Summer Reading: Banker to the Poor

Muhammad Yunus’ book traces the start of the now international Grameen (village) micro-lending program in Bangladesh. It has three vital lessons for nonprofit leaders.

1. Never underestimate the value of a small amount of resources in the right place at the right time. The people Yunus started serving with mirco-loans made the equivalent of two cents a day.

2. Never forget your mission. As micro-lending became perceived as successful, Yunus received many opportunities to lend money to people who were poor, but not necessarily the poorest of the poor. Yunus remained focused on his goal to serve the lowest 25 percent of the population.

3. Never forget to shape your requests to donor and others in packages that help them “see” your needs in ways they can appreciate. At one point working with the Central Bank, Yunus sought to develop a housing loan product. The Central Bank declined these since a house constructed from a $125 loan would not add to the country’s housing stock. Next, Yunus requested a “shelter loan.” This too was rejected. Finally, Yunus asked for a “factory loan” since the borrowers worked as entrepreneurs from their homes. With the assistance of the Governor of the Central Bank, Yunus received permission to begin his loan program.

For other reading suggestions see Recommended Reading.

Should Board Members’ Contributions Be Designated To Pay For Their Education?

I was speaking with a couple of colleagues the other day and the subject of board contributions came up. Later in the conversation we transitioned into the importance of ongoing board education and organizations building a sufficiently-large line item into their budgets for this. And then the idea bubbled up: What if one of the expectations of board service was that a portion of each board member’s personal contribution to the organization went to pay specifically for board education?

Such an expectation would do several things. It would communicate to the world that the organization believes an educated board is important. It would provide necessary dollars for such board education, without cutting into dollars dedicated to programming. And, it would help board members value the education the organization provides, because research affirms that people ascribe more value to something for which they pay rather than get for free.

There are some issues to consider. When my colleagues and I were talking, someone arbitrarily threw out $500 as the portion of each board member’s contribution that would go into this board education fund. While a substantial amount, with an average-sized board of 16, that only puts $8000 into the education coffer. True, $8000 is more than most boards currently devote to board education. But, $8000 won’t go far if the money is to be used for a true retreat, conference expenses or coaching, for instance. Asking for a number larger than $500 might be a non-starter for most boards – at least at this stage in the game. And, what happens in those organizations that ask for a personally meaningful gift from each board member instead of a contribution of a specific dollar amount? Yes, the leadership could opt to allot the entire board member contribution to its education fund, or designate a percentage, but how can any organization create an education budget if the ultimate total is an unknown? Perhaps the answer is that the board would still have to assign to the board education line a dollar amount from its general operating funds and use the contributions just to enhance its educational opportunities.

The biggest issue may be that some people will resent this set-aside, either out of principle or the belief that they do not need education – perhaps they’ve sat on many boards over the years and believe they have the job down pat. My guess is, though, this reality may be off-set by those that clamor to join a board that devotes so much attention to its board members and provides leadership training that they can then take back to their jobs or on to other organizations.

As someone who firmly believes in ongoing board education at every meeting, I love what this concept could “buy.” But I recognize it would require a major culture shift in most organizations. What do you see as the pros and cons? Is this an idea with sufficient value to push?

Summer Reading 2010 Work Hard. Be Nice.

by Jay Matthews

Although they did not start out as a nonprofit, Mike Feinberg and Dave Levin’s work resulted in one: the Knowledge is Power Program (KIPP) Foundation. In 1994, Feinberg and Levin, Teach for America graduates, started an inner-city school program for middle school students. Today, 82 schools in 19 states and the District of Columbia are KIPP programs. KIPP serves 21,000 mostly middle school age children. While many KIPP students begin fifth grade at least one or more grades behind their peers in math and reading, after four years at KIPP, 100 percent of eighth grade classes outperformed their district averages in mathematics and reading based on state tests. Word Hard. Be Nice. tells the story of the early years of KIPP.

