30
ManagingNonprofitsorg
WILEY NONPROFIT LAW FINANCE AND MANAGEMENT SERIES
The Art of Planned Giving Understanding Donors and the Culture of Giving by Dougles E WhiteBeyond Fund Raising New Strategies for Nonprofit Investment and Innovation by Kay GraceBudgeting for Not-for-Profit Organizations by David MaddoxCareers in Fund-Raising by Lilya WagnerThe Complete Guide to Fund Raising Management by Stanley WeinsteinThe Complete Guide to Nonprofit Management by Smith Bucklin amp AssociatesCritical Issues in Fund Raising edited by Dwight BurlingameCultural Diversity in Fund-Raising by Janice Glow PetteyDeveloping Affordable Housing A Practical Guide for Nonprofit Organizations Second Edition byBen HechtFaith-Based Management Leading Organizations that are Based on More than Just Mission by PeterBrinckerhoffFinancial and Accounting Guide for Not-for-Profit Organizations Sixth Edition by Malvern JGross Jr Richard F Larkin John H McCarthy PricewaterhouseCoopers LLPFinancial Empowerment More Money for More Mission by Peter BrinckerhoffFinancial Management for Nonprofit Organizations by Jo Ann Hankin Alan Seidner and JohnZietlowThe First Legal Answer Book for Fund-Raisers by Bruce R HopkinsFund-Raising Fundamentals A Guide to Annual Giving for Professionals and Volunteers by JamesM GreenfieldFundraising Cost Effectiveness A Self-Assessment Workbook by James M GreenfieldFund-Raising Regulation A State-by-State Handbook of Registration Forms Requirements andProcedures by Seth Perlman and Betsy Hills BushGrantseekerrsquos Budget Toolkit by James A Quick and Cheryl S NewGrantseekerrsquos Toolkit A Comprehensive Guide to Finding Funding by Cheryl S New and James AQuickGrant Winnerrsquos Toolkit Project Management and Evaluation by James A Quick and Cheryl S NewHigh Impact Philanthropy How Donors Boards and Nonprofit Organizations Can TransformNonprofit Communities by Kay Sprinkel Grace and Alan L WendroffHigh Performance Nonprofit Organizations Managing Upstream for Greater Impact by ChristineW Letts William P Ryan and Allen GrossmanImproving the Economy Efficiency and Effectiveness of Nonprofits Conducting Operational Reviewsby Rob ReiderIntermediate Sanctions Curbing Nonprofit Abuse by Bruce R Hopkins and D Benson TesdahlInternational Fund Raising for Nonprofits by Thomas HarrisInternational Guide to Nonprofit Law by Lester A Salamon and Stefan Toepler amp AssociatesJoint Ventures Involving Tax-Exempt Organizations Second Edition by Michael I SandersThe Law of Fund-Raising Second Edition by Bruce R HopkinsThe Law of Tax-Exempt Healthcare Organizations Second Edition by Thomas K Hyatt and BruceR HopkinsThe Law of Tax-Exempt Organizations Seventh Edition by Bruce R HopkinsThe Legal Answer Book for Nonprofit Organizations by Bruce R HopkinsA Legal Guide to Starting and Managing a Nonprofit Organization Third Edition by Bruce RHopkinsThe Legislative Labyrinth A Map for Not-for-Profits edited by Walter PidgeonManaging Affordable Housing A Practical Guide to Creating Stable Communities by Ben HechtLocal Initiatives Support Corporation and James StockardManagingNonprofitsorg Dynamic Management for the Digital Age by Ben Hecht and ReyRamseyMission-Based Management Leading Your Not-for-Profit in the 21st Century Second Edition byPeter Brinckerhoff
Mission-Based Management Leading Your Not-for-Profit in the 21st Century Second EditionWorkbook by Peter BrinckerhoffMission-Based Marketing How Your Not-for-Profit Can Success in a More Competitive World byPeter BrinckerhoffNonprofit Boards Roles Responsibilities and Performance by Diane J DucaNonprofit Compensation and Benefits Practices by Applied Research and Development InstituteInternational IncThe Nonprofit Counsel by Bruce R HopkinsThe Nonprofit Guide to the Internet Second Edition by Michael JohnstonNonprofit Investment Policies A Practical Guide to Creation and Implementation by Robert Fry JrThe Nonprofit Law Dictionary by Bruce R HopkinsNonprofit Compensation Benefits and Employment Law by David G Samuels and HowardPiankoThe Nonprofit Handbook Third Edition Management by Tracy Daniel ConnersThe Nonprofit Handbook Third Edition Fund Raising by James M GreenfieldThe Nonprofit Managerrsquos Resource Dictionary by Ronald A LandskronerNonprofit Organizationsrsquo Business Forms Disk Edition by John Wiley amp Sons IncPlanned Giving Management Marketing and Law Second Edition by Ronald R Jordan andKatelyn L QuynnThe Private Foundation Answer Book by Bruce Hopkins and Jody BlazekPrivate Foundations Tax Law and Compliance by Bruce R Hopkins and Jody BlazekProgram Related Investments A Technical Manual for Foundations by Christie I BaxterReengineering Your Nonprofit Organization A Guide to Strategic Transformation by Alceste TPappasReinventing the University Managing and Financing Institutions of Higher Education by SandraL Johnson and Sean C Rush PricewaterhouseCoopers LLPThe Second Legal Answer Book for Nonprofit Organizations by Bruce R HopkinsThe Second Legal Answer Book for Fund Raisers by Bruce R HopkinsSocial Entrepreneurship The Art of Mission-Based Venture Development by Peter BrinckerhoffSpecial Events Proven Strategies for Nonprofit Fund Raising by Alan WendroffStarting and Managing a Nonprofit Organization A Legal Guide Third Edition by Bruce RHopkinsStrategic Communications for Nonprofit Organizations Seven Steps to Creating a Successful Plan byJanel RadtkeStrategic Planning for Nonprofit Organizations A Practicial Guide and Workbook by MichaelAllison and Jude Kaye Support Center for Nonprofit ManagementStreetsmart Financial Basics for Nonprofit Managers by Thomas A McLaughlinA Streetsmart Guide to Nonprofit Mergers and Networks by Thomas A McLaughlinSuccessful Marketing Strategies for Nonprofit Organizations by Barry J McLeishSuccessful Corporate Fund Raising Effective Strategies for Todayrsquos Nonprofits by Scott SheldonThe Tax Law of Colleges and Universities by Bertrand M HardingTax Planning and Compliance for Tax-Exempt Organizations Forms Checklists Procedures ThirdEdition by Jody BlazekThe Universal Benefits of Volunteering A Practical Workbook for Nonprofit OrganizationsVolunteers and Corporations by Walter P Pidgeon JrTrade Secrets for Every Nonprofit Manager by Thomas A McLaughlinValues-Based Estate Planning A Step-by-Step Approach to Wealth Transfers for ProfessionalAdvisors by Scott Fithian
Also by Ben HechtDeveloping Affordable Housing A Practical Guide for Nonprofit Organizations Second EditionManaging Affordable Housing A Practical Guide for Building Stable Communities
ManagingNonprofitsorgDynamic Management for the Digital Age
Ben Hecht and Rey Ramsey
John Wiley amp Sons Inc
Copyright copy 2002 by John Wiley amp Sons Inc New York All rights reserved
No part of this publication may be reproduced stored in a retrieval system ortransmitted in any form or by any means electronic mechanical photocopyingrecording scanning or otherwise except as permitted under Sections 107 or 108of the 1976 United States Copyright Act without either the prior writtenpermission of the Publisher or authorization through payment of the appropriateper-copy fee to the Copyright Clearance Center 222 Rosewood Drive DanversMA 01923 (978) 750-8400 fax (978) 750-4744 Requests to the Publisher forpermission should be addressed to the Permissions Department John Wiley ampSons Inc 605 Third Avenue New York NY 10158-0012 (212) 850-6011 fax (212)850-6008 E-Mail PERMREQ WILEYCOM
This publication is designed to provide accurate and authoritative information inregard to the subject matter covered It is sold with the understanding that thepublisher is not engaged in professional services If professional advice or otherexpert assistance is required the services of a competent professional personshould be sought
This title is also available in print as ISBN 0-471-39527-7 Some contentthat appears in the print version of this book may not be available inthis electronic edition
For further information about Wiley products visit our web site atwwwWileycom
fcopyebkqxd 102501 114 PM Page vi
Joseph C and Phyllis Hecht
BH
Felix and Janice Ramsey
Elizabeth A Peiffer
RR
Contents
Foreword xv
Preface xix
Acknowledgments xxi
About the Authors xxiii
Chapter 1 Nonprofits and the Digital Age 1
Understanding the Forces of Change 2
Forces of Change at Work 6
Learning to Operate in New Ways 9
Building the Dynamic Management Map Thriving on Change 10
Notes 11
Chapter 2 Dynamic Management and Dynamic Organizations 13
Dynamic Management Defined 13
