Newsletter: Lesson 2: Why Build a Traditional Organization to do Non-traditional Work?

Author’s note: This is the second in a series of articles regarding the mistakes I’ve made in developing our foundation over these first 14 years.  A friend recently sent me a book titled, “Success Always Begins With Failure”.   I love that title and hope that my failures shared will give you some tips for your own giving journey. [more]

When I sold my for-profit business in 2007, I’d already been doing non-profit work in earnest for ten years.  Alice and I had already invested over $1 million of my company’s profits in charitable work by then.  In just the four years since then, we’ve invested three times that amount and while we’ve not done better with more money, I believe our mistakes will lead us to scale.

The work from 1997-2007 was based on the same mission it is today – serving those who serve the poor.  We worked primarily in the St. Clair Superior neighborhood of Cleveland, backing three non-profits that developed nine services and another non-profit that fuels 75 projects among the poorest of the poor in India, Africa and Central America.

Our initial work was fairly successful by any measure – all four organizations we worked with more than doubled their size and impact, one grew six-fold.  We consulted on business disciplines with these groups and did some direct service as well using volunteers, consultants and one full time staff.

While learning a lot, we also reveled in seeing the product of our support.  For example, we helped educate kids who would not have otherwise attended school.  We also assisted refugees from war-torn countries who were housed and mainstreamed into American life.  In addition, we also supported the homeless with jobs in home health and custodial services as a means to get back on their feet.

Then in May of 2007 we were rewarded with extraordinary financial compensation for our 19 year odyssey of building a national print media business from scratch.  After we paid all our debts, paid lots of taxes and shared our new wealth with the employees who helped us create it, we anticipated using the remainder of the fortune to scale our dream of “serving those who serve the poor”.

And that’s when the trouble started.

In 2008, for example, we invested almost $1 million and, I believe, got less accomplished than 2007. Here’s why I believe that’s true.

  1. As with so many entrepreneurs, I put people and positions ahead of strategy.  For example, since we were building a strong organization, I figured I needed to start with a strong Executive Director.  Actually, what I should have done is give credit to how we’d gotten to where we were already, and built a new business plan before doing anything.  I didn’t.
  2. As with most “nouveau riche”, I thought putting money behind the efforts I wanted to support would cure their problems.  It didn’t.  (I recall my favorite nun telling me years ago that if money were the answer, the Catholics, Jews and US Government would have solved world poverty years ago!)
  3. Identifying a “niche” for our work was, and is, our overarching goal.  (Why do what others are already doing?)  With so much money, we figured finding our niche would be easier and faster than it was for us in our for-profit business.  It isn’t.  Finding a niche takes an extraordinary amount of time, patience and discipline, regardless of how well-capitalized you are.

These three hard-learned lessons may help you in your own search for engaging in social change.

First and foremost, write a plan.

It took until late 2009 for me to realize that.  In 2010, I finally wrote a business plan for the foundation.  Crazy, huh?  I guess I was the proverbial cobbler wearing shoes that are falling apart.

A business plan requires that you set goals first, then build strategies and then, and only then, build the organization and budgets that will support the goals and strategies you’ve aimed at.

The year I wrote the plan, The Business of Good had 10 board members, six full-time staff members and spent $850,000 in gifts and administration and was no closer to knowing what we’d accomplished than the previous ten years.

In 2012, the foundation will invest about $500,000 in total and will do so with no employees or administrative budget.

More importantly, every dollar we spend will be based on research we’ve done on pilot investments.  And our entrance and exit from the projects we support are through a disciplined and refined process.

Second, and finally, remember that in one sense a non-profit is no different than a for-profit in that you can only manage what you measure.

If we say, for example, we’ll help a non-profit change their revenue base, we’d better have set forth a timetable and mileposts for that change.  It is only by looking at these mileposts that we’ll know if we are “talking” change or “walking” it.

And the same goes for my journey so far with a well-capitalized foundation.  I’ve now learned that building a traditional foundation does nothing to assure that I will find my niche in becoming effective in social change.  In fact, it made it harder.

Now the challenge is to continue to come up with new plans, and measurement of those plans, to do what I can do to make the world a little better place.

There is no destination, really, but there are many milestones to shoot for and the joy to be had in the journey.

Peace,
Tim McCarthy

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