What can a nonprofit leader learn from this book? The value of partnerships and perseverance. While the relationships were not always rosy, in fact they were often difficult and challenging, KIPP had to work with local schools and school boards to succeed. If you are faced with a partnership you must make work, Work Hard. Be Nice. will give you insights about how to survive, grow and thrive in this environment and how to hold on to your vision in tough times.

Should US Nonprofits Adopt a Patron System?

I worked recently in Singapore. While I found many similarities in the ways nonprofits do business both there and here in the United States, I found differences as well. One of the biggest was their use of a patron system. Besides having what we would consider the familiar board structure with a chairman or president at the helm, a large number of organizations there also have a patron. Some even have a patron and a patron in chief. These are powerful individuals who wield tremendous influence. For instance, the patron in chief of Singapore’s Lyric Opera is the President of the Republic of Singapore. Its patron is the Minister for Education and Second Minister for Defense. The intent is that these individuals will provide support – including, in many cases, political clout – and encourage others to support the organization as well.

In the United States, our honorary boards could be considered the closest equivalent to the patron system of Singapore. Some organizations here are able to engage major players, such as the Gerald R. Ford Presidential Foundation which counts among its trustees James Baker, Dick Cheney, Alan Greenspan, Henry Kissinger and Donald Rumsfeld. But the number of organizations with the capability of attracting names of this caliber are far and few between. Would it be easier for nonprofits to attract a single patron? Would a patron help nonprofits that feel they lack sufficient access to affluence and influence?

I do believe that it would be easier to find a single patron than an honorary board. However, I do not believe that it would necessarily be easy. Think of all the nonprofits that have tried unsuccessfully to find a celebrity spokesperson. And, we certainly know how quickly a good name can become a liability. Tiger Woods, anyone? Singapore has experienced this with the patron system as well. The patron of their National Kidney Foundation, the wife of Goh Chok Tong, former Prime Minister of Singapore and current Chairman of the Central Bank, was forced to step down after defending the pay of the CEO, saying that his $600,000 (S) salary was “peanuts.” At least with an honorary board, one would hope there will be others whose reputations remain sterling, even if one of the names on that board turns bad.

As to whether having a patron would be helpful to organizations lacking affluence and influence...I'm not so sure. Singapore is a very small country. People tend to know one another and a patron's name alone carries clout. Here, the individual would have to be willing to actively use his/her influence on behalf of the organization to bring others along. Research done by Herman and Renz suggests that this does not happen as often as nonprofits hope. Besides, the reach of a single individual versus a larger group is necessarily limited, especially in a country the size of the United States.

So, even though I believe nonprofits in the United States can learn much from their counterparts in other countries, I'm not so sure I'd suggest our turning to a patron system here. But, I’m curious as to what others think. Is such a system an answer for us, especially in these difficult times?

Where, Oh Where are Our Nonprofit Money Trees?

Nonprofit leaders would like to have access to a money tree—a big healthy one.

In truth, they do. Healthy nonprofits grow groves of money trees composed of six* main species. They include these species of trees and yield, on average, these fruits.

1. Earned income: 28- 40 percent

2. Individuals gifts including bequests: 16-29 percent

3. Government: 21- 30 percent

4. Other income, like interest and entrepreneurial income: 10-16 percent

5. Foundations: 2-3 percent

6. Business/Corporate: 1-2 percent

Money trees start, as all trees do, either as a seed like an acorn or a planted seedling. Then nonprofit leaders tend, water and protect them. If you take care of your groves and continue to plant new trees, you will harvest fruit for years.

Which trees have you planted in your nonprofit? Which of your groves need tending? Which new trees are you learning to grow?

For more information about nonprofit income sources see:

How Will We Pay for This? 14 Ways to Obtain Income

Money-tastic #2: Nonprofit Income Opportunities

* A seventh species is the In-Kind Tree, where groups receive resources in lieu of cash.