Thriving in Turbulent Times: Maximizing Your Success in the New Social Environment

maximizing your success in the new social environment

www.wellesleyinstitute.com

Thriving in turbulent times

May 4, 2009

agenda


The emerging new economy

The third sector and survival

Funding and new opportunities

From competition to co-petition

Challenges and opportunities

Rise of social innovation

Need for social enterprise and social finance

Building a resilient and sustainable future

Culture underpins success


independent, non partisan, think tank advancing health equity

rigorous research leads to pragmatic policy

consumer-centric, solutions focused

relentless incrementalism tipping point decisions


affordable housing

healthcare reform

immigrant health

social innovation

“the future isn’t what it used to be”

environment

communications

information

interconnectedness

sandwich generation

Boomer and zoomer

less is less

freedom 85?


the new normal


shift to the intellectual capital economy

massive credit and debt loads

$5 trillion dollar stimulus

trillion dollar hangover and possible stagflation

possible loss of 20,000 NFP

coping with those left behind

the best is yet to come….we will recover


speed debating


Discussion 1

What macro issues do you

see affecting your

organization?

What micro issues affect

your organizations?

What is affecting your

colleagues?

What is affecting you?

the third sector (and why it matters)


Delivers vital services and

programs to people

Strengthens

communities…builds social

cohesion

Makes a large and dynamic

contribution to economy

Significant employer

12 million volunteers

$90 billion GDP


Six times

the size of

the auto

industry







0%

10%

20%

30%

40%

50%

60%

70%

1997 1999 2001 2004

Trends in Revenue Sources Core Nonprofit Sector

(without business and professional associations)

earned income

charitable donations

government

Case study: developing affordable homes


Canada-Ontario Contribution $2,100,000

Municipal grant 194,750

Donation

Fundraising

520,000

675,000

Subtotal $3,489,750

Mortgage 2,610,250

TOTAL PROJECT BUDGET $6,100,000

Financing a 50-unit seniors’ housing project (2007)

$122,000 per unit construction cost

Issues: Multiple funding sources, multiple accountability / regulatory

requirements, inconsistent funding rules, timing concerns, heavy

reliance on fundraising / earned income (20%), heavy reliance on private

financing (43%) with ongoing financial burden…

collaboration


collaboration principles


Collective activities form

significant part of NFP work

Much is accidental or

incidental; but still important

Much is also simply

information sharing with

some resources

Need to take to next level

speed debating


Discussion 2

In what types of

collaborations are you

normally involved?

What makes them good or

poor?

What would you change to

improve?


cause for concern

a heightened sense of anxiety about

funding and organizational stability, even

survival, over the next two or three years

at least one-third of the organizations

experiencing serious economic impacts,

and all fear that things will get worse before

they improve

NFP organizations are hearing that many

long-term funders, including many United

Ways, Community Foundations and family

foundations will be reducing their granting

programs in 2009 and 2010.

our collaborative initiative


A multi-year research and

policy initiative to examine

good (and not-so-good)

collaborations in the third

sector – and the private

sector

…and to provide solid

research and policy

direction to our ongoing

work in supporting effective

collaboration

funding and collaboration

reliability remains tenuous.

cumulative administrative

burden is all consuming.

multi-year grants do not

solve the administrative

burden.

funders are slow to

approve/reject grants

slow response time causes

“gap” problems for service

delivery. www.wellesleyinstitute.com

collaboration challenges

administrative burden is heavy, unrelenting, and places many constraints on their ability to operate effectively

actual impact of the funding process is directly at odds with reasons we engage non-profit organizations to deliver community services.

funders, large and small, rarely give community organizations any latitude to adapt or adjust programs and finances to meet local conditions and changing circumstances.

grant applications tend to be overly long, complicated, and difficult to complete.


collaboration principles

“more for the same”, not “the same for less”

collaboration can make existing organizations more efficient and effective, and can deliver better programs and services that benefit clients, through shared resources.

funders should not view collaboration (or, indeed, measures such as forced integration or amalgamation) as a means to reduce infrastructure

a means to improve effectiveness and efficiency starting, at a minimum, with existing resources.


recommendations

A new “virtual” Centre for Leadership in Collaboration, working in partnership with a funders’ collaborative alliance, should be created to serve as a hub and a catalyst for action among individual organizations, and with funders.

a more intentional structure within the third sector to identify and share good practices and to bring together NFPs and funders to share and assess collaborative ventures.

funding agencies should shift a meaningful portion of program dollars to create the infrastructure that supports collaborative partnerships.


recommendations

If collaboration is one of many activities that NFPs are expected to perform without dedicated resources, then the real gains from collaboration will be hard to achieve.

