Strategies of District Nonprofits: How Some Are Surviving and Thriving In Today's Environment
Times are tough these days, but you already know this. Just what are nonprofits doing to remain viable in the current economy? How are they modifying their operations to adapt to the new reality? Read how three nonprofits in the Eighth District are using mergers, good and sound business practices, collaborations and technology to navigate through the new environment.
Mergers and Acquisitions Can Bring Efficiencies to the Bottom Line
Volunteer Memphis had been around for 34 years; Hands On Memphis, 12 years. Both had coexisted as friendly competitors.
“Although we saw a clear definition and difference between the two organizations, the public at large and the funding community did not,” admits Mark Dean, former executive director of Volunteer Memphis, now executive director of Volunteer Mid-South.
When the executive director of Hands On Memphis resigned, Dean saw an opportunity. He contacted his board chair, who contacted the interim executive director of Hands On Memphis, who contacted his board chair, and the four met. After talking with their respective boards, the boards elected to hold a joint meeting to explore ways to work together. At the meeting, one of the Hands On Memphis board members asked, “What about a merger?” The elephant was now in the room.
After months of working on the details and the financial due diligence, the boards voted to merge. Since Volunteer Memphis had been around the longest, they accepted Volunteer Memphis’s bylaws and other legal identifiers. The board’s attorney filed the merger paperwork and terminated all legal references to Hands On Memphis. An offer was extended to board members of both organizations to stay on the new board.
“At first we were like a bride with a hyphenated name: Volunteer Memphis-Hands On Memphis,” says Dean. In the end, they decided on Volunteer Mid-South. “We decided that the name really needed to say Mid-South and it really needed to have the word Volunteer in it. We had a lot of equity built into the Volunteer Memphis name, plus if someone Googled ‘volunteer’ we wanted to pop up.”
The organizations had local support from various businesses and foundations for the merger. They put together a merger plan documenting marketing and other expenses for which they were able to secure financing.
“I went to one funder to let her know that we were planning to merge, and she jumped up and hugged me, saying she was so tired of explaining the difference between the two of us,” said Dean.
“As a former banker who did mergers and acquisitions with banks, merging wasn’t like a big bad bear to me; it made sense,” Dean says. He acknowledges that it frightened a lot of people and stresses the importance of putting in the extra effort to make people feel as comfortable as possible. But in the end, he says conflict cannot be avoided, because things will not be the same.
“Once you merge, everyone has their own version of what was said; their own vision for what the collective organization will look like,” Dean says. “The board needs to understand that change will be more than everyone all in the same office or that you have a new name.”
Since the merger, Volunteer Mid-South has been approached by several organizations considering merging. Dean assists them by sharing his merger file and the document they used, which has become a guide book for mergers. Even if organizations decide not to merge, he contends it is beneficial for organizations to explore ways to collaborate together.
Dean states, “Generally, the positive feedback surrounding mergers is that you are cutting back the amount of overhead, because you don’t have two buildings, two sets of letterhead, two computer systems, two telephone systems, and two audits.” He will be the first to tell you, however, that mergers don’t necessarily mean expenses are halved. “You don’t merge two organizations and cut the budget down to the size of one of them. If the organization operates a different way, you may incur additional expenses that you may not have considered within your business model.” Dean says their overall administrative costs went down somewhat, but not by 50 percent, mainly because of additional activities. In fact, he states that his insurance bill initially went up considerably, since they had not been doing direct volunteering. He has since reduced this cost by 30 to 40 percent by shopping around.
In addition, he says, organizations that merge should not expect to get funded at the collective level. “Funders do not say, ‘Okay, I was giving you a thousand and you a thousand, so now I’m going to give you two thousand.’”
While the merger may have helped to position Volunteer Mid-South for the future, Dean says the biggest thing they have done to survive is keep a lid on expenses. When he first came on board, he looked at all of their expenses because they were hurting financially. He discovered telephone lines they were paying for belonging to a former tenant who had never been disconnected. Dean got rid of the postal meter because they were not sending out volumes of mail. He reduced their rent by 60 percent and eliminated parking costs by securing less expensive office space with free parking. He put a freeze on salaries and elected not to rehire for one position. He paid down a line of credit that had been maxed out.
“Through watching our pennies, we were able to create a rainy-day fund. So last year when the economy went sour, we were in a much better position,” Dean says. He credits having initiated these actions prior to the recession as the reason his organization has been able thus far to weather the storm.
