Back for another episode of the Bonfires of Social Enterprise. Kathleen Kelly Janus is our guest discussing her new book, Social Startup Success, How the Best Nonprofits Launch, Scale Up and Make a Difference. Kathleen is an award-winning social entrepreneur, lawyer, and lecturer at Stanford University, where she teaches social entrepreneurship. And, as usual, we have a great Detroit artist playing a full song at the end of the episode so stay tuned.
Hello there, this is Romy back for another episode on the Bonfires of Social Enterprise. We have author, Kathleen Kelly Janus, as our guest discussing her new book, Social Startup Success, How the Best Nonprofits Launch, Scale Up and Make a Difference. Kathleen is an award-winning social entrepreneur, lawyer, and lecturer at Stanford University, where she teaches social entrepreneurship. And, as usual, we have a great Detroit artist playing a full song at the end of the episode so stay tuned.
Before we get rolling down the lane with good advice from Kathleen, let’s see what Natalie has come up with for our Fun Fuel for this episode.
I’m Natalie Hazen and I am bringing you this episode’s Fun Fuel.
Since this episode talks about Non-profits not operating on survival mode, I started thinking about what survival mode really means and I my mind drifted to cool animal survival instincts.
Survival instincts are inherent to all creatures great and small. I often wonder how animals survive natural disasters such as wildfires and tornados. I think of the birds being whipped around by such high winds and wonder if they get swooped up in the turbulence or soar higher.
According to TuftsNow.com, birds can ride out intense storms by taking advantage of microhabitats. Gale force winds can knock even the sturdiest of tv weatherman off their gait, but birds can seek shelter on the lee side of trees or deep inside thick hedges. The decrease in wind speed in these microhabitats can be huge, and as long as they stay put, they are not actually buffeted much by the wind. Now they do need to find food to last out the storms. There are some reports of birds increasing foraging activity as a storm approaches, which indicate some birds can detect subtle changes in air pressure, which can indicate an approaching storm. When this happens, they immediately try to get as much food as possible. The more fat a bird has, the better chance it has of surviving and riding out a long-standing storm.
So let’s join up with Romy and today’s guest to learn more about nonprofits not operating on survival mode.
Love it, love it, love it. Thanks, Natalie!
Alrighty, I had the opportunity to talk with Kathleen while she was in San Francisco preparing for her book launch. I mentioned earlier that Kathleen is a lecturer at Stanford, but she is also a co-founder of Spark among other human rights organizations. She informally advises a variety of non-profits and social entrepreneurs in San Francisco and more globally. Let’s drop in on our conversation and learn more about Kathleen and her great new book.
Romy: What prompted you to start to write a book on how to scale?
Kathleen: Well, this is a really critical question, as you know, Romy, and I think that it can be a controversial word, like a four-letter word, in the nonprofit sector and the for-profit sector because I think a lot of people would say that scale isn't necessarily a good thing for a number of reasons. Maybe we don't want big organizations. Maybe we want a lot of organizations working together. Maybe we want more Mom and Pop organizations that communities know best how to solve the problems of individual communities and scaling aren't necessarily going to be effective. Something that works in San Francisco isn't necessarily going to work in the middle of Iowa.
All of that true, and, also, we do have so many organizations that have really, really great ideas to scale and to grow, to expand their impact, and so the problem is that of the 300,000 nonprofits in the United States, 2/3 of them are $500,000 and below in revenue, constantly struggling to make the next payroll, when what they really should be focused on is making impact.
I wrote this book because I was really curious, who are the organizations that are getting over this revenue hump? What are the ones that are getting to, say, around two million dollars, which I define in the book as getting to a level of sustainability, where you're not constantly teetering on the brinks of collapse as an organization? I got to interview over 100 of the top performing nonprofits in the United States in order to try and get to the bottom of that question. Those are the findings that I feature in my new book Social Startup Success.
Romy: Wow. Well, I'm glad you just hit that head on because I'm delighted with the idea of scale, just for all the reasons you said, and there's just efficiency as partnerships can happen in the ecosystem when you've got successful organizations instead of those that are, I think you said in your introduction, spending more energy trying to just stay alive than delivering their social mission. I think we bump into them here in the Midwest in the Detroit area left and right and the donor fatigue and the staff fatigue is so high, they are about to collapse. I was delighted when I saw the word scale because I don't know, I'm sort of a practical, in-the-weeds gal at the street level, and we see the reality of what's going on.
