my organization (and yes, never get to this place again!).
I read your other entries on the Social Edge blog and your comment about not fitting with most grant guidelines because you didn’t focus on an outcome like clean water, schools, etc. I think you should be researching the foundations who focus on “society & social justice,” “civil society,” “international peace and security,” “international development,” “community empowerment.” I did a very quick google search and come up with several lengthy lists of opportunities. Those foundations will get exactly what you are doing. (And it does appear, looking at your financials, lack of foundation funding is glaring. But given what great individual support you’ve got, I would think that would make you that much more attractive to the foundations).
It was interesting to read your strategy and approach responses, you definitely seem to have the passion required! However, and I’m sure Sean can speak to this more effectively (and I’m in no way a fund development expert), but there is a missing element: the impactful outcome. There was only one statement that alluded to what you have already accomplished, being that trainees thought they could replicate. There may be pieces of this in other parts of your site which I didn’t see, for which I apologize.
What I would want to know, or to share with prospective donors, is that for X dollars you are expecting to pull Y refugees out of poverty, and history has shown your success through examples A,B,C. It may not be that simple of an equation, but I assume you get the idea – it’s about the measurable outcome, as best you can find a way to measure it. Tell me how effective you are with the money. And if you have comparisons, why you’re more effective than others.
I am so excited that there are a group of people engaged in helping FORGE figure out what’s ultimately wrong and what can be done about it, so I’m trying to answer your questions as thoroughly as I can. Here’s the next one:
1 Do they really only need $100,000? How will I, as a donor, know that FORGE won’t be back in the same situation next year?
The answer is yes, in that $100,000 is our shortfall on this year’s budget, but no, in that we obviously haven’t built the capacity to raise our full budget in a year. So we not only need to raise $100k, we need to fundamentally reorient and reevaluate both the sufficiency of our development resources and how we spend them. One thing is clear to me: we need to be devoting more of our time and resources to building our relationships and networks, as well as building the size and capacity of our board.
Still, I’m fairly confident that we can manage to do this without fundamentally adding much to our bottom line, but rather by being savvier about how we divide our time as a staff. We’ve learned a lot this year about what works and what does not work, and where we’ve gone wrong. We’ve also increased staffing levels in our domestic office, allowing me to take on more of the PR, development, and donor stewardship responsibilities that will help FORGE grow. The two main additions that I’d like to make to our bottom line which would be extremely helpful are:
a) Hiring a part-time admin/finance person to take over the accounting and other legal responsibilities (For the past 5 years I’ve been the one managing the admin, including our taxes, and it probably isn’t the best use of my time). Estimated cost: $25,000/year.
b) Building a modest budget for website engineering cost to increase donor conversion on the site. (right now we can’t afford any re-engineering). Estimated cost: $15,000/year.
If those two things could happen, and if my DD and I can concentrate on Board Development and relationship building, I’m confident that we can bridge the gap in our budget. Despite the economic downturn which just made things all the more severe, FORGE’s fundamental problem this year is that we were confused about where money would come from for our particular venture. When we changed our model, we did so consciously – we knew we had to have the staff resources to be able to spend on bridging our budget gap. I think what we did wrong, at the most basic level, was to invest those resources in writing grants and applying for prizes rather than building our network, working the phones, and getting our message out there (we were also building the new website, which I strongly believe will pay off in the long-term). So if you look back at my blog over the past 2 years, you’ll notice that I wasn’t so great at publishing every week. I was prioritizing the latest deadline over communicating with the public. That’s the kind of thing that needs to change if FORGE is going to stay viable and build sustainability. I think this is especially true of international NGOs in particular, whose results can’t be seen and felt by the majority of the organization’s investors.
I don’t think that I can completely answer the question of how will you as a donor know that FORGE won’t be in the same boat next year, but I can provide you with the information on what we are doing to avoid it for you to make your own judgment of faith. More on the subject of what we are doing to avoid it will come out in the answers to the rest of the questions…
You guys may get sick of me soon, but you asked so I’m answering! Here’s my responses to the next set of questions:
2) Where is her board in all of this? Who are their wise counsel and advisers? Bottom line: Has FORGE been wearing too many hats and/or not had the benefit of more than one “head” to help with strategy and execution?
So our board is small (definitely too small), and a bit of mixed bag. Two of our Board Members have been tremendously active fundraisers (one pulled together the Boston for Africa fundraiser that generated about 30% of this year’s revenue, and the other continually pulls in private donors). One is a former refugee who is great on programming advice and a habitual donor himself, but isn’t able to offer much in the way of direct fundraising. Then we have two that have been much less active in the way of fundraising in the past year. We are very aware that we need to be building the board out and increasing its development role and capacity, but going back to the whole not-building-out-a-great-network issue we hadn’t run across the right people and weren’t actively looking to find them like we could have been.
