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Nonprofit Management

Surviving the Fiscal Cliff

The one thing every nonprofit should do in the face of federal tax increases and spending cuts.

The fiscal cliff is here to stay in one form or another. Regardless of delays or compromises concerning federal tax increases or spending cuts, the perception that we are entering into a “less giving” environment is real. This perception is already affecting donor and nonprofit behavior. The question that emerges from this fiscal and psychological crisis is: Where do you want to end up—on the top or the bottom of the cliff?

There is only one thing that nonprofits need to do to end up standing on top of the fiscal cliff. They need to evaluate—but I don’t mean just any kind of evaluation. They need to engage in empowerment evaluation.

Empowerment evaluation

Empowerment evaluation is a form of self-assessment. It is designed to help people build their capacity to monitor and assess their own performance. It is different from many conventional forms of evaluation, because it places both community members and nonprofit staff in charge instead of an outside expert.   A “critical friend” works with program staff members and clients as a guide. These individuals are trained evaluators who believe in the purpose of the program, but are even more critical of program operations than an external evaluator, because they want the program to work. They help to keep things on track, and they ensure rigor and accuracy.

By taking charge of their own evaluations, people develop ownership over and responsibility for their efforts. Empowerment is not a neutral scientific experiment where the program succeeds or fails and everyone walks away, leaving the client to fend for themselves.

Empowerment evaluation uses feedback loops to help inform decision-making and produce desired outcomes. It turns nonprofits into learning organizations. This enables them to continue to grow, innovate, and survive the continual economic and environmental challenges around them.

What nonprofits need to evaluate

Nonprofits need to apply empowerment evaluation to assess three things:

  1. Their business model, from a bottom-line perspective
  2. The need for and quality of their services
  3. The stage of development of their services, from a larger organizational lifecycle perspective

Importantly, nonprofits need to invite their clients or customers and community members to the table to evaluate these things with them. This is unheard of for many organizations. Where is the objectivity if you evaluate yourself? Why should we let clients see our dirty linen? The answer is: Who knows the organization best? Who has the most at stake concerning its survival? Who benefits most from a well-functioning and productive nonprofit? Bottom line: Who is in the best position to evaluate it?

Business model

Most nonprofits will say they are continually assessing their business model. My experience over the last couple of decades is that the business model is taken for granted. People do what they did last year, and everyone keeps chasing the dollar.

More to the point, rarely are clients and community members invited to participate in fiscal discussions of this nature. But when they are invited, they produce meaningful contributions and gain a respect for what the organization is grappling with, often on a shoestring budget. The conversation alters their expectations in the future and makes them more realistic. It also makes the survival of the organization a shared experience.

The analysis, nevertheless, must be conducted from a bottom-line perspective. How much money is coming in, and how much is going out? Is it a sound and sustainable fiscal model? If not, what must change? This is where community buy-in is critical, and empowerment evaluation’s inclusive nature facilitates buy-in to problem solving (especially concerning unpopular decisions such as changes or elimination of specific service delivery programs).

Need for and quality of services

Many nonprofits conduct a survey, sometimes a focus group, concerning the need for and quality of their services. However, it is typically framed from the nonprofit’s perspective and has little to do with the client’s experience. In addition, little is usually done with the data.

With an empowerment evaluation, clients and community members can define their perception of an organization’s services and help determine the value of those services to the community.

This team approach to assessing nonprofit services:

  1. Saves time by short circuiting the process and going directly to the staff member and client or community member
  2. Helps identify the most relevant services (from a staff member and customer perspective)
  3. Pinpoints problems with service delivery
  4. Produces recommendations (grounded in both the staff member and client or customer’s perspective) concerning what needs to be done to improve the quality of those services.
  5. Build’s community loyalty and a sense of ownership concerning proposed solutions

Stage of development

All nonprofits have various stages of development in their organizational lifecycle. Some of their service delivery programs are like start-ups; they require additional attention and resources, but represent an investment in future revenue streams. Other service delivery programs have been cash cows for years but are coming to the end of their revenue producing cycle due to lower demand or less funding to support them. Who is in a better position to assess these stages of development (from a lifecycle perspective) than the people providing and receiving those services? Once again, an inclusive approach to self-assessment is likely to identify meaningful changes in need or value using this lifecycle perspective.

Survive and prosper, or disappear

The fiscal cliff is real. For those who plan on surviving and prospering, there is only one answer: evaluation. Those who evaluate inclusively will be in a position to justify current funding, make successful requests for additional support, and remain credible with donors, staff members, and clients alike. Nonprofits that assess alone will fall alone. They will be standing at the bottom of the fiscal cliff. Those who embrace their community will ultimately remain standing with their communities—on the top of the fiscal cliff. The view for those who embrace these diverse voices will be the envy of the larger community around them.