Dynamic Management Map 15
Using the Map 16
What if You Donrsquot Invert the Pyramid 17
Implementing Dynamic Management 18
ix
Is Dynamic Management Really Possible 18
Reflect and Reposition 24
Guiding Principles 24
Notes 24
Chapter 3 Organizational Context Taking the Pulse 27
Why Ask ldquoWhat is Going Onrdquo 28
Holding the Mirror up to Yourself Checking Your Own Pulse 28
Holding the Mirror up to Your Organization and the World around You 32
Two Organizations That Took Their Pulse and Changed Forever 34
Reflect and Reposition 40
Guiding Principles 40
Notes 40
Chapter 4 Corporate Culture Vision Values and People 43
The Importance of Culture 43
Vision 47
Repositioning Your Vision Vision and the Role of Leaders 54
Values 59
People 62
Reflect and Reposition 74
Guiding Principles 75
Notes 75
x Contents
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
ManagingNonprofitsorg
WILEY NONPROFIT LAW FINANCE AND MANAGEMENT SERIES
The Art of Planned Giving Understanding Donors and the Culture of Giving by Dougles E WhiteBeyond Fund Raising New Strategies for Nonprofit Investment and Innovation by Kay GraceBudgeting for Not-for-Profit Organizations by David MaddoxCareers in Fund-Raising by Lilya WagnerThe Complete Guide to Fund Raising Management by Stanley WeinsteinThe Complete Guide to Nonprofit Management by Smith Bucklin amp AssociatesCritical Issues in Fund Raising edited by Dwight BurlingameCultural Diversity in Fund-Raising by Janice Glow PetteyDeveloping Affordable Housing A Practical Guide for Nonprofit Organizations Second Edition byBen HechtFaith-Based Management Leading Organizations that are Based on More than Just Mission by PeterBrinckerhoffFinancial and Accounting Guide for Not-for-Profit Organizations Sixth Edition by Malvern JGross Jr Richard F Larkin John H McCarthy PricewaterhouseCoopers LLPFinancial Empowerment More Money for More Mission by Peter BrinckerhoffFinancial Management for Nonprofit Organizations by Jo Ann Hankin Alan Seidner and JohnZietlowThe First Legal Answer Book for Fund-Raisers by Bruce R HopkinsFund-Raising Fundamentals A Guide to Annual Giving for Professionals and Volunteers by JamesM GreenfieldFundraising Cost Effectiveness A Self-Assessment Workbook by James M GreenfieldFund-Raising Regulation A State-by-State Handbook of Registration Forms Requirements andProcedures by Seth Perlman and Betsy Hills BushGrantseekerrsquos Budget Toolkit by James A Quick and Cheryl S NewGrantseekerrsquos Toolkit A Comprehensive Guide to Finding Funding by Cheryl S New and James AQuickGrant Winnerrsquos Toolkit Project Management and Evaluation by James A Quick and Cheryl S NewHigh Impact Philanthropy How Donors Boards and Nonprofit Organizations Can TransformNonprofit Communities by Kay Sprinkel Grace and Alan L WendroffHigh Performance Nonprofit Organizations Managing Upstream for Greater Impact by ChristineW Letts William P Ryan and Allen GrossmanImproving the Economy Efficiency and Effectiveness of Nonprofits Conducting Operational Reviewsby Rob ReiderIntermediate Sanctions Curbing Nonprofit Abuse by Bruce R Hopkins and D Benson TesdahlInternational Fund Raising for Nonprofits by Thomas HarrisInternational Guide to Nonprofit Law by Lester A Salamon and Stefan Toepler amp AssociatesJoint Ventures Involving Tax-Exempt Organizations Second Edition by Michael I SandersThe Law of Fund-Raising Second Edition by Bruce R HopkinsThe Law of Tax-Exempt Healthcare Organizations Second Edition by Thomas K Hyatt and BruceR HopkinsThe Law of Tax-Exempt Organizations Seventh Edition by Bruce R HopkinsThe Legal Answer Book for Nonprofit Organizations by Bruce R HopkinsA Legal Guide to Starting and Managing a Nonprofit Organization Third Edition by Bruce RHopkinsThe Legislative Labyrinth A Map for Not-for-Profits edited by Walter PidgeonManaging Affordable Housing A Practical Guide to Creating Stable Communities by Ben HechtLocal Initiatives Support Corporation and James StockardManagingNonprofitsorg Dynamic Management for the Digital Age by Ben Hecht and ReyRamseyMission-Based Management Leading Your Not-for-Profit in the 21st Century Second Edition byPeter Brinckerhoff
Mission-Based Management Leading Your Not-for-Profit in the 21st Century Second EditionWorkbook by Peter BrinckerhoffMission-Based Marketing How Your Not-for-Profit Can Success in a More Competitive World byPeter BrinckerhoffNonprofit Boards Roles Responsibilities and Performance by Diane J DucaNonprofit Compensation and Benefits Practices by Applied Research and Development InstituteInternational IncThe Nonprofit Counsel by Bruce R HopkinsThe Nonprofit Guide to the Internet Second Edition by Michael JohnstonNonprofit Investment Policies A Practical Guide to Creation and Implementation by Robert Fry JrThe Nonprofit Law Dictionary by Bruce R HopkinsNonprofit Compensation Benefits and Employment Law by David G Samuels and HowardPiankoThe Nonprofit Handbook Third Edition Management by Tracy Daniel ConnersThe Nonprofit Handbook Third Edition Fund Raising by James M GreenfieldThe Nonprofit Managerrsquos Resource Dictionary by Ronald A LandskronerNonprofit Organizationsrsquo Business Forms Disk Edition by John Wiley amp Sons IncPlanned Giving Management Marketing and Law Second Edition by Ronald R Jordan andKatelyn L QuynnThe Private Foundation Answer Book by Bruce Hopkins and Jody BlazekPrivate Foundations Tax Law and Compliance by Bruce R Hopkins and Jody BlazekProgram Related Investments A Technical Manual for Foundations by Christie I BaxterReengineering Your Nonprofit Organization A Guide to Strategic Transformation by Alceste TPappasReinventing the University Managing and Financing Institutions of Higher Education by SandraL Johnson and Sean C Rush PricewaterhouseCoopers LLPThe Second Legal Answer Book for Nonprofit Organizations by Bruce R HopkinsThe Second Legal Answer Book for Fund Raisers by Bruce R HopkinsSocial Entrepreneurship The Art of Mission-Based Venture Development by Peter BrinckerhoffSpecial Events Proven Strategies for Nonprofit Fund Raising by Alan WendroffStarting and Managing a Nonprofit Organization A Legal Guide Third Edition by Bruce RHopkinsStrategic Communications for Nonprofit Organizations Seven Steps to Creating a Successful Plan byJanel RadtkeStrategic Planning for Nonprofit Organizations A Practicial Guide and Workbook by MichaelAllison and Jude Kaye Support Center for Nonprofit ManagementStreetsmart Financial Basics for Nonprofit Managers by Thomas A McLaughlinA Streetsmart Guide to Nonprofit Mergers and Networks by Thomas A McLaughlinSuccessful Marketing Strategies for Nonprofit Organizations by Barry J McLeishSuccessful Corporate Fund Raising Effective Strategies for Todayrsquos Nonprofits by Scott SheldonThe Tax Law of Colleges and Universities by Bertrand M HardingTax Planning and Compliance for Tax-Exempt Organizations Forms Checklists Procedures ThirdEdition by Jody BlazekThe Universal Benefits of Volunteering A Practical Workbook for Nonprofit OrganizationsVolunteers and Corporations by Walter P Pidgeon JrTrade Secrets for Every Nonprofit Manager by Thomas A McLaughlinValues-Based Estate Planning A Step-by-Step Approach to Wealth Transfers for ProfessionalAdvisors by Scott Fithian
Also by Ben HechtDeveloping Affordable Housing A Practical Guide for Nonprofit Organizations Second EditionManaging Affordable Housing A Practical Guide for Building Stable Communities
ManagingNonprofitsorgDynamic Management for the Digital Age
Ben Hecht and Rey Ramsey
John Wiley amp Sons Inc
Copyright copy 2002 by John Wiley amp Sons Inc New York All rights reserved
No part of this publication may be reproduced stored in a retrieval system ortransmitted in any form or by any means electronic mechanical photocopyingrecording scanning or otherwise except as permitted under Sections 107 or 108of the 1976 United States Copyright Act without either the prior writtenpermission of the Publisher or authorization through payment of the appropriateper-copy fee to the Copyright Clearance Center 222 Rosewood Drive DanversMA 01923 (978) 750-8400 fax (978) 750-4744 Requests to the Publisher forpermission should be addressed to the Permissions Department John Wiley ampSons Inc 605 Third Avenue New York NY 10158-0012 (212) 850-6011 fax (212)850-6008 E-Mail PERMREQ WILEYCOM
This publication is designed to provide accurate and authoritative information inregard to the subject matter covered It is sold with the understanding that thepublisher is not engaged in professional services If professional advice or otherexpert assistance is required the services of a competent professional personshould be sought
