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Enabling Technology Funding
Helping grantmakers understand the importance of technology to NPOs


Source: NPO.net

Information is the fuel for civil society. It empowers decision-making and enables action across the range of human endeavors. Information technology wields enormous power to advance nonprofit missions, and the key component of building and maintaining social capital lies in collecting, storing, analyzing, and distributing information.

However, the majority of nonprofit leaders and grantmakers have not yet embraced and acted on these facts. We hope that this position paper will help grantmakers understand the necessity for a shift in attitude. Further, we hope it will give grantmakers the tools they need to evaluate that aspect of funding requests that concerns information management.

In this document, we address the role of information management in the nonprofit sector and examine four obstacles to incorporating technology into the funding mechanism. Our goals are the following:
 
  • to encourage involvement with and acceptance of technology as a key component of organizational capacity and accountability.
     
  • to provide guidance for grant makers and grant seekers;
     
  • to identify topics for continuing education, discussion, and debate

We advocate that grantmakers and funders include an information technology component in their guidelines. Further, we propose that funders develop a common terminology and a common set of standards that will contribute to a consistent evaluation protocol for technology requests. We encourage grantseekers to participate enthusiastically in this process and to contribute to the dialogue.

Nonprofits face increasing demands for information from internal sources such as management and boards and from external sources such as grantmakers, regulators, media, and individual donors. Nonprofits must include service statistics to document their effectiveness, and they must be fully accountable to funders about their mission and their finances. While technology is not the only answer to requests for information, it’s an important part of the answer. Information technology must be built into every nonprofit’s approach to funding requests and into every grantmaker’s expectations.

Furthermore, for nonprofits to communicate effectively with current and prospective stakeholders, they must also embrace new communications technologies. For example, everyone understands the importance of the World Wide Web, especially when integrated with other publications. Another example is email, which can be used as a tool for recruitment as well as for retention and fundraising.

Calling the Question

If few would argue these beliefs, why is it so hard for nonprofits to articulate and satisfy their own technology needs? And why are grantmakers reluctant to make technology-related grants? We suggest several answers.

The absence of models for technology components in proposals

First, there is a dearth of models for technology components in proposals. Few funders issue guidelines for addressing technology needs in proposals. Few tools are available to help program officers evaluate the contribution of sound information management to the success of the project or organization. Without models, guidelines, or evaluation checklists, both parties to the equation must continually reinvent the process.

The myth of make-do

Second, many nonprofits operate according to "make-do" myths. They operate on the conviction that they must get by with what they have and that current technology is beyond their merit or means. Both grantseekers and grantmakers tend to think only of the capital costs of technology, ignoring ongoing soft costs, such as how much staff time they must invest in planning, implementation, and training.

In addition, nonprofits often fail to understand the difference between technology funding as an investment and technology as an ongoing cost of doing business. Because foundations and nonprofit staff members seldom understand the rules of thumb for how to budget for technology, grant requests are often inaccurate at both extremes -- not large enough on the one hand to cover the true costs of technology, or too expensive on the other in relation to the anticipated outcomes.

Accountability without tools

Third, while foundations increasingly require greater accountability, they are not specific about how to meet these requirements. In effect, do not raised the bar but not yet identified how to leap the hurdle. In many cases, foundation staff members do not acknowledge that meeting these higher standards carries a price tag.

Demanding greater accountability from grantees is a positive step that gives foundations a means of evaluating the impact of their investment in the community. However, this higher level of accountability represents a significant shift in how many nonprofits conduct business and places greater emphasis on record-keeping and evaluation. Although a dollar buys less service under this model, it allows funders to better evaluate the societal return on investment.

Technology literacy

Fourth, we contend that information technology is poorly understood by grantseekers and grantmakers alike. This situation often results in hesitation, avoidance, and over-reliance on vendors, consultants and sometimes a nephew’s opinionated roommate. Technical illiteracy is a pervasive problem that must be articulated and addressed. Until that happens, including technology in funding considerations will continue to face special difficulties.

Making the Case for Technology

We can no longer afford to remain silent about technology in funding guidelines. It is not enough to assert that technology is important to the nonprofit sector. Some specifics are called for. In the for-profit sector, technology is used to speed up and increase the capacity of traditional processes (bigger, better, faster) and to accomplish new tasks (e.g., 24/7 information and referral on the Web) that would otherwise be impossible.