Existing collaboratives, networks and integration structures (as an example: Local Health Integration Networks, the Community-Based Research Network, Community Partnerships, and others) should provide leadership in developing and sustaining effective collaborations.

The capacity for creativity for collaboration among these existing organizations needs to be encouraged and supported.


recommendations

Collaborative efforts should be established as time-dated initiatives with a shared vision, clear goals and objectives, and highly-defined impact mandates by all partners

Longer-term collaboratives should be encouraged to continually self-assess and re-invent themselves to remain relevant

Collaborations should adapt to changing circumstances and, in some instances, should be prepared to wind down in response to evolving conditions.”


not all doom and gloom

umbrella groups and networking groups are bringing their members together, to share best practices.

agencies are looking for new ways to collaborate with one another.

charities are looking at diversifying their fundraising base, and also at opportunities to generate new revenues.

concerned funders – such as foundations and United Ways – are actively engaged in explorations of how to have greater impact with fewer dollars.

reduce costs – to do more with less.


the chase for revenue

Stock market declines have had a severe impact on the value of endowment funds that many NFPs have been carefully building for years.

Corporate donors and sponsors are frequently not renewing their support.

A number of social service agencies – such as food banks and credit counseling agencies – report significantly increased demand for their services.


challenges

political vulnerability of grants and programs is increasing.

large and small grants impose heavy administrative burdens.

all three organizations described themselves as “operating on the edge,” with staff more than fully engaged and extremely vulnerable should a senior manager leave.

senior managers are very aware and worried that they cannot replace themselves.


More challenges

Grant management, of necessity, takes priority

over other management responsibilities.

Funders need to do things differently.

None of the agencies we studied had a portfolio

of funders that supported them to get on with the

task of delivering effective services and building

communities.

Core non-profits rely more heavily on non-

governmental funding…


The Roof co-location (Barrie)


social innovation

Culture of Social

Innovation

Public PolicySocial Finance

Social Entrepreneurship

Social Enterprise

A common lexicon is important

Social innovation does not entail commercial interest and is oriented towards systemic change

Social enterprise is a profit oriented entity marketing its products and services blending business interests with social ends getting both an economic and social return on investment. Often also called a social purpose business.

Social entrepreneurship is an individual-centred concept


social enterprise continuum


Volunteerism

Public Services

Social enterprise

Socially responsible business

Profit driven mainstream

business

social finance in the third sector

Role of third sector is to respond to need and pioneer new approaches beyond the reach of public and private sector.

Ability to do so is undermined by financial frailty

In UK Commission on unclaimed asset develop the concept of a Social Investment bank

Objective is to provide urgently needed greater investment and professional support.


speed debating


Discussion 3How do you define innovation

What forms of social innovation

do you use?

What are the obstacles to

innovation?

How do you reward risk taking?

the rise of social innovation

Social innovation is an initiative, product, process or program that profoundly changes the basic routines, resource and authority flows or beliefs of any social system (F. Wesley Sig Waterloo).

Social system is defined as any organized assembly of resources, beliefs and procedures regulated by interaction or interdependence to accomplish specific outcomes

Social systems are complex and must be adaptive and constantly evolving

Social systems have own culture, political and economic structures and social interactions


insights

Successful social innovations have durability and broad impact

Innovations avoid “band-aid” solutions

When broad and durable, SI is disruptive and create systemic change

Must cross multiple boundaries, reach different and more people, more organizations, and linked into social networks

Social innovations depend on “surprising coalitions”


the innovation cycle (F. Wesley)

S


exploration

choice

exploitation

resiliency

capacity

building social innovation capacity

Process needs to connect:

1) Links between vulnerability and resilience

2) Re-engaging vulnerable populations that are disenfranchised from resources

3) Creates links between a healthy environment, vibrant economy and social justice



Social Finance: New (and sometimes not-to-

new) ways to deliver the finances that third

sector groups need to get their work done…

enpTO: A pilot project led by the Centre for

Social Innovation, with the Wellesley Institute as

a founding partner, to assist non-profits to

develop their financial base

speed debating


Discussion 4

What new ways of

funding/financing have you

explored?

What are the barriers

internally and externally

Where might you find capital

sources?

The UK experiment…FutureFund Invested unclaimed bank assets into a 250M GBP

fund with annual revenue of 20M GBP

Bank acts as a “wholesaler” of capital for the social sector

It capitalizes present financial intermediaries, provide advice and support, develops sustained investment programs, supports new intermediaries in efforts to raise capital

Facilitates access to private finance as well as broader capital markets.


