How Donors Can Get More Mission Out of Their Nonprofit Dollar

Philanthropists can stretch their donation dollar ever further these days by investing in the people who manage and run the nonprofits, much like the private and government sectors of the economy.

The nonprofit world would not exist without the generosity of donors. The challenge is they often direct their contributions to fund bottom-line programming and retail services. They shy away from budget items that would qualify as overhead, such as leadership and talent development.

Instead of being transparent with donors about their real needs when it comes to our people, without whom our mission would fail, nonprofits often perpetuate the overhead myth by avoiding the hard conversations. Compounding the problem, nonprofits naturally attract compassionate individuals who are not always the most vocal about their needs and concerns.

It often results in little funding for professional development or for attracting, developing and retaining talent. Training new hires easily costs double the amount of retaining current leaders.

To address the lack of investment in nonprofit leadership, the Lakeshore Nonprofit Alliance — a membership-based organization serving more than 160 nonprofits in West Michigan — raised the money to start a high-impact, low-expense leadership program for nonprofit executives.

In this program, called Nonprofit LEAD 24/7, we set out to explore common challenges of nonprofit leadership, such as shaping culture, hiring well, firing well, building great teams, engaging in healthy conflict and leading change. As these leaders grow in their skills and abilities, they positively impact on their organization and therefore the overall community. In fact, the value of investing in nonprofit talent has quite a proven track record.

It’s often perplexing how donors — many of whom earned their wealth in for-profit companies — don’t always recognize the value of investing in people. Corporate America tends to invest significant dollars into their human assets, recognizing that talent development offers a high rate of return. Investing in people equals higher profit. So why doesn’t the same idea transfer to the nonprofit world?

Examples abound to illustrate the impact of truly investing in people.

First, leadership development in the nonprofit sector engenders success. Facing a wave of retirement among local leaders, the Boys & Girls Clubs of America undertook a rigorous assessment to identify the core leadership strategies — such as building an effective board and finding new revenue strategies — that generated the most success. They built a training program around those subjects to develop hundreds of leaders within their ranks.

Second, we have much to learn from those outside our traditional channels. The entrepreneur assistance nonprofit Endeavor collaborated with a private equity firm to identify transferable leadership attributes from the investor community. The experience taught Endeavor to understand and apply business investment principles to its own vast constituency, according to global advisers firm, The Bridgespan Group.

Third, we need to become more intentional in finding niche competencies to solve specific problems. YMCA’s Diabetes Prevention Program analyzed the traits and behaviors of leaders best equipped to conform its business model to the evolving health insurance environment. It crafted specific statements about the leadership competencies necessary for the transition and is hiring to fill those specific competencies.

The result of all these innovative approaches to leadership development? They became much more effective and efficient with their scarce donor dollars. We as nonprofits need to share more of our success stories that result from leadership and professional development. We can now demonstrate to donors that investing in people returns measurable value.

We need open, honest and transparent conversations with donors about how they can best help us succeed. We share the same goal of helping the most people with the least resources, and that is a great starting place for these talks. Effective nonprofits need visionary leaders who keep the mission front and center, while supported by the same level of talent as their successful private and government sector counterparts.

We intend to build upon our findings to serve even greater numbers of leaders and will continue to advocate for nonprofits to invest more of their budget into building their people.

We hope you join the effort!