‘Social Capital’ Is a Charity’s Best Investment

The twin crises on Wall Street and Main Street will put many nonprofit organizations in a double bind: Demand for their services will soar just as their sources of money grow scarcer. As corporate donors disappear, individuals anxiously hoard their diminishing assets, foundation endowments dip or dive, and government money is directed elsewhere, food-pantry cupboards may go bare, along with the coffers of organizations that focus on a range of other causes and services. This all-too-possible scenario puts at risk the entire nonprofit world — and charities cannot count on governments to bail them out anytime soon.

Those organizations that want to outrun this economic avalanche can benefit from lessons we learned conducting research for The Charismatic Organization, just released by Jossey-Bass. In this book, we set out to explain why some organizations experience steady growth while others are worthy but struggle.

A common assumption is that the presence of a charismatic leader is the answer — someone who can attract donors, the news media, and policy makers to a cause. But not every organization has such a leader, and not every charismatic nonprofit leader runs a successful organization.

We found that the answer lies not in the qualities of an individual leader but in the collective actions of everyone involved with the organization. We have spent more than 15 years working with nonprofit groups — first as grant makers responsible for leading the AmeriCorps program and later as consultants providing strategic and policy advice. In this process, we have come to know hundreds of organizations and worked closely with dozens, big and small.

Over the years, we began to observe a common element among successful organizations: They have high levels of “social capital” — the network of relationships built with people inside and outside the organization. Social capital matters because it leads to all other forms of capital that nonprofit groups need to make a difference, including financial, political, and human capital. Attracting resources is far easier if a nonprofit group has a strong network of dependable relationships at the ready.

To build their social capital, charismatic organizations do several things. Study after study finds that people who support nonprofit organizations, whether as donors, volunteers, or staff members, do so because they want to make a difference. Therefore organizations that want to build their social capital must not only work hard to carry out their charitable goals but also be prepared to show their results with hard numbers and engaging stories. Becoming more focused on results and data makes a nonprofit group more, not less, peoplefocused. Telling their stories compellingly makes them all the more attractive.

Second, people want to be part of a community, and they feel a greater sense of community when they are asked to participate in multiple ways. Charismatic organizations build an appealing culture and make it easy for people to become engaged in their cause, not just as donors but also as volunteers, advisers, and advocates. They cultivate strong connections among people based on trust and respect. They emphasize common values and a strong belief system, and their actions are consistent with their words. These efforts pay off in the form of loyal board members, donors, employees, volunteers, and champions.

Those findings are instructive at this time of economic challenge. They suggest that nonprofit groups that want to survive the downturn should:

• Ask for something other than money. Of course, cash is at the top of every nonprofit organization’s wish list, especially now. But it’s the hardest thing for many donors to give during tough times. Charities should keep those who supported the organization close, even if their checks get smaller or disappear altogether. They should ask for advice and expertise, donated goods, or connections to colleagues. Those are gifts that are easy to give and therefore easy to get. They should also find ways to involve a broader circle of friends and potential friends in their work — the money will follow, eventually.
• Keep in mind that while donor dollars may be limited, volunteers may offer an embarrassment of riches. Charities should be ready to accept offers of time from retiring baby boomers and people looking to switch into new careers, as well as from recent college graduates looking for internships. Corporations may offer to lend an organization staff members instead of giving money. Organizations that can use volunteers to magnify the work of staff members will benefit not just from extra person power but also from the potential for future donations: Volunteers are far more likely to donate to a cause than nonvolunteers.
• Make sure they’re getting results. Employees, donors, and volunteers are all motivated by an organization’s cause. Nonprofit groups should make sure they have a compelling statement to sum up their charitable missions, clarify their goals, and determine how they will measure progress toward them. Then they should connect the work of volunteers, employees, board members, and others to those achievements. If a charity can’t tell where it is making a difference, now is the time to redirect resources elsewhere. Hard times can force managers to confront failures and make hard choices. They should focus spending on programs that are getting the best results.
• Keep a can-do culture. While it’s tempting to impart gloom and doom, and selling a crisis may well get the attention of some donors, no one wants to throw money at hopeless causes. Charities need to convince everyone, including staff members, that it is possible to get through this challenge with their help.
• Emphasize free or low-cost get-to-know-you events over expensive galas. Those organizations that depend on a handful of big donors, whether they are individuals or institutions, leave themselves vulnerable during economic downturns. But cultivating new champions takes time. Cocktail parties in a board member’s home, presentations in a downtown conference room, or picnics in a park offer fun ways for charities to make new friends and start building relationships with them. Charities must not measure the success of these gatherings by dollars raised — that’s short-term thinking. They should make the supporters they recruited their new currency.
• Figure out social networking and other new technologies. A growing way for people, especially young adults, to connect with charities is through social-networking sites and other online communities. The good news is that even the smallest nonprofit groups can take advantage of these tools for little or no cost. For charities that don’t have anybody on their staffs who knows the difference between a wiki and a widget, they will want to find youthful volunteers who do and enlist their help.
• Collaborate with other organizations to expand a charity’s reach and stretch every dollar. Economic hardship often leads to mergers in the nonprofit world much as it does in business. Charities must get a step ahead — build relationships with other nonprofit groups that might productively collaborate with them to streamline the delivery of services, share space or back-room functions, or otherwise create better services and economies of scale.
• Invest in people. Charities need to find ways to keep the employees that have the most value. If monetary rewards are not an option, they must consider offering key employees more flexibility, recognition, appreciation, and low-cost high-value benefits. And if it is necessary to lay off staff members, they should say goodbye to less-productive staff members in a humane way — other employees will take notice.

All of those approaches rely on or enhance an organization’s ability to build strong relationships. The survival of nonprofit organizations — and their ability to help the nation through these troubled times — may well hinge on one key factor that transcends money, but ultimately leads to it: social capital.

Most of the charities we write about in The Charismatic Organization were built in the last several decades — Citizen Schools, City Year, Communities in Schools, Sports4Kids, and YouthBuild are all national nonprofit groups with local affiliates; the National Women’s Law Center is a national advocacy group; DonorsChoose.org is an organization that operates mostly online; New Profit is a venture philanthropy fund; and Imagination Stage and Bethesda Big Train baseball are local organizations.

They all have built strong relationships that generate the resources that fuel their ability to achieve important results.

However, those practices are not limited to young organizations. Social capital was the currency of successful nonprofit groups created a century ago during the Progressive Era. Robert Putnam, who popularized the concept of social capital, argues that “it is hardly an exaggeration to say that most major, broad-gauged civic institutions of American life today were founded in several decades of exceptional social creativity around the turn of the 20th century.”

These organizations are today’s who’s who of the nonprofit world, including the Girl Scouts, Goodwill, the Lions Club, the Sierra Club, and Volunteers of America.

While today we may recognize them for their household names, broad reach, and significant influence, a century ago they were struggling start-ups, whose volunteers, champions, and word-of-mouth were often more important than their employees and polished promotional materials. Those organizations survived two World Wars and the Great Depression, and many remain as relevant today as they were when they were founded. They are both effective and enduring.

Those nonprofit groups that take a lesson from them and focus on social capital will more likely be around when today’s economic cloud lifts, whether a year or a decade from now.

Shirley Sagawa and Deborah Jospin are the co-authors of The Charismatic Organization: Eight Ways to Grow a Nonprofit That Builds Buzz, Delights Donors, and Energizes Employees.