The nonprofit sector can benefit from the same applications of technology. The following examples show how technology can impact program functions, administrative tasks, and fundraising. Some of these are obvious while others are intended to encourage thought and stimulate debate.

Looking at key sub-sectors and critical nonprofit functions

The human service environment depends on case information to meet a range of agency needs. Caseworkers need a way to plan and record care information for new intakes and for cases transferred to them from other workers. Case records develop a life of their own, and prior care history is critical to understanding where clients have been, as well as where they are going.

The watchword for line workers should be "documentation is service." Once information has been entered, once it is available for reuse in court reports, evaluations, progress tracking and other sifting and sorting chores. Given the complexity of case record requirements today, such tasks are impossible in a paper-only case record.

A robust case management system is vital in identifying cases that exemplify best practices, as well as those that require supervisory intervention. And an electronic client management system allows an agency to bill and be reimbursed in a timely fashion for services provided under contract.

Arts and cultural organizations often have diverse constituencies. Keeping a record of the interests and past participation of constituents including individuals, families, corporate executives, schools, and clubs is essential to the right mix of programs and services. Expectations are high, and today a host of commercial providers from Internet booksellers to the corner grocery store are collecting information about consumers and their purchases in order to create and market products and services. Similarly, nonprofits are expected to offer a high level of personalization. Those that survive are those that can personalize cost-effectively.

Information is at the center of communication and advocacy as well. Organizations that can develop an integrated communications strategy combining content with multiple delivery vehicles will be better able to have their messages understood than those that offer their services through single channels or in markets that are long-abandoned. Today’s new communication channels are not the only valid venues for discourse. The most successful organizations are those that meet their constituents wherever they may be, whether by flyers tacked to neighborhood telephone poles or via direct mail, email, or the Web. Information technology plays a role in each of these media.

Education and healthcare organizations traditionally incorporate sophisticated information management as part of their basic business models. Technology is changing the face of services and enabling these organizations to compete with entities from the for-profit sector. These for-profits use technology as a way to deliver more customized services at lower cost, and they frequently pick the low-hanging fruit by focusing on activities with the highest profit margin while ignoring hard-to-serve populations.

Local providers can be left without a cushion of revenue-producing services but with an increased workload made up of students and patients considered least profitable in terms of their dollar return. These issues are even more critical for smaller organizations. Distance learning and telemedicine technology use the communications infrastructure to meet people’s need for expertise, skills, and ideas regardless of their physical location. All these factors directly benefit the community.

Administrative and fundraising functions are experiencing the same technology revolution as in being changed by the for-profit sector. Human resources and finance in particular are undergoing radical changes as the use of technology rises rapidly. A range of tasks from advertising available positions to tracking applicants to administering employee benefits increasingly contain an electronic component.

Fundraising has a long tradition of automation. The Internet lets organizations connect with donors and prospects at narrowly targeted levels, and it enables donors to contribute electronically. A connection via the Internet can give donors a clear picture and broaden their understanding of an organization’s mission, and it can heighten the level of trust between donors and organizations.

Models for Guidelines and Proposals

The integration of technology into foundation guidelines has two focal points. First is the assertion that information is a dynamic almost organic resource, and because of that, information technology in an organization is a significant and recurring expense. Second is that the principles and standards that pervade corporate technology planning and decision-making should be extended to the non-profit sector.

Technology is a significant and recurring expense

The first rationale for the inclusion of a technology component in grantmaking is that information technology is part of the basic infrastructure of an organization. The sector has tended to think of all technology as a special expense, not part of ongoing operating budgets. In preparing agency budgets, executives have resisted designating line items for technology upgrades, maintenance, and staff training.

To use technology effectively, nonprofits must budget for day-to-day technology expenses the same way they do for postage, photocopying, and other operational needs. Understanding the direct costs of any activity is an important managerial tool. Including technology and appropriate information management expenses in the calculation improves coordination, strengthens planning, and helps insure positive outcomes.