As for wise counsel and advisers, we certainly have some (including an Alumni Consulting Team from Stanford, a few VC-types from Silicon Valley, the principles at various foundations/organizations that we have and have not received funding from, several professors at Stanford that helped with the build of our Collaborative Project Planning Process, and of course our Board). However, I think that we have missed out on having enough diversity on our funding and marketing advice in particular. Perhaps if we had some advisors who had gone down a similar path, we would have realized earlier our missteps in putting too many eggs in the grants and past donors baskets. That’s a large part of why I’m writing this blog – in case it can be of any help to others in similar positions. Every org is positioned differently for funding, but perhaps some will find our learning curve helpful.
As for the question of wearing too many hats, I think that the most constraining hat I personally have had to wear is that of finance manager and accountant. If I could get that off my plate, I’d be a much happier camper! Other than that, we’ve always had a lot of heads to help with strategy and execution on the programmatic front, but not much at all on the development front. Although that is certainly starting to change as we put it all out there to the world and have people like yourselves dig in. Its deeply appreciated.
This is a very interesting thread. There are undoubtedly many other organizations in the same boat as FORGE — except I don’t know who they are, I haven’t looked at their Web site, and I certainly didn’t just spend 20 minutes of my life thnking about strategies that might work for those other orgs.
I think going public with this was a smart move. If 99 people criticize you and 1 person ponies up a check for $25K, it was well worth it. Besides, as Sean has pointed out, you have the added benefit of being one of the first to do this (at least in this forum). Perhaps you can ride this wave to the next level? Try elevating the discourse. There are a ton of reporters writing stories about how this economy is impacting the nonprofit sector. They’re looking for organizations to showcase and nonprofit leaders who will be transparent. Most importnatly, their writing for a more mainstream audience than this forum offers you (no offense to my esteemed peers and colleagues).
The holidays are upon us, people are still giving, and you have become the center of a social experiement. I for one think you are being handed a special opportunity. Keep up the good work.
I promise I’ll be quiet after this post, but I wanted to suggest one thing: I have seen success with organizations that have a great mission and passion and strategy (as FORGE seems to) by focusing on finding grants that allow that next level of fundraising. For instance, can you focus on finding a grant or large donor to give you $50k to hire a full-time development person or event coordinator or whatever for a period of time. That’s a very concrete number with a very concrete outcome that should greatly further your mission. A good person entirely focused on this effort should easily pay for themselves – when you’ve got a good mission and organization to back it up.
Our local CAF (http://www.challengedathletes.org/) is one great example. They used a grant from a local corporation to hire an event coordinator that put on a single event that netted over $1 million, a huge leap forward for CAF. Never would have happened without one person’s complete focus and dedication.
I’m with David. I sent a link to a foundation a few days ago to the info. email on FORGE’s website. I know some of us have access to funders and information/connections that might not be on Kjerstin’s radar. If she was up to it (are you?) would you guys be willing to send her your leads?
This would be a huge leap in eliminating the “scarcity mentality” that exists between NFP’s. I, for one, would love to show the world that there is enough funding for everyone and that, by combining forces (be they brain power or brawn)those of us who are invested in changing the world, can do so.
So, Kjerstin and the rest of you guys, what do you say about getting a little help from your friends?
I wish I could keep up with you! I have a few main points of response:
1) Rich, I like the idea of ‘elevating the discourse’ to more traditional print media. That’s something we’ve been considering, and even written the press release for, but haven’t yet pulled the trigger. It will be interesting to see how something like this story plays out in traditional media, as there isn’t the forum for the engagement of the conversation and feedback loop that I’ve found so useful online. I’ve liked that people’s options for responding to my blogging have been multifaceted: some ask questions, some make suggestions, some commiserate, some criticize. It seems to me that the print media presents more of a binary choice – donate or not – and most people aren’t ready to give at that point in the process and will simply move on. But maybe its possible to link the two?
2) David, thank you for the comment about the missing impact outcome. You are right-on there, I neglected to mention our results or explain why I was leaving them out. They are indeed on our website, at http://www.FORGEnow.org/content/results, and from that you can see the direct impact of our work (more M&E data on learning and leadership outcomes to be released at end of year). I think that why I personally tend to emphasize the strategy and the approach aspect of FORGE is that its what makes us unique. Anyone can build libraries and run health outreach initiatives, and these things do have direct, quantifiable impact. However what FORGE is *most* interested in is the long-term, and for that we believe that the our strategy and approach give a simple project like a computer training center an exponentially leveraged impact. That’s my thought process behind emphasizing the approach & strategy, but it doesn’t justify just leaving it out. Victor d’Allant, the Executive Director of the Social Edge, told me the the other day that I should try to talk more about the details of FORGE’s operations, otherwise it can come across as a generic venture! Its a point well-taken.
