Too often the nonprofit sector innovates but has no idea whether the new idea is any better than what they were doing. I totally understand feeling like you’re program or impact can’t be boiled down to a number but you need a number to even think about improving.

If you’re not measuring you can’t know if you’re improving.

Philanthropy is at its root about wealth re-distribution. It’s about someone who has resources and giving them, generally, to someone lacking or in need of resources. It is a very noble venture and one that I wholeheartedly believe in. So tell me how a business that engages in this model is something other than philanthropic? So businesses like Project 7 and others that give away a portion of their profits are quite philanthropic. They are giving away hundreds of thousands and millions of dollars. They are good things to have. But let’s not kid ourselves here. Since they are giving away money they are simply forcing their owners and investors to be philanthropic. They are forcing philanthropy and wealth distribution. Maybe it helps distinguish them in the marketplace but I do not see them as true social enterprises.

The true social enterprise is one that creates value or provides services that inherently meet some social good. It is the green energy technology or the micro-franchise business or the for-profit affordable housing provider. Their product is creating value for people and meeting a social need. It is fundamentally different than the other model.

In the philanthropic model the question investors should ask is how little can I give away to still maximize profits? In the second model your investors should be encouraging you to meet your social goal so as to experience increased profits. They are two fundamentally different things in my opinion.

Intuitively it makes sense, right? When we’re choosing a place to live we look for a community where we “fit”. So my wife and I find ourselves in a middle-class neighborhood of Chicago with ethnic restaurants, yoga studios, and a drop-in, pay-by-the-hour day care. Others end up in rural and exurban communities with large yards, big trucks, and the ability to go hunting on the weekends.

To dissolve the conversation down to just political differences would be incorrect. It’s about something much deeper than that. Bill Bishop writes,

What’s happened, however, is that ways of life now have a distinct politics and a distinct geography. Feminist synchronized swimmers belong to one political party and live over here, and calf ropers belong to another party and live over there. As people seek out the social settings they prefer – as they choose the group that makes them feel the most comfortable – the nation grows more politically segregated – and the benefit that ought to come with having a variety of opinions is lost to the righteousness that is the special entitlement of homogenous groups. We all live with the results: balkanized communities whose inhabitants find other Americans to be culturally incomprehensible; a growing intolerance for political differences that has made national consensus impossible; and politics so polarized that Congress is stymied and elections are no longer just contents over politics, but bitter choices between ways of life.

I think that last line hits the nail on the head. We’ve reached a point where our political discussion are not about policies but ways of life between groups that do not understand one another nor interact with each other outside of emotionally charged rallies.

The Big Sort is definitely worth the time to read.

So what should community development organizations, both domestic and international, do?

1.) Have an exit strategy.

If you are in a community development organization your job should be to work yourself out of one. You cannot build a self-sustaining organization that can continue into infinitum. You must develop something that has the capability to solve a problem and shut down. You must always be working towards your exit strategy.

2.) Measure your progress.

Measurement and evaluation is particularly crucial for organizations that seek to create environmental and community change. You must constantly be evaluating what is working and what is not. The goal is to move the needle. If you aren’t, you must innovate.

3.) The goal must dictate the form.

Hold loosely to organizational structure. At certain points and in certain places it might work best to operate a nonprofit. At other times and in other conditions starting businesses might be the best way to foster development. See yourself as a development professional, not a nonprofit one. The only organization I know of that has left a community after helping it develop utilized this technique well.

4.) Keep your eye on the prize.

Have a clear idea of what a developed community looks like. What are your goals? What do you want the neighborhood to look like after you’ve succeeded and are moving on to your next community? Make this specific and keep your eye on it.

If organizations can begin to hold onto these simple guiding principles you’ll be a lot further along in community development.

Unfortunately this is the reality in the nonprofit sector. Our “investors” do not reap the benefits of our work. They give on behalf of someone else, someone they most likely will never meet. I’ve written often about this fundamental distortion and it continues to plague my thinking. So how can we try and correct this uniqueness in the nonprofit sector?

1) Think in terms of outcomes. It is very easy to become a donor who gives to what is cool, trendy, or makes you feel good. It’s easy because that is the easiest thing to base our decisions on. Try and move beyond that. Peruse some annual reports, talk to a staff member, try and meet someone who benefits from the organizations work.

2) Think critically. When making investing decisions we think critically about the business model, leadership, and product that a company has to offer. Do the same when it comes to your philanthropic giving. Does the model they are using make intuitive sense? Do they have research to back up what they are doing? Does it seem like they are offering something that is making a difference in the world?

3) Don’t stress. Celebrate your philanthropic efforts and don’t let them become overly burdensome. If you even move a little into the investor mentality you are leaps & bounds beyond most donors. There are very few organizations where your money will actually do damage, thinking like an investor is all about maximizing the return of your philanthropic gift which is an unattainable goal.

I completely agree that organizational health is often neglected, not only by businesses but by nonprofits as well. In the book, Lencioni lays out practical advice to improve the health of every organization. The structure of the book is built around four key disciplines of healthy organizations; Build a Cohesive Leadership Team, Create Clarity, Over-communicate Clarity, and Reinforce Clarity. Within each of the disciplines he offers advice on how each can be accomplished in a wide range of organizations.

The Advantage is full of great insights and wisdom that any leader can apply to their organization. As I was reading the book I constantly found myself thinking how it applied to various scenarios I currently find myself in. The Advantage should definitely be on every serious leaders bookshelf.

Compare that to this scenario. As a donor I think about issues or problems in the world most stir me. Within that set I think about ways in which my level of giving can actually make a difference. I then seek out organizations that I find to be making a difference on that problem where my money can make a difference. I then engage with them, giving them money but looking to ensure that they are using my money to impact the problem I sought out to make a difference in.

Too often donors just give their money away. What if they chose to buy impact instead? Wouldn’t our world be a much better place?

Beyond just knowing what was the optimal play on any given hand, Johnson used some of the concessions casinos give high rollers to his advantage to wean down the house’s favor until it was nearly even. The article is definitely worth a read.

I am a proponent of what I call data informed decision-making. Too often we rely on instinct, our gut, or randomness when making strategic decisions. It’s not that these things are always wrong but I believe the organizations that truly succeed don’t rely completely on instinct, they move towards data informed decision-making. Integrating data informed decision-making into your organization is quite simple. The first step is to simply begin collecting data that you feel is informative in some way. This includes things like sales & profits by region and data but can move much beyond that. Especially in the social sector it is important to move from measuring activity data to outcome data.

Next, when making key strategic decisions, go back to the data. Ask yourselves can we justify this decision based upon the data in front of us? If not, can we collect some data to help support this decision? Data informed decision-making is just about adding a check in the decision-making process. It’s about checking your instinct, gut, or ideas with data. You won’t always be able to support every decision with data but this will help your organization succeed more of the time.

Be sure to check out the article here.