A few weeks ago I called up a program officer of a foundation to discuss my organization’s amazing idea to bring more immigrant and refugee leaders into the nonprofit field. “That’s a great idea,” said the program officer, “but what’s your sustainability plan? We don’t tend to support projects unless we know they will be financially independent in the future.”
“Well,” I said, “I have a great plan for that. Have you heard of teeth tattoo? No? You will! Dental adornment is going to be the latest thing, believe you me. Think about it: the Seahawks logo on your incisors! We will open a teeth tattoo parlor, and it will generate literally billions of dollars, enough to fund the project forever. But we need seed money. So how about 50K from you all?”
All right, I didn’t say that. I waffled something that sounded intelligent—“We are building up our base of individual donors, establishing relationships with local businesses, and using the Synergistic Paradigm Action Matrix in order to find the nexus between our strategies and adaptive advantage”—like a good grantseeker is trained to do. We talked some more. Then I hung up and unwrapped a bar of dark chocolate and ate it, both me and the chocolate 72% bitter.
Many foundations (and some donors) have this horrible fear that we nonprofits will become dependent on them. Like those Millennials who move back home to live with their parents after grad school and refuse to leave. Because of this fear, most foundations give one-year grants, usually restricted. Tough love, you know. And who could blame these funders. I mean, if my kid comes back home to live with me after grad school, I would make it as miserable as I can for him in order to encourage him to break out on his own and not become a leech; that’s called good parenting.
The concept of sustainability is ubiquitous, overbearing, and frustrating, as I explained earlier in “The sustainability question: Why it is so annoying.” Many funders and business people seem to believe that if nonprofits just try hard enough, they’ll reach this state of funding Nirvana and be self-sufficient and “sustainable.” And if they’re not actively working toward reaching fiscal enlightenment, they shouldn’t be supported.
Here’s the issue: This magical land of nonprofit financial self-sufficiency does not exist, and funders’ and donors’ unwillingness to admit this perpetuates an inefficient funding system that stymies us nonprofits’ abilities to tackle society’s most challenging problems. Consider:
First, the top nonprofits in the US still rely on a combination of funding including grants and government support. Take a look at the Nonprofit Quarterly’s 100 biggest nonprofits. Together their revenues total about $75 billion. Yet only 26% ($19.1 billion) are from program revenues and 4.7% ($3.574 billion) in investment income. And these are all huge, well-known orgs. If giant, successful organizations with awesome brands like YMCA, Goodwill, Catholic Charities, and United Way still rely on government and foundation support, then why the heck is there constant expectation that a nonprofit, any nonprofit, would be able to be self-sufficient?
Second, funders’ “tough love” stance is paradoxically the thing that prevents sustainability. Starving nonprofits with purposefully small restrictive one-year grants decreases their chances to achieve this elusive state of self-sufficiency. Each time a grant runs out, it’s like pushing a reset button; every time we reset something, we waste time and energy for it to ramp back up. And not funding something unless it has a clear strategy to be sustainable prevents it from developing a strategy to be sustainable. To quote one of my ED friends who is also equally frustrated over sustainability: “To not fund a promising project because it hasn’t figured out how to be self-sustaining is like not giving someone a heart-transplant because you don’t know if this person will live.”
Third, the pressure on nonprofits to be self-sufficient can lead to mission creep, wasted time and resources on nonsensical stuff, and warped public perceptions. When they work, earned income ventures are great (Just wait until the teeth tattoo parlor is up and running!) But often, the siren song of sustainability leads nonprofits to stray from their path and tackle projects they have no skills or business tackling. Many of these ventures fail. My last organization was tempted to open a café. It would have been a disaster if we hadn’t had a very wise and business-savvy mentor tell us we were insane. Meanwhile, one photography-based nonprofit I heard of had its status revoked because it was generating too much earned income and the public and IRS didn’t believe it was a nonprofit any more.
Fourth, and most importantly, can we just admit that nonprofits by our very nature will always be reliant on funders to support our work? Read this awesome and spirited defense of general operating funds, written by Grantmakers for Effective Organizations (GEO). Funders and nonprofits have a symbiotic relationship, like these fish and the sea anemonies. Ideally, we do our work, and funders raise money to keep it going. What is so wrong with that? Why am I, as an Executive Director, spending 80% of my time trying to find and Frankenstein bits of funding together instead of focusing on developing my organization’s project to bring more leaders of color into the field? (Psst: It’s been hard to recruit and retain leaders, any leaders but especially those of color, because they know that 80% of their time will be spent trying to find and Frankenstein bits of funding together).
Expecting nonprofits to be self-sustained seems to be perfectly normal. But imagine what it would be like if we imposed this onto other important fields, like public education:
Program officer: So, tell me about your project.
Principal: We have been working on this program called “Fourth Grade.” I think it aligns really well with your K-to-12 priority. Students, many of whom are low-income, will attend a total of 8 hours of programming per day. They will develop skills in math, reading, writing, science, as well as skills such as teamwork and critical thinking.
Program officer: That does align very well. What is the program budget?
Principal: $150,000 for the next fiscal year. This covers 1FTE teacher, as well as rent, utilities, supplies, trainings, etc.
Program officer: While the budget is reasonable, we can’t pay for more than 15% of any project. And, unfortunately, it can’t go to things like rent or utilities at the school.
Principal: Uh…we’ll find someone else who will pay for rent. And also, do children really need heat?
Program officer: Now, what is your sustainability plan? How will you keep “Fourth Grade” running once our one-year grant runs out? We don’t tend to support projects unless we know they will be financially independent in the future.
I’m married to a teacher, and she works horrible schedules every day, putting in three to six extra hours at home to grade stuff and prepare lessons. The work itself is difficult enough. Imagine if we force teachers to also focus on fundraising and sustainability the way that we force nonprofit professionals to. We don’t do that to teachers, because we know that their job is to teach. So why don’t we apply this basic concept to nonprofits: Our jobs should be to provide counseling, help people find food and shelter, remove kids from abuse and neglect, advocate to change unfair laws, take care of veterans, comfort the lonely, reduce damage on the environment, etc. We as a sector were formed because the business sector and the Government either ignore these issues or just suck at solving them. But every day, we spend endless amounts of time and energy playing nonprofit funding hot potato, which is not nearly as fun as that may sound. (“1 potato, 2 potatoes, 3 potatoes–lost it. 4 potatoes, 5 potatoes, 6 potatoes–audit”)
Nonprofit self-sufficiency does not exist, or is very rare. Chasing after this concept called “sustainability” is like searching for the fountain of youth, or El Dorado, or the Holy Grail, or a copy of the original Star Wars movie that has not been bastardized by George Lucas (Han shot first!). I’m not saying that we nonprofits should take things for granted, expect funding to just flow our way without effort, and not worry about sustainability. Like any organization—businesses, schools, faith-based groups, etc.—we must strive to maintain our work for as long as it’s needed. But the current funding system is ineffective, forcing us to spend considerably more time and energy than we should on trying to stay alive instead of focused on actualizing our missions. We need to admit that most nonprofits by their very nature are not ever going to reach financial independence, and that it is OK.
Until all funders and donors agree that we have a symbiotic relationship and not a parasitic one, I’m going to keep working on that teeth tattoo parlor as an earned-income strategy. When it opens, 25% off your first teeth tattoo if you mention this blog post!
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