By John Hoover
In the 2000’s, social entrepreneurship was well underway at The Andrea and Charles Bronfman Philanthropies (ACBP). Incubated programs including the Heritage Project, Birthright Israel, and the Karev Program for Education Involvement were in full swing, and several new programs were growing including the Green Environment Fund, the Association for Israel’s Decorative Arts, 21/64, Slingshot, and Reboot. For each, the mission was clear. Each developed a board, which each focused on hiring engaged, energetic, passionate, and talented people to staff these new enterprises. Board members, advisors, and staff of ACBP and the projects were excited about sparking something impactful. However, the new social entrepreneurs quickly realized that ‘organizational’ life gets in the way of mission – that is, building an infrastructure that can support the mission. Among other things, staff onboarding, securing office space, determining taxes, and finalizing audits all are essential to infrastructure but don’t lead to visible mission-related impact.
As an operating entity, ACBP had the capacity to extend its infrastructure to the programs that were being developed. In essence, we shared services. This allowed missions to thrive without the distraction of developing supportive services. In the private equity space, this type of support is commonly provided by an incubator. In looking at the field, organizations that did not have the benefit of sharing services were spending a disproportionate amount of time building and maintaining these services without the corresponding caliber of talent or resources.
To get a better handle on the challenges facing young organizations in the field, ACBP, the Jewish Federations of North America, and the Jewish Funders’ Network surveyed 56 nonprofit organizations with various budgets, sizes, and missions. The organizations most vulnerable were ones with budgets between $1 million and $3 million, or less than 20 staff. These were considered to be in the Limbo Range according to a studyconducted by the Management Assistance Group (MAG) in partnership with the Eugene and Agnes E. Meyer Foundation. At this stage, the risk is high that mission and impact will be hampered due to undeveloped resources or the lack of expertise to grow to a size that can sustain the supportive services. Several areas were identified as significant challenges:
- Grants management
- Fundraising support
- Budget and financial planning
- Cash management
- Investments oversight and advice
- Professional and organizational development
- Commercial insurance
- Database management
- User support
- Disaster recovery
- Computer hardware and software
Based on the survey and focus groups with membership organizations, charities, and their advisors, we identified common challenges and possible solutions and opportunities. Here are several approaches that boards, funders, and management may consider:
- Build it. Hire knowledgeable staff to work on non-mission related tasks so that the key program staff can devote the majority of the time on advancing the mission. For example, a startup youth village for orphans and vulnerable youth hired a social worker to be the first the Executive Director. She was passionate about this mission but spent nearly 80% of her time on administrative tasks due to the concerns about overhead. After a period of time and concern about Board fatigue and staff burnout, the Board decided to hire a COO/CFO. The result was greater focus on youth, funders, and governance. The risk of not building infrastructure with new focused staff support would lead program staff to work on off core-mission activities and detract from creating impact.
- Buy it. Outsource non-core mission services. Given the specialized nature of certain functions, this is a common alternative for investments, recruitment, and professional or organizational development. Outsourced solutions might include:
- individual or freelance professionals (e.g. creative artists, retired professional)
- single service firm (e.g. events planner, investment advisor, strategist)
- multi-disciplinary firm (e.g. professional employment organizations, managed technology service firm)
- Share it. Collaborate with like-minded organizations. This tends to work well for organizations that have developed strengths in administrative services in areas such as group purchases, commercial insurance or technology. They have the capacity to share their services without a significant incremental cost to them or the beneficiary. For example, the Jewish Federations of Greater Metro West New Jersey and of Greater Washington D.C. and their respective beneficiary agencies were collectively spending millions of dollars for technology. Together, they merged their IT departments and provided the services to themselves and their beneficiary agencies. Eventually, IT services became a separate entity. The company now services the same clients independently from the missions of the respective charities. This reduced costs and allowed management and the boards to focus more on mission.
- Leverage it. Every organization is part of a network, whether it’s a professional trade group, a Federation, or an association of regional grantmakers. Networks provide opportunity to leverage ideas, talent, resources, and synergies. Whether it is for group purchases, captive insurance programs, or pensions, there are economies of scale that member organizations and networks can obtain that allow for greater focus on mission. For example, one membership organization was looking to establish a group insurance program for commercial insurance and risk management. Its members had the option of participating, which relieved the organizations from having to manage commercial insurance on their own and allowed the organization to benefit from lower premiums.
The easy part of freeing up resources to focus on mission is finding the right approach for a given scenario. The hard part is changing existing organization culture to accept that approach. Change is about doing things differently – giving up control, negotiating services, determining costs, leveling expectations, and getting buy-in. There is no single driver of change. It could be boards, funders, staff, or networks. Change starts at the top with the adaption of the belief that how an organization functions today might not be how it should move forward tomorrow. As a private operating foundation, ACBP leveraged its resources and applied its people, including its founder, to fast track growth, highlight opportunities, increase focus on mission, and extend its back-office services to core startup grantees.
John Hoover is Senior Vice President and Chief Financial Officer of the Andrea and Charles Bronfman Philanthropies.
[“Making Change by Spending Down” is a commentary series of The Andrea and Charles Bronfman Philanthropies (ACBP) – in partnership with the Foundation Center – to share insights and lessons of ACBP as it spends down its endowment by 2016 and closes. Each month various stakeholders will contribute new posts that will explore how ACBP’s decision to spend down affects a broad range of interests: from mission, employees and grantees, to investments and legacy. Decision makers across the social sector will benefit from the first-hand knowledge and community of learning being created.