Tools for Effective Grantmaking - Give Smart

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All philanthropy is personal.

That's one of the "terrible truths" cited by Thomas Tierney and Joel Fleischman in Give Smart: Philanthropy that Gets Results.  Tierney spoke today, along with Kristi Kimball of the Hewlett Foundation and Jeff Cain of Philanthropy Daily at an event hosted by the Hudson Institute.

According to Tierney, the fact that all philanthropy is personal has several implications:

  • Giving is a voluntary act.  Individual givers have different motivations for giving.  In many cases, family philanthropy in particular is first about engaging the family and secondarily about philanthropy, which can sometimes be at odds with impactful giving.  According to Tierney, "fewer, bigger, longer" gifts (in the form of grants or donations) results in greater impact.  Multi-generational giving frequently results in more, smaller, and shorter gifts as each family member develops his or her own giving priorities;
  • Impactful giving is about more than money.  It also involves giving time and talent.  The notion of giving more than money dovetailed interestingly with one of Kristi Kimball's key points: philanthropists that determine how their grantees (or donees) should implement programs risk missing or excluding innovative solutions.  In other words, grantmakers (she was speaking from the perspective of a foundation) that select only grantees that fit within a proscribed foundation theory of change risk missing out on high-performing organizations that are tackling problems in innovative ways.  There is a tension, then, between giving more than money and letting grantees determine how best to implement their programs.

At the risk of being overly simplistic, my big takeaway from this session was that giving is complicated, and that the various reasons that people cite for giving are all valid.  Giving, on one level, is quite a simple act.  I have money.  You need money.  You are doing something I believe in.  I give you money so that you can do that thing I believe in.

But impactful giving isn't nearly that simple.  I have money.  I have strong beliefs about what's important.  You have more experience than I do with the program that you're working on.  Kristi Kimball would argue (and I'd agree) that I should do some research to see if you're effective at what you're doing, and then give you money to keep doing it.  But then how do I know that you're doing it well?  Furthermore, how do I then know that I'm doing my job (as a giver of philanthropic funds) well?

Thomas Tierney and Joel Fleischman posit six questions that philanthropists should answer:

  1. What are my values and beliefs?
  2. What is "success" and how can it be achieved?
  3. What am I accountable for?
  4. What will it take to get the job done?
  5. How do I work with grantees?
  6. Am I getting better?

Future posts will delve further into some of these questions.  For today, I'd encourage the following:

  • If you work for a foundation: ask yourself the questions above and really take some time to think about the answers.  And ask the questions again in three months.  And in six months. And so on.
  • If you work for a nonprofit: ask your funders a version of these questions.  Ask about their values and their perception of success.  Ask them how they will help you get there - what they are willing to invest in your success to help their own.  Ask how they work with their grantees and what kinds of feedback they solicit.

While there are no easy answers, understanding that philanthropy is personal and engaging on that level will help promote some of the conversations that we need to have as a sector to know if our giving is smart and if our programs are impactful.

 

Image credit: http://www.flickr.com/photos/gibsonsgolfer/5516389372/
Author: Dahna Goldstein
May 23, 2011, 03:17 PM

Challenging Four Prevailing Wisdoms in the Nonprofit Sector

sharing in the nonprofit sector

In yesterday’s post, The Recession and Transforming the Nonprofit Sector, I wrote about Dr. Paul Light’s webinar about emerging trends in the nonprofit sector and my major takeaway that we need to challenge prevailing wisdoms in the nonprofit sector in order to transform the sector and emerge from the financial crisis as a strong, viable whole that is greater than the sum of its parts.

Here are four prevailing wisdoms and modus operandi that we need to challenge:

Low overhead = good organization.  

Charity Navigator, to its credit, is working to revamp its rating system to focus on things other than administrative versus program expenses, but the effects of years of promoting low overhead as a performance metric have taken their toll on the nonprofit sector.  What can we do?  Nonprofits can work to educate their donors.  Step one: stop promoting your organization’s overhead ratio in your marketing materials.

Restricted grants are the best/only way to meet donor intent

Despite numerous calls from nonprofits, associations of nonprofits, and other groups, foundations continue to mostly give restricted grants rather than general/operating support.  I find this, honestly, baffling.  While foundations are restricted themselves by donor intent, I don’t think many donors’ intents were to make operating difficult for the organizations they wanted to support.  To follow up on the previous prevailing wisdom, there are necessary and beneficial overhead expenses in nonprofit organizations.  Particularly in times of economic distress, funding to keep the lights on, pay the fundraising staff, and cover the rent is absolutely essential to organizations’ ability to perform their missions. 

What can we do?  Foundations can continue to move towards providing more general/operating support.  And nonprofits can ask for it.  Frame needs not in terms of deficits, but opportunity – not, “we need general/operating support so that we don’t have to lay off a staff person,” but, “we need general/operating support so that we can continue to grow a strong organization that delivers the valuable services that your funding dollars generously support.”

Competition for funding dollars means we can’t share information

Yes, nonprofits compete for funding.  And the competition is tough.  Foundations, governments, and individual donors have limited funds, and, filled with good intent, can only give them to a limited number of organizations.  And information is valuable in the fundraising process.  What makes your organization’s programs successful might be the very thing that differentiates you enough to get the grant or the large donation.  But information hoarding comes at a cost to the sector and to the constituents we’re trying to serve.  Organizations that operate in similar fields or geographic areas, or work with the same set of constituents end up reinventing wheels.  Constantly.  Funders then fund similar programs that result in similar knowledge that could be shared with significantly magnified impact.  But the incentives don’t exist for organizations to share information about impact and outcomes – except when funders require it (and then, frequently, the funders don’t share). 