At the same time, some initiatives use technology to do things that would otherwise be impossible. Changing business practice, such as more intensive vouchering or an invoicing requirement, often requires initial capitalization of new information systems. A community technology center designed to bridge the digital divide will be largely a technology project. Similarly, major systems planning, along with significant upgrades or additions to organizational capacity, qualify for special funding. In these situations, a major part of the funding request may involve capitalizing the technology investment.

Few would argue that technology is a major part of every activity in the sector. Yet many projects or programs do not require a whole computer and therefore will not require a hundred percent of a computer’s cost allocation. One reason that computers are such powerful multipurpose tools is that they need not be dedicated to a single task. A single computer can store and process data from multiple software applications for multiple projects. While every proposal should contain a technology component, it does not necessarily follow that every project requires dedicated hardware. Program officers should keep this fact in mind while still realizing that every project has information management costs.

Adapting corporate technology principles

Technology planners in the corporate sector operate under accepted business principles or laws. These principles offer a baseline for calculating the cost/benefit ratio of networking, hardware replacement and the point of diminishing return for technology investment. They include:

Moore’s Law (named after Dr. Gordon Moore) is a manufacturing benchmark for predicting the rate of advancement for chip speed and cost. This law, which has been demonstrated as true for more than 25 years, postulates that computer speed will double every 18 months, while the value of existing computers will drop by one-half. An important implication of Moore’s law is that computers are essentially obsolete within two years of purchase. A key component of effective operations is adequate hardware, which we define as computers less than 36 months old. Moore’s law is a compelling argument for replacing hardware on a regular schedule.

Metcalfe’s Law (named after Bob Metcalfe) concerns the value of information. Not as easily quantified as Moore’s law, Metcalf’s law states that the value of information increases exponentially with the number of computers connected to a network. A document on the local hard drive of a single computer is useful only to the user of that computer; but, when readily available to all the staff members of an organization, the document may well be the essential just-in-time piece of information needed to make a decision. Formulated prior to the widespread use of the World Wide Web, Metcalf’s law was one of the major justifications for corporations to install Local Area Networks (LANs). The rapid migration to the Internet for personal, business and nonprofit applications resoundingly affirms this principal. Metcalf’s law is a powerful argument for both LANs and Internet connections in the nonprofit sector. Yet increasingly it raises issues of privacy and confidentiality as information becomes more accessible.

Less widely discussed than the previous laws, the Cost Complexity Curve states that the cost of a project will increase exponentially with its complexity. In other words, the cost of a technology project grows at a rate much faster than its functionality, and small increases in the complexity of a project can escalate costs dramatically. The cost/complexity curve is the major reason why so many technology projects go over budget -- those small enhancements to scope, unforeseen in the original plan, drive costs up the curve. The organization’s staff members often fail to understand the cost implications of these enhancements and almost always advocate for including them regardless of cost.

While the cost/complexity curve is the best-case representation of the relationship between price and functionality, it is certainly possible to pay for more than you get. For the program officer, this problem increases the challenge of assessing the cost-to-benefit ratio of a proposal. Two comparable and competing proposals can carry vastly different price tags based on slight differences in sophistication.
Information management is a significant component of any nonprofit activity, and funders should insist that grantseekers include a sound technology plan. That plan must be sustainable and able to leverage new technologies, must make information accessible both internally and externally, and must balance costs and manage risk.

Evaluating Technology and Effectiveness

Everyone nods in agreement that technology can benefit the nonprofit sector. All too often, however, those nods turn to head shaking as program officers struggle to make sense of technology requests. The best technology changes daily, and keeping up with options, pricing, and opportunities is a full-time job. How can program officers adequately consider the technology component of proposals?

Our advice first is to keep the process program-driven and never lose sight of the project’s goals and outcomes. The fundamental question remains: "Is the cost worth the outcome?" Factors such as technology evolution (Moore’s Law), the value of information sharing (Metcalfe’s Law), and the relation of cost to complexity will establish a baseline for what’s reasonable. That baseline may seem high, but it is often a cold reflection of the true cost of doing business. Time and experience will help program officers refine their sense of appropriate technology costs.

When technology costs are too high in relation to the impact of the proposal and in comparison to similar projects, program officers can advise grantseekers to reduce the scope of their technology in the same way that they recommend adjustments in any proposal. However, the technology specified may be appropriate to the level of information management required and the only way to cut costs is to reduce the proposed level of information gathering, analysis, and reporting.