This title is also available in print as ISBN 0-471-39527-7 Some contentthat appears in the print version of this book may not be available inthis electronic edition
For further information about Wiley products visit our web site atwwwWileycom
fcopyebkqxd 102501 114 PM Page vi
Joseph C and Phyllis Hecht
BH
Felix and Janice Ramsey
Elizabeth A Peiffer
RR
Contents
Foreword xv
Preface xix
Acknowledgments xxi
About the Authors xxiii
Chapter 1 Nonprofits and the Digital Age 1
Understanding the Forces of Change 2
Forces of Change at Work 6
Learning to Operate in New Ways 9
Building the Dynamic Management Map Thriving on Change 10
Notes 11
Chapter 2 Dynamic Management and Dynamic Organizations 13
Dynamic Management Defined 13
Dynamic Management Map 15
Using the Map 16
What if You Donrsquot Invert the Pyramid 17
Implementing Dynamic Management 18
ix
Is Dynamic Management Really Possible 18
Reflect and Reposition 24
Guiding Principles 24
Notes 24
Chapter 3 Organizational Context Taking the Pulse 27
Why Ask ldquoWhat is Going Onrdquo 28
Holding the Mirror up to Yourself Checking Your Own Pulse 28
Holding the Mirror up to Your Organization and the World around You 32
Two Organizations That Took Their Pulse and Changed Forever 34
Reflect and Reposition 40
Guiding Principles 40
Notes 40
Chapter 4 Corporate Culture Vision Values and People 43
The Importance of Culture 43
Vision 47
Repositioning Your Vision Vision and the Role of Leaders 54
Values 59
People 62
Reflect and Reposition 74
Guiding Principles 75
Notes 75
x Contents
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
WILEY NONPROFIT LAW FINANCE AND MANAGEMENT SERIES
The Art of Planned Giving Understanding Donors and the Culture of Giving by Dougles E WhiteBeyond Fund Raising New Strategies for Nonprofit Investment and Innovation by Kay GraceBudgeting for Not-for-Profit Organizations by David MaddoxCareers in Fund-Raising by Lilya WagnerThe Complete Guide to Fund Raising Management by Stanley WeinsteinThe Complete Guide to Nonprofit Management by Smith Bucklin amp AssociatesCritical Issues in Fund Raising edited by Dwight BurlingameCultural Diversity in Fund-Raising by Janice Glow PetteyDeveloping Affordable Housing A Practical Guide for Nonprofit Organizations Second Edition byBen HechtFaith-Based Management Leading Organizations that are Based on More than Just Mission by PeterBrinckerhoffFinancial and Accounting Guide for Not-for-Profit Organizations Sixth Edition by Malvern JGross Jr Richard F Larkin John H McCarthy PricewaterhouseCoopers LLPFinancial Empowerment More Money for More Mission by Peter BrinckerhoffFinancial Management for Nonprofit Organizations by Jo Ann Hankin Alan Seidner and JohnZietlowThe First Legal Answer Book for Fund-Raisers by Bruce R HopkinsFund-Raising Fundamentals A Guide to Annual Giving for Professionals and Volunteers by JamesM GreenfieldFundraising Cost Effectiveness A Self-Assessment Workbook by James M GreenfieldFund-Raising Regulation A State-by-State Handbook of Registration Forms Requirements andProcedures by Seth Perlman and Betsy Hills BushGrantseekerrsquos Budget Toolkit by James A Quick and Cheryl S NewGrantseekerrsquos Toolkit A Comprehensive Guide to Finding Funding by Cheryl S New and James AQuickGrant Winnerrsquos Toolkit Project Management and Evaluation by James A Quick and Cheryl S NewHigh Impact Philanthropy How Donors Boards and Nonprofit Organizations Can TransformNonprofit Communities by Kay Sprinkel Grace and Alan L WendroffHigh Performance Nonprofit Organizations Managing Upstream for Greater Impact by ChristineW Letts William P Ryan and Allen GrossmanImproving the Economy Efficiency and Effectiveness of Nonprofits Conducting Operational Reviewsby Rob ReiderIntermediate Sanctions Curbing Nonprofit Abuse by Bruce R Hopkins and D Benson TesdahlInternational Fund Raising for Nonprofits by Thomas HarrisInternational Guide to Nonprofit Law by Lester A Salamon and Stefan Toepler amp AssociatesJoint Ventures Involving Tax-Exempt Organizations Second Edition by Michael I SandersThe Law of Fund-Raising Second Edition by Bruce R HopkinsThe Law of Tax-Exempt Healthcare Organizations Second Edition by Thomas K Hyatt and BruceR HopkinsThe Law of Tax-Exempt Organizations Seventh Edition by Bruce R HopkinsThe Legal Answer Book for Nonprofit Organizations by Bruce R HopkinsA Legal Guide to Starting and Managing a Nonprofit Organization Third Edition by Bruce RHopkinsThe Legislative Labyrinth A Map for Not-for-Profits edited by Walter PidgeonManaging Affordable Housing A Practical Guide to Creating Stable Communities by Ben HechtLocal Initiatives Support Corporation and James StockardManagingNonprofitsorg Dynamic Management for the Digital Age by Ben Hecht and ReyRamseyMission-Based Management Leading Your Not-for-Profit in the 21st Century Second Edition byPeter Brinckerhoff
Mission-Based Management Leading Your Not-for-Profit in the 21st Century Second EditionWorkbook by Peter BrinckerhoffMission-Based Marketing How Your Not-for-Profit Can Success in a More Competitive World byPeter BrinckerhoffNonprofit Boards Roles Responsibilities and Performance by Diane J DucaNonprofit Compensation and Benefits Practices by Applied Research and Development InstituteInternational IncThe Nonprofit Counsel by Bruce R HopkinsThe Nonprofit Guide to the Internet Second Edition by Michael JohnstonNonprofit Investment Policies A Practical Guide to Creation and Implementation by Robert Fry JrThe Nonprofit Law Dictionary by Bruce R HopkinsNonprofit Compensation Benefits and Employment Law by David G Samuels and HowardPiankoThe Nonprofit Handbook Third Edition Management by Tracy Daniel ConnersThe Nonprofit Handbook Third Edition Fund Raising by James M GreenfieldThe Nonprofit Managerrsquos Resource Dictionary by Ronald A LandskronerNonprofit Organizationsrsquo Business Forms Disk Edition by John Wiley amp Sons IncPlanned Giving Management Marketing and Law Second Edition by Ronald R Jordan andKatelyn L QuynnThe Private Foundation Answer Book by Bruce Hopkins and Jody BlazekPrivate Foundations Tax Law and Compliance by Bruce R Hopkins and Jody BlazekProgram Related Investments A Technical Manual for Foundations by Christie I BaxterReengineering Your Nonprofit Organization A Guide to Strategic Transformation by Alceste TPappasReinventing the University Managing and Financing Institutions of Higher Education by SandraL Johnson and Sean C Rush PricewaterhouseCoopers LLPThe Second Legal Answer Book for Nonprofit Organizations by Bruce R HopkinsThe Second Legal Answer Book for Fund Raisers by Bruce R HopkinsSocial Entrepreneurship The Art of Mission-Based Venture Development by Peter BrinckerhoffSpecial Events Proven Strategies for Nonprofit Fund Raising by Alan WendroffStarting and Managing a Nonprofit Organization A Legal Guide Third Edition by Bruce RHopkinsStrategic Communications for Nonprofit Organizations Seven Steps to Creating a Successful Plan byJanel RadtkeStrategic Planning for Nonprofit Organizations A Practicial Guide and Workbook by MichaelAllison and Jude Kaye Support Center for Nonprofit ManagementStreetsmart Financial Basics for Nonprofit Managers by Thomas A McLaughlinA Streetsmart Guide to Nonprofit Mergers and Networks by Thomas A McLaughlinSuccessful Marketing Strategies for Nonprofit Organizations by Barry J McLeishSuccessful Corporate Fund Raising Effective Strategies for Todayrsquos Nonprofits by Scott SheldonThe Tax Law of Colleges and Universities by Bertrand M HardingTax Planning and Compliance for Tax-Exempt Organizations Forms Checklists Procedures ThirdEdition by Jody BlazekThe Universal Benefits of Volunteering A Practical Workbook for Nonprofit OrganizationsVolunteers and Corporations by Walter P Pidgeon JrTrade Secrets for Every Nonprofit Manager by Thomas A McLaughlinValues-Based Estate Planning A Step-by-Step Approach to Wealth Transfers for ProfessionalAdvisors by Scott Fithian
Also by Ben HechtDeveloping Affordable Housing A Practical Guide for Nonprofit Organizations Second EditionManaging Affordable Housing A Practical Guide for Building Stable Communities
ManagingNonprofitsorgDynamic Management for the Digital Age
Ben Hecht and Rey Ramsey
John Wiley amp Sons Inc
Copyright copy 2002 by John Wiley amp Sons Inc New York All rights reserved
