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Laura Nichol: Rethinking capital -- it's more than money

Yes, money is essential to the life of any church or organization, but it is other forms of capital that really build the community of faith, says a Houston leadership consultant and UMC layperson.

April 12, 2011

All organizations require financial capital, but they also need other forms of capital if they truly are to live out and achieve their missions, said Laura Nichol, a leadership consultant.

“[Organizational leaders] are used to thinking about raising financial capital,” Nichol said. “That’s where they focus their time and energy. But we’ve found that by getting them to focus on three other forms of capital -- network, service and intellectual capital -- and then helping them understand how they can raise those forms of capital, they become energized and more committed.”

Churches, for example, can easily focus too much on their need for financial capital. Yet it is hearts, feet, hands, words and actions that really build a community of faith, Nichol said. When churches understand the four forms of capital, it changes the whole nature and structure of a fundraising campaign.

“A capital campaign moves from raising money to build buildings, to actually building the community of faith in a much more sustainable way,” Nichol said.

Nichol is a partner with Rio Advisors LP, a Houston leadership advisory firm that works with boards of directors, CEOs and management team members in both business and nonprofit organizations. An active layperson, Nichol is a member of the board of visitors at Duke Divinity School and is past chair of the board of stewards at St. Luke’s United Methodist Church in Houston.

She spoke with Faith & Leadership about organizational leadership and alternative ways of thinking about and understanding capital. The video clip is an excerpt from the following edited transcript.

Q: Can you give us a brief overview of your work with Rio Advisors?

We work with people and organizations who want to implement long-term, sustainable, positive change. And we do that by addressing and helping them integrate five different levers: leadership, strategy, communications, process and culture.

We focus on the leadership, on CEOs and boards and the direct reports to CEOs. We look at communications, with much of our work in the domains of language. We work on process, trying to understand what processes are in place in an organization and where missing links might be. We can help people create strategy, but often we’re asked to help implement existing strategic plans. And then across the whole spectrum of those four things you create culture. Our work is really the intersection of economics and human behavior.

Q: In your work, you talk about four very specific forms of capital as a way to help leaders think about their resources. Tell us about those.

Over the years, different economists and other social scientists have written about various types of capital. But I first heard about these four forms capital in a talk by Laura Arrillaga-Andreesen, the founder and former chair of SV2, the Silicon Valley Social Venture Fund, and the co-founder of the Stanford Center on Philanthropy and Civil Society.

In talking about her four forms of capital, the place to start, actually, is a shift in language. When we work with boards and leaders, we often find that they focus a lot on language about the past. Our work is to shift them to language about the future, which is about possibility. Once they begin to frame everything in possibility, then the second frame is to move to investment in capital, particularly for nonprofits. That’s a different way of thinking for them. They’re used to thinking about raising financial capital. That’s where they focus their time and energy. But we’ve found that by getting them to focus on three other forms of capital -- network, service and intellectual capital -- and then helping them understand how they can raise those forms of capital, they become energized and more committed.

So network capital is the ability to introduce other people to the organization. Again, we go back to language. Often in nonprofits, board members think about making a request of someone. We help them shift their language, to understand that really, what they’re doing is making an offer. You don’t ask people to come in and be on a board. You introduce them to the offer that this organization makes. People today are yearning to make a difference. If you can connect your network to the difference that your organization makes, those people will be connected to the organization. Rather than focusing on raising capital and asking you to give money, I’m going to ask you to get connected to the organization.

Service capital is the ability to ask someone to come and lend their hands, feet, heart. Depending on the organization, those can be very different activities. Sometimes we might want to ask someone to go door to door or dig in a garden, or do other work. But many times it’s actually about taking someone by the hand, saying, “Come walk with me and see what this organization does.” You’re helping someone experience the work that the organization is doing. If you can help people experience the outcomes of the work versus the activities, then you will connect people more deeply to the organization and its mission and how they can make a difference.

And then the third is intellectual capital -- the ideas that people can bring. How do you engage people in an ongoing conversation? In our work with boards, looking at board meetings, for example, how do you shift from a once- or several-times-a-year come-in-and-hear-reports session to instead creating an ongoing conversation? How can the board work with the staff and the larger organization to have an ongoing conversation? Innovation comes from having adjacencies. If you have a diverse board that is actually in an ongoing conversation, you will have enough connections and overlaps that new ideas and innovations can be brought together.

In creating intellectual capital, it’s about creating space and safety for people to really challenge each other, to think differently and to share their ideas in a way that opens up new ideas.

Q: Safety is probably not a real easy thing to achieve, is it?

Safety in today’s world is hard. It’s about creating an environment where people get to know each other. In our work with boards, we spend time encouraging them and facilitating them to really get to know each other. Not in a game -- what color are you, or what animal are you? -- but instead in a way that they really talk about their personal challenges, obstacles, energies and dreams. When you move to that level of interest, you find so many connections. It becomes safer once people have opened up a little.

It is incredibly important for leaders to create an environment where people can trust enough that they can have meaningful conversations. Again, it’s a yearning for connection, whether to work that has meaning or to other people who are going to help you do that work.

Q: And what about financial capital?

Financial capital is interesting. It’s about money, but again, it’s about making the offer and helping people understand that their money isn’t going to fund an activity but to make a difference in someone’s life. So it’s helping organizations define what the outcomes are, often two or three steps away from the donation. You can fund an activity, but in the end, what will that change?

For example, an organization called “charity: water,” which raises money to drill for clean water in Africa, does a great job of using these four forms of capital. You could say, which they do, “If you give $5,000, you can drill a well that gives clean water.” But the founder, Scott Harrison, does a great job of then connecting all of the dots. That well allows people to stay healthy, children to live longer, women to do something other than carry water. You move on to all the different outcomes that change lives and that connect people to giving more money. We’re finding that if you talk about those other three other forms of capital, the financial capital always follows.

