On October 21, I called the Forging Ahead blog “The Most Important Nonprofit Blog” because of the way that executive director Kjerstin Erickson was embracing radical transparency in response to their fundraising crisis. On November 3, the Tactical Philanthropy Community responded with a number of offers of assistance. The lead assistance came from Curtis Chang of Consulting Within Reach. At my request he agreed to offer FORGE pro bono consulting with the stipulation that he too would embrace radical transparency and both release his final report to the public as well as blog about the process on the Forging Ahead blog. (For more on “radical transparency” see “The See-Through CEO” which appeared in Wired Magazine in March of last year).
Through out all of this, FORGE has been working with the various members of the Tactical Philanthropy Community (including Rich Polt of PR firm Louder Than Words) to build a sustainable strategy. They’ve also already raised over half the money they need to close their budget shortfall.
Today, Curtis’s final report is being released. Both FORGE and Curtis hope that you will add your thoughts and comments. You can read an executive summary below the jump or you can click here to read the full report.
The Road Map for FORGE
By Curtis Chang, CEO of Consulting Within Reach
In the beginning of November, I was engaged on a pro bono basis to provide FORGE with a road map towards long term sustainability. You can read here for more about how this process got started. The goal was twofold: 1) give FORGE actual guidance going forward and 2) give potential donors a sense of the organization’s long term prospects if it survived its immediate financial crisis.
As has been true during this brief experiment in radical transparency, Kjerstin and I have agreed to release this document for the benefit of our sector’s shared learning. You are invited to engage with your questions and comments.
1. FORGE as a pathfinder
FORGE has found a new approach to African refugee camps that seeks to transform these “warehouses of pity” into opportunities for education, job training, and other forms of development. As far as can be ascertained, there is no other entity – either as a NGO or formal government body (including the United Nations) – that is pursuing this paradigm.
FORGE thus has already succeeded in the main task of a “pathfinder.” By “pathfinder,” I am referring to the way that a large convoy figures out where it needs to go when it finds itself lost in new territory and uncertain of how to proceed.
Two risks a pathfinder especially runs are a) running out of supplies; and b) losing touch with the main body. Ironically, a pathfinder can succumb to these problems even as it succeeds in its main task: the new route may be so far from the well worn path that the pathfinder ventures beyond the radius of safety.
FORGE has yet to learn how to manage these risks in an optimal fashion. It discovered its promising new route, but with the danger of a) running perilously short of funding and b) neglecting to network enough with more established parties.
Its immediate difficulties are traceable to its inexperience in balancing the rewards versus risks inherent in the path finding endeavor. I have elsewhere pointed out specifics of this inexperience, such as its messaging to potential donors, or the funding model.
However, it is important to reiterate that these difficulties only surface meaningfully for a pathfinder who is fulfilling its core mission: forging ahead far beyond where most felt it wise to stop. The ones who stay well within the radius of safety are rarely the ones who discover the new route.
2. Critical needs: fundraising and networking capacity
Now is the season for building FORGE’s own financial supply line and its relationships with the main body.
This reorientation is especially critical for Kjerstin. She has spent the vast majority of her time on program issues. By her estimation, less than 5% of her time has been spent on networking, and only slightly more on direct fundraising. In the future, she needs to spend more than 60% of her time on these functions.
While the priority of fundraising should be obvious, it is worth noting here why networking more broadly is also very important. There are three main reasons:
- FORGE needs more outside validation and legitimacy. This lack is most evidenced by the absence of any established expert in the refugee field on the board. Addressing this problem requires that Kjerstin get out there regularly in the settings where thought leaders in the field congregate.
- The organization needs to broaden its donor base, especially with foundations and high net worth individuals. This is only going to happen by developing a broader set of relationships than the ones FORGE currently owns.
- Finally, the role of a pathfinder is to bring its findings back to the main body. It may very well be that in the long term, FORGE’s most scaleable influence will not be in the number of refugees it directly serves. I am unsure given all its limitations about how high its numerical growth ceiling can be. But I am convinced it can and should diffuse its ideas. For instance, it may be that FORGE will make its ultimate contribution by getting the United Nations Commission on Human Rights (which oversees most of the relief work in the camps) to incorporate aspects of its developmental model.
3. Short run tactic: pulling back its programmatic commitments
Developing funding and partnership capacity will take bandwidth and resources. FORGE needs to think of the next 1-2 years as a season where it maintains just enough of a presence in the camps to continue refining the model and building legitimacy, but pull back how far it extends itself programmatically.
The full report lists some of the short tem steps FORGE can take in this regard.