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COMMENTS

  • Jenifer Morgan (SSIR)'s avatar

    BY Jenifer Morgan (SSIR)

    ON January 22, 2013 08:58 AM

    POSTED ON BEHALF OF EUGENE FRAM:

    Post Newtown: The Power of the Nonprofits

    An ABC press release dated 1-14-2013 by Kevin Dolak (@kdolak) reported the formation of a new nonprofit organization by the parents of the children who perished at Newtown, Connecticut.

    Speaking at a press conference at Newtown, Conn., this morning, Tom Bittman, co-founder of Sandy Hook Promise, outlined three discussion points that the organization hopes will bolster a national discussion and affect change in communities: gun responsibility, mental health and making public spaces safer. 

    This action shows the importance of local nonprofit organizations to take positive action, in the wake of such a tragedy.  A nonprofit, in this situation, stands as a venue to allow the parents and their neighbors to promote a needed cause.  It is a way to personally galvanize the local and national communities to action and to ensure that the mission won’t fail once the headlines turn to another issue. 

    As the group moves forward, it will quickly need a state charter and select a board of directors to ensure that the nonprofit achieves its mission and perpetuates the vision and values of the founders.

    While, this step may seem to be a mere bureaucratic way station, how the board functions is critical to the nonprofit’s future success.  No doubt, many well-meaning supporters will want to give their time and resources to the board. Like the directors or trustees of all nonprofits, the governors of Sandy Hook Promise will carry substantial ethical and responsibilities to the memories of the lost children. . The failure of the board of Greg Mortenson’s Central Asia Institute certainly acts as a reminder of the diligence required of nonprofit boards in the 21st century.   

    As the organization grows, the directors of trustees will need to assure the founders that:
    • The organization is operated in an ethical manner.
    • Persons involved with the board, management and staff understand the mission vision and values of the organization.
    • Programs and program impacts are achieved.  This won’t be easy because some of these will be qualitative and difficult to measure.
    • While the organization will need to be a caring one, it
    needs to be operated with a reasonable level of efficiency and effectiveness.
    • As the organization grows, the board will have to become less involved with operations, more involved with policies and strategies. It will then need to engage professional managers, who should be overviewed, not micromanaged. * 

    The fact that the Sandy Hook parents chose a local nonprofit, as a venue to implement their mission is significant.  While there are many national organizations that would be willing to take up their cause,
    it shows the power of a local nonprofit to improve the general welfare of the local and communities.  To achieve this goal, the board of directors or trustees plays a significant role that is not often highlighted.

    Let all of this be a reminder of the importance of nonprofit boards and staffs, and their capacity to turn a tragic event into a positive effort. 


    See my blog site and book:  Blog site -  http://bit.ly/yfRZpz 


    Book: http://amzn.to/eu7nQl 

  • BY David Fetterman

    ON January 22, 2013 12:41 PM

    Hi Gene,

    Thanks for your comments, particularly concerning a topic that is so close to everyone’s hearts at this time.  I am from Connecticut and as a consequence have my own ties to this personal and national tragedy.

    Your first line captures so much of what I was speaking about:  “a new nonprofit organization by the parents of the children who perished at Newtown, Connecticut”.  Who would know the issue better than the parents?

    The more we either have people start-up their own nonprofits or, more likely, the more community members are involved in established nonprofits, the more likely the nonprofit is going to be aligned with community values and interests.  As you point out, it is a way “that the mission won’t fail once the headlines turn to another issue.”  It is common sense, but unfortunately this kind of involvement is not as common a practice as it should be. 

    The next step in involvement, however, is not lip service but substantive involvement.  One fundamental form of involvement is in co-evaluation of the nonprofit mission, services, and plans for the future.

    This is one of the best ways of keeping a nonprofit on task, avoiding mission creep and following a pattern of simply chasing the money.  Empowerment evaluation is a tool that helps organizations “walk their talk” - do what they say they are doing - and accomplish their objectives, with substantive and sustainable outcomes).

    Once again thanks for sharing your thoughts and expertise here.

     

  • BY Eugene Fram

    ON January 26, 2013 08:55 AM

    I agree evaluation is the key to nonprofit survival.

    There must be an agreement on jointly developed goals and outcome expectations. The goals and outcomes should be achievable but challenging. Some goals are clearly quantifiable (e.g. membership data, revenues) and readily available.