Ironically, some funders do not appreciate this frugality. Dean explains, “One funder hurt my feelings when he said they were looking to help nonprofits that were down to their last dime and had no resources. I thought, I have saved and made my employees do without. I have been careful and you do not want to fund me but you will help somebody else who has not prepared.” Nonetheless, Dean believes, “You need to have a rainy-day fund. You need to keep your expenses low, even when times are good.”
You can learn more about this organization at www.VolunteerMidSouth.org.
Strategic Collaborations Bring Credibility and Productivity
Many individuals and families are facing challenges requiring them to seek assistance from local community-based organizations for the very first time. Yet, community-based organizations and the nonprofit sector typically operate with limited capacity and resources. Even though the nonprofit sector is continually challenged to devise ways to increase and strengthen its capacity, many organizations have been able to rise to the challenge, such as the Lawrence and Augusta Hager Educational Foundation in Owensboro, Ky. Much of the organization’s success can be attributed to collaborating with other entities to leverage available resources, thus enabling the Foundation to accomplish its mission.
Larry and Frankie Hager established The Hager Foundation in 1990 in honor of Larry’s parents. According to Keith Sanders, executive director, the Foundation’s mission is to improve the opportunities of children, especially those who are economically marginalized. In Owensboro, located in western Kentucky with a population of about 56,000 people, about 30 percent of the households have children under the age of 18, and approximately 16 percent of the households live below the poverty level. One of the major focuses of the Foundation is in the investment of early childhood education and in raising public awareness to the cost benefits of this investment.
The Owensboro community recognized the leadership and many efforts of Larry Hager by naming a preschool in his honor. The preschool is a collaboration between the public school system and the Head Start program, serving about 400 children. In November 2009, the Hager Preschool was designated as a Kentucky Early Childhood Center of Excellence. As a Center of Excellence, the Hager Preschool serves as a model for other districts. Staff members provide on-site consultation and present their model of success at state, regional and national levels. Only two preschools in Kentucky have received the Center of Excellence designation.
In 1992, the Foundation sought an innovation partnership with the Green River District Health Department and the United Way to fund two full-time nurses in two of the local elementary schools, where roughly 90 percent of the students qualify for reduced or free lunch. The nurses provide a variety of services, such as well-child exams, immunizations, health education and first aid. Today the health school clinics are still operating and are self-sustaining.
As the Hager Foundation forged ahead with its mission to improve opportunities for children, it also realized that it could not ignore the needs of the parents. Sanders states that “to improve the well being of children, you can’t be blind to the plight of their parents. Improving family financial self-sufficiency enhances family functioning.” Focusing on the needs of the parents, the Hager Foundation has been instrumental in forming the Green River Asset Building Coalition (GRABC) and Bank on Owensboro through diverse collaborations and funding efforts.
As part of their Earned Income Tax Credit campaign, GRABC opened its first five Volunteer Income Tax Assistance (VITA) sites in January 2005 and completed just over 300 returns. This past tax season, it operated 12 VITA sites and completed more than 2,800 returns. The Foundation has been able to tap into a variety of resources to sustain its Earned Income Tax Credit campaign. Some of the funding sources include the city of Owensboro, the county court, Internal Revenue Service, Kentucky Domestic Violence Association, several financial institutions and other local community foundations.
Staying abreast of trends and best practices, Sanders learned about the Bank On initiative last summer and modeled the concept in Owensboro. Bank On is a program that is typically a city- or state-led coalition that brings together local government, financial institutions and community organizations to help improve the financial futures of unbanked families. Bank On campaigns have been started in more than 60 cities and states and have the financial support of the partnering financial institutions. In Owensboro, due to the additional support of the Fifth Third Foundation and the Progency Fund, the initiative launched in May 2010.
The Hager Foundation has built a reputation that includes program credibility and productivity. That has played a vital role in its ability to attract diverse funding sources to sustain the various programs it supports. But equally as important as fundraising, the Hager Foundation has demonstrated the importance of “friend raising.” Since its inception, The Hager Foundation has worked with collaborations and partnerships to help create a community in Owensboro where people work, live, play and develop potential, proving that nonprofits can not only survive during challenging times, but ultimately thrive.
To learn more about The Hager Foundation, contact Keith Sanders at 270-685-5707.
Mobile Giving is Leveraging Technology for Good
When an earthquake registering 7.0 on the Richter scale devastated Haiti, the world responded to the critical need for aid and emergency relief. The William J. Clinton Foundation, which focuses on worldwide issues of urgent need, is one of the leading organizations using one of the hottest tools available to fundraisers today—mobile giving—to coordinate relief efforts and call on the global community to assist those facing unimaginable disaster.