Kathleen: Absolutely. A scale doesn't have to mean that you're a 50-million-dollar organization in the nonprofit sector. It's interesting.
Kathleen: In fact, only 140 nonprofits that were started since 1970 have actually sailed past 50 million dollars, and those are the big organizations that we think of, like Teach for America, and those organizations are doing important work, but the reality is that the vast majority of organizations will never get to that level of scale, so when we talk about scale, I'm not talking about scaling past millions and millions of dollars of revenue. I'm really talking about how do we get organizations to a level of sustainability.
Romy: Keeping the doors open. The first rule of sustainability.
Romy: First rule.
Kathleen: That's basic.
Romy: Let's step back to our listeners and talk about your role right now with Stanford and your history with Spark. Many of our listeners may not be familiar with that. Would you mind taking us on a little tour of your work life and your history there?
Kathleen: Absolutely. Well, I think, like most people, I am an accidental social entrepreneur. I didn't intend to go out and start a nonprofit. I always felt passionate about giving back to causes that I cared about, so when I started working as a corporate lawyer in San Francisco, I wanted to get involved in nonprofits and didn't find one that was really engaging and harnessing the spirit of young people, and so we started Spark as a way to engage young professionals, millennials, in new forms of philanthropy to support gender equality issues, so at that point, I was spending my days billing corporate legal hours and spending my nights making name tags and guest lists and sending out grant reports and working on building this nonprofit, Spark.
That was really, for me, the first opportunity where I felt like I could be an activist and claim that and be a leader in the social justice movement even though I was a young professional in the corporate sector, too, and I think that's one of the things that's so exciting about being alive today is that our work, giving back, doesn't have to be relegated to after five when we leave the office, that there is so much more opportunity to be involved in social causes, whether you're working at Goldman Sachs or in a law firm or for a nonprofit or a social enterprise.
I started teaching at Stanford as a way to evangelize that message. I quit my job as a corporate lawyer and I started working in human rights work and social entrepreneurship. In my class, I often get students who ask me, "Should I go work for a nonprofit, or should I go make some money and then give back later?" It turns out that it doesn't have to be an either/or thing, that you can give back no matter whether you're 25 years old or you're a 65-year-old millionaire, that there are opportunities to give every space in between. That's one of the issues that I've become most passionate about is I've written Social Startup Success just thinking about how can we all have tools to be able to be more effective with the resources that we're spending on social causes so that we can be more efficient at solving these really pressing social problems, like global poverty and climate change. The clock is ticking on these issues, and we need to be effective and efficient if we want to make a dent.
Romy: I love this idea that you're talking about here, that the book has launched from this student question. We get that a lot. We have students from around the globe reaching out to us asking those same questions because we're in this space here. I often get the sub or the follow-up question of, "Well, what if I wanna work for this company, but they don't have these types of programs? How am I gonna feel?" My opportunity is to say, it's always, "Well, here's your opportunity to start something and put something in place that will be a legacy for those that follow behind you. It's not always a what can you do for me and is your company gonna fit my giving pattern. It's an opportunity for you to create a way to give that's unique to you because there's probably someone else that will follow you that will enjoy your-"
Romy: ... There's probably someone else that will follow you, that will enjoy your path making if you will.
Kathleen: Yes, I love that Romy. You know, companies have no choice but to institute social cause programs into their work. The evidence shows that 85% of millennials specifically accept a job at a company because of their work in X cause. This is really important data when you're looking at some of the turnover at major tech companies for example. The average tenure is a year and a half.
Kathleen: And this is really, really expensive for companies, to lose employees. So if you can generate loyalty by starting social cause programs, opportunities to volunteer, to give a certain number of your hours to non-profit work, to do donation drives. Whatever your program might be, you're ultimately going to have a happier workforce, and a much more effective company too.
Romy: Yes, absolutely. Absolutely. Before we stray off down another path, I want to get back to your great book here. As we mentioned I'm most of the way through it, and thanks for sharing it with me ahead of time. I just love so many of the basic functional things you talk about in the book, and you talk about you have this feeling in your book, in your writing of like, "It's okay to fail a little bit. It's okay to test. It's okay to experiment." Let's talk a little bit about that, related to some of your findings when you were out talking to all these non-profits that have done things well.
