Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

January 30, 2012

Funders should exit their comfort zones

By Todd Cohen

Despite their seemingly endless evangelizing about the need for change, foundations sure seem slow to embrace it.

But if they expect to have even a prayer of making change happen on the causes and issues they care about, grantmakers first need to change the way they themselves do business.

Many foundations are disconnected from the nonprofits they fund and the communities those organizations serve.

Tone deaf to what nonprofits say about the operating and financial problems they face, and the kind of support they need, many foundations prefer to push their own pet ideas or those of consultants and other hangers-on who seduce them with management jargon and philanthropic-correctness.

Foundations drone on about the need for collaboration, evaluation and diversity, but they shun true partnerships, reject criticism, and dismiss ideas that differ from or challenge their own.

To help nonprofits and the people and places they serve cope with unprecedented challenges in the face of social and global crises and change, foundations need to use a lot more common sense about how they work.

The need for foundations to embrace change is the focus of the year-end statement for 2011 by Kathleen Enright, founding president and CEO of Grantmakers for Effective Organizations.

After 10 years of working to help funders work smarter, GEO still sees big gaps between the needs of nonprofits and the way funders operate.

While a new study from GEO will show “pockets of progress,” particularly among its members, Enright says, “broad-scale change remains elusive.”

On the whole, she says, the study finds that “general operating support remained static, evaluation remains predominantly an exercise in accountability rather than learning, and most grantmakers do not seek input on strategy or specific proposals from grantees or recipient communities.”

And instead of getting the operating and program support they need, she says, many nonprofits have been “hollowed out by accepting funds that are too rigidly restricted or do not cover the full costs of programs, operations or overhead.”

So GEO has been working to help make philanthropy “smarter so that nonprofits can grow stronger and deliver better results in communities,” she says.

Change, however, is “coming slower than we’d like,” she says.

A 2008 survey by GEO found a “persistent gap between nonprofit needs and grantmaker practices, with foundations making slow progress on adopting the practices that they and their grantees say are essential to supporting nonprofit health and vitality,” Enright says.

While the lack of progress across the field is disappointing, she says, funders have a critical opportunity “to focus on areas where they do have the power to make changes to better serve grantees and recipient communities and to invest grant dollars more effectively.”

Enright’s recommendations for funders include changing the way they give grants and changing how they relate to others.

On their grantmaking, she says, funders should provide flexible funding, increase multi-year support and streamline their requirements

And in their relationships, she says, funders should “foster deeper connections” and “tap the wisdom of grantees” and representatives from communities they support; learn together with grantees and community members; and collaborate to have greater impact.

“The only way for philanthropy’s response to match the complexity of the issues we hope to address is if we consciously shift the focus away from our individual interests and resources and instead look at how best to solve problems in combination with others,” Enright says.

“By supporting networks, focusing on collective action, being willing to follow as well as lead, and bridging diverse perspectives on the ground,” she says, “grantmakers will start to play a more vital role in creating positive change.”

January 23, 2012

Charities need to trust themselves

By Todd Cohen

A virulent strain of strategic paralysis threatens to afflict much of the charitable marketplace.

Deeply wounded by unprecedented financial distress, and looking for a quick fix, many charities are becoming smitten if not obsessed with trendy, philanthropically-correct management ideas peddled by nonprofit trade groups, consultants, foundations and academic researchers.

So in trying to cope with escalating demand for services and an increasingly grim market for charitable investment, many nonprofits are trying to swallow, without digesting, big concepts like logic models, market research, metrics, performance evaluation, social media, entrepreneurialism, and return on investment.

Any or all of those and other concepts, if they make sense for a particular nonprofit and are planned carefully and applied strategically, might help an organization inform the way it works and help it survive and thrive.

But many nonprofits simply grab onto those ideas in a panic and without scrutiny or thinking through their implications, including their true costs and possible downside, as well as how to put them into practice in the most productive way.

Strategic theories, whether borrowed from the world of business or developed in think-tanks or on university campuses, are no substitute for street smarts and common sense.

No matter what a consultant advises, a funder demands, or a study or textbook prescribes, nonprofits need to think on their own about how to cope in an economy that is deeply damaged, and a social and global environment that is evolving quickly in the face of multiple crises, sweeping demographic change, and rapid advances in technology.

A management theory or formula certainly can help inform the decisions a nonprofit makes about how to improve its services, operations or fundraising.

But no two organizations or sets of business challenges are alike, market forces continually shift, and theory is little more than a guess until put into practice.

Many nonprofits are fortunate to have experienced and gifted managers and leaders who can help their organizations set a vision, build a team, think for themselves, understand their challenges, and identify, sort through and select their most promising options and partners.