3) Leanne, thank you so much for coming forward with this lead/recommendation. As I said via email, this is exactly what we need! Oftentimes, I think that nonprofits (especially small ones) are just missing links to the big-picture of whats out there. It helps to have supporters out there keeping their eyes and ears open for possibilities to pass along. This is what I’m talking about when I say that FORGE an I should have put more energy into building a network!
Thanks again to all. Looking forward to my meeting with Sean tomorrow…
Kjerstin, mainstream media coverage would be great for you. The hook that would appeal to the journalist would not be “a great nonprofit is in need” (there’s a ton of those stories), the hook would be “a nonprofit takes a unique approach to the financial crisis by embracing radical transparency”. The core of the story would not be “donate or not”, it would be “look at the amazing thing this nonprofit is doing”. The outcome for you would be strong third-party validation of your efforts and a great piece to provide to potential funders.
You should get that press release out next week. Make sure you pitch the story with the right hook, not that you need money, but that you’ve gone transparent.
Rich, any thoughts on the press release?
Glad you both agree that there is value to elevating the discourse. That said, I’m not convinced that there is a press release here. Until this “social experiment” proves to be success (however “success” is defined), the story is not yet complete.
A more practical approach for now, might be to reach out to a handful of reporters that cover the nonprofit space, and let them know that FORGE is taking a very unique approach to weathering the financial drought. Suggest that as they prepare stories looking at how the NP sector is being affected by the economy, that they might like to speak with you.
These are just some of my quick, initial thoughts (as I scurry off to a meeting). Would be happy to share more on this later and to hear from any other marketing pros in the community. Always nice to hear what others think!
It?s a double-edged sword. When we advised participants that percentage returns on several of our AIDS Ride events would be low back in 2002 ? because of low registration for the event, and in the interest of total transparency, we were brutally criticized. Until society has a deeper understanding of the realities of nonprofit business operation, i.e., until it dispenses with this ridiculous notion that 100% of funds should go to the cause, and that no charity should ever fail at anything, even in the interest of learning, like the giant film studios do, too much information can be detrimental to the cause. That?s why so many organizations fold their real accounting into larger summaries, making it impossible to discern the accounting on events and specific operations. I think that?s a shame, because it obscures the data pool. But let?s face it, society still has very Puritan ideas about charity, and that?s what we need to change. If society had a more sophisticated view, it would be interested in failure as much as success, because failure informs future success. But the current paradigm demonizes failure, which is demoralizing and utterly counterproductive.
At the risk of going completely off topic in a public forum… I have to say that Dan Pallotta (who made the last comment) changed my life!!
Dan – I did your Boston-NY AIDS ride in 1998, the Alaska AIDS ride in 2001 (day 2!!!), and the Bear Mountain-Boston AIDS ride in 2002. The Pallotta TeamWorks AIDS rides got me into the sport of cycling, they turned me into an aggressive fundraiser for the first time in my life, and most importantly, they were the impetus behind my leaving a PR job in the technology sector to start an agency dedicated to “communicating good.” I hated the way you were vilified by the media back in 2002, particularly after being so profoundly impacted by the work you were doing.
So to bring this back on topic… I don’t purport to understand the minutiae of nonprofit accounting. I do know that nonprofits are businesses – and that means they need to make money. Still, we have a long way to go until the average person is comfortable with the idea that their charitable funds are going towards anything BUT the “cause.” Perhaps the answer lies in redefining what is meant by the “cause.”
Anyway, great to hear from you. If you’re ever in Boston, I’d love to go for a ride.
Hi Dan, good to see you pop up here. It is always fun to see the connections between Tactical Philanthropy community members become visible. I’ll be working on better connecting readers over the next year (with the Forum being a start).
Addressing your point, Dan, I think you’re completely correct. However, since FORGE only needs something less than $250,000 to both close their budget gap and “fix” their organization, my hope is that they can attract a small set of funders who “get it” via the visibility of this discussion. If FORGE is “saved”, it will provide a case study of a nonprofit that succeeded due to their transparency.
Thanks for the acknowledgment. Send me an e-mail some time at firstname.lastname@example.org.
Sean it would be great if FORGE found the assistance they need through your site.