Social finance is the flow of financial capital to human need uses:

• Affordable Housing• Social Enterprise• Support for working families• Health & Home Care• Community Development• Social Economy• Clean Technology• Microfinance• Fair Trade• Green Building• Education• Bottom of the Pyramid

social finance

Charity and Non-profit

GovernmentBusiness

Hybrid

Space

source: market sector listing adapted from www.xigi.net)

http://www.xigi.net/

47

A healthy social finance marketplace contains many different MODELS

spectrum of social finance

Investment Type UK Examples Canadian Examples

Financial Institutions Triodos, Charity Bank Vancity

Financial Investment Product Universe

Social Investment Forum, GSI

Jantzi Index

Social Venture Capital - business Catalyst Investeco, Renewal 2

Social Venture Capital – social enterprise

Bridges Ventures, Venturesome

Resilient Capital

Government Loans Future Builders Fiducie Chantier de L’economie Sociale Trust

Non-Government Grants Unltd. Enterprising Non Profits (ENP) – BC and ON

Philanthropy Esmee Fairbairn McConnell FoundationVancouver FoundationOntario Trillium Foundation, Wellesley Institute

UK social finance spectrum

48

Unsecured Loan

Overdraft

Quasi-equity

Equity

Grant

Pre-funding Capital

Fundraising

Working Capital (open)

Soft Development Capital

Standby Facility

LOW RISK HIGH RISK

Hard Development Capital

Increasing evidence of commercial finance available

Patient

Capital

Secured loan

Working Capital (closed)

LOW

CHANCE OF REPAYMENT

HIGH

CHANCE OF REPAYMENT

Need for further supply of capital and development of financial instruments

What does Canada’s spectrum look like?

Venturesome’s Spectrum of Venture Capital Investment

Courtesy of Paul Cheng at Venturesome

Dark grey area show where supply

of finance is readily available Light

grey area is where there is a need

for more capital and instruments

49

Paul Cheng - Venturesome

3 models of social enterprise1. Profit Generator – goal to get profit and give some (or all) away to charity (Patagonia)

2. Trade Off Financial and Social Returns - activity has social impact, but needs to trade off between financial and social impact (ie, The Hoxton)

3. Lock-Step – no trade- off between social and financial impact - if one side goes down, the whole organisation does (ie. community wind farms)

Creating Social Finance Solutions

- 100% + 8%0%

Capital-protected Market-rate returnGrant-makers- 15%

Courtesy of Paul Cheng at Venturesome

Venturesome is not a bank, nor a granting organisation - it providesunderwriting/stand-by facilities, unsecured loans and equity and quasi-equity

• Responding to issues in the third sector – charities are undercapitalized with weak balance sheets and a ‘donor’ culture rather than an ‘investor’ culture

• Provided £12m to 200 organisations, with a default rate of less than 5%• Current fund is £10m with banks, foundations and HNW individual investors• Exploring the ‘negative return’ spectrum

social finance support systemsCourtesy SIG @MaRS

50

The UK marketplace also contains many social finance INTERMEDIARIES

Social Enterprise

Growth

Research

GuidestarAshoka

Investment Bank

Social Finance Ltd

Corporate Finance

Catalyst

Legal Structures

CIC’s

What systems exist in Canada?

legal structure basics

51

What is an appropriate legal structure?

What is CIC?

Each model has its pros and cons...what is right for Canada?

What is an L3C?

What is the Community Enterprise Act?

Community interest companies (CIC) are a type of limited company designed specifically for those wishing to operate for the benefit of the community rather than for benefit of owners of the company..

CICs can be limited by shares, or by guarantee, and will have a statutory “Asset Lock” to prevent the assets and profits being distributed, except as permitted by legislation. This ensures the assets and profits are retained within the CIC for community purposes, or transferred to another asset-locked organisation, such as another CIC or charity.

L3C'sare low-profit limited liability corporations, which function via a business modality that is a hybrid legal structure combining the financial advantages of the limited liability company, an LLC, with the social advantages of a non-profit entity. An L3C is run like a regular business and is profitable. However, unlike a for-profit business, the primary focus of the L3C is not to make money, but to achieve socially beneficial aims, with profit making as a secondary goal.

Sector leaders in Canada are exploring the creation of a legal structure, learning from CIC and L3C models.

financial stakeholders in Canada

52

Federal and

Provincial

Government

Private Companies

How do we engage and connect the individuals in these stakeholder groups?

What is he role of crowd sourcing and micro-investors?