While there are no satisfactory guidelines for what program outcomes should cost, it is possible to develop internal measures for comparison. Some program officers establish a base cost per person by comparing the ratio of constituents served to the total project cost. Others use the cost of technology per worker as a measure. The values determined in these exercises are less important in themselves than they are in comparing similar proposals.

The hard part in comparing proposals occurs when technology costs are in line between similar projects. In these situations the cost of service, whether measured by worker, client, or some other metric will not show any clear winner. The challenge then is to determine whether the proposed technology plan is the most effective way to manage information.

Success indicators

The first and by far best indicator of success is usually an organization’s prior experience with technology in the proposed area. Innovations built on experience are more likely to work than new initiatives. Organizations that are familiar with the problems being addressed and how the technology tools fit into the solution typically do a better job than agencies that start from scratch. That is not to say that new applications of technology to nonprofit endeavors should not be funded. It simply means that these areas carry a greater risk of failure.

Second, funders should be alert for lessons learned by individual program officers and grantees regarding technology grantmaking. They should also be prepared to share their own outcomes, both positive and negative. The possibility that a project will fail because it uses innovative technology should not disqualify it from consideration -- especially if the lessons learned can help other grantees or the sector avoid similar problems in the future.

Third, look at past performance. Be alert for signs that the agency may be trying to solve fundamental management problems with magic computer pills. While advertising encourages us to believe that business problems can be solved by purchasing new hardware and software, this is seldom the case. We urge funders to investigate carefully any proposal from a technologically inexperienced organization that requests new information management capabilities yet fails to explain how change will happen within their organization.

Fourth, develop reliable independent resources. Among these might be individuals who are technologically savvy, staff members at tech-smart companies and organizations, trusted colleagues at colleges and universities, and the professionals at the IT Resource Center or similar nonprofit technology experts. Foundation board members, particularly when they have professional links to IT- intensive industries such as insurance or financial services, may be willing to volunteer their staff members to serve on a technology review committee.

Do not assume that the foundation’s MIS staff members will help. They already perform an important function that is different and separate from the program staff, and it may be unwise to presume that they have the time, the willingness or the expertise to evaluate proposals.

Assessing Information Management in an Organization

Specific components to assess in a proposal include:

Planning

Effective planning should extend well beyond shopping lists and installation timelines. At its best, planning should include discovering the most effective combination of human, financial, and technical resources to achieve the proposed goal. The best technology plans are filled with questions as well as tests to answer those questions. A key reason for failed technology is lack of planning, particularly in testing assumptions and piloting projects before full implementation. Piloting a project with end users provides valuable insight into how things work in the real world and the time the project will actually require. Program officers should be wary of plans that do not allow for adjustments based on lessons learned from test outcomes.

Sustainability

The sustainability of technology becomes a key factor in the overall sustainability of the proposed project. As applicant organizations develop sophistication in creating and upgrading technology budgets, their income streams develop apace. Technology needs on the whole should fit into the organization’s overall budget; but major expansions in service will often require substantial and costly upgrades in infrastructure, which require major funding.

Training

A fully articulated infrastructure includes a training component. Training should be integrated with operations at all levels of the organization. Training increases the value of employees and insures that the organization will function at an optimal level. It can also contribute to staff retention. Among the questions to ask:
· Is there a proposed articulated training component?
· Is the training ongoing?
· How closely would training adhere to budget?
Training must continually be reassessed to make sure it accommodates changes in technology and human service?

Suitability

Technology needs are as legitimate as any other category of business expense. The proposed budget should reflect the actual need, just as in any function of an organization. The watchword here is appropriateness. For grantmakers, best practice requires familiarity with costs and the ability to easily find resources that will facilitate an appraisal of the proposed line items. Agencies that subscribe to the myth of make-do will underestimate the role of technology, but it is also possible to overuse or overstate what technology can accomplish.

Resources

Managing information requires a significant commitment of resources. Money is almost always first on the list of needed resources, but staff time for learning, changes in business plans and operations, and technical support skills are also important. A good technology plan acknowledges the full range of financial, human, and organizational resources that must be committed to help a project succeed. The plan also should specify whether the resources are internal to the organization, such as a network administrator, or will be outsourced to a contract worker. Nonprofits do not need every technology skill within their own staffs, but they do need the means to access these skills and services as needed.

