Rebranding the Nonprofit Sector in 8 Steps

It’s time to stop defining ourselves negatively – with a label that only says what we aren’t.

It’s time to get rid of the old story of scarcity that says no matter how hard we try we will always lack the resources we need.

It’s time to reclaim our branding back from the Internal Revenue Service, to tell a new story and find a new name for our sector.

Here are eight ideas. I see them as an invitation to dialogue. I don’t have all the answers, but I am confident that we can find them if we work together. Collaboration has always been the strength of our sector and our best strategy for change.

Step 1: Change the name, change the narrative

Nonprofit describes a tax status, not the public-interest purpose of charitable organizations, nor their intent to improve people’s lives. I suggest scrapping the old nonprofit handle along with its scarcity connotation.

Over the years, board members, donors, and other stakeholders have come to believe that “nonprofits can’t make a profit”. This is erroneous. The reality is that nonprofits not only can make a profit, they should make a profit.

Nonprofits are tax-exempt. That means they are prohibited from distributing profits to any directors, shareholders, or trustees. Instead, these entities must invest their profits back into their organizations, their operations and their ability to serve the public good. So “tax-exempt” is an accurate description of what we do. However, it fails utterly to convey the mission-driven social impact our organizations are expected to deliver.

A number of new names have been suggested. I’ve heard colleagues use “charities”, “social purpose organizations”, or “impact organizations”, or “public benefit organizations”. The positive-connotation possibilities are unlimited.

So let’s start a dialogue (see Step 8) with the aim of generating naming options and creating a brand that focuses on impact (what we do) while offering adequate latitude to include all 501 (c) 3 organizations.

Our identity doesn’t arise from the lack of a profit motive. Our identity comes from our work – through our efforts to improve the human condition, through our quest for change.

For the remainder of this article I will use the term “for purpose” organizations in lieu of “nonprofit”, and offer that as my contribution to the dialogue of adopting a new term to describe tax-exempt charitable organizations.

Step 2: "Think money first"

Purpose is the why. Service is the what. Income generation is the how.

All for purpose organizations can begin to break the culture of scarcity by adopting an economic model that provides for the support of the full costs of their programs and operations, and advocate with grantmakers and donors to fund the same. (Huffington Post: “What Nonprofits Need Most.”)

Studies have shown there’s no “one-size-fits-all” when it comes to business and funding models (SSIR Review, Fall 2011 Finding Your Funding Model .) The important lesson here is that for purpose organizations can and must be able to identify their unique revenue drivers and determine how to invest in and grow these revenue streams. It’s also worth noting that many organizations have successfully scaled their work in the last 20 years due to this methodology. It's time to Think Money First to break the culture of scarcity.

Ask yourselves "How well do your staff and board Think Money First and understand your full cost funding model?"

Step 3: "Define – and enshrine – sustainability"

Sustainable growth depends on the viability of the organizations leading the change. Funders and service providers should know what sustainability means in functional terms so they can adopt it as a chief operating principle. Here’s a draft definition: Sustainability means maintaining operations – as well as financial good health – over the long-term through income generation and adequate planning to survive unexpected financial challenges. (“Financial Sustainability for Nonprofit Organizations – A Review of the Literature”, Rand Corporation, 2012 )

For purpose organizations must ensure that revenues cover the full costs of doing business, including the creation of operating cash reserves, investing in their people, funding depreciation, and developing risk capital. This will help for purpose organizations navigate through economic ups and downs and allow them to better capitalize on growth opportunities.

Step 4: "Size isn’t everything"

What’s the most important financial goal? Many donors would say “scaling the work.” However, not every “for purpose” organization has a mission that correlates with broad growth of their services. Some local community service agencies (such as a Boys & Girls Club or a community garden) are valuable assets for a particular neighborhood or community, but “scale” is not a long-term strategic priority, nor should it be. These organizations often need to think about strength much more than growth. They need to ensure their programs, services, and finances are being fully funded to deliver quality services to a particular community.

