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November 2011 - "Just in Time Comes to Nonprofits"

 

Remember back in the 1980s when “just-in-time” inventory control first came to America’s retailers?  This key feature of “lean manufacturing” meant that retailers could squeeze out costs by reducing inventory.  “Inventory is waste” is just-in-time’s mantra.

 

In our times of sluggish recovery, the shoppers themselves are applying a “just-in-time” strategy.  Consider these developments:  Wal-Mart reported that 2011 second quarter U.S. sales were flat, but the dollar stores reported higher sales.  You might guess that shoppers would stick with the store that offers the lowest unit price, but that’s not the case.  Instead, more shoppers are buying smaller amounts on a just-in-time basis, because they have less money in their pockets to spend.  Rather than buy a big box of detergent at a rock-bottom price per ounce, they buy a box that’s big enough to get them through the next few days, but at a higher price per ounce.  Wal-Mart itself is responding to this new world by opening up Walmart Express stores that offer a fraction of the products than its super-sized stores offer.

 

Americans are applying the lesson that inventory is waste, and that’s changing their shopping habits.

 

It seems to me that the same effect is also is taking hold in the nonprofit world.  Nonprofits don’t report their earnings the way public companies do, so what follows is based on anecdotal evidence.  Here’s what I see.

 

Friends in nonprofit theaters report three trends in our tough economy:  subscriptions are down and audience is down, but at some of the theaters, revenue from ticket sales actually is up.  I notice a parallel trend at some museums.  Membership is down and attendance is down, but in some cases – including our own – revenue from ticket sales is up.

 

What may explain these trends is the public’s new just-in-time way of thinking.  People today are less willing to tie up their money with an advance commitment to theater subscriptions or museum memberships – that’s bad “inventory” management.  Because of tough times, many people aren’t attending theaters or visiting museums as often as they used to, but when they make a decision on short notice, they may be willing to pay full freight for a ticket.  That helps the bottom line, even if some of the tickets are unsold.

 

Will old habits return when the economy recovers?  No.  The just-in-time way of thinking is a social trend, as well as an economic strategy.  It is often said of the Millennial Generation – those born between the late 1970’s and 2000 – that they are unwilling to make social commitments in advance.  Museums are discovering that new kinds of programs work best for that group, events that appear to spring up without much warning and allow people to drop in and out.  If the evening is going well, they will invite their friends to join them by using social media.  The Millennials are as interested in great content as everyone else, but they won’t sit still for a long talk.  Think of how foreign this new kind of format is to the world of advance theater ticket sales.

 

And have you noticed that discounts today also are shaped by just-in-time thinking?  Groupon offers the reigning discount concept for the Millennial Generation.  It is based on daily offers and immediate use.  Since theater subscriptions and museum memberships are discounts stockpiled in inventory, they just won’t work the same way anymore.

 

Do subscriptions and memberships have a future?  Yes, but they need to change.  One of the nine goals of the Chicago History Museum’s strategic plan is membership.  Membership will thrive if it sheds its old skin and takes on the coloration of the friend-and-fan world of social media.  We have taken a first step in a bold experiment with our neighbor, DePaul University.  All of DePaul undergraduates are scheduled to become members of our museum for free.  We will communicate with them exclusively by email and social media.  They will enjoy full member discounts and will become involved in our programs as they choose.  In other words, they will have the run of the museum on the kind of drop-in basis that their generation favors.  We hope to build loyalty by friending Chicago’s future leaders.

 

Gary T. Johnson,

President, Chicago History Museum

 

October 2011 - "Museums and Shelf Space" 

 

Consider this observation by Kenneth Hoffman, the Education Director of the National World War II Museum in New Orleans.  "Students learn about World War II maybe four days in middle school and four days in high school.  Eight days is not enough for a world event of such importance."

 

That's a classic statement of a "shelf space problem," a very useful business concept for nonprofits.  Everyone can visualize what happens on store shelves:

 

        Which product categories get a shelf?

        On each shelf, which particular items get displayed?

        How does the store decide which products go on the best shelves?

 

Let's consider different types of responses by museums to shelf space problems, starting with the National World War II Museum.  There, one strategy is to offer new products as a way to get placed on more shelves.

 

Here's the thinking.  Because of urgent national needs, our society places a high value on STEM education:  science, technology, engineering, and math.  In effect, our schools are building new shelves for those subjects.  The museum is looking for ways to tell the story of the war using those disciplines.  It wants a place on shelves other than the history shelf.  The war brought about new technology innovations, such as radar; that would make the war a great field of study for technological innovation.  The nuclear age that we live in today began with the development of the atom bomb; there are lessons for physics and engineering.  Why not offer insights about how the war affected the environment?  Other new fields of study are possible, too.

