Inside Philanthropy

Funders should exit their comfort zones

2012-01-30T05:26:00.001-05:00

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.”

Charities need to trust themselves

2012-01-23T05:25:00.000-05:00

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.

Women a model for engaged giving

2012-01-17T05:30:00.000-05:00

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.

Nonprofits have a great story to tell

2012-01-09T05:34:00.002-05:00

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.

Bad consultants are bad news for nonprofits

2012-01-02T05:26:00.000-05:00

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.

Foundations giving less for social change

2011-12-19T05:39:00.000-05:00

By Todd Cohen

After gaining ground in the first half of the decade, foundations in the wake of the 2008 economic collapse have reduced their investing in efforts to try to fix flawed social systems to better serve people in need.

That finding in a report from the Foundation Center on the impact of the 2008 financial crisis on social-justice funding is particularly troubling because our deeply-afflicted economy has put vulnerable populations at even greater risk.

Social-justice grantmaking in 2009 fell to below 2007 levels, and likely still will trail 2008 levels in 2015 if funders do not see five years of above-average investment returns, says the report, Diminishing Dollars.

So in addition to the pain it has inflicted on people in need, the broken economy is making it tougher for nonprofits that work for systems-change to secure the funds they need to do their work.

And in the face of escalating and interconnected social and global crises, the nonprofit perspective in the often-corrosive debate about systems-change is indispensable.

Working in the trenches of society, nonprofits see first-hand the damage its broken social systems inflict on vulnerable people, as well as the obstacles those systems create for needy people to help themselves.

And nonprofit policy groups serve as the civil society’s research-and-development arm.

Foundation support is important, yet foundations accounted for only 14 percent of the nearly $291 billion in charitable giving in the U.S. in 2010, with nearly half of foundation giving coming from family foundations.

And data on social-justice funders sampled in a separate report from the Foundation Center, show their giving totaled only $3.1 billion in 2009, down from $3.7 billion in 2008.

So with foundation support shrinking from an already-small base, the challenge for nonprofit groups engaged in policy work is to better identify and tap private resources in the social economy that can be used for social good.

To address rising demand for the work they do, all nonprofits, not just those involved in policy work, face huge challenges in strengthening their organizational “capacity,” including the need to stop treating fundraising as a business transaction and build more meaningful partnerships with individual donors, foundations and corporations.

Policy work is difficult, messy and thankless, and it is essential that nonprofits be able to make a clear and compelling case that helps donors and funders understand social and global problems, and see how supporting their organization will help address those problems.

That requires even more work on the part of policy groups to understand funders’ values, the causes they care about and the problems they face.

Doing a better job understanding and connecting with donors and funders not only can produce greater investment in policy work, but also can help build the networks of individuals and organizations that will be needed to truly fix the broken social systems in our damaged society.

Foundations, business adapt for impact

2011-12-12T05:28:00.000-05:00

By Todd Cohen

Foundations and corporations increasingly are recognizing they can have a bigger impact on causes they care about if they make full use of their assets.

That is good news because the social economy needs to grow to address social and global problems that are accelerating in the face of escalating economic, political and environmental crises.

Foundations, which can be maddeningly slow to adapt to economic and social change, and pig-headedly resistant to changing the way they do business, increasingly are moving beyond making grants and also making loans and investing in capital markets.

And corporations, which in recent years have tried to align their philanthropy with their business strategy, now are beginning to look at ways to use all their assets to invest in causes that will help address social and global problems that also represent big obstacles to their own bottom line.

‘Mission investing’

With the model for using private assets for public good evolving quickly, a growing number of foundations are pursuing “mission investing” to achieve a social benefit.

Private foundations are required by law to pay out at least 5 percent of their assets each year in grants and overhead costs.

In a healthy economy, foundations typically count on income they earn from investing their assets to cover that payout.

And they scream bloody murder when anyone suggests they be required to pay out a bigger share of their assets.

But with gloom and doom in the economy, more foundations seem to understand they can better advance the causes they care about by using more of their assets.

A recent report by the Foundation Center found that, among nearly 1,200 foundations that responded to a survey, 168 foundations with a total of over $119 billion in assets engage in some form of mission investing.

Half of those foundations, for example, hold “program-related investments,” or PRIs, often in the form of loans, loan guarantees or equity investments.

Those PRIs are derived from a foundation’s assets but count toward their 5 percent payout requirement.

Another 22 percent of responding foundations hold market-rate “mission-related investments,” or MRIs, that broadly support the foundations’ programmatic goals but do not count toward their required payout.