Just one example of how nonprofits are turning to technology and innovative tools, the Clinton Foundation’s campaign, launched within hours of the quake, provided an immediate opportunity for citizens of every walk of life to become philanthropists and contribute monetary donations to a common, timely cause.
Angel Urena, deputy director of communications for the Clinton Foundation, describes the necessity of their mobile giving campaign. “It was very important for the Clinton Foundation to make engagement easy and accessible. At a time of crisis, the last thing an organization wants to face is a series of obstacles that could potentially stymie support, whether in providing information or securing donations. Mobile giving helped in that regard enormously because it takes away some of the steps associated with putting a donation in the mail or logging onto a web site to find the appropriate donation location. It is as easy as typing a few characters into your phone.”
The world today is interconnected due in large part to advances in technology. Nonprofits and fundraisers can make the most of this new reality, as Urena explains. “In the past, responses to catastrophes were often much slower, due largely to a lack of rapid communication. Today, thanks to the internet and mobile giving campaigns, we have new, dynamic, and effective ways to reach out to people.”
According to Experian Simmans, a marketing research firm, 90 percent of adults in the United States use at least one mobile device. Mobile giving allows anyone with access to texting services (or short message services = SMS) to become a charitable donor. Nonprofits tapping into this expansive market are able to encourage immediate response to topical issues from people who are typically outside of the traditional giving base. Mobile giving engages younger people in philanthropy and the work of nonprofit organizations in a new and unique way. The benefits of mobile giving are immediacy, affordability and accessibility, which enable people to quickly transform their compassion into action.
A typical donation from a single text message is either $5 or $10. But the dollars add up quickly. Thanks to the mobile giving campaign alone, for example, the Clinton Foundation reports receiving more than $524,000 for Haitian relief to date. Donations are collected through existing wireless bills. According to mGive, one provider of text message donation capability, more than $30 million has been donated to Haitian relief efforts overall through mobile giving channels.
Nonprofits new to mobile campaigns may be confused about the first steps they need to take to get started. To implement their mobile giving campaign, the Clinton Foundation partnered with the Mobile Giving Foundation (MGF). The MGF describes itself as the “glue” between a charitable giving campaign, the wireless industry and wireless users. The MGF processes and vets applications from nonprofit organizations wishing to deploy a mobile giving or communication campaign. Once approved, the MGF develops fundraising campaigns in conjunction with established mobile marketing firms and the nonprofit. That messaging platform is then used by wireless carriers through their SMS centers. The wireless carriers pass 100 percent of the charitable funds they collect through to the MGF. The MGF also remits 100 percent of the donation to the recipient nonprofit. The MGF charges back costs for short-code costs, reporting and messaging charges directly to the nonprofit organizations or their supporting service providers on a post-donation basis.
Similar to the approach used by the Clinton Foundation, small nonprofit organizations may be able to implement a mobile giving strategy by mitigating some of the technical barriers through partnership with intermediaries and existing networks.
A second consideration that is essential for implementing an effective mobile giving campaign is marketing. When creating a campaign in response to a particular crisis, Urena points to the need for marketing that is both prompt and integrated.
“The Foundation worked to incorporate our URL and mobile giving short code in every communication we made, especially in the days and weeks after the earthquake happened,” Urena says. “We continue to promote them today, but they were particu-
larly important in the immediate aftermath of the earthquake.”
In addition to fundraising, SMS is increasingly being used by nonprofit organizations for both advocacy and marketing alike. For example, the American Heart Association is implementing a multichannel mobile campaign using mobile banners, SMS, wallpaper, ringtones and mobile giving to create a multiprong approach to raising awareness, as well as funds.
One of the challenges posed by this tool is keeping donors and interested people engaged over the long term, once the initial critical action phase is over. To do this, nonprofits are creating applications for use on a variety of mobile devices that tell the story of how donations are being used. These applications allow organizations to follow up quickly and frequently with donors to demonstrate how monetary donations are working toward a mission. They also allow nonprofits to engage in a rich discussion with existing donors, potential donors and advocates about issues of common concern.
A final lesson that the Clinton Foundation offers to other nonprofit organizations considering a mobile giving campaign is to plan ahead, before crisis strikes.
“The Clinton Foundation had explored mobile giving previously, and was in the process of deciding how best to integrate it into our overall efforts,” Urena says. “When the earthquake happened, we were familiar with mobile opportunities but had not yet explored all the possibilities. The optimal scenario would be to have a mobile giving plan in place before an emergency; so, you’re able to build on an existing network, rather than create one in an instant.”
For more information about the William J. Clinton Foundation, visit www.clintonfoundation.org. For more information about the Mobile Giving Foundation, visit www.mobilegiving.org.
Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.
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