Charitable

Endowments

Financial

StakeholdersFinancial

Stakeholders

SIO & SRI Mutual

Funds

High Net Worth

Individuals

Credit Unions

Insurance

Companies

Pension Funds

Mainstream

Banks

Foundations

Financial

Stakeholders

The Third Sector includes voluntary and community groups,

social enterprises, charities, cooperatives and mutuals

enabling public policy

53

The UK has an OFFICE OF THE THIRD SECTOR

The UK civil society contains many successful

ADVOCATES and ASSOCIATIONS

• Created in 2006 • Sits within Cabinet with its own minister, Kevin Brenn an• Pros and Cons to placement in central government

• Social Enterprise Coalition provides research and awareness programs and is proactively developing relationships with both political parties

• The National Council for Voluntary Organisations (NCVO) provides the support and voice for the voluntary and community sector

Which government body, advocates and associations do we need in

Canada?

54

Policy Catalyst Working GroupReflecting public benefit through government

Key issues to address

What should a ‘government body’ cover? • How should public benefit services be reflected in government

•Focus Innovation and not cost-cutting

What is an appropriate policy catalyst?•Creation of a social innovation ministry (Office of the Third Sector)?

•Creation of a social innovation endowment (NESTA)?

What should a ‘NESTA-like’ organisation do? •Canada-wide knowledge management and research

• Funding for social innovation projects

•Challenge Grant Programs

Should the catalyst be provincial, federal or both?

Is there a role for municipal leadership?

structure and reform(courtesy SIG @MaRS)

55

Two big issues to address:

Regulatory reform (foundations and taxes)•Revising and advocating for improvement of regulations for

foundations

• CRA and PRI guidelines for foundations

• Exploring how tax levers might support investment in social

innovation and social enterprises

Legal structure• Designing and advocating for a legal structure for Canada

• Pros and cons of CIC and LC3

• Provincial and Federal actions need to be activated

Key Step: Convene a high profile working group

building a resilient and sustainable future

Third sector organizations will need to engage in new models for future expansion

Private-Public and Third sector partnerships will be critical

Collaboration will necessitate real exchange and sharing of financial and people resources

Organizations will need to agree to common missions, values and objectives


Breaking news…legislative victory!


The Wellesley Institute convinced

the Ontario government just last

week to amend its draft anti-

poverty law to recognize critical

importance of third sector

People are talking to each other

online

2 choices:

1. Resist it, and it will happen anyway, elsewhere,

outside your influence

2. Support it, participate, influence it, and leverage

it for extending your brand

some benefits of social media

1. Listen and learn

2. Publish valuable news and information

3. Distribute promotions

4. Create or extend your brand personality

5. Engage in conversations and customer services

6. Efforts lead back to websites – repository of

information


The web is about conversations,

not top down delivery

of information or messages.

Social media works best in tandem

with traditional means

Baby….bathwater….no!

Segments our audiences

Build on the power of networks and burgeoning

communities

Organizations using communities to connect

faster, more collaboratively, more inclusively, and

more effectively

Proliferation of social media stories within

traditional media piques interest

the purpose of social media is to

engage with audiences in interactive

communities

Genuine engagement facilitates a highly involved

audience that wants to interact with “the brand”

The more people an organization can interact

with who already have strong social networks, the

more likely it is that a message can be spread

through those networks

Social media can change the world We’re looking for impact, influence, and change

A message that resonates can make an enormous difference

Frozen Pea Fund – original Twitter posts became a global campaign for breast cancer awareness

Barack Obama’s presidential campaign

Kiva.org

Netchange

Stableandaffordable.com

Homeless Hub

Can you think of any others?

innovative ways of getting things done


The social web allows people and organizations

to connect in unlimited ways

connectivity as a catalyst for change

Technology as an enabler for innovation

For example: Kiva.com

Microloans for the developing world

Connects third world entrepreneurs with

microlenders world wide

Organizations using sm successfully


Here comes everybody

Focus on relationships, not on “campaigns”

Commit resources to learning and training

Made and learned from mistakes

Respect and humbled by medium

Social web innovates….


Public relations

Media relations

Communications

Networking

Collaboration

Outreach

Fundraising

Word of mouth

How?


Constant, small iterations

Lather, rinse, repeat

Tell stories


Great grassroots initiatives

Facebook groups

Flashmob opportunities

Online communities

Email

E-commerce on site

doing more with less

© The Wellesley Institute

www.wellesleyinstitute.com70

Building your brand



Ensuring the right culture



Culture precedes innovation success


Social entrepreneurship governance model

Permission to fail

Integrated thinking

Creative thinking and pragmatic doing

Small acorns produce large oak trees


We gratefully acknowledge the

support and contribution of our

various partners in the creation of

this presentation.

Thank you.

Thank you and summary




Thriving in Turbulent Times: Maximizing Your Success in the New Social Environment

News & Politics

effective collaboration

collaboration reliability

nfp organizations

community organizations

new social environment

new opportunities

survival funding

funding process