Kathleen: Well, testing is critical, and something that non-profits and for-profits can all learn from. I think that we have, we now live in an age where human-centered design has become more common in the workplace, this is just this idea of using customer-facing mechanisms to test out prototypes in sort of low-cost ways, that you can then perfect before you scale. One of the most interesting findings from all of my interviews is that non-profits are doing this kind of testing too in small ways. For non-profits, it's really critical, particularly in the early stages of development because they don't necessarily have a lot of resources. Sadly there's not a lot of seed funding for social enterprises.
This testing process becomes a way to both try and figure out what kind of program is going to work, to develop a really close relationship with your end users, your customers, your beneficiaries. And also, to develop the data so that when you go out and raise money for your cause, you can say, "Look, this is working and I have some impact to show for it." For example, ... And it doesn't have to be really expensive, or fancy. An example that I talk about is Beth Schmidt, who founded Wishbone, was a teacher in a low-income school and realized that her students weren't getting the same kind of opportunities that so many of their more privileged counterparts were getting to follow their dreams during the summer.
She assigned them an essay to talk about their passions, she went to a photocopy machine, she photocopied some of the top papers in the class, and she sent them off to her families and friends. She thought, "What if I could get people to pay for low-income students to follow their dreams?" Her family and friends came back with thousands of dollars to fund these kids for art camp, and film fellowships during the summer. Then she was able to go back to those donors and tell them about the stories of these kids, and the impact that these summer experiences had, had on their lives.
It was then that she realized, "Okay look, I have this idea. This is really, it's really impactful for the donors, it's really impactful for the students for all of these reasons," and she was able to go out and raise a whole bunch of money because she had done this low-cost prototype in the start. This is an example of what that kind of testing process might look like for an organization. That again, it doesn't have to be expensive, and it's critical because it develops this sense of being okay with understanding when things fail. But that's another part of the testing process that we are not so comfortable within the non-profit sector because we have to go out and raise money. There's not a lot of incentive to talk about where we're failing, and yet no one's going to be effective in the long run if they're not able to acknowledge not only what's working, but what's not working.
Romy: Right. No one's going to have the answers right out of the gate.
Kathleen: No, no. And what's interesting is that this testing process becomes embedded within the DNA of the organization as they grow. It enables them to constantly be improving as they grow and to scale.
Romy: You know, you touched on something that is one of my, I'll call it nerve points. I'll probably have to come up with a better word for that. But, when ... Which I love you hit on this. There's that concept testing that's just talking about the theory of what you want to do, and then there's that testing where you're really trying something and asking for funding for it.
Romy: There's something about putting money down on it, or some say, "Skin of the game," or I guess legal terms, you're putting consideration down on the deal, meaning that you're really into it. We do have some of the folks that come to us saying, "Well I've been testing this," and our auto response is, "How have you been testing this? Have customers or donors been giving you money or consideration for it, or are you talking to them about it? Cause those are two different results." Did you find any of that in your studies?
Kathleen: Well absolutely. I mean, it has to be about having that really close relationship, both before and after the consideration happens, right?
Romy: Mm-hmm (affirmative).
Kathleen: So it's not only about testing with people, but it's involving them in every step of the process. Are you engaging them to develop the idea in the first place? And this is where a lot of organizations go wrong, because frankly a lot of social enterprises are coming out of big university pitch competitions, where students are encouraged to come up with a great idea for an organization, when they don't necessarily have connections or lived experience with the issue that they're trying to solve. Not everybody is going to have list experience, and that's fine. If you haven't been homeless, it doesn't mean that you aren't equipped to try and solve the problem of homelessness. But, you better have some interaction with homeless people.
Kathleen: You're building a program to solve their problem.
Kathleen: That's not only true when you're providing services, but it's true even in the development process, even in those early stages of getting the program up and running.
Romy: Yes, yes. And I feel those same principles apply to either customer acquisition, or donor acquisition, or both. There's still a similar process.
Kathleen: Absolutely, absolutely. And being honest, and creating those honest relationships. So getting back to fundraising, I mean some of the best funders that I talk to will ask an organization that comes in the door, "What have you failed at? What's not working?" As a proxy for understanding whether they are really being honest with themselves, and testing in a way that is meaningful.