FORGE’s own calculations indicate that some combination of these steps could bring its operational budget to $265,000, about $135,000 less than this year’s budget. This will give them some more short term breathing room to build the capacity necessary for the long run.
4. Building the financial supply line
Like most nonprofits, FORGE can consider four main potential revenue streams:
Foundations: FORGE has experienced significant disappointment here. Despite devoting almost a full FTE to grant writing, it has made only minimal gains.
Government: According to Kjerstin, there is little available from the United Nations given FORGE’s model of focusing on development versus relief.
Corporations: This kind of funding is most viable when the issue intersects with the actual business in some meaningful way, or it is a high visibility issue in the mass culture. Sadly, no company looks at African refugees as a market and the overall issue has low cultural visibility.
For a fuller analysis of these three revenue streams for FORGE, please see the full report.
5. What FORGE needs for individual fundraising
This obviously places great weight on FORGE’s ability to do individual fundraising. It is in this area above all else that FORGE needs to obtain some immediate outside expertise. The staff team (including Kjerstin) and the board lack the necessary level of strategic thinking, experience, and/or bandwidth to conceive and execute a fundraising plan at the scale required. Organizational infrastructure needs to be developed in fundamental areas like donor management software and donor cultivation practices.
While providing an individual fundraising plan is beyond the scope of my work here, I will offer some guiding thoughts on 1) the role of the board and 2) playing to FORGE’s strengths.
FORGE needs to reconstitute its board. The current board has served well its purpose in the initial launch phase as it has given Kjerstin a lot of room to maneuver. But the current board is missing three types of individuals critical for fundraising:
- C-level executive business leaders
- Refugee policy expertise
- Nationally (or at least trans-regionally) networked individuals.
The full report provides further description of why each of these three types are particularly important for FORGE’s future.
Playing to FORGE’s strengths
I have written elsewhere that FORGE has an original “fundraising soul,” one that was born in the college student world. Clearly, it has to expand beyond that world. But it can still retain a connection to that student world in a way that actually fuels its expansion.
For instance, FORGE has a cadre of individuals who in the last five years took a year off of school to work in the camps, raised money for FORGE, and are now back at school or have recently graduated. This is an army of potential evangelists for FORGE. But they need to be led and equipped more proactively than they have been.
See the full report for more on this subject.
6. Conclusion: Will FORGE make it?
My answer to this question really depends on what one means by “FORGE?”
If the question is “Can FORGE as an organization make it?” then I must confess that I have no idea. Pathfinders do suffer a high mortality rate. FORGE faces some significant challenges. The plan outlined above requires some good execution, but truth be told, it also depends on good luck. For an organization at its life stage, a chance encounter with a wealthy individual here, a new government contact there could make all the difference.
If the question is “Can FORGE as an approach make it?” then I would answer, “I sure hope so.” The problem of African refugees is not going away and getting worse. Refugees are staying longer and longer in these “warehouses of pity.” And an entire generation of potential leaders in those communities is being wasted. A new route forward is desperately needed. So the paradigm of treating the camps as development opportunities where the refugees themselves lead the projects deserves a fair chance to gain wider traction. Personally, the second biggest reason I have invested my own resources is that I want that idea to be disseminated, regardless of what happens to FORGE as an institution.
Finally, if the question is “Can FORGE as a group of individuals make it?” then I would answer “Of course.” FORGE’s greatest strength is the passion and commitment of its people, starting with Kjerstin but extending to the US and international staff and the board. Those assets are both enduring and what economists call “fungible:” easily transferred to other contexts. And in that vein, I have told Kjerstin on numerous occasions that FORGE is most likely just the first of several causes she will spearhead over the course of her career. There are few better long term investments, in my book, than giving an obviously talented individual like Kjerstin her first shot at social entrepreneurship. This is the biggest reason I have given of myself to FORGE for this season, and have been quite glad for it.
Standing ovation, Curtis. You are a great consultant and an even better human being. Thank you for sharing this with us.
This is a great report and I have been extremely impressed with FORGE for stepping up and showing us true transparency.
I am interested to know if the question of some kind of merger or even contracting relationship with existing NGOs in the camps where FORGE works was ruled out.
I could see this being ruled out because FORGE decided they must be independent to serve refugees properly.
On the other hand, exisiting NGO’s might be able to support the work through their own resources and using their established fundraising networks. Even without a merger or absorbing the program, they could pilot FORGE with a contract, still leaving the organization largely independent. This may even reduce immediate fundraising burden and allow them to build for the future instead of scrambling for now.
It would seem to me that the organizations running the camps infratructure and daily services have an interest in FORGE succeeding.
I could also imagine that those organizations running the camps are too strained themselves.
