The Networked Nonprofit of Tomorrow, Part 2: From Tensions to Trust and Transparency

March 15, 2017

This three-part blog series unpacks and explores ONE HUNDRED’s recent findings on “networked nonprofits” and situates these hub-and-spoke entities’ unique organizational challenges in today’s philanthropic landscape.

Anatomy of the Issues

As we saw in our first post on “networked nonprofits,” hub-and-spoke networks matter because they make up a significant part of the nonprofit sector (35% of the largest 400 nonprofits are networked, if we exclude educational institutions) and span everything from social services, international relief and development, health systems, sororities and fraternities, higher education, and beyond.

Having worked with many networked nonprofits, ONE HUNDRED set out to catalogue the unique challenges typically faced by hub-and-spoke entities, identifying the core principles, key tensions, and best practices that each and every networked nonprofit must address to ensure fundraising success in today’s philanthropic landscape.

This post looks at the tensions that typically surface within networked nonprofits and how both the periphery and the center can enhance fundraising efforts through greater commitments to coordination, transparency, and trust.

“The center must be willing and able to help affiliates get the fundraising job done. The center must be a servant leader.”

Fostering Trust & Transparency

We’ve identified five critical areas of potential conflict within networked nonprofits that can disrupt or impede fundraising success, along with the principles and best practices that must be addressed if these pitfalls are to be avoided. We tackle the first three issues in this post: Transparency, Resource Efficiency, and Prospect Sharing.

1. Transparency

Any organization—public, commercial or nonprofit—must worry about transparency between its center and its constituent parts, whether for core management or program implementation. For most networked nonprofits, the affiliates are the “boots on the ground,” the points of contact with those being served and, often, those funding that service. The pathways between the center and affiliates, therefore, must be clear.

And that transparency turns into trust. The center needs to believe that its affiliates’ programs and actions are aligned with central priorities, and affiliates need to believe that the center has their best interests at heart. This mutuality of commitment underpins the entire relationship. Any perception of asymmetry undermines trust.

Our experience suggests that transparency can be designed into an organization’s overall fundraising efforts:

1. Codify the Rules. Too often the standards and principles governing decision-making are left unspoken and undocumented. It’s hard to find clarity when nothing is documented, and there can be no transparency if there’s no clarity. Go back to basics: codify the rules and the rationale for the systems in place.

2. Consult, Consult, Consult. Subject that codification to system-wide discussion. Managers in charge will need to make decisions, but open the process up to discussion and suggestion at all levels. Set out a clear process so both affiliates and the center are consulted on goals, strategies and tactics.

3. Document What Works. Transparency isn’t just about process, it’s about results. Opinions are important—people need to feel involved and consulted—but fundraising performance can be measured. Put performance systems in place to track metrics and document what works and what doesn’t.

2. Resource Efficiencies

Fundraising is process-driven, and process is often resource-intensive. Donors care about how their money is used, so attention must be paid to resource efficiency. But should central hubs select and design those systems or should affiliates be allowed to use systems that meet their needs and simply report results to the center?

Tensions abound. Centralization can contain costs, but this may not drive efficiency for affiliates. Fundraising data and prospect modeling are complex and data consistency and coherence are critical (if arguing for centralization), yet distant ownership and murky accountability make enforcement difficult, and accuracy can be lost without affiliates’ on-the-ground knowledge of donors.

“Networked nonprofits—both affiliates and headquarters—can enhance their fundraising through greater commitments to coordination, transparency, and trust.”

So where to begin? There’s no single, one-size-fits-all solution. Solutions must fit organizational culture: traditions of loose affiliation will bias coordination toward the affiliates, while traditions of close control will favor the center. But sensitivities about the right balance are particularly important, whichever bias is chosen.

Where tradition favors decentralization, there are three necessities:

1. A Common Core. Common, enforceable processes and policies are a must for all data and management systems. Local control must be within clear quality and process standards and can’t impede central leadership from reporting on the status of the organization’s fundraising.

2. Common Metrics. Common performance metrics and reporting standards are also critical. Local control must be accompanied by commonly held definitions of all performance indicators, or central management won’t be able to tell how any element of fundraising is actually doing.

3. Technical Assistance. The center must, must, must have the ability to provide technical assistance to its affiliates if it is to combine local control with central standards and reporting demands.

Where tradition favors centralized control of fundraising management systems, three elements must be in place:

1. Input. Peripheries must have their say: they must have continual buy-in and the ability to communicate what is not working in the field.

2. Action. The center must exhibit humility, flexibility, and a willingness to act on what isn’t working—not just pretend to listen to affiliates. Listening means a willingness to act, or resentment will result.

3. Outputs. If the center controls fundraising systems and data processes, it must be absolutely best-in-class, providing clear evidence that centralization is in the affiliates’ best interests, or the perception can be one of dictatorship.

3. Prospect Market Share

For hub-and-spoke organizations in which both headquarters and affiliates carry out fundraising, the most divisive struggles involve prospect “ownership”—a huge source of conflict at all levels. Is a high net worth individual the prospect of the affiliate in whose city he or she lives, or of the center? If an individual has multiple homes, to which affiliate does he or she “belong” for purposes of cultivation and solicitation? Is the multinational corporation the prospect of the center or of the affiliate(s) where the plants are located? Essentially, who “owns” the prospect?

The question is how to develop the most strategic way to manage prospects to ensure donor relationships of maximum financial support. Without a clear system, donors can become confused and annoyed. And donor annoyance and donor loyalty do not go hand-in-hand.

Regardless of what prospect ownership system an organization adopts, it must be built on three principles:

1. Zero Ambiguity. Everyone at all levels must be clear about how the process will work, with explicit criteria defining prospects, prospect levels, and ownership—in some cases this may require educating the donors.

2. Sharing the Credit. A system for sharing financial credit for major prospects must be developed. Affiliates must be able to maintain relationships with major donors while working to meet performance goals for which they’re accountable. Those interests must be recognized and protected.

3. Joint Solicitation. Highly collaborative prospect sharing is already a reality in many affiliate structures. The affiliates may “own” the prospect but lead in introducing them to headquarters. Joint solicitations benefit both hub and spoke and funds can be shared for mutual benefit (e.g., a 60/40 split).

The wisest nonprofits incentivize prospect sharing between affiliates and headquarters by sharing credit and offering resources to assist with local prospect cultivation (e.g., national representatives, major gift experts). This creates a mutual stake in local prospect cultivation and stewardship, and strengthens both overall fundraising performance and the skills and capacities of affiliates to grow major gifts in general.

Push-Me-Pull-You Realities

All networked nonprofits must address their unique organizational challenges—they’re too important and well-documented to ignore. Our research shows that the sooner such organizations commit to greater transparency, to balancing resource needs, and to managing prospects to serve the entire organization, the sooner they’ll lay the groundwork needed for fundraising success. These are complex challenges, but they’re not without solutions.

In our next post, we’ll discuss the final hub-and-spoke challenges that must be addressed. See you then.

Download the white paper here.