No part of this publication may be reproduced stored in a retrieval system ortransmitted in any form or by any means electronic mechanical photocopyingrecording scanning or otherwise except as permitted under Sections 107 or 108of the 1976 United States Copyright Act without either the prior writtenpermission of the Publisher or authorization through payment of the appropriateper-copy fee to the Copyright Clearance Center 222 Rosewood Drive DanversMA 01923 (978) 750-8400 fax (978) 750-4744 Requests to the Publisher forpermission should be addressed to the Permissions Department John Wiley ampSons Inc 605 Third Avenue New York NY 10158-0012 (212) 850-6011 fax (212)850-6008 E-Mail PERMREQ WILEYCOM
This publication is designed to provide accurate and authoritative information inregard to the subject matter covered It is sold with the understanding that thepublisher is not engaged in professional services If professional advice or otherexpert assistance is required the services of a competent professional personshould be sought
This title is also available in print as ISBN 0-471-39527-7 Some contentthat appears in the print version of this book may not be available inthis electronic edition
For further information about Wiley products visit our web site atwwwWileycom
fcopyebkqxd 102501 114 PM Page vi
Joseph C and Phyllis Hecht
BH
Felix and Janice Ramsey
Elizabeth A Peiffer
RR
Contents
Foreword xv
Preface xix
Acknowledgments xxi
About the Authors xxiii
Chapter 1 Nonprofits and the Digital Age 1
Understanding the Forces of Change 2
Forces of Change at Work 6
Learning to Operate in New Ways 9
Building the Dynamic Management Map Thriving on Change 10
Notes 11
Chapter 2 Dynamic Management and Dynamic Organizations 13
Dynamic Management Defined 13
Dynamic Management Map 15
Using the Map 16
What if You Donrsquot Invert the Pyramid 17
Implementing Dynamic Management 18
ix
Is Dynamic Management Really Possible 18
Reflect and Reposition 24
Guiding Principles 24
Notes 24
Chapter 3 Organizational Context Taking the Pulse 27
Why Ask ldquoWhat is Going Onrdquo 28
Holding the Mirror up to Yourself Checking Your Own Pulse 28
Holding the Mirror up to Your Organization and the World around You 32
Two Organizations That Took Their Pulse and Changed Forever 34
Reflect and Reposition 40
Guiding Principles 40
Notes 40
Chapter 4 Corporate Culture Vision Values and People 43
The Importance of Culture 43
Vision 47
Repositioning Your Vision Vision and the Role of Leaders 54
Values 59
People 62
Reflect and Reposition 74
Guiding Principles 75
Notes 75
x Contents
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Mission-Based Management Leading Your Not-for-Profit in the 21st Century Second EditionWorkbook by Peter BrinckerhoffMission-Based Marketing How Your Not-for-Profit Can Success in a More Competitive World byPeter BrinckerhoffNonprofit Boards Roles Responsibilities and Performance by Diane J DucaNonprofit Compensation and Benefits Practices by Applied Research and Development InstituteInternational IncThe Nonprofit Counsel by Bruce R HopkinsThe Nonprofit Guide to the Internet Second Edition by Michael JohnstonNonprofit Investment Policies A Practical Guide to Creation and Implementation by Robert Fry JrThe Nonprofit Law Dictionary by Bruce R HopkinsNonprofit Compensation Benefits and Employment Law by David G Samuels and HowardPiankoThe Nonprofit Handbook Third Edition Management by Tracy Daniel ConnersThe Nonprofit Handbook Third Edition Fund Raising by James M GreenfieldThe Nonprofit Managerrsquos Resource Dictionary by Ronald A LandskronerNonprofit Organizationsrsquo Business Forms Disk Edition by John Wiley amp Sons IncPlanned Giving Management Marketing and Law Second Edition by Ronald R Jordan andKatelyn L QuynnThe Private Foundation Answer Book by Bruce Hopkins and Jody BlazekPrivate Foundations Tax Law and Compliance by Bruce R Hopkins and Jody BlazekProgram Related Investments A Technical Manual for Foundations by Christie I BaxterReengineering Your Nonprofit Organization A Guide to Strategic Transformation by Alceste TPappasReinventing the University Managing and Financing Institutions of Higher Education by SandraL Johnson and Sean C Rush PricewaterhouseCoopers LLPThe Second Legal Answer Book for Nonprofit Organizations by Bruce R HopkinsThe Second Legal Answer Book for Fund Raisers by Bruce R HopkinsSocial Entrepreneurship The Art of Mission-Based Venture Development by Peter BrinckerhoffSpecial Events Proven Strategies for Nonprofit Fund Raising by Alan WendroffStarting and Managing a Nonprofit Organization A Legal Guide Third Edition by Bruce RHopkinsStrategic Communications for Nonprofit Organizations Seven Steps to Creating a Successful Plan byJanel RadtkeStrategic Planning for Nonprofit Organizations A Practicial Guide and Workbook by MichaelAllison and Jude Kaye Support Center for Nonprofit ManagementStreetsmart Financial Basics for Nonprofit Managers by Thomas A McLaughlinA Streetsmart Guide to Nonprofit Mergers and Networks by Thomas A McLaughlinSuccessful Marketing Strategies for Nonprofit Organizations by Barry J McLeishSuccessful Corporate Fund Raising Effective Strategies for Todayrsquos Nonprofits by Scott SheldonThe Tax Law of Colleges and Universities by Bertrand M HardingTax Planning and Compliance for Tax-Exempt Organizations Forms Checklists Procedures ThirdEdition by Jody BlazekThe Universal Benefits of Volunteering A Practical Workbook for Nonprofit OrganizationsVolunteers and Corporations by Walter P Pidgeon JrTrade Secrets for Every Nonprofit Manager by Thomas A McLaughlinValues-Based Estate Planning A Step-by-Step Approach to Wealth Transfers for ProfessionalAdvisors by Scott Fithian
Also by Ben HechtDeveloping Affordable Housing A Practical Guide for Nonprofit Organizations Second EditionManaging Affordable Housing A Practical Guide for Building Stable Communities
ManagingNonprofitsorgDynamic Management for the Digital Age
Ben Hecht and Rey Ramsey
John Wiley amp Sons Inc
Copyright copy 2002 by John Wiley amp Sons Inc New York All rights reserved
No part of this publication may be reproduced stored in a retrieval system ortransmitted in any form or by any means electronic mechanical photocopyingrecording scanning or otherwise except as permitted under Sections 107 or 108of the 1976 United States Copyright Act without either the prior writtenpermission of the Publisher or authorization through payment of the appropriateper-copy fee to the Copyright Clearance Center 222 Rosewood Drive DanversMA 01923 (978) 750-8400 fax (978) 750-4744 Requests to the Publisher forpermission should be addressed to the Permissions Department John Wiley ampSons Inc 605 Third Avenue New York NY 10158-0012 (212) 850-6011 fax (212)850-6008 E-Mail PERMREQ WILEYCOM
This publication is designed to provide accurate and authoritative information inregard to the subject matter covered It is sold with the understanding that thepublisher is not engaged in professional services If professional advice or otherexpert assistance is required the services of a competent professional personshould be sought
This title is also available in print as ISBN 0-471-39527-7 Some contentthat appears in the print version of this book may not be available inthis electronic edition
For further information about Wiley products visit our web site atwwwWileycom
fcopyebkqxd 102501 114 PM Page vi
Joseph C and Phyllis Hecht
BH
Felix and Janice Ramsey
Elizabeth A Peiffer
RR
Contents
Foreword xv
Preface xix
Acknowledgments xxi
About the Authors xxiii
Chapter 1 Nonprofits and the Digital Age 1
Understanding the Forces of Change 2
Forces of Change at Work 6
Learning to Operate in New Ways 9
Building the Dynamic Management Map Thriving on Change 10
Notes 11
Chapter 2 Dynamic Management and Dynamic Organizations 13
Dynamic Management Defined 13
Dynamic Management Map 15
Using the Map 16
What if You Donrsquot Invert the Pyramid 17
Implementing Dynamic Management 18
ix
Is Dynamic Management Really Possible 18
Reflect and Reposition 24
Guiding Principles 24
Notes 24
Chapter 3 Organizational Context Taking the Pulse 27
Why Ask ldquoWhat is Going Onrdquo 28
Holding the Mirror up to Yourself Checking Your Own Pulse 28
Holding the Mirror up to Your Organization and the World around You 32
Two Organizations That Took Their Pulse and Changed Forever 34
Reflect and Reposition 40
Guiding Principles 40
Notes 40
Chapter 4 Corporate Culture Vision Values and People 43
The Importance of Culture 43
Vision 47