    But some, like “community impact,” in the case of a human services group, are important, but they only can be developed within an imperfect format -  that is, they are developed from small samples, or are anecdotal, subjective, interpretative or qualitative.  Most nonprofits can’t spend thousands or hundreds or thousands of dollars to have an outside consultant provide statistically solid data.

    In these cases, there must be an agreement on subjective outcomes and the imperfect methods by which they will be developed. 

    David speaks to the community and staff level concerning self-evaluation, however, what I would add to this conversation that on the management level, the chief executive has to have trust that the board members are fair people and doing the best they can to evaluate outcomes.  When done over a number of years, the board and the CEO become more comfortable with the process.

    For more details see: Eugene Fram & Jerry Talley, (2010)  “Using Imperfect Metrics Well: Tracking Progress & Driving Change,“Leader to Leader, winter, pp. 52-58.
    Blog site: http://bit.ly/yfRZpz  Book: http://amzn.to/eu7nQl

     

  • BY David Fetterman

    ON January 26, 2013 05:27 PM

    I agree evaluation is the key to nonprofit survival.

    DF: Our current fiscal environment with the fiscal cliff and the debt ceiling influencing decision making on a daily basis demands continual assessment of performance.

    There must be an agreement on jointly developed goals and outcome expectations.

    DF: I agree.  The word we use is consensus.  We don’t all have to agree 100% - that never happens. Our standard is simple:  can you live with it.

    The goals and outcomes should be achievable but challenging.

    DF: Correct.  We make sure we have a lot of small wins along side long-term ones - otherwise folks get depressed and disillusioned.  A combination is reinforcing.

    Some goals are clearly quantifiable (e.g. membership data, revenues) and readily available.
    But some, like “community impact,” in the case of a human services group, are important, but they only can be developed within an imperfect format -  that is, they are developed from small samples, or are anecdotal, subjective, interpretative or qualitative.  Most nonprofits can’t spend thousands or hundreds or thousands of dollars to have an outside consultant provide statistically solid data.

    Df: 100% in agreement with your observation and experience.

    In these cases, there must be an agreement on subjective outcomes and the imperfect methods by which they will be developed.

    DF: Precisely - the key for me is that they are grounded in the participant/community member/ staff member experience.  At the same time this can be done within the context of larger organizational and even national standards like the Centers for Disease Control and Prevention in the case of our tobacco prevention work in Arkansas.

    David speaks to the community and staff level concerning self-evaluation, however, what I would add to this conversation that on the management level, the chief executive has to have trust that the board members are fair people and doing the best they can to evaluate outcomes.

    Df: Thanks for highlighting the role management plays with the board.  It is an often neglected piece of the puzzle but vital.  We often have empowerment evaluation workshops just for the board so they understand the process and can be supportive of it (without accidentally undermining it).

      When done over a number of years, the board and the CEO become more comfortable with the process.

    DF: Nice - point. A lot of folks want quick fixes but building capacity takes time but it lasts.  Also as we build a sense of ownership a sense of responsibility for the initiative develops and that kind of commitment you can not buy.

    I encourage folks to take a look at Gene and Jerry’s work.  We have worked together helping others help themselves enhance their own performance.


    For more details see: Eugene Fram & Jerry Talley, (2010)  “Using Imperfect Metrics Well: Tracking Progress & Driving Change,“Leader to Leader, winter, pp. 52-58.
    Blog site: http://bit.ly/yfRZpz  Book: http://amzn.to/eu7nQl

  • David,

    The portion of your post that resonates most with me is the following:

    “Importantly, nonprofits need to invite their clients or customers and community members to the table to evaluate these things with them. This is unheard of for many organizations.”

    Indeed, it is certainly unheard of in many organizations. Some nonprofits staff suffer from the well-meaning belief that, given their professional expertise, they are able to provide programming or initiatives which benefit their target groups absent input from the very individuals that comprise the groups.

    Inviting clients and customers to the table is a form of radical collaboration, wherein individuals who are never part of a conversation are given a voice on how a nonprofit’s intervention could look, unfold, or be evaluated.

    Letting outsiders in to help set metrics, determine methods for data collection, and interpret evaluation results can yield surprising outcomes. Furthermore such collaborations provide what Patton calls “process use,” or the beneficial learnings that accrue to participants for merely engaging in the activity regardless of the evaluation outcomes.

     

  • BY David Fetterman

    ON January 29, 2013 11:30 AM

    David,
    The portion of your post that resonates most with me is the following:
    “Importantly, nonprofits need to invite their clients or customers and community members to the table to evaluate these things with them. This is unheard of for many organizations.”

    DF: Yes - it is a radical step for many nonprofits - but really just common sense.