And 28 percent invest in both PRIs and MRIs.

‘Sustainable value creation’

A report earlier this year from Accenture and the Committee Encouraging Corporate Philanthropy called on corporations to do more to integrate social change into their business models to improve both their business and society.

Using a strategy known as “sustainable value creation,” the report urged companies to identify social and global problems that serve as obstacles to their business, and then take the same approach to addressing those problems that they take in addressing business problems, using all their corporate assets and smarts.

In the process, corporate social investing becomes a way to benefit society while also improving the company’s bottom line.

In the face of rising expectations from shareholders, growing demand for greater transparency, and the need for new sources of growth, the report said, companies should move quickly to find ways to combine their own interests with those of society.

Impact investing

With the wounded economy compounding social needs, prompting cuts in social spending by government, and creating fear and uncertainty on the part of donors and funders, the charitable marketplace needs to find ways to grow and tap private assets that are not being used for public good.

By moving beyond grantmaking and investing more of their assets to address critical social and global problems, foundations and corporations are helping to expand the social economy by looking for new ways to put private resources to public good.

That kind of innovation is critical to help make the social economy more productive in serving people and places in need.

Nonprofit capacity needs more investment

2011-12-05T05:29:00.001-05:00

By Todd Cohen

Nonprofits face a crisis in their organizational “capacity,” and their boards and funders need to step up to help address it.

Traditionally expected to do more with less, nonprofits are strained to the limit because of the wounded economy, with many of them at serious risk of failure.

Facing rising demand for services because the economy has hammered their clients, nonprofits also have had to cut their budgets, freeze or cut their staffs, salaries and benefits, and intensified the pressure on staffs already under stress and often headed toward burnout and the exit.

Yet instead of actively piloting their organizations through a storm that is setting off alarm bells, nonprofit boards keep hitting the snooze button.

Funders could be doing a lot to help, but many are preoccupied with their own agendas.

Individual donors are cautious in this uncertain economy and looking for ways to be more involved in causes they care about and to have a greater impact.

A growing number of foundations are looking for “evidence-based” programs that make a big impact.

And corporate givers are looking to invest in causes that will have a big impact on social and global problems that also represent big obstacles to their own bottom line.

An effective way for individual and institutional donors to increase their involvement with nonprofits, as well as their impact on causes they care about, is to invest in building the capacity of nonprofits.

And nonprofits face a long list of capacity challenges.

· * A mass exodus is expected among executive directors because of retirement, burnout and lack of board support, although the ailing economy may prompt some leaders to delay their departure.

· * Boards, often selected and serving for the wrong reasons, lacking a clear sense of their role and responsibilities, and typically clueless, need rigorous training and development.

· * Focusing on delivering services and making ends meet in the face of rising demand from clients and heightened caution and expectations from funders, nonprofits often short-change the need to plan strategically.

· * Nonprofits have become perpetual fundraising machines yet often treat donors as automated teller machines and fail to take the time to get to know their donors, cultivate them, engage them in their organizations, and help them see the connection between supporting the nonprofit and addressing the causes they care about.

· * Individual donors, foundations and corporate-giving programs want nonprofits to measure the impact of the grant funds they receive, yet few nonprofits are equipped to track and make sense of impact metrics.

· * Telling their story and communicating with donors, funders, partners, sponsors and clients is critical for nonprofits, yet they often lack the time and know-how to develop and practice he communication skills they need.

· * Nonprofits face huge challenges in acquiring and making productive use of technology to help run their back-office operations, and handle their fundraising, marketing and communications.

· * Funders increasingly want nonprofits to form partnerships to qualify for grants, but collaborating is hard work and requires a lot of time and resources.

· * Nonprofits are highly complex organizations, yet donors and the media typically expect people who work for nonprofits to take a vow of poverty, a model that is not realistic if nonprofits expect to attract the professionals nonprofits need.

· * Policy work and advocacy are critical tasks for all nonprofits, yet they typically shun it either because they lack the time or expertise to get involved, or because they believe they are not supposed to be advocates or fear that engaging in policy work may be too controversial and will upset their funders.

Building all or any of that capacity requires resources, and nonprofits boards should be working hard to help their organizations secure those resources.

Nonprofits also should be working to help funders understand their need for support to build their capacity.

And funders should be working to move beyond their default position of demanding too much of nonprofits while providing too little support.

While demanding that nonprofits measure their impact, for example, too few funders provide the funds to help pay for that measurement.