Repositioning Your Vision Vision and the Role of Leaders 54
Values 59
People 62
Reflect and Reposition 74
Guiding Principles 75
Notes 75
x Contents
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
ManagingNonprofitsorgDynamic Management for the Digital Age
Ben Hecht and Rey Ramsey
John Wiley amp Sons Inc
Copyright copy 2002 by John Wiley amp Sons Inc New York All rights reserved
No part of this publication may be reproduced stored in a retrieval system ortransmitted in any form or by any means electronic mechanical photocopyingrecording scanning or otherwise except as permitted under Sections 107 or 108of the 1976 United States Copyright Act without either the prior writtenpermission of the Publisher or authorization through payment of the appropriateper-copy fee to the Copyright Clearance Center 222 Rosewood Drive DanversMA 01923 (978) 750-8400 fax (978) 750-4744 Requests to the Publisher forpermission should be addressed to the Permissions Department John Wiley ampSons Inc 605 Third Avenue New York NY 10158-0012 (212) 850-6011 fax (212)850-6008 E-Mail PERMREQ WILEYCOM
This publication is designed to provide accurate and authoritative information inregard to the subject matter covered It is sold with the understanding that thepublisher is not engaged in professional services If professional advice or otherexpert assistance is required the services of a competent professional personshould be sought
This title is also available in print as ISBN 0-471-39527-7 Some contentthat appears in the print version of this book may not be available inthis electronic edition
For further information about Wiley products visit our web site atwwwWileycom
fcopyebkqxd 102501 114 PM Page vi
Joseph C and Phyllis Hecht
BH
Felix and Janice Ramsey
Elizabeth A Peiffer
RR
Contents
Foreword xv
Preface xix
Acknowledgments xxi
About the Authors xxiii
Chapter 1 Nonprofits and the Digital Age 1
Understanding the Forces of Change 2
Forces of Change at Work 6
Learning to Operate in New Ways 9
Building the Dynamic Management Map Thriving on Change 10
Notes 11
Chapter 2 Dynamic Management and Dynamic Organizations 13
Dynamic Management Defined 13
Dynamic Management Map 15
Using the Map 16
What if You Donrsquot Invert the Pyramid 17
Implementing Dynamic Management 18
ix
Is Dynamic Management Really Possible 18
Reflect and Reposition 24
Guiding Principles 24
Notes 24
Chapter 3 Organizational Context Taking the Pulse 27
Why Ask ldquoWhat is Going Onrdquo 28
Holding the Mirror up to Yourself Checking Your Own Pulse 28
Holding the Mirror up to Your Organization and the World around You 32
Two Organizations That Took Their Pulse and Changed Forever 34
Reflect and Reposition 40
Guiding Principles 40
Notes 40
Chapter 4 Corporate Culture Vision Values and People 43
The Importance of Culture 43
Vision 47
Repositioning Your Vision Vision and the Role of Leaders 54
Values 59
People 62
Reflect and Reposition 74
Guiding Principles 75
Notes 75
x Contents
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Copyright copy 2002 by John Wiley amp Sons Inc New York All rights reserved
No part of this publication may be reproduced stored in a retrieval system ortransmitted in any form or by any means electronic mechanical photocopyingrecording scanning or otherwise except as permitted under Sections 107 or 108of the 1976 United States Copyright Act without either the prior writtenpermission of the Publisher or authorization through payment of the appropriateper-copy fee to the Copyright Clearance Center 222 Rosewood Drive DanversMA 01923 (978) 750-8400 fax (978) 750-4744 Requests to the Publisher forpermission should be addressed to the Permissions Department John Wiley ampSons Inc 605 Third Avenue New York NY 10158-0012 (212) 850-6011 fax (212)850-6008 E-Mail PERMREQ WILEYCOM
This publication is designed to provide accurate and authoritative information inregard to the subject matter covered It is sold with the understanding that thepublisher is not engaged in professional services If professional advice or otherexpert assistance is required the services of a competent professional personshould be sought
This title is also available in print as ISBN 0-471-39527-7 Some contentthat appears in the print version of this book may not be available inthis electronic edition
For further information about Wiley products visit our web site atwwwWileycom
fcopyebkqxd 102501 114 PM Page vi
Joseph C and Phyllis Hecht
BH
Felix and Janice Ramsey
Elizabeth A Peiffer
RR
Contents
Foreword xv
Preface xix
Acknowledgments xxi
About the Authors xxiii
Chapter 1 Nonprofits and the Digital Age 1
Understanding the Forces of Change 2
Forces of Change at Work 6
Learning to Operate in New Ways 9
Building the Dynamic Management Map Thriving on Change 10
Notes 11
Chapter 2 Dynamic Management and Dynamic Organizations 13
Dynamic Management Defined 13
Dynamic Management Map 15
Using the Map 16
What if You Donrsquot Invert the Pyramid 17
Implementing Dynamic Management 18
ix
Is Dynamic Management Really Possible 18
Reflect and Reposition 24
Guiding Principles 24
Notes 24
Chapter 3 Organizational Context Taking the Pulse 27
Why Ask ldquoWhat is Going Onrdquo 28
Holding the Mirror up to Yourself Checking Your Own Pulse 28
Holding the Mirror up to Your Organization and the World around You 32
Two Organizations That Took Their Pulse and Changed Forever 34
Reflect and Reposition 40
Guiding Principles 40
Notes 40
Chapter 4 Corporate Culture Vision Values and People 43
The Importance of Culture 43
Vision 47
Repositioning Your Vision Vision and the Role of Leaders 54
Values 59
People 62
Reflect and Reposition 74
Guiding Principles 75
Notes 75
x Contents
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Joseph C and Phyllis Hecht
BH
Felix and Janice Ramsey
Elizabeth A Peiffer
RR
Contents
Foreword xv
Preface xix
Acknowledgments xxi
About the Authors xxiii
Chapter 1 Nonprofits and the Digital Age 1
Understanding the Forces of Change 2
Forces of Change at Work 6
Learning to Operate in New Ways 9
Building the Dynamic Management Map Thriving on Change 10
Notes 11
Chapter 2 Dynamic Management and Dynamic Organizations 13
Dynamic Management Defined 13
Dynamic Management Map 15
Using the Map 16
What if You Donrsquot Invert the Pyramid 17
Implementing Dynamic Management 18
ix
Is Dynamic Management Really Possible 18
Reflect and Reposition 24
Guiding Principles 24
Notes 24
Chapter 3 Organizational Context Taking the Pulse 27
Why Ask ldquoWhat is Going Onrdquo 28
Holding the Mirror up to Yourself Checking Your Own Pulse 28
Holding the Mirror up to Your Organization and the World around You 32
Two Organizations That Took Their Pulse and Changed Forever 34
Reflect and Reposition 40
Guiding Principles 40
Notes 40
Chapter 4 Corporate Culture Vision Values and People 43
The Importance of Culture 43
Vision 47
Repositioning Your Vision Vision and the Role of Leaders 54
Values 59
People 62
Reflect and Reposition 74
Guiding Principles 75
Notes 75
x Contents
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Contents
Foreword xv
Preface xix
Acknowledgments xxi
About the Authors xxiii
Chapter 1 Nonprofits and the Digital Age 1
Understanding the Forces of Change 2
Forces of Change at Work 6
Learning to Operate in New Ways 9
Building the Dynamic Management Map Thriving on Change 10
Notes 11
Chapter 2 Dynamic Management and Dynamic Organizations 13
Dynamic Management Defined 13
Dynamic Management Map 15
Using the Map 16
What if You Donrsquot Invert the Pyramid 17
Implementing Dynamic Management 18
ix
Is Dynamic Management Really Possible 18
Reflect and Reposition 24
Guiding Principles 24
Notes 24
Chapter 3 Organizational Context Taking the Pulse 27
Why Ask ldquoWhat is Going Onrdquo 28
Holding the Mirror up to Yourself Checking Your Own Pulse 28
Holding the Mirror up to Your Organization and the World around You 32
Two Organizations That Took Their Pulse and Changed Forever 34
Reflect and Reposition 40
Guiding Principles 40
Notes 40
Chapter 4 Corporate Culture Vision Values and People 43
The Importance of Culture 43
Vision 47
Repositioning Your Vision Vision and the Role of Leaders 54
Values 59
People 62
Reflect and Reposition 74
Guiding Principles 75
Notes 75
x Contents
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Is Dynamic Management Really Possible 18
Reflect and Reposition 24
Guiding Principles 24
Notes 24
Chapter 3 Organizational Context Taking the Pulse 27
Why Ask ldquoWhat is Going Onrdquo 28
Holding the Mirror up to Yourself Checking Your Own Pulse 28