    Indeed, it is certainly unheard of in many organizations. Some nonprofits staff suffer from the well-meaning belief that, given their professional expertise, they are able to provide programming or initiatives which benefit their target groups absent input from the very individuals that comprise the groups.

    DF: Yes and then they are blindsighted when the community is less than appreciative, unresponsive, or even looks elsewhere for assistance.

    Inviting clients and customers to the table is a form of radical collaboration, wherein individuals who are never part of a conversation are given a voice on how a nonprofit’s intervention could look, unfold, or be evaluated.

    DF: Yes - it builds their programatic capacity (as well as their evaluative capacity).

    Letting outsiders in to help set metrics, determine methods for data collection, and interpret evaluation results can yield surprising outcomes. Furthermore such collaborations provide what Patton calls “process use,” or the beneficial learnings that accrue to participants for merely engaging in the activity regardless of the evaluation outcomes.

    DF: Absolutely.  They being to think like evaluators by conducting their own evaluations. They also find the findings and recommendations more credible because they are theirs.  This is within the context of what they are already being held accountable for anyway and with the guidance and assistance of a critical friend (someone with evaluation expertise who supports the program but asks the critical questions because they want the program to work).

    Many thanks for your postings John.  I can see we have tremendous alignment in our views and experience.  Best wishes.

    - David

  • Jenifer Morgan (SSIR)'s avatar

    BY Jenifer Morgan (SSIR)

    ON February 4, 2013 02:19 PM

    POSTED ON BEHALF OF José María Díaz Puente:

    To my knowledge starting an evaluation process opens up a fruitful period of reflexion among the members of any organization. And if this evaluation process is carried out in a way that fosters participation, collaboration and empowerment, benefits increase exponentially.

    In my experience applying Empowerment evaluation in rural development programs in the most disadvantaged areas of the European Union, two concepts has been of particular importance to make the most of the evaluation process: the cycles of reflection and action, and the critical friend role of the evaluator.

    Cycles of Reflection and Action

    Empowerment evaluation is a process of collecting and analyzing data or reflecting on the data, and then using the data to inform decision making.  In my experience working in rural areas the cycles of reflection were evidenced in the use of monitoring systems. The management teams of the rural programs showed an increasing interest in the use of evaluation tools for monitoring the programs. They came to rely on these tools to think about and assess program progress.

    Critical Friends

    We worked with the rural communities to help them conduct their internal evaluations, not as experts, but as people who believed in their work with an eye toward helping them design meaningful assessments of their work and building their evaluation capacity. We helped them to design their monitoring tools and provided suggestions to help them make the process more rigorous: (1) recommending to remain inclusive concerning invitations to their meetings; (2) advocating for the use of evidence to determine program effectiveness, including collecting information, analyzing the data, and designing strategies with the rural communities; and (3) recommending adaptations to ensure that they valued stakeholder contributions. These suggestions facilitated engagement and encouraged participation.

    These two concepts applied in rural organizations focused on the development of the local communities helped to cultivate an environment of profound respect and helped people to maximize their potential.

  • BY David Fetterman

    ON February 4, 2013 11:22 PM

    To my knowledge starting an evaluation process opens up a fruitful period of reflection among the members of any organization.

    DF: That has been my experience too.  I have also found that it changes us as evaluators as well.  It makes us re-think our role and need for control.  We learn to value that much more the partnership relationship.  It also humbles us to know how much more people can do than we might expect sometimes.

    And if this evaluation process is carried out in a way that fosters participation, collaboration and empowerment, benefits increase exponentially.

    DF: I agree.  This is my experience as well.  Native American’s, in the Tribal Digital Village, built one of the largest wireless systems in the country, guided by the empowerment evaluation approach. (See my latest book Empowerment Evaluation in the Digital Villages at:  http://www.ssireview.org/articles/entry/empowerment_evaluation_in_the_digital_villages_hewlett_packards_15_million)  The. tobacco prevention group I work with in Arkansas are responsible for creating the Arkansas Evaluation Center; a bill that passed the House, the Senate, and has been signed by the governor.  (See our blog at:  http://tobaccoprevention.blogspot.com) Thes.e are exponential benefits from this approach.

    In my experience applying Empowerment evaluation in rural development programs in the most disadvantaged areas of the European Union, two concepts has been of particular importance to make the most of the evaluation process: the cycles of reflection and action, and the critical friend role of the evaluator.

    DF: Glad to hear you highlight these concepts.  I don’t think enough people have focused on these concepts. 

