Well folks, I’ve arrived again at Harvard Business School for another course, this time Governing for Nonprofit Excellence. This is a four-day course that I’ve been looking forward to for about a year. Unfortunately, due to Hurricane Sandy and a cautious state governor who wants to be re-elected in a few weeks, all operations at Harvard University (and every other educational institution in the state) have been suspended for Monday, including our class. I’ll let this picture say it for me.
But we did have a class on Sunday, so I do have something to share.
The first case served as an introduction to the major topics of this course. The learning points boiled down to a governance model for nonprofit excellence that highlights the four topics the board should focus on:
- Mission & Strategy – you gotta know where you’re going, so set the direction and clarify your intentions about how to accomplish your mission. This topic aligns the value that you produce (the social good) with the support ($) that is necessary in order to build the capacity to deliver the value.
- Performance – Planning means nothing without execution, so be sure you can demonstrate performance. Although it is not always easy, find ways to measure the social good that you do and your financial performance.
- Relationships – the board needs to care for the organization’s relationships, internally with staff, board and volunteers, and externally with the public, beneficiaries, and anyone else you have a relationship with.
- Culture – ensure that your values and norms are reflected in everything you do and that your organization is engaged with the broader world.
The four points can be summarized in two questions:
- What are we accountable for?
- To whom are we accountable?
Before you say “You went to Harvard to learn that??!!!!??” let me tell you that the real learning isn’t the bullet point summaries, but how they work out in real life decisions. The case was about a hospital in the midst of the market upheaval caused by the introduction of HMOs, that shifted power from the service provider to the service payer, and the need to dramatically change how they did business. As the hospital assessed its options, ALL of these points came into play and really had a dramatic effect on the decision that was made. Often we either pay lip service to these points or we assume they are just naturally in the background of all our board discussions. But unless you explicitly raise these points, they won’t be used. They became very powerful and insightful guides to the whole process of plotting out the hospital’s future.
Challenges that are Unique to Charities
Right now, these are just a few noteworthy points about the challenge of leading charities. I don’t know if they will be developed further in the course.
- Nonprofits choose to face the toughest challenges of society. For profits focus on challenges only where there is a profitable way forward. So by our very nature, our work is very difficult.
- The charitable sector has under-developed capital markets. You don’t have venture capitalists funding new charities, for example. So funding is very hard to come by. Furthermore, venture capitalists expect only 10-20% of their investments to be big winners, and maybe 30-40% to be moderately successful. They’ll lose their investment on the rest, and they’re okay with that. But in the charitable sector, grant makers and venture philanthropists expect every project to be successful. Is this realistic? No. If every project had to be successful, you’d have no risk-taking or innovation taking place.
- Unlike for profits, which are accountable only to their shareholders, nonprofits have multiple accountabilities: donors, grant makers, philanthropists, government programs, beneficiaries, the public and on and on it goes. Some of them may have competing interests, so satisfying everybody can be difficult.
Why are so many charities just getting by? Unfortunately, the professor says: “Mediocrity in the charitable sector is sustainable because some people will support a charity regardless of its outcomes.” Alnoor Ebrahim They believe in the cause.
That’s it for the lessons from today. I expect the lessons and insights to grow more profound as the days go on.