By Adam Lehman
When I transitioned from more than 20 years as a business builder to joining Hillel International as its Chief Operating Officer, many friends shared their unsolicited warnings to me about the challenges I would encounter: “Everything will move as slow as molasses.”; “Your colleagues will have a 9-to-5 mentality”; and “You’ll be overwhelmed by the bureaucracy of trying to get anything done.”
Three years later, I can confidently say that almost none of the warnings match our reality at Hillel International. The pace of our work is brisk, and typically represents the 24-7 (or 24-6, given the respite of Shabbat) pace I experienced in both start-up and Fortune 500 settings. My colleagues are intensely committed, and often chronically overextended, in their devotion to the mission. And rather than encountering the barriers and weight of bureaucracy, I’ve found that we and our nonprofit partners operate with modest structure and process, sometimes to a fault.
While I haven’t experienced many of the stereotypical nonprofit challenges, I have encountered some significant “business model” differences and challenges. As nonprofits like Hillel strive to be model 21st century social enterprises, it’s imperative that we confront and overcome these endemic business model challenges.
Third Party Payer Pains: Most businesses operate through a “first-party payer” model, whereby the customers receiving the benefits of a product or service directly pay the provider of that product or service. Within the Hillel movement, we provide a wide variety of services and benefits to students on more than 550 campuses around the world, almost all of which are delivered at absolutely no charge to students or their families. Instead, most funding comes from donors who support our mission and work. While this third-party payer model has survived the test of time for countless nonprofits, it does introduce management complexity (especially when compared to for-profit business models).
Even with donors paying most of the bills, we apply several approaches to ensure that our students and the 1,200 Hillel professionals who directly engage them remain at the center of our focus, investment and strategic decision making. We maintain fidelity to a strategic plan expressly built around achieving student engagement metrics. We reorganized our entire staff structure around a “Campus Success” philosophy and team which I wrote about here (and which has been supported and developed in partnership with the Marcus Foundation). And we work closely with institutional funders who are aligned with this customer-centered philosophy.
Directed Revenue Ripples: Hillel International has experienced substantial growth over the past four years, doubling our topline revenue, based on the vision and generosity of numerous philanthropists who have partnered with us to advance core aspects of our mission and work. We are grateful for the transformative work enabled through these major grants. At the same time, managing across a revenue mix of grants earmarked for specific programs requires a substantially different approach than businesses employ. Simply put, a typical business can take all of the revenues it generates and deploy those resources however it chooses to pursue short- and long-term success. (Nonprofits do have similar discretion for non-directed grants and donations; however, the un-mistakeable trend in philanthropy is toward directed giving.)
In order to manage effectively across our mix of directed and general revenues, we are working to:
- Ensure that all grants fully align with our strategic plan and overall mission.
- Structure grants to incorporate the “true cost” of implementing and supporting our programs, including both the direct and indirect expenses on which program viability and success depend.
- Evolve our operating infrastructure, teams and processes to continually maximize their efficiency and alignment with core priorities.
- Nurture and grow our network of institutional and individual investors interested in supporting our overall mission, plan and capacity.
- Diversify our overall revenue sources, including by growing earned and recurring revenues.
If You Come, They Will Build It: In business, there continues to be a relentless mantra of focusing on your unique value proposition, as growth and margin expansion closely tie to that unique value. The same strategic logic should also apply in the nonprofit context. However, nonprofit economic drivers can sometimes produce different results. While disciplined management can help to ensure a strong match between donor funding and the unique focus areas of a donor-funded organization, management complexity can creep in simply by having diverse funders underwriting different areas of your core plan and priorities.
To overcome this complexity, we’ve pursued several strategies to increase alignment across all of our different donor-funded programs and initiatives. At a development level, we pursue funding that fits well with our highest priorities, rather than just “playing the field.” At the funder level, we created an “Investors Council” through which all major program funders stay apprised of our overall organizational progress. Through this vehicle, each major funder has the opportunity to engage with and provide guidance regarding our full range of challenges and opportunities, not just in relation to the specific program or initiative that funder supports. At a staff level, we’ve introduced new cross-departmental and cross-program communication tools and gatherings to keep all teams coordinated and to quickly surface and resolve any potential areas of misalignment.
While managing in the nonprofit context has required me to adapt to different business model dynamics, I very much recognize and am grateful for the many benefits of having funders as core partners and stewards in our work. In that spirit, I look forward to further opportunities to collaborate with forward thinking colleagues, lay leaders and funders, as we pursue our aspirations for continued growth, innovation and impact into the future.
Adam Lehman is chief operating officer of Hillel International.