Q: Earlier, you talked about changing language from past to possibility. Can you tell us more?

There are three domains of language: past, present, future. If you listen to the language of most conversations, language of the past is incredibly important, because it’s the language of connection. Language of the present is language of action: What do we do? When are we going to do it? But language of the future is the key language of leadership. It’s the language of possibility.

In working with nonprofits, we look at the way they interact with their board and their donors to help them change their language. In a meeting, it’s important to touch on the past. It’s a way to connect. But we don’t want to use the meeting to hear reports, the language of the past. That’s an inefficient use of people’s time.

Q: It strikes me that many churches get stuck in conversations about the past and problems instead of possibility.

Which is ironic, given that we are people of faith. We live in possibility, right? But it’s so tempting to get stuck in the past. As a leader, you can do your best and be aware and touch on the past, but then move to possibility. That’s where the bulk of your time should be spent in conversation. And then once possibility is firmly rooted in the conversation, then you can move to the language of the present, to action.

People will do their best to pull you into the past: “We’ve tried that before and it didn’t work”; or, “When we did that it was a complete failure.” As a leader, your job is to be aware that they’re stuck in the language of the past and continue to pull them to the language of possibility. When you can get the room to shift into a conversation of possibility, the energy shifts, and people’s faces change, their body movement changes.

The key to creating the agenda for the meetings that we do is to ask the right questions. There’s a great quote that the problem half-solved is a question correctly asked. That’s the battle as we create these agendas: what question is it that we want them to debate and talk about? And once you get that going, it’s hard to get them to stop, because the ideas just begin to build on themselves.

Q: Are the four forms of capital both institutional and personal?

Yes. I mean, we all have four. We all have that huge amount of capital that we’ve raised over a lifetime. Corporate executives can often focus on the network of the moment, their job and the corporation. And we forget this huge network that we have across many organizations and many relationships over a lifetime. The richness is to be able to weave those relationships together. By putting those different relationships together, you get new ideas and the adjacencies that create innovation.

Q: What do these four types of capital mean for institutional leadership?

Their greatest significance for leadership is that they shift your focus from a short-term to a longer-term horizon. If you look at long-term, sustainable, positive change, the horizon is always longer than a year, a quarter. The language of investments and capital allows you to engage people within your organization for a long time, for a lifetime, really. When organizational leaders think in that way, it fundamentally shifts the conversations that they have and how they think about their organization.

Q: What do they mean for church leaders?

I think it’s fundamentally tied to who we are as people of faith -- that those four capitals are what we’re asked to go out in the world and to exhibit from our faith standpoint. We’re supposed to show the work that we can do. We’re supposed to be able to share the Word in a way that’s compelling and captures people’s hearts. We’re supposed to be continually building a community of faith.

And I’ve really struggled personally with, what is a church? What is a church? And it is this collection of people who are together for a time doing the work of God, sharing the ideas and love of God, being together. And one of the fruits of that is financial capital to allow you to do more work. But too many churches focus on money as the main engine, and it’s really the hearts and the feet and the hands and the words and the actions that we have that build this incredible, ever-expanding community of faith.

So if we could change to thinking about raising those capitals, I think it’s so exciting. And churches that I’ve worked with, once they get that language, a capital campaign becomes something very different. A capital campaign moves from raising money to build buildings, to actually building the community of faith in a much more sustainable way. And the energy around that, the excitement around that and the contribution that people can make. People, whether or not they have financial funds, all of a sudden understand what they can do to help build their church and to build the kingdom of God, here, now. It’s all four of those capitals that each of us have to tap into.

Q: Why do words like “capital” and “investment” have such resonance for people today, even church people, instead of more theological language like “grace” or “gifts” or “talents?”

Language is important obviously, so I’m always looking for a connection language. And the world where I work is the business world. So much of the church today is populated with business people. A language that connects them to a long-term horizon and speaks of investment instead of need shifts the energy. There’s a lot of work being done in universities and social entrepreneurship about non-profit worlds and business language. Those two together create a tremendous amount of innovation by letting that conversation happen.

Q: Can you give us an example of how you have used the four forms of capital in your work with church-related organizations?

I did a board retreat for a church with a terrific new pastor, who’s been there only a few years. When he came in, the church had a lot of debt and factions were fighting. So we did a series of meetings where I invited the board members to first tell stories of when they had had successes, when they had dreamed together, when they had built things together. I wouldn’t allow them to use the language of the past, only the language of possibility.

They said, “This is hard.” But when they shifted into that, you could see everyone relax and begin to have a dialogue. The next meeting, we introduced the four forms of capital and got them to start brainstorming around them and what they could do to raise those. The next meeting, we began to build a document that would guide them, that had their vision and then what they wanted to do to implement that vision -- what their values were, how they were going to act when they were with each other. And then, from the strategies, we moved into an action plan. So their action plan is built on the kinds of capital that they want to raise.

In this particular church, we did an exercise where they came into the sanctuary and we asked them to dream about what that space, emotionally, could feel like, what could be accomplished, and then write on Post-it notes the things they wanted to keep that they thought were important and what they thought needed to change to help the body of Christ grow. When we were finished, the entire sanctuary was covered with stickers. And it allowed people then to have a conversation about what they loved and treasured about the church and then what they were willing to change.

If the discussion is framed as, “We’re going to change or we’re not going to change the sanctuary,” you’ll never get them to agree. But if you go underneath that, emotionally, and explore people’s interests and their dreams, you’ll find all sorts of overlaps, and that’s where you meet. Then you can start dreaming about what it means to actually implement those interests. Now they’re beyond the sanctuary. They’re talking about building affordable housing. They are dreaming big. It’s stunning.