But the leadership of those organizations could certainly go to bat for FORGE. They might be a good board prospect for FORGE too.
I’ll let Curtis and/or Kjerstin reply to your question. But I have a question for you. You work at SmartGivers.org, a charity rating organization. What are your general thoughts on transparency as a best practice? See these questions that have come up and my answers. I’d love your input.
Thanks so much for asking. I had noticed these comments earlier and your responses. My favorite thought on this subject is your last one “The point is helping the cause.” The one thing that helps me navigate through transparency is questioning whether long-term transparency will help the people who desperately need the services and advocacy that nonprofits provide. I find very few instances where more transparency would not have helped.
The 376 organizations who have completed reviews with public results on smartgivers.org give me great hope that transparency is very highly valued and easier than ever. There are even organizations who completed reviews knowing that they would not meet all of standards. The conversation started by FORGE and carried on here is also inspiring.
However, I am still worried about what I call selective transparency. It is quite easy to be transparent when an organization is doing well. When an organization is having problems or recovering from or discovering mismanagement (financial, governance, or otherwise) there is a fear that exposing the problem will weaken the organization further, losing donors immediately and the resources needed to meet your mission.
But I believe we must encourage each other to default to transparency. If you are telling your donors that everything is fine, they might be giving to you because they think everything is fine. Likewise the people you serve are counting on your services and deserve to know if the organization is stable. However if your position is actually precarious and you know that, is it right to not tell people, at least in an annual report of some kind? I do not think it is right. I think there is an ethically slippery slope to be avoided there.
Also the difficulties that an organization might be having maybe out of its control and being upfront about them may be the only way you find the right donors. This leads me to my next point, everyone should reward transparency. Let’s imagine you are a grant maker using our site. You find that an organization does not meet the financial health standard due to persistent deficits. Assuming the rest of your careful due diligence goes well, our great hope is that you contact the organization and let them explain their difficulties and maybe follow-up with some capacity building support rather than a project grant that exactly fits your guidelines.
Many nonprofits have expressed to me that the general public does not understand nonprofit finances and governance well enough to benefit from transparency. I actually think that the general public may not understand nonprofits very well because of a lack of transparency. Nonprofits are complicated businesses and not educating the public will not help.
Let’s be clear, I could talk about transparency forever.
But before I end this comment I wanted to talk about the cultural basis of transparency. I think everything I said above really applies to the US scene and it’s growing culture of transparency. I think we are on the verge of becoming a curious hybrid between the way publicly traded companies operate and the old community chest/public benefit type organization. Transparency is grounded here in a kind of no-choice culture that grows out the regulatory system and things like states’ use of the Model Nonprofit Corporation Act. Nonprofits who are led by people who come from cultures not used to this system can have difficulty adapting to it. The concept of “saving face” is a good example. Another thing I have seen is that for people who come from places with an oppressive government something like the new (or the old) 990 could be met with suspicion. I think the issue of transparency being culturally influenced is quite clear. But I do not believe that some cultures are prone to varying levels of transparency. I suspect it is more a question of how that transparency is delivered or expressed that is different.
[Disclosure: This comment is modified from an earlier post I made on Social Edge.]
From the report:
“Donors, especially high net worth ones, tend to be executive types. They are reassured when they see that “one of their own” is involved in FORGE’s governance. This is especially true given how young the FORGE staff is (all under 25). When such a donor looks at the current roster of board and staff members, they see individuals that would be several levels down their own corporate hierarchy, a reality that does not inspire donor confidence.”
Although I understand the fear of inexperience, why should it matter that FORGE’s staff is all under 25? I’ve found that in the nonprofit sector more than the for-profit sector, ageism against young individuals is much more of a significant problem. Angel investors and venture capitalists have no problems funding young twenty-somethings from Stanford who they believe have a great idea and great potential, but when it comes to a young twenty-something who has an amazing track record of passion, intelligence, and on-the-ground experience like Kjersten, few from the foundation and grantmaking world are willing to take a chance. And many of the fears that potential donors may have can be easily solved through mentorship and good communication – in fact, one advantage of young people is their greater willingness to listen to reason and expertise. But if the foundations don’t fund organizations like FORGE and people like Kjersten, then their beliefs become a tautological self-fulfilling prophecy BECAUSE the eventual failure will undoubtedly happen because they refuse to support the organization.
It’s so frustrating to see that the “pathfinders” are often times far too ahead of the curve for the funders. Unlike the for-profit world, where being ahead of the curve is more likely to get you funding, in the nonprofit world, being ahead of the curve is less likely to get you funding (grantmakers may not “get” it; the method of producing impact doesn’t “fit” the somewhat arbitrary grantmaking guidelines, etc). Thus, one of the perverse incentives of the nonprofit finance market is that it encourages social entrepreneurs to instead of first come up with a great idea, look at the available funding streams and come up with a mediocre idea. Even though it seems that FORGE is correctly focusing on development rather than relief, since the SROI is probably much higher there, the difficulty of finding funding is much higher than it should be.
