with David Greco Pacific Ballroom February 5 2016 845am 1015am REAL COST REAL OUTCOMES David Greco Project Director Real Cost Project wwwrealcostprojectorg 2 The world has changed and so must we Its time for a new approach ID: 732508
Download Presentation The PPT/PDF document "Real Costs. Real Outcomes" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Real Costs. Real Outcomes
with David Greco
Pacific Ballroom
February 5, 2016
8:45am – 10:15amSlide2
REAL COST. REAL OUTCOMES
David Greco
Project Director, Real Cost Project
www.realcostproject.org
2Slide3
“The world has changed, and so must we. It’s time for a new approach.” - Clara
Miller, President, F.B. Heron Foundation
www.realcostproject.org
3Slide4
WHICH OF THESE EXISTED IN 2005?www.realcostproject.org
4Slide5
A rapidly changing social sector:Technology & Data
Big Money
Government
Market SolutionsImpact InvestingRegionalization & Collaboration
www.realcostproject.org5Slide6
87%
<$1MM
54%
<90
days of cash
65%
<10% overhead
+
+
1.5 Million Nonprofit Organizations
Weak Infrastructure
Strained Capacity
Limited Impact
Less Quality
Fewer People Served
www.realcostproject.org
6Slide7
www.realcostproject.org
7
MONTHS OF CASH
CALIFORNIA NONPROFITS OVERALL
NONPROFITS
SERVING LOW-INCOME COMMUNITIES
<1 Month
13%
14%
1 -3 Months
40%
46%
TOTAL
(<3
MONTHS)
53%
60%
3 Months +
47%
40%
ABILITY TO MEET DEMAND
CALIFORNIA NONPROFITS OVERALL
NONPROFITS
SERVING LOW-INCOME COMMUNITIES
YES
44%
35%
NO
56%
65%Slide8
2004
2012
Revenue < $500K
79%
80%Revenue < $100K
52%53%
Deficits
26%
30%
www.realcostproject.org
8
Orange County Nonprofit Sector 2004 - 2012Slide9
www.realcostproject.org
9
THE CONSEQUENCES
Limited
Capacity &
Weak
Infrastructure
Pursue
Off-Strategy & Non-scalable
Funding
Distraction & Fragmentation
Lack of Liquidity
‘Doom Loop’
Inability to Meet Demand
Funding Does Not Cover the Full CostSlide10
STOPPING COUNTERPRODUCTIVE ACTIVITIES AND BEHAVIORS
What can you do to make sure that you achieve the worst result imaginable
with respect to achieving impact.
Adapted from Liberating Structure’s Making Space with TRIZ
www.realcostproject.org10Slide11
www.realcostproject.org
11Slide12
STOPPING COUNTERPRODUCTIVE ACTIVITIES AND BEHAVIORS
What can you do to make sure that you achieve the worst result imaginable
with respect to achieving impact.
Is there anything that we are currently doing that in any way, shape, or form is on the list? Be brutally honest!What
first steps will help us stop what we know creates undesirable results?Adapted from Liberating Structure’s Making Space with TRIZ
www.realcostproject.org
12Slide13
www.realcostproject.org
13Slide14
NATIONAL PARTNERS
www.realcostproject.org
14Slide15
www.realcostproject.org
15
Statewide reach focusing on Southern and Northern California Grantmakers
In-depth interviews conducted
Qualitative approach spanning multiple funder types
RESEARCH OVERVIEW
Annual Budgets from $400,000 to $9 Billion
Staff Roles including
Board
M
embers,
Executive Directors, and Program Officers. Slide16
WHAT WE LEARNEDwww.realcostproject.org
16
Lack of formal policies around overhead or indirect costs
No standard definition of terms
No shared or common language
Discretion left to program, grants management, and/or financial staff
Little or no formal training on determining full cost
Practice driven by cultural norms and perceived ‘best practices’ in the field
Radical differences in approach and practiceSlide17
A NEW APPROACH. A NEW PRACTICE.
WHAT WILL IT TAKE TO GET THERE?
www.realcostproject.org
17Slide18
Simply put, the real cost includes all necessary costs for a nonprofit organization to deliver on mission and to be sustainable over the long term.
Program ExpensesAdministrative and Operating Expenses
Reserve and Capital Expenses.
www.realcostproject.org18Slide19
REGIONAL FORUMSSan Francisco – June 9, 2015
Los Angeles – June 15, 2015Orange County – June 19, 2015
San Diego – June 23, 2015
www.realcostproject.org19Slide20
KEY TAKEAWAYSCulture of
Philanthropy: The uneven power dynamic creates a culture where nonprofits feel they cannot be transparent on issues around financial challenges and the true cost of delivering services.
Restrictions and Program-based
Funding: Many institutional foundations are organized and staffed around specific program areas. This system institutionalizes practices that 1) reinforce the idea that programs – not overall organizational capabilities – are what matters most; 2) restrictions are necessary to link funding to specific program results; and 3) accountability is necessary for the program officer to justify the grant.Shift
to Outcomes: There was a great deal of agreement that focusing on inputs such as cost is not providing the opportunity for nonprofits to effectively deliver on mission. Rather, foundations should ground their grantmaking by focusing on what are they trying to achieve.
Organizational Innovation and Growth: Supporting indirect and overhead costs can have lasting impacts on organizations by allowing leadership the ability to remain flexible in changing times
.
www.realcostproject.org
20Slide21
INSTITUTIONAL BARRIERSLack of understanding of nonprofit financial
management.Lack of established best-practices models around funding the full cost of
programs.Lack of trust and a belief that many nonprofits don’t understand how to run “like a business” – especially among trustees and foundation board members.
SECTOR-WIDE BARRIERSA pervasion culture and mindset that “Overhead is Bad”.Lack of a shared language and common definitions around overhead and full costs.
Lack of open and transparent conversations between funders and nonprofits.Deeply ingrained practices, beliefs and perceptions.Lack of established best-practices models around real cost funding.
Lack of understanding of nonprofit financial management.
Lack of skills and training around measuring and evaluating
outcomes.
www.realcostproject.org
21Slide22
OVERCOMING BARRIERSExecutive Buy
in: Simply, change happens at the top. In order for lasting and impactful change to occur in funding methods, executives and boards of trustees must fully understand the issues and be prepared to implement changes.
Engaging Grantees in a Real Cost Conversation:
Before changing grantmaking practices, grantmakers need to examine their current practices – both formal and informal – and to engage in conversations with their grantees as to what does it really take for them to achieve their outcomes and how the funder’s grantmaking practices are helping or hindering the achievement of outcomes.www.realcostproject.org
22Slide23
What do you need to help you move forward?What support do funders need?
What support do nonprofits need?
www.realcostproject.org
23Slide24
For More Information:Real Cost Project – www.realcostproject.org Northern California Grantmakers – ncg.org
San Diego Grantmakers – sdgrantmakers.orgSouthern California Grantmakers – socalgrantmakers.org
David Greco, Project DirectorEmail: david@socialsectorpartners.com
Phone: 213-640-9295www.realcostproject.org
24