But far too many charities are willing to put their brains, experience and instincts on hold while embracing well-meaning but often vague and half-baked ideas prescribed by trade groups, consultants and funders who are quick to preach their pet theories but do not stand in the shoes of those charities and will not have to live with the consequences of the advice they give.

Instead of blind faith in these self-anointed experts, who often are clueless about or complicit in the cut-throat competition and shameless cronyism that corrupt the charitable marketplace, nonprofits need to trust their own ability to find their way out of the economic gloom and doom.

The best hope for charities is to have faith in their own vision and judgment.

January 17, 2012

Women a model for engaged giving

By Todd Cohen

Nonprofits that want to build closer relationships with their donors should take a hard look at a new study on giving by wealthy women.

Wealthy women are more strategic about their giving than wealthy men, more engaged in the causes they support, and more focused on the impact of their giving, says the Bank of America Merrill Lynch 2011 Study of High Net Worth Women’s Philanthropy.

Those findings are important because, barely treading water in the treacherous economy, nonprofits are looking for ways to better connect with donors.

A growing number of nonprofits also are focusing more attention on building relationships with existing donors who have the potential to make larger gifts.

All of that requires better understanding donors, helping them understand community needs, and showing them how supporting a particular nonprofit will help address those needs.

For their part, donors increasingly want to be involved with charities they support, and see the difference those organizations make.

Women are creating and controlling a bigger share of wealth in the U.S., says the new study, which conducted by the Center on Philanthropy at Indiana University and is based on mailed surveys completed by 628 men and 283 women with average household wealth of $12.2 million and average household income of nearly $640,000.

Women spend more time than men on their homework before giving to a charity, the study says, and are more likely to create an annual giving strategy or budgets.

Women expect deeper communication with a charity, and care more about its efficiency and effectiveness and about hearing about the impact of their gift.

They also want to be more involved with the charity, and volunteering represents one of their main motivations to give.

And while men and women volunteer at similar levels during their working years, retired women volunteer at a higher rate than do retired men.

Women also are more likely than men to stop giving to a charity they previously supported, while men tend to give to the same causes year after year.

And in three of four wealthy households, women either are the sole decision-maker or an equal partner in charitable giving.

Strained to the breaking point by the dismal economy, nonprofits no longer can afford to take donors for granted as impersonal sources of cash.

Nonprofits need donors who will be partners, understanding and caring about urgent community problems, engaged with the nonprofit, and recognizing that supporting the nonprofit will help address those problems.

While the Bank of America Merrill Lynch study looks at the philanthropic attitudes and behaviors of wealthy donors, nonprofits should mine it for ideas about how to build stronger relationships with their own donors, regardless of their level of wealth or income.

Smart, caring and involved donors are critical for nonprofits of all sizes, and understanding why and how high-net-worth women give provides insights into the kinds of donors any nonprofit should be working to engage.

January 9, 2012

Nonprofits have a great story to tell

By Todd Cohen

A crucial task for nonprofits struggling in the broken economy is to do a much better job talking about the essential role they play serving people and places in need.

Through the stories they tell, nonprofits need to raise supporters’ and partners’ awareness of urgent social and global problems, help them see their organization’s impact in helping to fix those problems, and help them understand the difference they can make by investing time, know-how and money in their organizations.

Stories also are essential in helping investors appreciate nonprofits’ own need to build their capacity to learn, lead and grow, as well as the challenges they face in navigating economic stress and social change.

The unraveling economy has pushed many nonprofits to the edge, swamping some and motivating others to find ways to work smarter and serve better.

Demand for nonprofit services has soared while the marketplace for the resources nonprofits count on has tightened and is shifting dramatically.

Powering the expanding social economy is any individual or organization working to put private resources to public good.

In the face of social and global crises, sweeping demographic change, and rapid advances in technology, the once-separate worlds of charity, private capital and public policy are evolving quickly and starting to overlap.

In that rapidly evolving marketplace, underlying challenges for nonprofits are to adapt and improve their organizations, help their investors understand how change is affecting the communities they care about, and show investors how they can make an impact on fixing community problems by getting involved in their organizations.

That requires engaged boards and donors, effective and inspired leaders and managers, partners who are truly collaborative, and an organization with the vision, business model and resources to turn that vision into results.

It requires understanding the values and interests of prospective donors, volunteers and other partners, and finding meaningful and fulfilling ways to engage them in the organization.

And it requires developing a clear, simple and compelling story that helps people see how supporting a particular nonprofit will make a difference in the causes they care about.

A critical part of building organizational capacity is for nonprofits to vastly improve the way they communicate, both internally and externally.