However, I’m not too enthralled by the idea of “playing to FORGE’s strengths” through its alumni and student base. Both, while passionate, are often an undependable source of labor – many are already extremely busy with their own lives and initiatives and many will be worried about their future careers; becoming a FORGE evangelist, even with the certainty of success, may not be enough incentive. Add to the fact that there might be a high likelihood of failure (one big question I have is: how are you, as a student or an alum, going to raise several tens or hundreds of thousands of dollars through friends and family in a down economy when many are already questioning your career choice?), I have to wonder whether this path is simply a moment of wishful thinking because the other funding sources haven’t looked so great in the past.
I think Curtis’ recommendations of changing the composition of the board is spot on, but I would encourage step 2 to be another push towards foundation funding. I would be interested in knowing what kind of feedback FORGE has received from foundations in their grant application process (if any – something the sector really should work on) and whether or not there is anything FORGE can do to meet any additional requirements in the next cycle of funding. If FORGE can land a grant from a big foundation in this space, I think that would be the best way to achieve the legitimacy it needs and solve its many other problems. To start, I think Hewlett might be a good prospect for a variety of reasons – there’s a strong Stanford connection, they have a global development program, and they understand SROI and impact analysis. Who knows, maybe Paul Brest of Hewlett or Bill Somerville of PVF might want to chime in with some of their thoughts on the whole matter.
[Further Disclosure: I worked at Hewlett as a research assistant to Paul. My recommendation of pursuing Hewlett funding is my unbiased, honest recommendation and any views expressed here do not reflect the views of the Foundation or Paul.]
Tony and Paul, super helpful comments! Thanks!
Paul, obviously I agree that transparency is a key element for a functioning social capital market.
Tony, good point on the ageism in philanthropy. I’ve always found it kind of stunning to watch philanthropy name a whole group of people “NextGen” which, while well intended, also implies “Not Important Now”.
Lots of great comments here – thanks for the feedback.
Paul, I did raise the merger/acquisition issue briefly with Kjerstin but I just didn’t have time to go into it with any rigor. Pulling mergers off is incredibly complicated and requires long, long study. Still, I should have at least flagged it as an option in the report. Great question!
Tony, I think the “ageism” issue is a complicated one. It’s true that VCs in the for profit world may be willing to invest in a young entrepreneur. It’s also true that they insist at some point that more experienced management step in once the concept has been established. So, I think it is a matter of recognizing what stage an organization is in and what is needed at that stage.
Sean, funny you mention the “NextGen” buzzword. Lucy has since mentioned how it was delisted by the folks at eJewishPhilanthropy.com and replaced with ““NowGen.” So maybe there’s hope yet for the sector!
Curtis, I agree that the ageism issue is a complicated one. It is as you say; VCs often insist that more experienced management step in once the concept has been established. And to be honest, I wouldn’t mind if that were the case in the nonprofit sector, where funders and entrepreneurs planned out the eventual exit strategy where the founder eventually steps down to be replaced by leaders who have expert knowledge in scaling up organizations or managing large organizations. But there is one significant problem with this model, which applies to all nonprofit entrepreneurs and not just young nonprofit entrepreneurs – replacing startup leaders with more experienced management distorts the incentives of starting a nonprofit in the first place. While in the for-profit world, founders are rewarded for their risk with their generous equity stakes in the companies they started, the corresponding return for the nonprofit entrepreneur is being able to work on issues that you’re passionate about and lead that organization. If funders started to consistently replace nonprofit entrepreneurs, the nonprofit entrepreneur’s individual exit strategies are reduced to 1) working on the funder’s side (which seems to be common these days) or 2) becoming unemployed.
It might be the case that ageism isn’t at all an issue here and the reason why FORGE hasn’t received the funding it needs is completely independent of her and the rest of FORGE’s age and that what we have here is just another case of a good nonprofit not getting the funding it needs. But I would hypothesize that age does play a factor when foundations evaluate grant applications – that ceteris paribus, everything else being equal, FORGE would have received more money if the people there were older.
Tony, you make a good point about the lack of “pay off” during an exit strategy. This is the same reason why we don’t have much M&A activity. I’m not someone who thinks that there is a profit opportunity in every social problem, but I do wonder what the world might look like if we were willing to compensate people for producing social good (including windfalls when they exit a successful start up).