 

But it's not enough for a museum simply to create a new product line.  Holding a place on a new shelf means that the product offered must meet a genuine need.  The new product can't just be a "come-on" for the existing product.  Making good on that promise will determine whether the initiative succeeds or fails.

 

Our own Chicago History Museum is considering a new exhibition for family audiences, "Chicago by the Numbers."  However engaging the exhibition might be to history lovers, it won't win over math teachers unless it helps their classes to meet the state's goals for math achievement.  That's a brutally honest fact, but winning and holding shelf space is never easy.

 

There are no shortcuts to getting new shelf space, as the mixed experience with state education mandates illustrates.  In Illinois, Holocaust education is mandated, but it seems that the mandate is followed only when local schools develop a genuine interest in this important subject.  The Illinois Holocaust Museum & Education Center offers a valuable service by offering a very moving museum experience and by developing curriculum.  Another example of a mandate in Illinois is the school holiday in honor of Casimir Pulaski.  This potential teaching moment generally is ignored because interest among educators is weak.  Even with a mandate, it takes a battle to win shelf space.

 

Is having a very broad mission a disadvantage when it comes to winning shelf space?  Yes.  Natural history museums definitely have that very problem in today's brand-focused culture.  If a museum seems to belong on many shelves, then it may wind up on no shelf.  Even an encyclopedic museum must offer "products" that correspond with familiar branded categories.

 

An important but narrowly-focused mission also runs into a shelf space problem.  In that case, one very useful strategy is to understand that the museum’s subject matter is part of a wider story.

 

Consider the National Underground Freedom Center.  This museum opened in 2004 in Cincinnati, an important stop on the Underground Railroad's route for escaping slaves.  The museum’s website tells how the story of the Underground Railroad is used to draw far-reaching lessons.  The underlying theme is that the path to freedom – historically and in contemporary times – is a constant struggle requiring courage, perseverance and cooperation among people of diverse backgrounds willing to help one another.  The mission is to inspire everyone to take courageous steps for freedom today.  The Center also presents the world's first museum-quality, permanent exhibition on the subjects of modern-day slavery and human trafficking.  Visitors are also asked to make a personal commitment to be 21st-century abolitionists in the cause of freedom.

 

The Andersonville National Historic Site in Georgia takes a similar approach and uses one important story to tell a bigger and continuing story.  As stated in their website, From the Revolutionary War to Operation Iraqi Freedom, American prisoners of war have endured untold hardships, and shown tremendous courage. Andersonville NHS commemorates the sacrifices of these brave Americans through exhibits in the National Prisoner of War Museum; preserves the site of Camp Sumter (Andersonville prison); and manages Andersonville National Cemetery.

 

But once again, there are no shortcuts to getting the new "shelf space" that ought to come from broader appeal.  You may have noticed that both museums just discussed have the word "national" in their title.  This is a trend for museums that want to spread their wings, such as Chicago's Mexican Fine Arts Center Museum, which in 2006 became the National Museum of Mexican Art.  In order to win shelf space battles, however, "national" museums need to make good on the promise conveyed by the name with broad, not local, offerings.  In particular, they need to find ways to reach a national and international audience, which takes us to another important shelf space battleground:  product placement in the internet age.

 

There are two ways to get the best displays for a product in a local supermarket:  Offer a product so compelling that the retailer feels compelled to give it prominence or pay for product placement.  The same is true for the web.

 

The way to have a compelling product that rises to the top in internet searches is to "own your brand." Consider the Chicago History Museum once again.  By changing the name in 2006 from the Chicago Historical Society to the Chicago History Museum, we left a name behind that did not correspond with our function and acquired a name that says who we are.  The term "Chicago History" also functions well for web searches.  Of course, Chicago history is too big a brand for any single institution to monopolize, but that's not a problem.  Because of the strength of our collection and the service orientation of our staff, we like to think we are the go-to source for Chicago history and a trusted guide for the crowds of organizations, communities, and individuals that are doing their own Chicago history.

 

If you don't have a site so popular that it rises to the top of search results, then you may want to pay for web ads or search engine optimization.  In any event, remember that it is not enough to post good content and hope for the best.  There are lots of "shelves" out there in web searches, and you easily can be demoted to the wrong one.  Is search optimization worth the trouble?  You bet it is, because your mission is worth fighting for.

 

Time will tell whether the choices made by the museums in these examples will succeed.  In any event, visualizing a nonprofit's "shelf space" reveals key dynamics that affect operations and also points the way to strategic responses.

 

Gary T. Johnson,

President, Chicago History Museum

 

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July 2011 - "Philanthropy Versus Charity?"

 

Modern usage draws a bright line between "philanthropy" and "charity," but as the head of a nonprofit, I respectfully disagree.

 

A philanthropy, commonly understood, is a private initiative for public good.  The word bears its Greek origin in two words:  love + humanity.  The emphasis is on "initiative," the sense that there is some organized method of delivery, rather than a purely personal act.