Holding the Mirror up to Your Organization and the World around You 32
Two Organizations That Took Their Pulse and Changed Forever 34
Reflect and Reposition 40
Guiding Principles 40
Notes 40
Chapter 4 Corporate Culture Vision Values and People 43
The Importance of Culture 43
Vision 47
Repositioning Your Vision Vision and the Role of Leaders 54
Values 59
People 62
Reflect and Reposition 74
Guiding Principles 75
Notes 75
x Contents
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Chapter 5 The Business Model and the Customer 77
Defining ldquoBusiness Modelrdquo 77
The Customer 78
Expanded Customer Choices 92
Expanding Your Customer Base 96
Sustainability 98
Reflect and Reposition 100
Guiding Principles 100
Notes 100
Chapter 6 ContentmdashProducts and Services 101
Reflecting on Content 101
The New Frontier for Products and Services The Internet Double Helix 106
Reflect and Reposition 119
Guiding Principles 120
Notes 120
Chapter 7 Infrastructure 121
What Is the Infrastructure 121
Senior Management 122
Creating the Environment 122
Having a Vision for the Net 125
Stable and Diverse Resources 125
Technology 146
Reflect and Reposition 165
Guiding Principles 167
Notes 167
Contents xi
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Chapter 8 Alignment 171
The Role of the Leader in Aligning the Organization 173
Tools for Alignment 173
Corporate Structure and Organizational Chart 177
Reflect and Reposition 194
Guiding Principles 194
Notes 195
Chapter 9 Living the Map The One Economy Story 197
Who We Are and How We Got Here 197
Holding the Mirror up to Ourselves 200
Building the Culture Vision Values and People 202
Developing the Business Model 207
Building the Infrastructure 211
Alignment 214
What the Future Holds 215
Share Your Experiences Living the Map 216
Notes 216
Chapter 10 Whatrsquos in Store for the Dynamic Manager Looking at the Future of Nonprofit Management 217
The Horn amp Hardart-ization of Customers 217
The Melting Pot in the Lunch Room 219
Good-bye Tonto or the End of the Lone Ranger 221
xii Contents
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
The Corporate Facelift 222
How Do I Respond to These Trends 224
Notes 230
Appendix A Resources for Online Fundraising 231
Glossary of Internet Terms 257
Index 271
Contents xiii
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Foreword
One of the core values at Cisco Systems is customersuccess We drive customer success by listening toour customers taking whatever steps are neces-
sary to meet their needs and sharing with them the gains we haveexperienced through the use of our own Internet-based applica-tions That is a key ingredient to successmdashfor customer successtranscends to organizational success
The question we ask ourselves ismdashhow does this translate intothe nonprofit world This is a task we have set for ourselves atCisco leverage the Internet and technology to extend innovation toand for the use of nonprofit organizations
There are many parallels to be drawn between the organizationaldevelopment and management of corporations and that of non-profits Although the end user or customer may be different theoperational challenges and opportunities are quite similarmdashldquoprod-uctrdquo development and delivery administration finance humanresources benefits talent recruitment staff development and train-ing internal and external communications The size and scale ofan operation varies in both corporations and nonprofits but thesolutions for addressing these issues can be adapted across sectorsMany of these challenges have been addressed through theInternet
The relationships between businesses consumers governmentsnations and individuals have been forever altered by the Internetrevolution It has democratized the power of one-to-many and many-to-one relationships by enabling equal access and equal participationHowever this has also posed the threat of greater opportunitydivides between those organizations who have access and those whodonrsquot There is really no practical reason why the nonprofit sector
xv
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
should not be in lock step with the opportunities and innovationsenjoyed by the corporate and government sectors The main differ-ence is that corporations and governments have made Internet tech-nology a priority and budget for this annually They view it as astrategic investment and a critical success factor
Nonprofits should also consider Internet technology as a key ele-ment in their ability to better deliver services to their customers Foran example of how the Internet investment can provide value tononprofit organizations one need only to look to the applicationsthat are currently leveraged For instance the Cisco NetworkAcademy is a comprehensive 8-semester 560-hour curriculum thattrains students and in-transition workers how to design build andmaintain computer networks Employing an e-learning model theNetworking Academy Program delivers Web-based educationalcontent on-line testing student performance tracking hands-onlabs and instructor training and support The curriculum devel-oped by education and networking experts is offered at secondaryschools technical schools colleges universities and other educa-tional programs around the world This has enabled schools andcommunity-based organizations in their training and workforcedevelopment programsmdashboth for those newly entering the work-force as well as the workforce in transition (going from industrialtype jobs to technology-based jobs)
In addition to training there exists a huge opportunity to lever-age communications and public relations about a nonprofit organi-zation (NPO) in attracting new donors and furthering advocacyThe Internet enables nonprofits to become more ldquocustomerrdquo centricand reach out to new constituencies and to create strong relation-ships between the NPO the donors government organizations andcommunities of interest
This book by Ben Hecht and Rey Ramsey makes a compellingstatement about the ldquostrategic inflection pointsrdquo facing nonprofitsHowever the good news is that many corporations foundationsgovernmental organizations and individuals are committed to thesuccess of nonprofits during this period We at Cisco have a com-mitment to the success of the nonprofit sector We believe that thebest role we can play is to support the work of community organi-zations via our technology financial resources and the applicationof best practices learned across all sectors
xvi Foreword
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Foreword xvii
The book does an excellent job of teeing up many of the keyissues NPOs are facing as they enter a period of rapid change muchof it brought on by the Internet Revolution Technology is both thecatalyst of change and the vehicle for mastering it I wish you wellas you launch into the new world of the digital age
John P Morgridge Chairman of the Board Cisco Systems
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Preface
ManagingNonprofitsorg is a book about people andthe power of ideas It is about building a twenty-first century nonprofit organization that uses
technology and the best management thinking to create a digital cul-ture or a place that caters to customers where people want to workand where ideas are the currency of choice Digital culture is lessabout hardware and software and more about mindset An organiza-tion with a digital culture has an ethos of learning rewards innova-tion and risk-taking puts its people first and looks for ways in whichtechnology can help do things in new and different ways This bookwill help you build that culture into your own organization
More importantly however we hope this book will help you tothrive on change and become a better leader If we have learnedanything in the past 10 years it is that the Digital Age is aboutchange Leaders who flourish in todayrsquos environment do so becausethey have developed a dynamic process of self-reflection and havea willingness to do things differently They reflect constantly upontheir individual and organizational efforts and are not afraid toreposition themselves in order to embrace change capture marketopportunities and serve customers We call this process of contin-ual reflection and repositioning ldquoDynamic Managementrdquo and pro-vide you with a map to help you make it part of who you are andhow you manage
