What to Say When Your Donor Asks: How Much do you Spend on Overhead?
Beware of a half truth; it may be the wrong half. This has always been a favorite proverb of mine. And a recent blog post of Top 10 Business Truisms by Scott Gillum, which I referenced yesterday, caused me to wonder how black and white (or possibly gray) these truisms might be – particularly as they might be applied to nonprofits. Yesterday I reviewed the first 5 ; today I take a look at truisms 6 – 10.
- The Rule of 70% – given the speed of today’s market, competitors, and customers, getting a product and/or marketing campaign/program 70% complete and out the door is good “enough.” Let customers/prospects complete the rest of the 30% for you. Less internal debate and more customer feedback makes for successful programs and products.
Given the lightening fast pace of change in today’s marketplace I confess I find this notion quite attractive. We’ve all heard people make the comment about not letting the great get in the way of the good. Still… I don’t know if I can personally adhere to this principle. After all, 70% is a “C” grade. This may be ‘gentlemanly’, but is it really sufficient to distinguish us from the crowd so that we rise to the top? Perhaps the real takeaway here is that energy needs to be strategically focused. And since having a customer-centric focus is more important than ever before, given the digital revolution that easily enables customers to interact with us and their peers in a manner that helps to define our brand, applying more resources to creating a dialogue with our customers makes complete sense. Since actively communicating/dialoguing is more labor intensive than before, we have less time to devote to things like wordsmithing, proofreading and graphics.
- NEW does not mean BETTER – everyone loves something new but it is the last thing that any company should focus on. Building/ selling/thinking NEW takes too long, cost too much and will have the lowest ROI. Focus first on getting more out of existing…and then invest in new (see 80/20 rule…again).
The classic marketing matrix reveals four options, in decreasing levels of cost-effectiveness: (1) market penetration (go to existing customers with existing products); (2) market development (go to new markets with existing products); (3) product development ( new products; existing markets), and (4) diversification (new products; new markets). We’ve know for some time that risk increases the further our strategy moves away from known quantities. This classic truism is good to keep in mind, especially in today’s digital world where we’re tempted to go after every bright new shiny object. This is not, however, an argument in favor of the status quo. There are ways to think in new ways, yet still apply this thinking to existing markets/products/programs/services. For example, beginning with the most cost-effective market penetration, online strategies can be applied to: (1) increase market share online; (2) improve customer loyalty, and (3) increase customer profitability by increasing purchase or usage frequency and quantity, thus improving profitability. For example, let’s say you already have a blog. You can take this “product” and penetrate your market more deeply with such strategies as:
· Guest posting on other blogs in your niche
· Having people guest post on your blog
· Improving the SEO of your site so you rank highly for relevant keywords
· Promoting your blog or product through the email list of another organization’s blog; then reciprocating
- The Elephant in the Room syndrome – there are big problems impacting performance in every organization that everyone knows about but no one talks about or attempts to fix. They will treat the symptoms but not the core problems… call it career preservation.
True. You can probably think of obvious problems that fail to get addressed wherever you are and wherever you’ve been. Usually the sheer size of these problems makes them difficult to confront or control. Often, those in authority are prime candidates for elephancy. They may run you over while whatever truths you have to offer are cast aside. They have a thick skin that is hard to penetrate with the truth. The result is an opinion above knowledge scenario. Some of the ways to get under the elephant’s skin may be to source the power of the crowd.
- Risk Tolerance – fast growing and “best in class” companies have a culture of tolerating risk and/or failure. It is a HIGHLY valuable and a very real competitive advantage.
This raises the question as to whether or not the public holds nonprofits to a different standard when it comes to managing risk. The key question is: Who bears the risk? The CEO? The board of directors? The donors? The clients? An interesting study from the Andrew Young School of Policy Studies attempts to address this conundrum. Nonprofits are in a unique stewardship role as guardians of the public trust; they are accountable to their funders and must ensure their ability to fulfill their missions. Sometimes the relationship between all the stakeholders is ambiguous; it’s not always clear who is charged with responsibility to take on and assess risk. Measuring risk is also a different equation in the nonprofit world. Since there is as much of a social as a financial return on investment, nonprofits don’t think as classically in terms of risk and reward. As a result, they may tend to make unduly conservative decisions. Ironically, this very conservatism could impede their ability to attract the venture philanthropy that could enable them to develop innovative solutions to social problems and create greater impact. A recent Progress through Boldness paper by Susan Raymond, Executive V.P. of Changing our World, addresses the unique relationship nonprofits have to risk:
If philanthropy, in search of the certainty of impact, fails to embrace the risk of the unknown, who will do so? Government, faced with the unknown, tends to politicize the inquiry process, in part to cast blame should failure ensue. Commerce will embrace risk, but only in so far as there is a clear balance of return. It is philanthropy that can invest in the edge of knowledge, and expect some failure with equanimity.
- Performance Dashboards – we recently completed a research study with the CMO Council that surveyed over 400 CMO’s in companies over $500 Million in revenue. 50% of the responders said that they have a Dashboard and 38% said that they were working on one. Here’s the truth…they don’t have a dashboard; they have an excel based “Report Card” of what they did, where they spent marketing dollars and what they got in return (hopefully). The reality is that a real Dashboard has real time information and can allow you to forecast at least 30 days forward. If you are part of the 38% who is actively working on building one, figure out how to move the needle on the dial before you expose your performance to the rest of the organization. Don’t show everyone in the organization your “numbers” until you know how to move them in the right direction.
Want to make your nonprofit board look dashing? Then it’s time to put the ‘dash’ into (1) measuring your outcomes and (2) using the data to inform future planning. This is just plain old good advice. After all, could you drive a car without one?