    Cycles of Reflection and Action

    Empowerment evaluation is a process of collecting and analyzing data or reflecting on the data, and then using the data to inform decision making.  In my experience working in rural areas the cycles of reflection were evidenced in the use of monitoring systems. The management teams of the rural programs showed an increasing interest in the use of evaluation tools for monitoring the programs. They came to rely on these tools to think about and assess program progress.

    DF: Thanks for sharing your experience in rural areas in Spain.  I have also found in rural areas in the US that the value of monitoring can not be overstated.  It contributes directly to evaluative thinking.
     
    Our 18 tobacco prevention grantees in Arkansas establish goals, benchmarks, and then compare actual performance with them.  As they reflect on the data together, they become a community of learners – holding themselves accountable and helping each other out, sharing problems and solutions.  This approach creates a continuous feedback loop of reflection and action.

    Critical Friends
    We worked with the rural communities to help them conduct their internal evaluations, not as experts, but as people who believed in their work with an eye toward helping them design meaningful assessments of their work and building their evaluation capacity. We helped them to design their monitoring tools and provided suggestions to help them make the process more rigorous: (1) recommending to remain inclusive concerning invitations to their meetings; (2) advocating for the use of evidence to determine program effectiveness, including collecting information, analyzing the data, and designing strategies with the rural communities; and (3) recommending adaptations to ensure that they valued stakeholder contributions. These suggestions facilitated engagement and encouraged participation.

    DF: Excellent point. Engagement, and participation are aspects of process use – the theory that the more that people are involved in doing their own evaluations the more they are likely to act on the results and implement the recommendations – because they are theirs.  For more information about the critical friend role and how they help shape the environment, cultivate talent, and help people produce outcomes see:

    Fetterman, D.M. (2009). Empowerment evaluation at the Stanford University School of Medicine: Using a Critical Friend to Improve the Clerkship Experience. Ensaio: Avaliação e Políticas Públicas em Educação. Rio je Janeiro, 17(63):197-204.

    Fetterman, D.M., Deitz, J., and Gesundheit, N. (2010). Empowerment evaluation:  A collaborative approach to evaluating and transforming a medical school curriculum.  Academic Medicine, 85(5):813-820.

    These two concepts applied in rural organizations focused on the development of the local communities helped to cultivate an environment of profound respect and helped people to maximize their potential.

    DF: Thanks for sharing your international experience.  Thanks also for reminding folks that we don’t empowerment anyone, people empower themselves.  We just help to create an environment conducive to people empowering themselves and maximizing their own potential (and producing real outcomes).

  • BY Cindy Banyai

    ON February 22, 2013 12:58 PM

    I think you are right in pointing out that many organizations talk about continually updating their business model, but rarely engage in institution and community-wide activities to do so.

    In my experience dealing with nonprofit organizations around the world there is a general lack of evaluation capacity, and even a fear of evaluation since it is so often linked with obligations from donor agencies. I think that by taking an empowerment evaluation approach organizations build their evaluation capacity and begin to create a productive atmosphere for evaluation in general.

    It’s true that many nonprofits will not make it through this economic downturn and may indeed fall off their own fiscal cliff. Building evaluation capacity through empowerment evaluation and connecting with the communities they serve is a good way for organizations to survive and move forward.

  • BY David Fetterman

    ON March 2, 2013 09:42 AM

    DF: Hi Cindy

    I think you are right in pointing out that many organizations talk about continually updating their business model, but rarely engage in institution and community-wide activities to do so.

    DF: It is ironic.  The “inclusive investment” of engaging the community and giving them a much larger role in guiding their own social initiatives is less expensive in the long-run than any externally derived model - because it cultivates ownership, buy-in, and promotes sustainability.

    In my experience dealing with nonprofit organizations around the world there is a general lack of evaluation capacity, and even a fear of evaluation since it is so often linked with obligations from donor agencies. I think that by taking an empowerment evaluation approach organizations build their evaluation capacity and begin to create a productive atmosphere for evaluation in general.

    DF: The climate of constructive critique and improvement is imperative if we are to move forward in our communities.  Empowerment evaluation simply becomes the tool to do so.

    It’s true that many nonprofits will not make it through this economic downturn and may indeed fall off their own fiscal cliff. Building evaluation capacity through empowerment evaluation and connecting with the communities they serve is a good way for organizations to survive and move forward.

    DF: Absolutely. I have an article coming out soon in the Chronicle of Philanthropy that speaks direction to this issue - highlighting that their will be winners and losers as we face the fiscal cliff (those who monitor and self-assess now will come out winners when the dust settles).

    Thanks again for sharing your thoughts Cindy.  Best wishes.

    - David

    - See more at: http://www.ssireview.org/blog/entry/surviving_the_fiscal_cliff#sthash.eM1JA48I.dpuf

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