 

With charity, the emphasis is on the personal act of sharing.  There may or may not be an institutional channel.  Through the Latin and eventually to the Greek, "charity" also expresses a kind of love.

 

In business schools, you will find case studies of philanthropies.  In churches, synagogues, or mosques, you are more likely to hear about charities.

 

A new $1 billion foundation?  Philanthropy.  Handing money to a homeless person on the street?  Charity.

 

But is it ever so clear-cut?  Let's change the facts.

 

Volunteering in a soup kitchen?  Still charity.  What about giving that soup kitchen an annual fund gift or serving on its board?  Now it's sounding more like philanthropy.  What about founding a soup kitchen, organizing it as a not-for-profit corporation, and measuring its results each year?  Philanthropy.

 

Does it make a difference if we are talking about a museum and not a soup kitchen? Right from the start it sounds like a philanthropy, or does it?  What if I add that the museum's only audience is school children from underserved neighborhoods and that the museum serves hot meals to visiting school groups?  Does that make it sound more like a charity?

 

Let's come at it from the other way around.

 

A new $1 billion foundation devoted exclusively to agricultural reform in Africa?  Philanthropy.  A new $1 billion foundation devoted exclusively to subsidizing soup kitchens in church basements?  Is this charity?

 

The bright-line between philanthropy and charity doesn't make sense because each imaginable example begins with an impulse to share and includes a mode for expressing that impulse.

 

Nonprofits should remember that charity and philanthropy are intertwined.  Let's propose the following as a working pair of definitions:  Charity is the impulse to share and philanthropy is the "language" chosen for sharing.

 

Even the simple act of handing a coin to a homeless person on the street includes a chosen mode of expression.  An institutional element is not necessary, but it is as much a philanthropic choice as giving that coin to the annual fund of the soup kitchen down the street.

 

Remembering that charity is the impulse to share and philanthropy is the language chosen for sharing solves many mysteries.

 

Why is it that we often measure philanthropic initiatives not only by measuring their impact (e.g., the number of meals served or the number of jobs found for those who use the soup kitchen) but also by measuring the philanthropy's administrative costs (small is better)?  The answer is that even with large organizations, we have in the back of our minds the pure case of handing over the coin and we want to know how much of each donation goes to the person in need.

 

Why is it that the soup kitchen's board member and the organization's pro bono accountant both think of themselves as "volunteers," no less than the good people who serve the soup?  Each volunteer has an impulse to share, and each has chosen a personal language for sharing.

 

Nonprofit leaders should consider all of the people who serve their organizations in various ways and ask -- What are they trying to express?  Why have they chosen us as their own mode of charitable expression?  Why should other charitable people choose us?  Without these questions, established institutions may overlook and fail to honor the charitable impulse that lies behind the generosity of supporters.  Without these questions, less-established charities may overlook and fail to meet the need to be accountable to supporters.

 

Thinking of each philanthropy as expressing a language of sharing enables us to speak of philanthropy in a new way.  We want language to be suitable, and we certainly want each philanthropy to be suited to its use or purpose.  We speak of some language as beautiful.   Beauty includes excellence.  Beauty includes a quality that exalts the mind or spirit.  Clearly, the best philanthropies are also beautiful.

 

Scientists speak of elegant solutions to problems -- complete solutions with no wasted motion.  Maybe we also should speak of the best philanthropies as being elegant if their method of sharing is perfectly suited to the original impulse.  Philanthropic elegance would mean an ideal unity between mission, operations, and results.  Supporters would be certain that what they hoped to accomplish when they first felt the need to share, was, in fact, being accomplished.

 

Even the most informal philanthropic initiatives can aspire to find an elegant mode of sharing.  Let me give you my favorite example.

 

Bill likes to putter with old bicycles.  People drop them off when they clean out their garages, and Bill is always working on a couple of dozen at a time.  He fixes them up and gives them to kids in the neighborhood whose families cannot afford new bikes.  He also delivers bikes to two or three community organizations in other Chicago neighborhoods.  Bill is out of pocket once in a while for replacement parts, but he gets most of what he needs by recycling parts from broken-down bikes.  He is aware of a couple of individuals in other parts of town who do what he does, but there is no support group serving these independent operators.  Bill doesn't write up a case for his initiative, but if he did, he could tie it to top social priorities such as greening our cities and fighting obesity.  If he felt like it, he could marshall metrics confirming this initiative as a success:  Individuals served (hundreds), administrative overhead (zero), communities served (highly diverse), and so forth.  Even without metrics, anyone who has heard about this project would declare it to be a beautiful success:  The language of sharing that Bill has chosen for his philanthropic initiative is elegantly suited to its charitable purpose.

 

Can you say the same for your nonprofit?

 

Gary T. Johnson,

President, Chicago History Museum

Last updated October 2011