The question: How do we use Mass Cultural Council’s social capital to assist the field’s human capital in increasing organizations’ intellectual capital to help leaders build sustainable financial capital?
The Cultural Investment Portfolio supports over 400 nonprofit organizations with flexible unrestricted operating support, technical assistance, capacity building, and several types of advisory services. Furthermore, the relationship we have with our grantees is built upon trust and sustained via a long-term partnership; organizations in the Portfolio do not re-apply for funding, submit evaluations, or revert to ‘funder-speak’, that perfect Chamber of Commerce routine that organizations know all too well.
One result of this trust-based philanthropy is the honesty our grantees have with us regarding their organizational resiliency challenges, some including: loss of founding Executive Director, loss of major individual or institutional funder, a fast-changing business model environment, zero risk tolerance, outdated strategic planning documents, depleting the endowment as short term fix to a broken business model, internal cultural challenges, leadership recruitment and retention challenges, maintaining, purchasing and reinvesting into a facility, and technology and system needs, to name a few. I’m sure most organizations can see themselves somewhere on that list. In most of these recent conversations, our grantees tell us that they do not have the financial or intellectual capital needed to address these challenges on their own. We recognize that the Portfolio’s formula-based unrestricted operating support is one way to help capacity building, but customized strategy is needed to address these challenges effectively. We were up to the challenge.
Listening and Taking the First Steps
To accomplish this feat, in 2018, we conducted several focus groups and conversations with our grantee leadership to help us understand how we can better serve our organizations beyond direct grantmaking. These conversations were invaluable to help us understand organizational needs, deploy some of our unique strengths, avoid redundancy in the field, and create best practices to assist organizations find their own path towards sustainability. In short order, we learned that to truly assist organizations in a meaningful way, we needed to make a continuing commitment of time, build a cohort of like-mind organizations, curate a peer-to-peer advisor system, put some money behind the program, and include a provision for the program to learn from the participants, not just the other way around. Essentially, we needed to combine the advantages of a peer network with the customized individual approach to build capacity for organizations in financial need. We learned when addressing issues around sustainability, one-size-fits-all just doesn’t work.
After these conversations, we got to work. In 2019, we:
Met with other funders, capacity builders, stakeholders, researchers, and service organizations to understand best practices, macro environmental challenges, and what was already happening in the field
Engaged Nonprofit Finance Fund (NFF) to design a Financial Health Stress Test, focusing on an organization’s business model and capital structure, to help us identify organizations in financial need
Engaged with Executive Directors and Board Chairs of organizations that appeared most financially at-risk via the stress test to offer assistance. The offer of assistance was not a condition of the organization’s grant, and was completely opt-in
Worked with NFF to conduct deep financial health analyses on 36 CIP organizations who opted-in
Created a financial health continuum rubric to understand the urgency of service needed. Timing is everything.
Analyzed financial health results to identify common core challenges to the organizations’ business models and capital structures
Identified four core challenges that most organizations were facing: leadership transition, facility planning, managing risk and reserve building, cash flow and cash management
Had strategy meetings with senior leadership and governance of all organizations to review findings and offer customized assistance
Provided a capitalization primer with NFF to help organizations inventory their full cost and complete capital framework. This included a targeted session for our cohort, and a broader session for the entire Portfolio.
Provided a workshop on our first focus area (leadership transition) with Third Sector New England/Missionworks. Like our capitalization primer, a portion of the workshop was designed for our cohort, but the remaining session was for the entire Massachusetts nonprofit community.
Participating organizations designed their own outputs and outcomes that will lead them towards financial sustainability
The Capacity Accelerator Network
We are excited to officially launch this work as the Mass Cultural Council Capacity Accelerator Network (CAN). In our research, we discovered that we are the only state arts and culture agency in the country to undertake this level of systematic capacity building with nonprofit organizations. It is our trust-based philanthropy that makes this work not only possible, but effective. We are thrilled to share some of the highlights that make up the Capacity Accelerator Network in 2020:
Specially designed workshops that help CAN organizations create customized outputs and help create their own sustainability outcomes
A financial stipend for participating organizations
Business model and capitalization consultants that will provide imbedded one-on-one assistance to some of our most fragile organizations
A component of each focus area workshop will be offered to the entire Cultural Investment Portfolio and the broader Massachusetts nonprofit community
Curated peer advisor relationships with other Portfolio leaders who have faced similar sustainability challenges and were successful in overcoming them
20% overall increase to FY20 unrestricted operating support grants
Early Signs of Success
While we are just getting started, we’ve already heard some early signs of success from our organizations:
For the first time, several organizations have told us that board and staff are having honest conversations around vision, mission, equity, and sustainability
New business model and capitalization structure plans are making organizations more attractive to individual and institutional funders
Organizations have created emergency preparedness, leadership transition, and succession plans
Initial culture change frameworks have been created to prepare organizations for equity in leadership transitions
Dissemination of best practices for financial planning that leans towards building health and sustainability, and relating those strategies to programs and risk
New procedures for helping budget managers have more understanding of revenue and expense forecasting and financial management
New budget planning tools that address depreciation and building it into annual budgets
Frameworks for creating financial management and fundraising plans that can accompany new strategic plans.
At the conclusion of the formal Capacity Accelerator Network in June 2020, we will be evaluating and reporting on the effectiveness and impact of this capacity building model to our broader community. We will be back with even more success stories, some lessons learned, and new best practices for other funders on how to create and steward this type of trust-based philanthropy with their own grantees. Stay tuned.
Mass Cultural Council is providing a 3-pronged package of support for our cultural nonprofit organizations to not only understand and access assistance offered through new Federal Acts, but to also deliver broad and high-touch capacity building services to help organizations in understanding their current financial challenges and crafting a strategy forward.
From Artist News to Creative Youth, Community Initiative, and Power of Culture, our email lists are a great way to keep up with the work of Mass Cultural Council and its partners across the Commonwealth.