Ask yourselves "How well are are you defining and enshrining sustainability at your organization?" "How well are you advocating for full-cost funding with donors and grantmakers?"

Step 5: Raise the standards for how funders invest in human capital

Rusty Stahl and his team at Fund the People, are impressively informing grantmakers and donors about the importance of throwing out an archaic paradigm of sweat equity (doing more with less) being the norm for the talented people who dedicate their lives to this sector. They are educating funders to "Fund the People" and strategically invest in for purpose professionals who are the bedrock of civic life. But, we should ask ourselves why is the "for purpose" sector having to push this kind of human capital agenda? Our communities, environment, and economy all benefit when for purpose leaders have the support to not just survive, but to thrive. We would never expect a for-profit company to do anything less than invest in its people to help drive the company's success. Why don't we have the same standards for the for purpose sector?

Step 6: Raise the standards for nonprofit management education

Many nonprofit management education programs skim the surface as it relates to the two most challenging responsibilities for purpose leaders have: 1) creating a culture of fundraising throughout the organization, and 2) building an effective, fundraising board of directors. These educational programs have to change and meet the realities of what it's like to run a for purpose organization on a day to day basis, with resource generation being the most challenging, yet critical variable to fulfill missions sustainably. In addition, boards have the responsibility of hiring and supporting the executive director. Therefore, board members should focus less on creating job definitions for executive directors which require expertise in fundraising, finance, governance and programs. And, instead make it an ongoing priority to support the executive director's success by providing an organizational culture and environment that is conducive to fundraising success, and good management . (See step 7)

Step 7: Raise the standards for board leaders and offer more rigorous education and training

There are an estimated 20 million board members in the US, serving 1.6 million for purpose organizations (BoardSource, 2012). But the majority of these board members are not actively governing their organizations : 71% are not actively fundraising, 68% are not actively monitoring programs, and 56% are not actively planning for the future (Urban Institute 2007).

For purpose organizations are legally required to have a board of directors that takes responsibility for “ensuring resources for the organization.” But these volunteer directors must meet no legal requirement to demonstrate their knowledge and capabilities to serve. How can such a critical population of leaders, responsible for our sector’s financial strength and sustainability, not have required training or competency standards to meet?

Study, after study, has shown the correlation between fundraising success and board member involvement. What about the idea of funders coming together to fund a nationally-recognized credential of board leadership with built-in incentives for board members to participate?

 Step 7.5: Make research accessible and actionable for board leaders

One of the key strengths of the for-purpose sector is our ability to fund and develop research – especially research that influences the way we carry out our own work. We are great at sharing lessons learned. But it’s probably safe to assume that much of this research doesn’t reach the 20 million for-purpose board members. How can we make this important information more accessible and actionable for them? What if we were to create a portal to consolidate and disseminate the various studies and research on fundraising, leadership, governance and sustainability? What if this portal could provide easy-to-understand synopses of the findings so they could make better decisions?

With technology today, we can do these things. What’s holding us back?

 Step 8: Begin a national dialogue to develop a new name and narrative

For purpose leaders, philanthropy, government, academia and business should join together on-line and in-person with the goal of mapping out a concrete plan to create a new and authentic public identity for our sector.

I offer this post to all people who work or volunteer for charitable organizations, to all donors, to all philanthropic, civic and academic groups, to all community-minded businesses, to everyone who has ever benefited from the efforts of civil society.

This invitation is an expression of our faith in this sector. So don’t hesitate. Comment right here and now on this blog. Or if you prefer, email me with your ideas to re-brand our sector.

Let’s inspire a new blossoming of community service and philanthropy by dialoging with the aim of generating a new narrative that focuses on impact, sharing ideas for how to break away from the culture of scarcity, and raising our personal standards so we expect nothing less for the servant leaders who are creating a world that works for everyone.

"Our identity doesn’t arise from the lack of a profit motive. Our identity comes from our work – through our efforts to improve the human condition, through our quest for change. We are the for purpose sector." —Sylia Obagi