Nonprofit boards and philanthropic funders can take a big step in helping to address the urgent social and global problems we face by making significant investments that help nonprofits build their capacity to operate more effectively, efficiently and strategically in serving people and places in need.

Recruiting the next great generation

2011-11-28T05:32:00.001-05:00

By Todd Cohen

Ripped apart by a culture of greed and blame, the U.S. has become its own worst enemy, and we need a commitment to public service to help make ourselves whole again.

After its struggle and sacrifice during the Great Depression, “the greatest generation” defeated the Axis powers in World War II and powered the post-war economic boom.

But despite our economic and military might, we have lost our way, trapped in a self-fulfilling cycle of fear, hate, intolerance, finger-pointing, self-absorption and a righteous and unearned sense of entitlement.

Despite the mess we are in, Tom Brokaw, the former NBC News anchor and author of “The Greatest Generation,” has hope that the U.S. can reclaim its greatness.

We have failed as a people since 9/11 and during the current economic crisis to make anywhere near the kinds of sacrifices the men and women in our military have made in fighting a series of wars in the Gulf, Brokaw told nearly 650 people Nov. 18 at the Shelton National Leadership Forum at N.C. State University.

“It’s time for the rest of us to re-enlist as citizens,” Brokaw said at the Forum, created by Gen. H. Hugh Shelton, a North Carolina native and N.C. State graduate who served as chairman of the Joint Chiefs of Staff.

Brokaw proposed that six public-service academies be created, possibly at land-grant universities such as Cornell and Colorado State.

The academies, the civil equivalent of our military academies, would offer three-year fellowships supported through public-private partnerships.

Enrollment in the fellowships, Brokaw said, might be modeled on service in the Israeli Defense Forces, where national military service is mandatory for all citizens over age 18.

So fellows would serve after completing high school and before enrolling in college, and fellowships would include or be followed by service abroad.

Graduates of the academies, like people mustering out of the Israeli Defense Forces, Brokaw said, would be more mature when they enrolled in college, having learned important life lessons and critical skills such as managing risk and serving on a team.

Graduates of the academies also would function as a kind of “diplomatic special forces,” he said, sharing the best values of our society and culture with people in other countries, while learning about their culture and sharing what they learn when they return home.

Brokaw said America is under siege, both at home from the divisiveness in our society and politics, and abroad from fiercely competitive economic powers like China.

That competition, he said, is the economic and cultural equivalent of war.

And a key way to wage that war is through public service and the kind of sacrifice and commitment “the greatest generation” made to make America whole again after the devastation of the Great Depression and World War II.

So ultimately, Brokaw said, we need leadership.

Brokaw characterized our need for leadership by quoting the demand, if not the plea, from one of his young granddaughters when she was alone with her sister in a cabin during a camping trip while he and his wife were outside the cabin sleeping under the stars: “We need an adult – now.”

Philanthropy without borders emerging

2011-11-21T05:31:00.001-05:00

By Todd Cohen

The players are shifting and the lines are blurring in the “social economy,” creating big challenges and opportunities for people who care about social change.

At stake is the way private assets will be used for public good, whether through charitable giving, “impact investing” in the capital markets, or political advocacy and policy work.

Social investors increasingly are focusing assets on what they believe will be the most effective strategy for helping people and places in need, and are looking for results and not worrying about which sector an effective social-change organization happens to occupy.

The challenge for charities is to make sure that they not only are effective but also can help make investors’ assets more productive by teaming with other organizations, regardless of sector.

Those critical issues were addressed recently at a Children’s Investment Summit in Charlotte, N.C., by Lucy Bernholz, managing director of Arabella Philanthropic Investment Advisors.

“The way we make change happen has expanded, diversified,” Bernholz told about 50 funders and children’s advocates at the event, which was organized by the Council for Children’s Rights.

Social investing

Building on the traditional investment of individual donors, charitable foundations and corporate giving, and the work of nonprofits, Bernholz said, the social economy in the past 18 months has experienced a “sea change.”

What has emerged is a marketplace of rapidly-growing choices and opportunities for individuals and companies “to engage directly in how they can use their resources to advance social good,” she said.

Investors in the capital markets, for example, increasingly are screening their portfolios to “align with their values,” she said, either investing in companies with social values they share or shunning those with values they oppose.

In a global market worth $7 trillion, that rapidly-growing breed of social investor can be a powerful force for social and global change.

And a growing number of states have passed laws that allow the incorporation of “benefit” corporations that have the twin goals of advancing a social cause while building shareholder value.

