More Pearls of Nonprofit Wisdom from Harvard

Harvard Business School

• “So, what do you do?”
• A Strategy for Asking for Major Gifts
• “Fully funded, now what’s our mission?”
• Do You Know What You Don’t Know?
• A beautiful moment!
• “I didn’t sign up for this!”
• Living with History
• Harvard Business School: Final Reflections
• Back at Harvard Business School
• Pearls of Wisdom from HBS
• More Pearls of Nonprofit Wisdom from Harvard
• Wrap-Up at Harvard

It was a very full day today. I’m going to give you another “string of pearls” – just a whole lot of pearls of wisdom I heard from all the different professors and guest speakers. Enjoy!

Ability to Change

“Harvard predates the country and has lots of arcane systems. If we can change, you can change.” Frances Frei.

On Excellence

Frances has done global research on what customers want to get and what employees want to give. Her summary is, “Every single customer wanted to receive excellence. Every single employee wanted to give excellence. However, well-intentioned, energetic people following their natural instincts are a large part of the mediocrity problem.”

In order for an organization to reliably produce excellence that is sustainable and scalable, the following problems must be overcome:

1. Not having the courage to be bad. In order to be excellent at some things, you have to be willing to let others things be done badly. Choose to be excellent in what the customer values. This is the Blue Ocean concept, which she builds on in her book Uncommon Service. Don’t be apologetic about what you are bad at. That would be the beginning of the end. For example, Ikea has no sales staff. You have to find what you want for yourself and figure out if it goes together. They have low prices and the trade-off is no sales help. If someone hates you for the bad thing, great! That means you have been clear about what you will and will not do excellently. When we design to eliminate complaints, everyone is ticked off at something and you have in fact designed mediocrity into your organization.
2. Excellence costs money. You must design reliable funding options into the offering or revenue model to pay for excellence. The alternative is mediocrity.
3. If employees fail, it is our fault. We design jobs for the employees we wish we had. We need to design the jobs so that the people we actually hire can be successful. Commerce Bank in the U.S. hired the happiest people they could. The risk was they would end up with pleasant incompetence in their branches. They prevented this by designing the jobs in a way that they could not fail. For example, they only had one product – chequing accounts. They didn’t have to know how to cross-sell, up-sell, advise customers or do anything else. All they had to know was how to open an account and transact deposits and withdrawals.
4. We must be able to observe when customers’ discretionary actions can influence cost or quality so that we can manage and train them in a way that makes them like us more for doing it. Not having sales help in a furniture/decorating store could be a negative. So Ikea trained customers to have it their way and explore their own sense of style. Customers believe Ikea is helping them express themselves by not having sales/design staff.

Customer Surveys

Frances says research shows that customers are not reliable at saying what they prefer, so customer surveys don’t work. Instead, she recommends conjoint analysis, which sounds fancy but basically means giving people two alternatives and asking, “Do you prefer this to that?”

What Should Board Governance Contribute to the Organization?

Kathleen McGinn says the board should have four visions that it contributes:

1. The overall vision. A focus on goals, what you are trying to accomplish
2. The strategy vision. How you should organize and execute to achieve the overall vision
3. The operational vision. Performance and outcomes definitions of success and their related measurements
4. The compliance vision. How you will ensure the organization stays within the rules set by the board

High Performance

Allen Grossman says that achieving high performance in business is like playing chess. In nonprofits it is like playing three-dimensional chess. His question is, “Do your board and your staff have a shared definition of what high performance looks like?” He doesn’t have a firm definition of high performance, but he thinks this one is pretty good: A high performing organization is measurably achieving its mission with effective use of resources over an optimum period of time.

Getting high-profile board members

Paul Salem owns fifty businesses, many are multi-billion dollar businesses. He is chair of one of the charities we studied today and he says that generally the rich and powerful will not join your board, but they will join your advisory board.

The Biggest Decision of a Board

According to Paul, there is no decision bigger than, “Do we have the right CEO?” You can mess up on a lot of other things as a board, but if you have this one right you’ll be okay.

Government Funding

Paul says nonprofits that rely on government funding will wake up one day really disappointed.

When People Don’t Want to Take a Position

Robert Kaplan, famous for co-developing the Balanced Scorecard and Strategy Maps, taught a case that ended up with the entire class acting out the board meeting. Issues were on the table and we had to vote. Some people wanted to waffle and they stated principles, or said “If this, then…but if that…” and he used a line several times that I thought was terrific. When people must take a position and they try to wiggle out of it, his response to what they say is, “That’s fantastic! I agree with everything you said. Now, what do you want to do? What is your vote?” Of course, the follow-up questions are “Why are you voting that way?” and “Why do you believe that?” People sometimes equivocate to avoid making a commitment. But when you are in a leadership position, you must commit to a decision. You can’t avoid it.

What Is the Board’s Mission?

Kaplan said that so much focus is placed on the organization’s mission, vision, and priorities that those of the board are often never considered. So the board should ask itself these questions:

• What is the Board’s mission?
  • Kaplan said this question should help the board define its role in the organization.
• What is the Board’s vision?
  • This question will help the board identify what it is trying to achieve.
• What are the Board’s top three priorities?
  • Succession planning and mission accomplishment are huge responsibilities and if they haven’t been addressed recently, they should be. Other priorities may be defining the governance structure, setting policies, fundraising and so on. Larry Nelson, former CCCC chair, always asked it this way, “What must the board accomplish through its work over the next year?”

Nomenclature

Howard Stephenson says we are not nonprofits. Every organization needs to end up with a surplus or profit or whatever you want to call it. We all must spend less money than we receive. What we really should be called is tax-exempt.

The Guaranteed Fundraising Formula

The formula you absolutely must know for success in fundraising, according to Howard, is:

# of donors x the average gift size = the amount raised

Don’t make something more fancy than it needs to be. Just do what you can to affect the variables!

Getting to a Significant Gift

Cold-calling and telethons just get the small gifts. For big gifts you must go and see the person face-to-face. Howard says he tries to perform a cashectomy without anaesthesia!

You have to frame the project in a way that is attractive to the prospective donor. If he’s raising money for scholarships, Howard will tell conservative people that we need to ensure the best talent is developed to help our great country. He tells liberal people that we need to ensure the disadvantaged have an opportunity. He says he is telling the truth to both groups of people, but framing it in a way that they want to hear it.

Don’t try to get someone’s largest gift of the year. If they haven’t already given you their largest gift, you are unlikely to get it. Instead, Howard asked someone whom he knew preferred other universities to Harvard, “I really hope that we can be #5 on your giving list this year.” The person replied, “Yes, #5 sounds about right.” He got a cheque for $35 million!

Talking about needs will get you small gifts. Talking about impact is the way to get large gifts.

Offering Incentives to Give

Offering gifts for donations might find some new donors for you, but Howard says it turns the gift into a transaction and not a shared mission. That means you will get only small gifts and you are aiming too low.

One more day to go!