Foundations need to get real

Foundations are living in a dream world.

Their annual reports, websites and conferences are exercises in self-congratulation for their bold innovation and good works.

But while they pride themselves on investing in change, they are slow to change themselves.
Foundations are secretive, clubby and fixated on pet programs.

They talk a lot about diversity, and require it from nonprofits that want grants, but too few truly diversify their own boards and staffs.

And few foundations have the backbone to push for changing flawed public policies.

Foundations seem to save their activism for fighting efforts to require that they disclose too much information or pay out a bigger share of their assets through grants.

And while they demand greater accountability from nonprofits, far too few foundations practice the openness they preach or will make grants to help nonprofits improve their operations.

According to a recent report in The New York Times, the Carnegie Corporation and the James Irvine Foundation both have published reports recently examining failed grants they made.
But they are the exception.

As blogger Albert Ruesga reports, a new book by foundation veteran Joel Orosz says foundations generally fail to risks.

With wealth, influence and independence, foundations should be leading the charge for social change and a more effective charitable marketplace change.

Instead of patting themselves on the back, preaching to nonprofits and whining about excessive regulation, foundations should clean up their own houses, invest in nonprofit infrastructure, help address urgent social needs, and form collaborative efforts to attack broader social problems.

Social media: Do nonprofits get it?

[PJ wants to know what you think. Below is a summary of our special report on technology. After reading the summary and the report itself, please submit your comments.]

New media give nonprofits powerful tools to work smarter.

In a special report published today, PJ looks at how nonprofits are using new media to run their shops, raise money and promote their causes.

But nonprofits that simply plug new media into old ways of doing business may be bound for the scrap heap.

To survive and thrive, nonprofits must adapt to the engaged new-media world in which individuals with easy access to computers, mobile devices and wireless connectivity are transforming the way charitable dollars are raised and social causes are promoted.

The challenge for nonprofits is to wed tried-and-true principles of operating, fundraising and service-delivery with the emerging new-media culture that engages the collective power of individual voices, values and assets for the common good.

Media philosopher Marshall McLuhan believed “the medium is message.”

Do you believe nonprofits will get the message and truly tap new media to engage a diverse audience in sharing and contributing to the job of fixing our most critical social problems?

Check out PJ’s special report, and let us what you think.

Bank mergers can pay off for charity

Consolidation among big financial-services institutions has resulted in more charitable giving by the merged institutions, a new report says.

Flying in the face of widely-held nonprofit expectations, says the report by the National Committee for Responsive Philanthropy, annual giving by seven major financial institutions grew to over $400 million in 2001 from roughly $100 million in the 1980s.

With competition growing among big national banks, their executives “embraced philanthropy as a means of attracting and retaining more business and employees,” the watchdog group says.
“The complexion of corporate philanthropy has changed radically in the last decade,” it says. “Now, more than anytime in the past, corporate giving has become integral to a company’s DNA. Companies are working strategically to incorporate their giving into the business model.”

The report also credits community advocates for their “critical work in pushing regulators and banks to ensure that community needs are not forgotten in the process before, during and after mergers.”

But big bank mergers also have had their downside, the report says.

As they have merged, banks have taken on a more national focus, and their philanthropy has shifted to national organizations and away from local giving, and also has shifted regionally, with the South emerging as the big winner, the report says.

It also finds the Form 990PF annual returns a big majority of bank foundations file with the IRS violate the agency’s rules on information the returns should include.

“Many claims made by banks about their philanthropy are not externally verifiable, and there is a lack of standardization regarding what is included in the definition of ‘philanthropy’ by financial services corporations,” the report says.

As the report makes clear, bank mergers can pay dividends in the form of charitable giving, particularly with a strong push from community advocates.

And as banks embrace philanthropy as a corporate value and strategy, they should disclose their philanthropy in greater detail.

Common ground on social change

From the right and left, two smart philanthropic thinkers offer views of the role nonprofits and foundations can and should play in addressing social problems.

In separate columns in the June 28 issue of The Chronicle of Philanthropy, conservative Bill Schambra and liberal Pablo Eisenberg both suggest opportunities for moving beyond limits they see in the social-change ambitions of charitable organizations.

Schambra, director of the Bradley Center for Philanthropy and Civic Renewal at the Hudson Institute in Washington, D.C., sees both arrogance and failure in the efforts by progressive philanthropy to tackle the underlying causes of problems like poverty.

“Die-hard believers in the search for root causes” dismiss as “contemptible charity” the work of addressing the symptoms of those problems, Schambra says, and themselves waste millions “on behalf of a mantra without meaning.”