That approach, designed to make it easier for the companies to raise capital while eliminating the risk to their directors from lawsuits claiming the companies’ pursuit of social goals weakens shareholder value, likely will produce a “train-wreck” confrontation with traditional nonprofits, Bernholz said.

Convergence

The battle will be over, on the one hand, preserving the traditional definition and form of nonprofits, as well as the public policy that encourages charitable giving and, on the other hand, whether effective for-profit companies that have a social mission should have to compete against ineffective organizations that get a tax-exemption.

The convergence of sectors in the social economy is not a big issue for young entrepreneurs with a social mission, Bernholz said, because as long as their investment makes a difference, that increasingly effective and influential group of social investors do not care whether they invest in for-profit organizations or nonprofits.

Data and metrics

What social investors increasingly want, Bernholz said, are data and metrics that show the impact of a social program.

Data not only help a nonprofit or social venture tell its story better, but are critical to securing social investment, she said.

“You can’t grow the marketplace without measuring,” she said.

And today’s investors expect data to be available, she said, so nonprofits and social enterprises need to share information and be transparent about who they are, where they get their money, what they do, and their impact.

Philanthropy’s limits

Undermining the role of traditional philanthropy in the new social economy is the fact that philanthropy has “vastly oversold itself,” Bernholz said.

When private philanthropy agrees to try to help offset cuts in public spending for programs like those that have been eliminated in public schools, for example, it creates a “substitution effect,” she said, with taxpayers and government then taking it for granted that tax dollars no longer are needed for those programs.

And private philanthropy cannot begin to replace government funding to address basic public needs such as education, transportation and law enforcement.

“Philanthropy can’t do it all,” Bernholz said.

Leveraging

What philanthropy can do is try to leverage its assets, working in partnership not only with nonprofits and other charitable funders but also with for-profit companies and with government, and getting involved in policy work and advocacy.

Philanthropy, Bernholz said, “only makes a difference it if influences other resources.”

Another big trend in the social economy is the growth of private investment in political advocacy, a trend that got a big boost from the U.S. Supreme Court in 2010 in the landmark Citizens United decision that expanded the role corporations and unions can play in funding political broadcasts in candidate elections.

In the face of all these converging forces in the social economy, nonprofits need to be much more focused, strategic, collaborative, efficient and effective.

Showing impact

Regardless of its size and shape, and whether it lives in the nonprofit, for-profit or political world, a social enterprise that wants to attract social investment needs to be able to make a difference, show its impact and tell its story.

And despite seemingly overwhelming social and global problems, social investors still can make a big difference, regardless of the vehicle in which they choose to invest.

The key for them will be to picking social-change organizations that show they can make an impact on a particular cause by making productive use of the investment they get, and using that investment to build partnerships and secure additional resources to address that cause.

A manifesto for smarter fundraising

2011-11-14T05:39:00.001-05:00

By Todd Cohen

Nonprofits are consumed, often unproductively, with fundraising.

They frequently invest precious dollars to hire the wrong people to chase the wrong money from the wrong donors using the wrong sales strategies and pitches.

It is no wonder that over the past 40 years, charitable giving in the U.S. has barely budged from its 2 percent share of average household disposable income after taxes.

Now, based on ideas from several gatherings of nonprofit leaders, researchers, consultants and vendors, two philanthropy scholars at Indiana University have produced a report that calls for a much-needed overhaul of the fundraising business.

In the report, Growing Philanthropy in the United States, Adrian Sargeant and Jen Shang call for sweeping changes to build fundraising through creating more meaningful and productive donor relationships, focusing on audiences and fundraising strategies that can grow, improving fundraising training and development, and building public trust in nonprofits.

“Forty years of increasingly sophisticated fundraising practice, the development of planned giving vehicles, the appearance of the Internet, and the rise of new digital channels have done nothing to move the needle on giving,” they write.

The report, released by Blackbaud and the Hartsook Institutes for Fundraising, offers a slew of recommendations, all aiming to improve fundraising so it can grow giving.

Donor relationships

High on the list of the report’s criticism of fundraising are ways fundraisers operate and deal with donors.

Fundraisers treat donors as “piggy banks” and focus on performance measures such as response rates, immediate return on investment, and total amounts campaigns raise, an approach that is obsessed with metrics and is “crippling” the long-term performance of fundraising programs, the report says.

In their annual funds, for example, charities lose well over half their supporters between the first and second donation, and 30 percent a year from then on.

