September 2014 | ASU Magazine (link here)

Today’s nonprofit organization faces challenges that might have seemed unrecognizable to similar groups operating 40 or even 20 years ago.

Some of the current “hot topics” in the field include: the promise – or peril of crowdfunding; a growing level of income inequality between the richest and poorest in America; a shift from questioning a nonprofit organization’s overhead to questioning its impact on society; and the role of social entrepreneurs, who borrow and adapt for-profit ideas to resolve societal challenges.

The evolving nature of nonprofit organizations is fueled by several factors according to alumnus Patrick McWhortor, president and CEO of the Alliance of Arizona Nonprofits.

After a rash of business scandals in the early years of the 2000s, there was a heightened demand for accountability to the public, which included looking critically at nonprofits as well as for-profit businesses. This led to greater transparency and the need for improved organizational infrastructure.

The second issue is the so-called “Great Recession” that began in 2007, and which McWhortor emphasized is not over for nonprofits. The continuing economic uncertainty has forced many organizations to meet a growing demand for services at the same time their resources have dwindled and their reserves are becoming tapped out.

“In the past probably 10 to 20 years there has been a growing emphasis on the need for nonprofits to shore up their business infrastructure as a way to make them more efficient, promote accountability, and ultimately, have the most impact they can in the community,” he says.

Dynamic shifts are underway in the nonprofit world, and units such as Arizona State University’s Lodestar Center for Philanthropy and Nonprofit Innovation are applying data-driven research to help organizations modernize their operations, and providing next-generation training to nonprofit leaders and board members. According to Robert Ashcraft, the Lodestar Center’s executive director, one of the most crucial steps in successfully adapting involves addressing the issue of capacity building – a concept that the National Council of Nonprofits defines as “activities that improve and enhance a nonprofit’s ability to achieve its mission and sustain itself over time.”

“Nonprofits increasingly are very complex. Part of our role is to build the capacity for how they’re led,” says Ashcraft. “We have a number of capacity-building initiatives, and we’re applying the discipline and metrics of enterprise across all sectors to identify the elements that constitute effective leadership and management of nonprofits.”

READY FOR A NEW APPROACH
McWhortor asserts that the economy is driving a lot of interest in innovation in the nonprofit sphere – including developing new models for sustaining nonprofit missions and making the most impact with constrained resources.

Social entrepreneurship is a significant trend driving innovation, McWhortor says. It’s practiced by retiring baby-boomers and millennials alike; both groups are looking to make a difference in the world, even if that difference takes place outside the traditional boundaries of nonprofits.

“That brings lots of new ideas and creative business models to the nonprofit world and in some cases, they’re challenging some of the underlying assumptions of the nonprofit world,” McWhortor says.

The Lodestar Center, which grew out of a 35-year-old undergraduate program and took on its current name in 1999, offers degree programs in nonprofit leadership at the bachelor’s, master’s and doctoral levels and is arguably the largest and most robust nonprofit academic center operating at a university anywhere, Ashcraft says.

“We are a huge epicenter of this field that supports students at all levels and provides a great laboratory for them engaging in their research and learning. It’s the full range of knowledge, tools, training, academic programs and research,” he says. “Other universities certainly have elements of those things, that might include a research institute or some community outreach, but we have all of these elements under one roof.”

Despite being an established center, Lodestar has focused on leading rather than just following industry trends and sharing them with professionals interested in expanding their skillset. Jill Watts, director of capacity building initiatives at the Lodestar Center, oversees the Generation Next Nonprofit Leadership Academy, a nine-month training program that began in 2008 and is sponsored by American Express. The academy’s training curriculum is carefully crafted to address specific trends in the nonprofit world, so current leaders can make their organizations responsive to external changes.

“It helps them to see what sort of trends are happening, why people are giving, why they stop giving and there are very specific questions we ask to understand the donor psyche,” Watts says. “All of those factors can go into the design and implementation of a campaign or development program. It all goes back to how we can put this research into practice.”

Learning to plan for impact
Fundraising is one area that has changed dramatically for nonprofits in recent years. Corporate social responsibility isn’t just a matter of the community relations department cutting a check these days; corporations are shifting their philanthropic missions, moving away from sponsorships of luncheons and galas and other traditional mainstays of the not-for-profit budget.

“Most corporations have become very strategic about their philanthropic giving. They want to see results. They want to see impact. They want to build relationships,” Watts says.

That’s led to a movement in nonprofits to diversify their funding mix. Whereas nonprofits could traditionally fill their budgets with an annual campaign and a few grants, now they’re looking at a scarcity of unrestricted funds related to the fact that, by and large, donors have become much more specific in their desires.