What can we do?  Funders can ask for information about outcomes, impact, what works, what doesn’t (see talking about failure below), with the explicit intent to share that information broadly with related organizations (both funders and those organizations delivering related services).  Funders can do that in a way that doesn’t require nonprofits to adhere to an arbitrary (or funder-determined) set of outcomes measures that doesn’t align with the organization’s own evaluation and tracking mechanisms, but rather one that encourages grantees to track information, learn from it, and share it.  Nonprofits can think a bit more broadly about what information, shared with other organizations (even competitors) would ultimately best serve their constituents.  In other words, if sharing information about what’s working and what isn’t in your programs would help your constituents (and help you better meet your mission), shouldn’t you do it?  What if other organizations also shared more information?  Wouldn’t the ability to learn from their experiences help you serve your constituents better (and help you better meet your mission)?  What little steps can you take to start sharing information that will contribute to a rising tide to lift all constituent and mission boats?  Of course, you shouldn’t share everything, but think about what information truly needs to be kept, and what can be shared.

Talking about failure will hurt your organization

There was an episode of Family Ties where Alex P. Keaton went to interview at Princeton University, his dream school.  When asked about what unique qualities he possessed, he responded, “At the risk of sounding immodest, you see before you a young man without a flaw…unless, of course, you find me immodest, in which I have one flaw” (watch the video, starting at 7:39).  While the nonprofit sector generally doesn’t resemble an 80s sitcom, there is a prevailing notion in the nonprofit sector that organizations must present themselves the way Alex did in the interview – that they must be perceived to be perfect or else risk losing funding opportunities.  Discussing failed programs and initiatives, according to the prevailing wisdom, risks losing future funding opportunities.  The fear is very real – many funders would rather hear about successes, and worry that continuing to invest in an organization that has failed to deliver a program risks throwing good money after bad. 

This is a very difficult notion to combat.  Some funders are starting to discuss failures (recently an notably, the Northwest Area Foundation), and need to encourage their grantees to do so as well – but need to make it clear to grantees that they will not be penalized.  This is a cultural shift that needs to happen for the betterment of the sector – foundations (and individual donors) need to encourage, even reward, sharing and openly discussing failures and need to make it abundantly clear to grantees that they will not be penalized for their openness and self-reflection.  And it needs to go a step further.  The benefit of discussing failures is the ability to learn from them – and to have others learn from them so that we, as a sector, can build on collective wisdom and generated knowledge to better serve our constituents and our missions.

 

What do you think?  What are the prevailing wisdoms that foundations and nonprofits need to challenge in order to transform the sector and shape a strong emergence from the recession?

 

Image: http://www.flickr.com/photos/wooandy/220929743/

Author: Dahna Goldstein
February 24, 2011, 02:00 PM

The Recession and Transforming the Nonprofit Sector

I just attended a webinar hosted by the Nonprofit Quarterly that featured Dr. Paul Light, NYU Wagner's Paulette Goddard Professor of Public Service, about emerging trends in the nonprofit sector.

Dr. Light is well known in the sector for, among other things, his gloomy 2008 prediction that up to 100,000 nonprofits would close as a result of the economic downturn.  While the number of nonprofits that have gone under in the intervening years is difficult to quantify (nonprofits do not necessarily report to the IRS when they close their doors), Dr. Light indicated that numerous sources have cited closures and mergers in the nonprofit sector.  In addition, the IRS is likely to revoke 501(c)(3) status from between 50,000 and 100,000 nonprofits as a result of their failure to file required reports with the IRS.  At the same time, though, the IRS approved 60,000 new exempt organizations last year.

In his 2008 article entitled, "Four Futures," Dr. Light explored four possible paths the nonprofit sector might take as a result of the economic downturn:

  1. The rescue fantasy (an idealistic scenario where the nonprofit sector is "saved" by the kindness of strangers and giving remains at high levels)
  2. A withering winterland (in which every nonprofit feels the financial and resource pain of an economic downturn)
  3. An arbitrary winnowing (in which those organizations that have the most resources continue to have the most resources, and others falter, purely based on size, scale, marketing, etc., rather than the quality of services provided)
  4. Transformation (in which the sector sees the economic downturn as an opportunity to reinvent itself)

While the rescue fantasy clearly hasn't occurred (though Dr. Light noted that for a limited number of organizations, the economic stimulus package provided a version of this fantasy), it seems a combination of the other three have – and will likely continue.

The silver lining to an otherwise sobering scenario is that the nonprofit sector continues to have an opportunity to transform itself.  Dr. Light specifically mentioned alliances and advocacy as areas where we can take more control of our own fate than we have been: the nonprofit sector, when speaking with a unified voice, is a powerful institution.  We need to mobilize that voice to urge legislators at both federal and state levels not to continue cutting nonprofits' funding and delaying payments.  We need to challenge the prevailing wisdom that appears rampant among legislators that nonprofits will always be around, regardless of how aggressively their budgets are impacted by legislation and the economy.

nonprofit sector transformation

The notion of challenging prevailing wisdom really struck me.  The nonprofit sector still has a ways to go in emerging from the financial crisis in which we’ve found ourselves for the last several years, and I think there are several prevailing wisdoms within our own sector and modus operandi that we need to challenge.

Stay tuned for tomorrow's post – Challenging Four Prevailing Wisdoms.

 

Image: http://www.flickr.com/photos/_brilho-de-conta/400937249/

Author: Dahna Goldstein
February 23, 2011, 04:06 PM

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