Use this book to harness the power of technology to strengthenyour organization to provide new and value-added products andservices to an expanding customer base and to adapt the best man-agement and leadership practices to your efforts We look forward
xix
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
to being with you as you begin your journey toward dynamic man-agement Visit us regularly at wwwmanagingnonprofitsorg tolearn about the trends in the field and to be a part of a new wave ofnonprofit organizations
Ben Hecht
Rey Ramsey
xx Preface
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Acknowledgments
The authors want to thank and acknowledge all thepeople who helped us to make this book a realityRicki Baker Alec Ross David Saunier Rob Bole
Phillip Hughes Rachel Jackson Greg May and Adam Richman fortheir research editing hunting and gathering Peg Cunninghamfor her administrative support All of the nonprofits who openedtheir doors to us and spent time explaining and detailing theirefforts including Fred Krupp Environmental Defense DeniseJoines ONENorthwest David Prendergast Americarsquos SecondHarvest Ned Rimer Citizens Schools Kelly Fitzsimmons NewProfit Inc Steven Marine Roger Guard NetWellness BB Oteroand Jomo Graham Calvary Bilingual Multicultural LearningCenter Billy Shore Share Our Strength Susan Herman NationalCenter for Victims of Crime Rebecca Wodder American RiversJohn Ball Kristin Wolff Worksystems Inc Darrell HammondKaboom Kevin Smith Fannie Mae Foundation Sarah HollowayMOUSE Michael Bodaken National Housing Trust Judy Stein andCharlie Quatt Quatt amp Associates We also want to thank MarioMorino Jed Emerson Joan Fanning Mark Weinheimer and CarolBerde for their insights into the future of the nonprofit movement
Special thanks to our original editor at John Wiley amp SonsMartha Cooley whose enthusiasm support and advocacy for thisbook made it happen and to Susan McDermott who took over forMartha midstream and made sure we had a great final product BenHecht wants to acknowledge his wife Lynn Leibovitz and his chil-dren Eliza and Sam for their love patience and support as heworked on this book as well as his other less time-consumingendeavors Rey Ramsey wants to acknowledge his entire family fortheir faith and inspiration throughout
xxi
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
About the Authors
Ben Hecht is an experienced nonprofit executiveauthor and teacher In 2000 he and Rey Ramseyfounded One Economy Corporation a national non-
profit dedicated to maximizing the power of technology to help low-income people to improve their quality of life and get out of povertyHe currently serves as One Economyrsquos President and Chief OperatingOfficer From 1996 to 2000 he was with The Enterprise Foundation helast served as Senior Vice President for Program Services In thatcapacity he led the organizationrsquos efforts beyond housingmdashbuildingwell-respected programs in child care workforce development andeconomic development He also increased the organizationrsquos revolv-ing loan fund from $30 million to $200 million
Mr Hecht has written two books Developing Affordable Housing APractical Guide for Nonprofit Organizations (2nd Edition 1999) andManaging Affordable Housing A Practical Guide for Building StableCommunities (1996) both published by John Wiley amp Sons He alsohas written law review articles on place-based housing and economicdevelopment and contributed chapters on state historic preservationlaws and the use of partnerships and syndications in HistoricPreservation Law and Taxation (Bender 1986)
Mr Hecht received his Juris Doctorate from GeorgetownUniversity Law Center and his CPA from the State of Maryland For10 years he taught at Georgetown University Law Center and builtthe premier housing and community development clinical programin the country In 1992 with Congressional support Mr Hechtfounded the National Center for Tenant Ownership at Georgetowna program facilitating affordable housing development by nonprof-its and tenant groups nationwide
xxiii
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Prior to his work at Georgetown Mr Hecht worked for the publicaccounting firm of Coopers amp Lybrand in Washington and served ascounsel to the nonprofit National Rural Development and FinanceCorporation He has been an adjunct professor of law at GeorgetownUniversity Law Center for 12 years teaching accounting concepts forlawyers Over the years Mr Hecht has served on the boards of non-profit housing organiztions in Portland Oregon Cleveland Ohio andNew York City and on the national boards of the National Center forLead Safe Housing and the Consensus Organizing Institute He lives inWashington DC with his wife Lynn Leibovitz and two children
Rey Ramsey is a seasoned executive and social entrepreneur Hecurrently serves as Chief Executive Officer and Board Chair of OneEconomy a nonprofit organization that he founded together withBen Hecht From 1996 to 2000 he was the President and ChiefOperating Officer of The Enterprise Foundation As President MrRamsey played an instrumental role in the dramatic growth andprogrammatic impact of the organization He was also publisher ofthat organizationrsquos first online magazine Mr Ramsey also drovethe Foundationrsquos development of quality information resources andthe use of technology to help community development organiza-tions Mr Ramsey joined Enterprise in 1993
At age 29 the Governor of Oregon appointed Mr Ramsey toserve as the statersquos Director of the Department of Housing MrRamsey worked with the state legislature to create Oregonrsquos firsthousing trust fund and merged two state agencies to create a com-bined Housing and Community Services Department
Mr Ramsey holds a BAin political science from Rutgers Universityand a Juris Doctorate from University of Virginia Law School Afterlaw school Mr Ramsey moved to Oregon where he practiced lawbefore becoming the state economic development officer for eight cen-tral Oregon counties
Mr Ramsey serves on many boards including Habitat forHumanity International and the Advisory Board of the BrookingsInsitution Center on Urban and Metropolitan Policy
xxiv About the Authors
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
C H A P T E R O N E
Nonprofits and the Digital Age
The 21st century will be a time of immense change forthe nonprofit industry In the coming years the dig-ital age will hit us in full force Technology and the
Internet will increasingly cause the same types of chaotic changesand market disruptions in the nonprofit industry that it continues tocause in the for-profit industry Customers who will become increas-ingly ldquowiredrdquo used to comparison shopping on Web sites and accus-tomed to overnight delivery will demand more products andservices in more convenient ways Dramatic infusions of new moneyfrom government devolution and philanthropy will foster unprece-dented consolidation and competition in the industry
Simply put business will not continue as usual At times like thiscertain fundamentals about the way the nonprofit industry hasoperated will change At a strategic inflection point Intel chairmanAndy Grove argues the forces of change are so great that they canbe fatal if not attended to At those times organizations that under-stand and anticipate these fundamental changes and learn how tooperate in new ways will thrive Those who maintain the status quoare unlikely to survive intact This book is designed to provide aframework to help you navigate through the strategic inflectionpoint when it hits your part of the industry and to build an organi-zation that thrives on change
1
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
UNDERSTANDING THE FORCES OF CHANGE
The fundamental forces of change facing the nonprofit industry fallinto five related but distinct categories technology customersmoney competition and choice Although these factors have allbeen at work over the past decade to various degrees most sectorsof the industry have not had to face or have chosen not to face theconsequences of these forces to date
Technology
Leading nonprofits in the 21st century will require applying lessonslearned from the dotcom worldrsquos use of technology and theInternet as a communications tool that efficiently moves informa-tion to fundamentally reshape old ways of doing business What isthis likely to look like1 Nonprofits will scale their operations inways never seen before They will use their organizationrsquos informa-tion assets often as the first-mover in their sector to get to a lot ofcustomersmdashboth old and newmdashfast They will be able to be both aldquohigh-techrdquo and ldquohigh-touchrdquo organization by combining physicalqualities and informationdigital assets This approach will givethem both a distinct competitive advantage and the capacity to actas a broker with traditional and new customers
