The management strategy of nonprofit doers of good is often characterized as overworked, underfunded, and putting out fires. Similarly, the nonprofit funding culture perpetuates a dependent cycle on the philanthropic giving of foundations, government, corporations and individuals. The funding priorities of the giver often redirect programming, which can also divert or dilute a social impact mission for this sector. And with a growing number of registered 501(c)3 entities, the competition for limited grant funding is also on the rise. Add to that the donors’ need for an exit strategy for their support, and it is clear that nonprofits need to plan beyond philanthropic gifts to fund their social programming.
If we look outside the nonprofit model for potential funding, the private sector offers tools to tailor management practices from reactive to prescriptive. For example, investors ask for the projected return on investment (ROI), the value of outcomes as relates to the investment, and for options to sustain the program beyond the period of the investment solicited. Clearly these practices applied to nonprofit management create greater predictability and accountability, translating into increased confidence for investors.
Specifically, building investors’ confidence positions nonprofits for development loans or private investments to diversify and sustain programming over the longer term. Leveraging resources with other social programs that serve the same population (think collective action across sectors) builds upon respective organizational strengths and reveals additional funding opportunities to pursue. Tracking the value of outputs, assessing the program outcomes, and measuring and messaging the social impact in terms of economic value, is also fundamental to managing for sustainabilty.
And there is additional information that is rarely tracked and messaged to stakeholders, but should be. The social return on investment (SROI) — demonstrating the value of savings to society over the long run — is the ‘so what’ of any social profits’ existence. But to message it, the SROI has to be tracked and measured.
For example, say you are a social profit that takes recycled materials from the streets of Haiti, providing jobs for the locals collecting the trash and then turning the plastic into profitable clothing (think Threads). When a major retailer picks you up (think Timberland), and you track the pounds of garbage and number of jobs created in the communities where you engage, you can message this output in your marketing. Value added. Similarly, the increased income to the local community collecting plastic bottles, is also an impactful and valued outcome. But taking it a step further, the value of the SROI will link your initiative to the bigger social change goal(s) desired for the community where your program is engaged. This social impact goal might be positive changes in local health indicators due to reduced garbage in public areas. Perhaps it is increased local school attendance due to healthier children who are not playing amidst trash. Maybe it is new homes construction now possible due to enhanced incomes from collecting the bottles. So if these indicators are also identified and tracked, we are now talking about social change beyond your specific program intervention.
Why does this matter? When you can message the economic value of social impact, you connect the relevancy of your program to additional funders’, investors’ and collaborators’ goals and create a whole new trajectory for sustainabiltiy — beyond donations or grants — within the philanthropic toolkit.