Pittsburgh’s philanthropic sector drives community change as nonprofits evolve

“But the corollary of that is there is increasingly an expectation among the foundations that are willing to make that investment that they want an exit strategy,” he says.
“They want to know: What’s your five-year plan to replace this revenue that we’re providing you?” Flanagan says. “And if you can’t explain that and you don’t have a viable plan to get to that point, it’s much harder to convince them they should engage in the effort.”

Evolving with new ideas

In order to become more entrepreneurial and results-oriented, area nonprofits must evolve into smart organizations.
Strickland, who has been in the sector for 40 years, says everything is more sophisticated.
“I think we’ve had to get smarter, but that’s true for any industry. We’ve had to become more entrepreneurial, more focused, more performance driven, where we’re validating our works and what we do, our outcomes, our metrics, our measurements — and that’s good stuff,” he says.
Not only does it improve their ability to do their mission, a business-like approach appeals to a wider audience, Strickland says.
Ann Truxell, executive director of Vintage, says the nonprofit industry as a whole is utilizing evidence-based programs, putting resources into programs that have been recognized through research as effective.
The nonprofit Familylinks has a quality improvement department that looks into services in every quarter, says CEO Fred Massey.
“It works with indications through outcome measurements that are set,” he says. “It monitors them and reports back and forth. And there’s a correction action plan that must be put in place if we’re missing targets so that we can constantly improve upon how well we deliver services.”
At POWER, Davis makes sure the organization puts some money into the budget for things that a nonprofit doesn’t typically do — like a marketing plan.
“I feel really strongly that the pressure is constantly for nonprofits, you’ll hear, to behave more like a business, and yet when you spend money or you put in your operating budget something that a business would not even think twice about, like a marketing plan or marketing dollars or an HR department, then you’re criticized,” she says. pit_cs_Phil_bikes
Coleman followed a similar path at CCN. She wanted to see if her instincts about organization assets and areas of challenge were correct.
“When I’ve only got a small amount of money and resources, am I as a leader putting those resources in the correct area?” she says.
With her academic background, she wanted to start with some data, so Coleman commissioned a benchmarking study of 143,000 domestic violence centers across the country to get a true reading of how her nonprofit was performing.

Maximizing impact

Operating smarter isn’t just a result of trying to attract foundation funding. As government dollars shrink, Dewey says some organizations that have relied on those monies for 80 to 90 percent of their funding are down to 70 percent or less.
Dewey believes technology is one way to bridge the gap.
Technology can decrease labor expenses, Dewey says, while providing institutional memory to bring humanism back to serving people.
BNY Mellon recently sponsored a new social innovation challenge with The Forbes Funds called UpPrize. It creates partnerships between nonprofits and technology startups, in order to alleviate common pain points through the use of technology.
The program, which will award up to $1 million to Pittsburgh entrepreneurs, received an overwhelming response, Boswell says.
“I think that’s where the blurry lines are happening in a positive way. So you see some of our nonprofits becoming more entrepreneurial, and you see some of our startup for-profit entities becoming a lot more socially minded in the products that they design and create,” she says.
GTECH, which has always been entrepreneurial since it started nine years ago as more of a true startup than a traditional nonprofit, is taking a different approach with one of its programs.
“Because of that saturation of market space, I think organizations need to be really, really thoughtful around how to achieve the most impact, and sometimes that comes in the form of stopping doing what we do or changing how we do what we do,” Butcher says.
GTECH has doubled its staff and revenue in the past two years, and the organization is expecting it will double again over the next two years. In order to focus on its core land use work, it recently transferred its ReEnergize Pgh program to another nonprofit, Conservation Consultants.
Butcher says it made more sense from a resources and issues standpoint to stop the program and transfer it to a partner agency.

A different set of rules

It’s important to operate efficiently, but nonprofits must be careful not to forget the grass-roots approach to their mission.
“It’s a very hard dance to do. It’s particularly hard to do when there are so many people that have been in nonprofits for 100 years, and I’m one of them, and as the new folks come up, it’s maybe a different way of looking at things,” DiLettuso says.
“There’s a delicate balance between a good business plan and not forgetting your mission,” she says, “and it’s something that I think most executive directors walk every day.”
While the Heinz Endowments has encouraged the nonprofit sector to be more results-oriented in its thinking, more entrepreneurial and more innovative for decades, Oliphant says that’s with the caveat that this is still the social impact sector. It’s not the business sector and the rules are different.
“The reality is that running a business will teach you a lot about how to run a nonprofit, but it is not the same thing,” he says.
An organization that is mission-driven will behave differently and operate differently than a for-profit business.
Successful nonprofit executives have to know how to run a budget, set goals, measure progress, make do with less and stick to their mission, Oliphant says. But when the economy goes down, the demand for nonprofit services goes up.

“In many ways, the nonprofit world’s most expensive time is when the least resources are available,” he says. “Nothing in the for-profit world trains you for that.”

 
 

Taking a proprietary stake

Some foundations, especially on the national level, are adding intellectual property clauses to grants, says Thomas Crawford, associate vice chancellor of Corporate and Foundation Relations at the University of Pittsburgh.Many foundations use program-related investments, although tax laws don’t allow them to put an overwhelming amount of money into that area. More and more, he sees them considering, “Can we use that, and can we take advantage of it, perhaps to build our own endowment for the future?”
Foundations have the ability to take a stake in the intellectual property for a period of years, just in case the researcher hits on something big, Crawford says.
“What it allows them to do is to say, ‘OK, you think you have the next greatest version of some online tool that will help somebody learn algebra. We can’t really give you a straight gift. What we’d like to do is give you an investment, and when that thing hits and you sell it to Google or whatever we are in the discussions about intellectual property rights,’” he says.
Crawford thinks this trend will occur more and more, especially in the technology and medical sectors.

If the foundation is making an investment, he says it’s an interesting idea that the foundation decision-makers owe it to the future of the foundation to take a stake in it. Otherwise, they might be passing on an opportunity to become part of something that would make a difference for future grant opportunities.

 

GIVING PROFILE


 
Pittsburgh metropolitan statistical area
2.46% giving ratio — ratio of itemized charitable contributions to adjusted gross income.
$1.091 billion total contributions.
$2,762 median contribution.
5.9% — the decrease in contributions when compared to 2006 data.


 
The average national giving ratio was 3% for $225 billion total contributions.
Of the 50 largest metropolitan areas, Salt Lake City was the most generous with a giving ratio of 5.5%. Providence, Rhode Island, and Hartford, Connecticut, were the least generous at giving ratios of 1.9%. Pittsburgh ranked 44th.
 
Source: Chronicle of Philanthropy, “How America Gives,” using IRS data that represents 80 percent of the money individuals gave to charity in 2012, and 74 percent of money given to charity in 2006.