So the story the organization develops about its role and impact in taking on social and global problems should inform and help shape the work it does and the way it works.

The staff, board and volunteers of a nonprofit should be able to tell that story, and should be telling it every chance they get.

And they should be using the broad range of available vehicles to tell it, including talking to donors and other individuals and organizations; using the organization’s website, email and other digital media; and speaking to civic organizations, on public-affairs radio and television, and writing guest opinion columns for news and specialty publications.

Nonprofits have important stories to tell, and they should make it a priority to tell those stories as clearly, as often and as broadly as they can.

January 2, 2012

Bad consultants are bad news for nonprofits

By Todd Cohen

The charitable marketplace is home to some great consultants and a lot of good ones.

They understand and care about charities and the communities they serve, and want to help them improve.

But consultants who are mediocre at best, and who care more about their fee than they do about charities and the communities they serve, are courting nonprofits and foundations in growing numbers, and those organizations need to be wary.

Often exiles from nonprofits because they were ineffective, burned out or just wanted a bigger paycheck, bad consultants can drain nonprofits’ limited funding in return for simplistic advice masquerading as strategic thinking.

Many who could not cut it as nonprofit professionals turn to consulting because they spot easy prey in nonprofits desperate for strategic advice.

Some of these consultants, despite their professional mediocrity, recognize that shameless self-promotion can yield a big payoff.

They radiate self-confidence, and try to sound smart by parroting philanthropic and business jargon.

They crank out books that consist of little more than superficial, feel-good prescriptions for fundraising success and organizational improvement.

And they aggressively book themselves to speak at conferences, workshops, lunches and webinars, where they weave self-congratulatory tales of their own consulting work into their presentations while hawking their products and services.

Their showmanship makes believers of nonprofits hungry for help, and resonates with foundations eager to find intermediaries to push foundations’ agendas in return for lucrative fees.

What these consultants are selling is blind faith in their image and self-confidence.

But after paying the fees, many nonprofits are left with little more than a consultant’s promise that cosmetic and formulaic changes will improve their organizations.

Nonprofits buy what mediocre consultants are selling because, strained to the breaking point in our damaged economy, and struggling to make ends meet in the face of rising demand for services and of shrinking resources, they need help and want to believe the consultants can provide it.

The icing on the cake is that consultants are neither regulated nor accountable for whether their advice actually makes a difference.

The hard work of turning that advice into results remains with the nonprofits.

And if the nonprofits fail to improve, the consultants are long gone, with the convenient excuse that the nonprofits did not follow their recommendations.

Many foundations also are smitten with consultants.

Their endowments can insulate foundations from the struggle to survive in the real-world marketplace, where success depends on good ideas, good strategy, good execution, and hard work.

Because they control endowments, even though the assets typically represent wealth created by other people, executives and program officers at many foundations fancy themselves experts, if not sages.

And admiring their own reflection in consultants, foundations pay them to push their ideas and agendas on nonprofits.

‘Consultant Nation’

Jan Masaoka, outgoing editor-in-chief of Blue Avocado and incoming CEO of the California Association of Nonprofits, recently questioned the growing clout of what she calls the “Philanthropic-Consultant Industrial Complex.”

The infrastructure of consultants and organized philanthropy is “changing who’s running the show,” she wrote on Nov. 11.

“Rather than supporting nonprofits,” she wrote, “foundations and consultants are increasingly telling nonprofits what nonprofits should be doing.”

When a foundation announces it is launching a new initiative for low-income seniors, for example, “we now assume that much of the money will go to re-grantors, researchers and consultants rather than to on-the-ground nonprofits and the seniors themselves,” she wrote.

In an article on Dec. 10 entitled “Consultant Nation” that looked at the growth and influence of the consulting business in the for-profit world, The New York Times reported that what separates consultants from business executives is that consultants “remain removed from their decisions.”

Unlike executives who climb the corporate ladder at a single company, the Times said, consultants “do not execute the decisions they make and live every day with the consequences.”

That also is a big problem with consultants in the nonprofit world: They swoop in, ask questions, facilitate a board retreat, produce a report, pocket their fee, and leave.

Nonprofits and foundations need to stop this madness.

They need to take a hard look at consultants who want their business, and ask tough questions about who they are, how they work and what they actually do.

They should request samples of consultants’ work, and ask other clients what they were like to work with, what advice they actually delivered, and what kinds of results that advice actually produced.

If they do not become more informed and critical consumers of consulting services, nonprofits and foundations will have no one to blame but themselves if all they get for their money is a report filled with philanthro-babble and empty promises.

And in the end, the ones who will pay the price for bad consultants are the people and places the nonprofits and foundations exist to serve.