Nonprofits will embrace strategic alliances with value-addedpartners Working with former competitors friends and even newfor-profit and nonprofit organizations they will build mechanismsto share information and knowledge with each other to enhancetheir collective competitive advantages From these relationshipssome existing organizations will likely become obsolete andreplaced with new infomediaries who are able to play an enormousrole in a particular sector by mining customer data and making cus-tomization of that data possible
Technology and the Internet will enable organizations to redesignthemselves from the inside out by creating new business processesand systems With the Internet as their communications backbonethe knowledge required for innovation will flow freely from oneemployee to the next regardless of position within the organization
2 ManagingNonprofitsorg
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
Customers
Customer-led applications of technology and the Internet will forcenonprofits to change if they want to attract interact with and retaintheir customers Simply put customers are fast becoming part of the Internet culture Results from the US Department ofCommercersquos most recent report on the digital divide2 show thatcomputers and the Internet are rapidly becoming a part of everyAmericanrsquos way of life The data show that the overall level of USdigital inclusion is rapidly increasing The share of households withInternet access soared by 58 percent rising from 262 percent inDecember 1998 to 415 percent in August 2000 More than half of allhouseholds (510 percent) have computers up from 421 percent inDecember 1998 There were 1165 million Americans online at somelocation in August 2000 319 million more than there were only 20months earlier The share of individuals using the Internet rose by358 percent from 327 percent in December 1998 to 444 percent inAugust 2000 If growth continues at that rate more than half of allAmericans will be using the Internet by the middle of 2001
The rapid uptake of new technologies is occurring among mostgroups of Americans regardless of income education race or eth-nicity location age or gender Groups that have traditionally beendigital ldquohave notsrdquo are now making dramatic gains The gapbetween households in rural areas and households nationwide thataccess the Internet narrowed from 40 percentage points in 1998 to26 percentage points in 2000 In rural areas in 2000 389 percent ofthe households had Internet access a 75 percent increase from 222percent in December 1998 African-Americans and Hispanicswhile still lagging behind other groups showed impressive gains inInternet access In 2000 African-American households were morethan twice as likely to have home access than they were 20 monthsbefore rising from 112 percent to 235 percent Hispanic house-holds also experienced a tremendous growth rate during thisperiod rising from 126 percent to 236 percent3
This Internet culture is about more than just access however itrsquosabout putting that access into action More Americans are goingonline to conduct such day-to-day activities as business transactionspersonal correspondence research and information gathering and
Nonprofits and the Digital Age 3
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
shopping Eighty percent of Internet users report that they regularlyuse e-mail Low-income Americans are more likely than higher-income Americans to use the Internet for online coursework and localjob searching In fact 45 percent of Americans who use the Internet athome and earn $10000 to $15000 use it to take online courses 25 per-cent use it for local job searching4
What does all of this mean for nonprofits It means that they willhave to build new and different customer-centered relationshipswith their customers These relationships will have to reflect wheretheir customers are now not where they have been in the past Thequantity and quality of communications will have to increasethrough creative and compelling applications of e-mail instantmessaging services list serves and Web sites Products and serviceswill have to be available where and when customers want themCustomers will want their interactions customized to fit theirunique circumstances
Money
An unprecedented amount of money has become available forinvestment in the nonprofit industry over the past decade Thedevolution of power from centralized government at the federaland state level to local communities has literally flooded some sec-tors of the nonprofit industry with new money Billions of dollarsannually are being delegated to the local level to implement reformsof education health care energy conservation affordable housingand transportation More often than not government units are ill-prepared or too thinly staffed to do this work This situation has leftnonprofits as the only viable vehicle for change Nowhere is thismore obvious than in the way that the United States has imple-mented its approach to welfare reform After more than 30 years oftelling states and poor people what they had to do to fight povertythe federal government has thrown out all the rules granted largesums of money to the states and told them to figure out how to getthe job done In turn state legislatures wary of failed governmentprograms are relying on local nonprofit organizations to solveseemingly intractable problems They are now looking to nonprof-its to help get people to work find and keep a good job and pay forquality child care
These recent opportunities however have the potential of beingdwarfed by what the future holds Despite periodic stock market
4 ManagingNonprofitsorg
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
fluctuations the economic boom of the past 20 years has created anastonishing amount of individual and foundation wealth inAmerica That funding combined with the $48 trillion that will betransferred from parents to children in the next 20 yearsmdashthe so-called intergenerational transfer of wealthmdashis likely to create thelargest pool of money dedicated to making positive social change inthe history of humankind Add the growing interest in venture phil-anthropy to this mix and you have a formula for financing trulyinnovative approaches to solving many of the worldrsquos problems
Competition and Choice
The availability of technology and new resources has spurredgrowth in the industry In fact the sheer number and scope of non-profits has grown more in the past decade than it had in the pre-ceding 20 years5 Every area of public life has been impacted bythis change from institutions like schools universities and muse-ums to groups advocating for environmental human andwomenrsquos rights This rising tide however has not necessarilyraised all the boats For example organizations that have beenunable to ldquoscale uprdquo their programs to meet funder or governmentdemands or to withstand outside scrutiny have been losing out toother nonprofit or for-profit groups that can answer these chal-lenges In some cases additional funds have so severely taxedantiquated internal accounting and reporting systems that theseissues have overwhelmed senior managementrsquos energies and par-alyzed organizations
Competition has also come from unexpected places especiallywhere the amount of money in play is significant In Dallas Texasfor example the city awarded its welfare-to-work program man-agement contract to Lockheed Martin the large defense contractorwith a track record of managing complex databases and being afierce competitor for business not a nonprofit workforce develop-ment organization For all intents and purposes the nonprofitworkforce development sector has been shut out of this work Thisexample alone illustrates both the promise and pitfalls that non-profits will face more often in the 21st century
Finally wired customers will increasingly demand more choicesdriving both competition and consolidation For example manynonprofits who stick only to high-touch in a limited geographicarea inevitably will be driven out of business or forced to compete
Nonprofits and the Digital Age 5