Advice to Grantseekers and Grantmakers

Guidelines for grantmakers

Grantmakers must provide guidelines on technology funding that are clear and fully articulated. They should spell out whether they will accept technology projects on their own or how to present the technology components of any project. They should be specific about what level of detail to include in proposals, and they should incorporate realistic time frames between proposal approval and actual implementation. Guidelines must indicate the level of detail expected in budgets. Funders should specify any requirements for a training plan and an upgrade plan, along with a budget for technology maintenance sufficient to indicate whether the planned project or operation meets the organization’s expressed needs.

In-kind giving

We recommend proceeding with caution because no technology is free, and technology is an ongoing cost, not a one-time expense. Donated technology - especially hardware - is usually available because it is no longer useful to the donor. Why then would it be useful to a nonprofit organization?

Conclusion

Of the four impediments to technology funding cited at the beginning of this paper, the most difficult to address is the last: The lack of understanding by grantseekers and grantmakers of the power of technology and the resulting hesitation, avoidance, and over-reliance on outside experts.

This weakness is found most often among more senior staff members (on both sides) whose formal education and career advancement occurred before computer technology became a keystone of the business world. We recommend searching out learning executive opportunities that are designed specifically for the nonprofit and philanthropic sectors. This learning should help individuals:
 

     
  • explore and understand both the power and the limitations of information
    technology;
     
  • clarify the options available today as well as capabilities on the horizon;
    and
     
  • create a comfort zone for themselves in key applications.

These kinds of educational opportunities we envision will help leaders embrace technology, not treat it as a necessary and expensive evil.

Some nonprofit certificate programs are beginning to emphasize technology, and some computer science programs are starting to include the nonprofit sector among their industry-focused options. While we applaud these efforts, we would also like executive education options to be designed for three-day immersion seminars or weeklong camps that can accommodate busy program officers and nonprofit executives.

Technology is important to a stable and productive nonprofit sector. Recognizing that importance in grant maker’s guidelines and grant seekers’ applications will help that promise bear fruit.

Appendix/Related Web Resources

Grantmakers for Effective Organizations, or GEO, is an affinity group dedicated to promoting learning and encouraging dialogue among funders doing work in the field of organizational effectiveness.
http://www.geofunders.org/

The National Strategy for Nonprofit Technology (NSNT) is a leadership network of nonprofit staff members, funders, and technology assistance providers working together to analyze the technology needs of the nonprofit sector, and to develop a blueprint for how it can use technology more creatively and effectively and creatively. They have proposed principles for information technology in the sector as well as the formation of the Nonprofit Technology Enterprise Network (NTEN).
http://www.nten.org/

The mission of the Alliance for Nonprofit Management is to provide to provide leadership in enhancing a civil society by challenging and strengthening those who deliver management and governance support services to nonprofit organizations.
http://www.allianceonline.org/

ONE/Northwest (Online Networking for the Environment) is a non-profit organization helping the conservation community in the Pacific Northwest protect the environment through the effective use of electronic networking technologies. Their tool kits and assessment forms are useful for any type of nonprofit.
http://www.onenw.org/

NPO.net is a Chicago-area nonprofit-focused Internet resource operated by the IT Resource Center and the Donors Forum of Chicago.
http://www.npo.net/
http://www.itresourcecenter.org

The Benton Foundation publishes an online tool kit of policy and best practices for nonprofits using technology.
http://www.benton.org/Practice/Toolkit/

For a discussion of Metcalf’s law, review George Gilder’s paper at:
http://www.seas.upenn.edu/~gaj1/metgg.html

The US Department of Commerce funds technology projects through the National Technology Infrastructure Administration’s Technology Opportunity Program. This program epitomizes the ideal of sharing both good and bad lessons learned.
http://www.ntia.doc.gov/otiahome/top/index.html

Developed by CompuMentor, a San Francisco Bay Area technology matching program, TechSoup.org provides news, articles, and an information exchange around nonprofit technology issues.
http://www.techsoup.org

November 08, 2002
 
 
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