The sector “remains too focused on donor acquisition, content simply to refill an increasingly leaky bucket and ignoring opportunities to build meaningful relationships with supporters over time,” the report says.

Instead, it says, nonprofits should focus on increasing donor loyalty and retention by emphasizing the values of donors and the impact they can have, and giving them greater control over the relationship with the charity.

Charities also need to recognize the value of their fundraising programs.

To address turnover rates that typically can total 30 percent a year among staff, for example, nonprofit CEOs and boards need to show their fundraisers the respect they deserve.

Charities also must reorganize their fundraising operations; integrate separate programs for annual, major, campaign and planned giving; build collaboration among fundraising staff; promote shared back-office facilities; and support a longer-term approach rooted in stewardship and not driven by short-term and “siloed” metrics that “will only be counterproductive.”

Public trust

Growing philanthropy requires developing public confidence in charities, the report says.

No nonprofit that reports public donations, for example, should claim to have zero costs of fundraising, the report says, and leaders inside and outside the nonprofit sector that promote “inappropriately low ratios and pretend that this is somehow good business” should be challenged the report says.

“Fundraising should be regarded as an investment” that must be properly reported, it says.

It also calls for nonprofits in different fields and subsectors to create their own range of performance metrics, and for trade groups to map out and enforce best-practices codes for each form of fundraising and bar from membership any professionals who fail to meet those standards.

New giving

Charities need to encourage monthly giving, do a better job of engaging young people, promote best practices in social media, and encourage asset-based giving, the report says.

Cash, for example, represents only 7 percent of the average American’s wealth, according to estimates, so assets represent 93 percent of a person’s giving potential and are “largely untapped by fundraisers” who mainly continue to ask for cash.

Charities also need to do a better job asking for bequests, says the report, which also says the passing of the Baby Boomers will result in a “massive drop” in annual giving.

Over 80 percent of Americans will support nonprofits during their lifetimes, yet only about 8 percent will do so on their death, says the report, which calls for nonprofits to encourage every category of supporter to consider making a bequest or gift in their will.

“Responsibility for securing outright ‘gifts in wills’ must be wrested from planned-giving departments and promoted as a core form of giving in all categories of supporter,” the report says.

It also calls for encouraging wealthy people to “think through for themselves what might constitute an appropriate portion of their wealth to give away,” rather than “scolding” them.

Training and development

The quality of fundraising training and development also needs to improve, the report says.

Foundations, for example, should invest in research that aims to help grow giving and benefit the sector as a whole, says the report, which also calls for creating the field of “donor behavior,” growing giving by “enhancing the quality of the donor experience,” and establishing a research institute to focus on fundraising and serve as a research-and-development department for the sector.

Existing systems of professional development and certification for fundraisers need to make “knowledge of donor behavior” central to a career in fundraising, while undergraduate programs in fundraising should be developed, and all masters’ programs in nonprofit management should include a required module on fundraising.

The report also calls on colleges and other institutions that offer fundraising certificates to “label what amounts only to a certificate of attendance as exactly that.”

Teaching and learning resources also need to be developed and made available to help boards overcome their “endemic lack of understanding of how to fundraise,” a gap the report calls “the critical barrier to developing philanthropy in the U.S.”

What next?

Sargeant and Shang say they will set priorities among their recommendations and assemble working groups to develop action plans to put them into effect.

But nonprofits and foundations can begin immediately to better understand the fundamental role that fundraising plays in advancing their mission, the fundamental flaws in the way charities raise money, and the fundamental need among donors to have deeper, more meaningful and more engaged roles with causes they care about.

In short, nonprofits and foundations need to reinvent the way they work with donors, and invest greater attention and resources to growing philanthropy so they can more effectively serve people and places in need.

Filling charities’ leadership gap

2011-11-07T05:29:00.002-05:00

By Todd Cohen

The charitable marketplace is thin on leadership, and needs a quick infusion.

Smart, effective and passionate managers are helping many nonprofits and philanthropies stay afloat in an economy and society hurtling toward chaos.

But the spark that distinguishes leaders from managers is in short supply.

Leadership is a widely touted concept, and everyone seems to have a different take on what it means and who has it.

Amazon, for example, lists over 72,500 “leadership books,” many of them written by retired sports coaches, retired military leaders, and self-anointed leadership gurus.

But the proof of leadership lies not in theory or feel-good prescriptions but in the results that leaders produce.

And a key to understanding why leaders succeed is to understand how they think and work.