Watts says that nonprofit leaders have had to become much better at discussing the specific impact of their programs, especially when given access to their counterparts in the business world.

“We … try to get (nonprofit leaders) face time with those people and do ‘speed-networking,’ basically,” she notes. “They can sit for five minutes at a time with corporate leaders and talk about where there might be an alignment between their mission and the corporation’s focus.”

Reaching out – and back – into the community
ASU has been invaluable in helping the Valley’s Native American Connections grow and navigate the changes in the nonprofit world, says Diana “Dede” Yazzie Devine, the group’s president and CEO and a 1999 graduate of the MBA program at ASU’s W. P. Carey School of Business. When she started at Native American Connections 35 years ago, Devine was the third employee and the group functioned on a $50,000 annual budget. Now, Native American Connections has 140 employees, an annual budget of $11 million and operates at 18 sites throughout the Phoenix area.

“Midway in my career here, I knew we were running a business, just like any other business,” says Devine, who went through the business school’s executive MBA program to boost her business knowledge. “We’re using sophisticated financing strategies; we’re acquiring properties and using them as assets; we’re acting just like businesses, but with heart, with the thought of always aligning our mission to our business decisions.”

Devine, who serves on the Lodestar Center’s advisory board, says Native American Connections regularly partners with ASU in a number of ways.

“We look to the Lodestar to train our board members – they’ve done a lot of work around how to interact with the philanthropy and donor community,” she said. “We use their products and tools, we participate in the salary survey. Every year they’re on the leading edge of what the next innovation will be.”

Devine notes that the Lodestar Center also functions as an entryway for nonprofits to access many other resources at the university, from students seeking internships and graduates seeking employment to researchers specializing in areas that align with the nonprofits’ various missions. And the community connection is not just one-way. Devine and McWhortor both serve on the ASU Community Council, a Valleywide advisory group of approximately 30 members who help advise President Michael M. Crow on topics related to nonprofits and social embeddedness.

Partnering to resolve large-scale challenges
The Lodestar Center isn’t the only ASU unit studying nonprofit issues. David Swindell, associate professor of public affairs and director of ASU’s Center for Urban Innovation, conducts research that deals with the interrelationships between governments and nonprofits. One of Swindell’s projects is studying nonprofit agencies across 26 different sectors at each of the country’s 50 largest metropolitan statistical areas.

“What I’m trying to develop is some kind of model to look at demand vs. supply of those services to determine where you would look to consolidate some of these services or where there are underserved areas that could use additional services,” he says. “This takes a step back and looks at the community level for measurements. Are we seeing a shift in the demand for services because we’ve actually solved some of these problems? A successful nonprofit is one that actually solves its way out of existence.”

In another project, Swindell and his collaborators are building a tool to help governments decide whether they should collaborate on providing some services and if so, what form of collaboration makes the most sense in the context of the service and the type of community. As is the case with public-private partnerships, public-nonprofit partnerships are a growing trend for providing services. And Swindell says the advancement of nonprofits as a field of study have influenced this expansion.

“We’re seeing a lot more of these in recent times because there’s been a growing professionalism in the nonprofit community. There are a lot more people who are skilled at these services than there have been in the past,” he says.

Using the past to succeed in the future
Swindell says the university is able to influence how nonprofits will transform themselves in the future because Arizona’s leaders – in the government, business and nonprofit realms – tend to have strong ties to ASU.

“We have so many of our graduates now who are running local governments and nonprofits, our alumni are our collaborators now,” he says. “The thing about being at ASU is there are so many doors open and so many great opportunities to apply research to public problems.”

Ashcraft, named in 2012 to the Nonprofit Times’ “Power and Influence Top 50” list, says the success of the Lodestar Center now is a tribute to the wisdom at ASU that created it in the first place.

“If you think about our center, we’re a knowledge and tools hub for those who lead and manage nonprofits, but also for those who volunteer and serve on boards and give money, across every topic imaginable,” he says. “Really it was ahead of its time.”

ASU’s approach to nonprofits is still ahead of its time, emphasizing the embrace of new technologies to enable nonprofits to remain vibrant in the community. The Lodestar Center has moved many of its resources online, making them useful to nonprofits statewide.

“Clearly technology has changed the way in which so many nonprofits raise money,” Ashcraft says, pointing to the 900 nonprofits that participated in Arizona Gives Day, an online fundraising effort hosted by the Alliance of Arizona Nonprofits and the Arizona Grantmakers Forum. “Those that don’t have the understanding or the capacity turn to us and we provide the latest knowledge and tools … We keep evolving the field and the field keeps evolving us,” Ashcraft says.