Tuesday, December 30, 2008

On The Cheap

“Knowing that a new program will require $500,000 to implement, raising one-fifth of that, and then attempting to initiate it with the hope that “more will come in later on” or that “something is better than nothing” is standard operating procedure among too many nonprofits. That is a recipe for disappointment and disillusion all around.”
Jeffrey L. Bradach, Thomas J. Tierney, and Nan Stone, “Delivering on the Promise of Nonprofits, Harvard Business Review, December 2008.

Ever face this problem as a nonprofit leader? I have in several roles documented in Nonprofit Leadership.

When I first ran a nonprofit CDC back in Chicago in the mid-1970s, program size and scale were purely a function of what you could get. You took what was offered and applied for as many different grants as possible that seemed potentially relevant. The strategy was organizational growth. We became a “fox” chasing diverse elements of community development –training, rehab, model blocks, loan counseling, solar greenhouses, for-profit subsidiaries, sweat equity.

On my second tour of duty running a CDC, now in Baltimore during the late 1980s, early 1990s, we launched a community planning process that eventually became a model for the city. I not only adjusted the effort by what I raised from local philanthropy, but sold the project “on the cheap” in the first place. In this case, we produced a good plan, but didn’t have a lot of implementation capacity.

As a funder, I joined with several other foundations to invest in the Austin Labor Force Intermediary (ALFI) of ShoreBank in the 1990s. Among other mistakes, we funded the project at about a third of the request. Not surprisingly, in retrospect, it didn’t flourish in the long run.

This is a more complex problem for nonprofits than just holding the line on a proposed project budget. It’s about project cost estimates, co-investment potential, scale requirements, potential for piloting, and, frankly, sometimes even bloated budgets.

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