Romy: Wow, gosh. That's interesting. I noticed this beautiful encouragement test and experiment in your book. Moving to some of the things that, that data produces, it produces both, of course, you mention data that you can share, and the storytelling. How do you find Kathleen, that the data helps give them accountability or credibility, integrity? Will you talk about how that helps an organization?
Kathleen Janus: How we're collecting data to test whether what we were doing is actually having an impact. So, interestingly, in the survey that I conducted of 250 social entrepreneurs around the country, the organizations that tended to scale more quickly said that they began measuring their impact from the start.
This is critical, whether you're a for-profit social entrepreneur or a non-profit social entrepreneur. Because if you want to make an impact, and you're not measuring your impact, well then, why are you doing this work in the first place?
All of that said, it's really hard to do this well. It's what organizations struggle most with. 75% of nonprofits say that they do collect some, its data, so this is a good start. But only 6% of them think that they're making good use of that data. So, what non-profits and for-profit social entrepreneurs need to be doing a better job of is really taking a step back and figuring out, "What are the two to three things that I need to be measuring that are indicating whether I'm making progress toward my impact?"
You don't have to be a data scientist to do this well. An example is Aimee Eubanks Davis, a social entrepreneur who started an organization that serves college students who come from low-income backgrounds, to try and help them have a better chance of getting jobs. Started with a freshman class, so she was going to have four years until she knew whether her programs were actually going to be having an impact, whether those kids were actually going to get jobs.
She didn't have four years to waste, though, and to get that impact data, cause she had to get funded in the meantime. So what she did was she focused on, "What are the indicators that I can show to show whether I'm having progress toward those goals?" So, for example, she tracked the attendance of the students who participated in the program to show whether they were on track to actually graduate.
She tracked whether their mentors would recommend them for a job, to track whether they were on track to actually get a job. Really, those two or three things that she was focused on were critical as opposed to trying to collect thousands of data points and be swimming in them, and not really know what to do with them in the first place.
Romy : Right. That's a great word. It's almost just as important to also have a narrative of a why of why you're not going to use the other 10,000 data points. Some of it is just, it's impractical cause you have to run your organization, so you can't please everyone. So, we like to say the same thing. Pick a good couple that is natural data for you, something that you can consistently get, and just have some rationale about why that is what it is, so that-
Kathleen Janus: Absolutely.
Romy : ... it's okay.
Kathleen Janus: And then be really rigorous about it, right? It's not just about saying, "Oh look, our attendance is on track. We're doing a great job" and patting yourselves on the back and going home for the day. It's about really looking at, "Well, but for our intervention with this attendance have been as good?" With the [Brisen 00:23:34] example, one of the really creative ways they used was to get a control group.
They found a group of students who weren't able to participate in their program for whatever reason. The timing didn't work or other reasons. They gave them a $25 Amazon gift card, and then they tracked them as side by side for the group that is participating in their services. So, that's a way for them to say, "Okay, but for our program, this would have been the result, and so our students have an X% better chance of graduating or an X% better chance of getting a job." So, just being rigorous at every single step of the way.
Romy : That's interesting. Creating a control group that's not doing it your way, if you will. That's very interesting. Great idea. Great idea. Well, let's transition a little bit, cause I want to hit on a couple of points with you. You've got so much good stuff in this book, we want to encourage everyone to buy this book right away. If it's for a non-profit or for a for-profit, but let's talk specifically about the issue when you're introducing earned income in a non-profit.
For some of the folks that have been in the non-profit world for a while, call it more traditional folks, this idea of earning is super scary for them. They automatically associate it with unearned income, the ways that they can get in trouble, or unrelated I should say, income. So, let's talk about best ways to introduce that idea. You talk about in your book.
Kathleen Janus: Well, in the book I frame this idea of earning income in terms of the very same testing approach that we use for products. I think this is new. I think we all think about testing products as something that has become common in business and in the non-profit sector. But the idea of testing different revenue sources hasn't really become part of the way that we think.
The common approach to earning income has been to diversify your portfolio as if it's some stock, kind of portfolio, that you have X% from government revenue, X% from earned income, X% from foundation sources. And of course, all of that probably does help. If one of those sources goes away, you have others to drop 'em, but the reality is that's not how the world works.