Following a more practical and effective strategy, he says, are thousands of charities that “have come up with solid modest approaches to smaller, more limited aspects of problems.”

Eisenberg, senior fellow at the Georgetown University Public Policy Institute, blasts nonprofit leaders who whine that federal rules curbing nonprofits’ partisan politicking has “muzzled and silenced” nonprofits.

Nonprofits and foundations rightly steer clear of partisan politics to protect the tax-exempt and charitable status that is essential if they are to serve as an independent voice and force for social change, Eisenberg says.

What silences that voice and restrains that force, he says, is not a government muzzle or leash, but a “lack of leadership, courage, and competence among nonprofit leaders.”

Diverse ideas like those of Schambra and Eisenberg help drive a charitable marketplace in which progress ultimately depends on leadership that is both pragmatic and visionary.

For Schambra, moving beyond “a century of frantic and futile pursuit of ultimate answers” requires leaders who will champion “charity as a sensible alternative.”

For Eisenberg, moving nonprofits’ beyond their fear of engagement and “lack of activism” requires leaders who can help the sector recognize and overcome its own worst instincts, a dilemma he defines by quoting Pogo: “We have met the enemy, and he is us.”

The nonprofit sector needs leaders who can push for change, both by addressing immediate problems and looking for ways to fix flawed public policies that underlie those problems.

The challenge is to find solutions that will work in the charitable marketplace and help the marketplace itself operate in a way that is more even-handed and open to diverse ways of thinking and acting.

Foundations need to reach out

A handful of U.S. foundations are turning to the public to help make some of their grants.

As The New York Times reports, the Case Foundation, Rockefeller Foundation and Robert Wood Johnson Foundation all are asking the public for ideas they might invest in, and the Case Foundation even is inviting the public to vote on the best ideas.

All foundations and nonprofits would benefit by engaging the public in their thinking, and by becoming more inclusive in the way they do business.

According to a new study by the Urban Institute, the boards of public charities are akin to restricted clubs, with members who are overwhelmingly white.

And many foundations, while paying lip service to diversity and transparency, are deaf and dumb in the face of nonprofits’ urgent and ongoing need for operating support.

The effort to put grantmaking to a popular vote may sound like a philanthropic gimmick that apes reality-TV shows like American Idol, but at least that effort recognizes the reality that ideas are not the monopoly of the in-bred and well-heeled crowd that rules organized philanthropy.

And while it may be a sign of our plugged-in times, reaching out certainly is not new: Some foundations have worked diligently for years scouting the landscape to identify problems and solicit ideas for solutions.

An ongoing practice of the Kate B. Reynolds Charitable Trust in Winston-Salem, N.C., is to visit communities throughout the state to find out how it could better meet the health-care needs of their underserved residents.

Those visits have generated innovative grantmaking programs that otherwise might never have seen the light of day.

But while many foundations profess their commitment to diversity and demand that nonprofits practice it, far too few foundations are willing either to ask for ideas or truly listen to them.

All foundations would be wise to loosen up and open up.

Nonprofit boards lack diversity

Nonprofits talk a lot about diversity, but their boards overall fail to practice it, a failure that can hurt nonprofits’ ability to serve their constituents and raise money, a new study says.

“There is a disturbing level of insularity among nonprofit boards that is at odds with their public-service mandate,” says Francie Ostrower, who prepared the study for the Urban Institute.

Based on responses from CEOs or executive directors of over 5,100 public charities with at least $25,000 in annual revenues, the study found 51 percent of nonprofit boards have only white, non-Hispanic members.

No blacks serve on the boards of 18 percent of nonprofits for which over half the clients are black, while no Hispanics serve on the boards of 32 percent of nonprofits for which over half the clients are Hispanics.

For nonprofits overall, 86 percent of board members are non-Hispanic whites, 7 percent are black, and the remainder are from other ethnic groups.

While 94 percent of boards include women, women on average represent 46 percent of boards.
And boards of bigger, wealthier nonprofits tend to draw more heavil6y from members of elite groups, the study says.

The percentage of board members who also serve on corporate boards totals 80 percent among bigger nonprofits, for example, compared to 31 percent among the smallest nonprofits.

Fifty-one percent of the nonprofit executives surveyed gave their boards poor or fair marks for fundraising, and for monitoring their own performance.

To more effectively serve their clients and donors, nonprofits need to work hard to engage them and include them in meaningful ways in the work of their boards and their organizations.
And diversity alone, as measured in numbers, is not enough.

The goal should be to be truly inclusive, truly open to the ideas and participation of all constituencies the organizations serve.