Ripped from the Headlines

What can we learn from some cautionary tales from recent news stories about nonprofits?

Headline 1:  “Donors Demand Return of Historic $100 Million University Donation.”  (Fortunately, for the university’s sake, “only” $22.9 million has actually been received.)  But before you start chuckling about how you are unlikely to ever be so lucky as to receive a $23 million gift, let alone a $100 million gift, stop.  The lesson of this headline isn’t in the amount that the donors want back but in the university’s (perceived) failure to satisfy the donors.  Twin brothers Thomas and Timothy Pearson gave the revered University of Chicago $100 million to establish the Pearson Institute to conduct research on conflict-resolution.  That was in 2015.  Now, the Pearsons want their money back as they are unhappy with the caliber of people the university has hired, believe some of their money is being misspent and are upset because they weren’t invited to all of the 24 events the Institute hosted.  The university contends that the staff, faculty and students involved with the institute are all “remarkable” and doing “important and meaningful work.”  As is always true, perception is reality and when it comes to donors, perception is, more often than not, what matters.  When accepting money, we must be as clear and precise as possible as to what a donor will get in exchange.  Judging the caliber of an employee is neither clear nor precise.  Is paying a “hosting fee” to an academic division that is hosting a funded program an appropriate use of donated funds to establish the program?  While we can never know in advance what may become stumbling blocks down the road, we can and should make our asks—be they for big or small dollars—as specific and clearly measurable as possible.

Headline 2:  “Lack of Succession Planning Leads to Nonprofit Center’s Predictable End.”  If that headline doesn’t make every nonprofit board member run to create a succession plan—regardless of how recently hired the current executive director is—nothing will!  The 22-year old, well respected, independent New Hampshire Center for Public Policy Studies is no more, dead as a result of a failure to have a succession plan.  The organization has been leaderless since August 2017 when its long-time head left, and it had never replaced its leading economist when he died several years ago.  No leader, no show of bench strength, no plan for moving forward.  How do you keep those donors you did have, or try to attract new donors, to what clearly appears to be rudderless ship?  In our current times of an ever increasing competitive landscape for diminishing dollars, who would want to give to an organizations that is hanging out the signs of its own demise?

Headline 3:  “Kevin Spacey Foundation to Fold Today.”  If ever there was a ready-made lesson needed about the power of the bedfellows you keep, this is it.  The Kevin Spacey Foundation, a British organization that supported youth in the performing arts, had disassociated itself from the actor as soon as allegations of his sexual misconduct became known.  But, it would seem, the damage had been done and the board of trustees of the Foundation determined that the organization was no longer sustainable.  On February 27, it announced that its doors would close the next day.  Obviously, it is hard when someone’s name is part of a nonprofit’s name to not be tainted by the tainting of the namesake.  But had the foundation listened to the rumors, been proactive, gotten out ahead of the story, might the outcome have been different?  We should never be so quick to accept money that we don’t take the time to know the full backstory of those with whom we are joining forces.  If it weren’t believed before now, it is certainly known now:  even seemingly good, decent people do bad things of which a nonprofit wants no part.

Headline 4:  “Social Enterprise Meets Nonprofit Social Services:  Caution Advised.” Anchorage Community Mental Health Services is an approximate $20 million nonprofit that started a hydroponic farm, receiving a grant from the Alaska Mental Health Trust Authority to fund the approximate $3 million to renovate a building, hire staff and start the planting.  It is hard to know when Seeds of Change actually started, but early in 2017 it claimed it would be self-sustaining by the end of that year.  Self-sustaining but not throwing off any income to its parent organization that had two years of declining surpluses before it ran a $5 million deficit in 2015, the last year for which a 990 is publicly available.  Should a nonprofit that is experiencing (at least) three years of declining financial health be awarded a multimillion dollar grant?  Should the board of a nonprofit that is experiencing declining financial health agree to start a very expensive social enterprise with no clear timeline of when that social enterprise would be able to start providing it with unrestricted dollars?  There is no question that nonprofits wanting social enterprises is a hot button.  But as with all hot things, they are not for every nonprofit.  Care, deep consideration and extensive planning, must be given before launching a social enterprise, not the least of which is how long it will take to recoup startup costs (should that be necessary) and when the social enterprise will begin generating enough—and how much—profit to provide unrestricted dollars to the host nonprofit.