But in fact, the research shows that most organizations that scale to be quite big end up relying on a single fundraising source. That might be, for example, the Sierra Club relies on membership, or the American Red Cross relies on relief donations. But in the period leading up to say around three to five million dollars in revenue, it's all about testing to see what kind of natural match your organization is going to have.
No, there is no one size fits all funding model for any for-profit or non-profit social enterprise. Everybody needs to figure out what is going work for them and so you need to be trying out different strategies. Whether it's different ways to reach donors or whether it's ways to earn money from third-party beneficiaries who might be engaged and invested in the results of your program.
So, in the book, I talk about different strategies that people can use to engage in that testing process.
Romy : Kathleen, were you surprised at some of the techniques some of the organizations were using out there when you were doing your research?
Kathleen Janus: I was. Mostly just excited and enlightened by all of the different ways that people were being really scrappy to raise money. Because this is the biggest challenge in the non-profit sector and for all social enterprises, is that we have a sector that we've developed where the beneficiary of the impact of the work is different from the person who's paying for that impact, right?
So, in the for-profit sector, you know right away whether you're succeeding because your customer is paying for it, and if they don't like the services, they don't pay, and you go out of business. You don't have those kinds of market forces in the non-profit sector, so you have to be really, really scrappy about figuring out how to get people to raise money.
One of my favorite examples is Room to Read which figured out that you can actually get other people to raise money for you, that it doesn't have to be a lonely endeavor. In fact, using leadership chapters all over the world, they've been able to engage 16 different cities and 40 different chapters to raise 20 ... Excuse me. 40% of their ... Excuse me. 25% of their 50-million-dollar budget every single year.
Romy : Oh, my goodness.
Kathleen Janus: So, these are the kinds of creative strategies that I have really been inspired by hearing about, and which give me hope that everybody has the opportunity to do some of this testing, and to search for new sources of funding, to get their ideas off the ground.
Romy : Yeah, that's fantastic. That's fantastic. I'm certain you came out with some ideas of what you would do in the future, too, right?
Kathleen Janus: Absolutely.
Romy : Hopefully, some applies to getting this book launched really well.
Kathleen Janus: Exactly. It turns out launching a book is a lot like being a social entrepreneur.
Romy : Right. This has great missional stuff. Well, let's transition here. Was there any other stories you'd like to share before I tell 'em where they can buy the book?
Kathleen Janus: Well, I'll end with one that I think is super inspiring, which is that Raj Panjabi, the Founder of Last Mile Health, founded his organization when he was just out of medical school. He had escaped Liberia in the civil war and always vowed to go back, and so he went back and he started this training program for community health workers in the rural areas. Individuals who had to often walk 12-13 hours while they were sick, and to get to a doctor in the capital cities.
So, he found that by training community health workers, he could serve those people and make them feel better, and alleviate their pain. Many of 'em were suffering from AIDS and other diseases. So, his program was super effective and impactful. He got a bunch of community health workers trained all over the country and that program was exactly critical in 2012 when the Ebola crisis hit.
Because had they not had community healthcare workers in those rural areas, we might be living in a very different world today.
Kathleen Janus: So, I think this is really the essence of social enterprise, is how can we leverage the best talents and the best ideas to solve these really important social problems that we're facing today? And to leverage and harness the talents of so many people to come up with better solutions to make a difference in the world. That's what makes me most excited about this book and the work that I do.
Romy: Well, my goodness, anyone who bumps into you I'm sure is changed. We can hear your [inaudible 00:32:13] through this. I'm excited to finish reading the book. I so appreciate you being on our podcast. Let's tell the listeners how they can get your book.
Kathleen Janus: Well, you can get my book anywhere, at your favorite book retailer, and you can also find it on KathleenJanus.com.
Romy: KathleenJanus.com, and we'll put a link to that in our show notes. Kathleen, we look forward to catching up with you in the future as a follow-up, if you'd be open to that.
Kathleen Janus: Would love it. Thanks, Romy.
Thank you, Kathleen! That woman is full of great experiences and knowledge. Let’s state one more time where you can purchase her book. Her website is http://www.kathleenjanus.com/, or you can find it on any place you can purchase a book.
Time to close out with song. We love music over here at the Bonfires Podcast. Today, we have for you artist, Drew Shultz, with his song ‘What I’d Do For You’ all courtesy of our friends at Assemble Sound in Detroit.
Until next time, keep those bonfires burning….