Two articles The New York Times published October 29 offer perceptive insights into leadership by looking at leaders who achieved extraordinary business success.

In “The Genius of Jobs,” Walter Isaacson says that what distinguished the late Steve Jobs was his intuition, “based not on conventional learning but on experiential wisdom.”

Isaacson, author of a new biography of Jobs, says the maestro of Apple combined “an appreciation of the humanities with an understanding of science,” was “emotionally attuned” to his staff and to consumers, could “intuit the relationships between different things,” and was able to execute on his vision.

In the second article, “What’s Luck Got to Do With It?”, Jim Collins and Morten T. Hansen say highly successful business leaders are able to generate a high “return on luck,” good or bad.

Based on an examination of 230 “significant luck events” their subjects experienced, Collins and Hansen found that the big winners were not generally “luckier” than other leaders they studied.

While good and bad luck happens to everyone, they say, those like Microsoft’s Bill Gates who achieve extraordinary success “recognize luck and seize it.”

And while getting a high return on good luck is “essential,” getting a high return on bad luck can be a “truly defining moment” if a leader takes hold of it and transforms it into an opportunity, Collins and Hansen say.

So at a time of economic, social and global crises that have unleashed massive instability throughout the charitable marketplace, we need leaders with vision, intuition and the ability to identify, grab and run with opportunity.

Charities are living on the edge, their staffs stressed, their capacity strained, and their boards on auto pilot.

Donors are cautious and looking for involvement and impact, foundations are looking for evidence-based programs with a lot of impact, and corporate givers are looking to invest in causes that will make a big impact on social and global problems that also represent big obstacles to their own bottom line.

To thrive, nonprofits need more than just good managers; they need leaders with vision and intuition who can recognize big problems, both in their organizations and in their communities; identify and connect seemingly unrelated resources and strategies; and inspire people and partners who can work together and invest in addressing those problems.

Whether they are paid employees, volunteers or board members, charities need leaders with the vision to transform random luck into the opportunity to make a big difference in helping people and places in need.

Nonprofit power brokers cry wolf

2011-10-31T04:30:00.000-05:00

By Todd Cohen

The big players in the charitable sector are moaning and groaning again, this time over proposals by the Obama administration to trim the charitable tax deduction for wealthy Americans, and to raise their marginal income tax rates, proposals the big players say would damage nonprofits and their clients.

But new studies suggest the sector’s power brokers, as they tend to do, are overstating their case in an effort to protect the assets and interest of the big organizations and donors they represent.

Diana Aviv, president and CEO of Independent Sector, a trade group that counts big nonprofits and foundations among its members, told Congress this month that reducing the value of the charitable deduction for taxpayers earning over $200,000 a year would “blunt the impact of services across the sector,” and that reducing incentives to give would “hurt all charities and the people they serve.”

And the Council on Foundations, along with 148 foundations, told lawmakers the proposed cap on itemized deductions would have a “severe impact on charitable organizations and would greatly impede the work they do for the millions of Americans who rely on their vital programs and services.”

But a new study, conducted by the Center on Philanthropy at Indiana University and sponsored by Campbell & Company, concludes the proposals, by themselves and in the short-term, likely would result in a “relatively modest decline” in charitable giving.

A separate study, by Fidelity Charitable, finds that despite continuing economic challenges, American donors “remain committed to charitable giving” and are “planning ahead for it and giving even when there is no expectation or incentive to do so.”

And a third study, by Changing Our World, says that with state and federal funding shrinking, nonprofits should be retooling their finances and programs while also developing a culture of innovation that will help them adjust to future financial crises.

In peddling fear by claiming the Obama proposals will cripple fundraising throughout the nonprofit world, the big trade groups in the charitable marketplace are misusing and misleading small, community-based nonprofits and their clients that have been hit hard by an economy defiled by corporate greed.

Sadly, and shamelessly, those trade groups are using small nonprofits and their clients as a human shield to protect the wealth of the richest Americans, and the big philanthropies they create and support, at the expense of proposed social programs that aim to address the urgent needs of the same vulnerable populations the trade groups say their well-endowed patrons care about.

In a recent blog, Rick Cohen, national correspondent at The Nonprofit Quarterly, characterized the “dire warnings of a nonprofit catastrophe” by the nonprofit sector’s leadership as “hardly a ‘profile in courage’ moment” and “just embarrassing.”

Whenever they get a whiff of efforts to more tightly regulate big philanthropy, the big trade groups for nonprofits and foundations stomp their feet.

They act, Cohen, says, “sort of like a traditional old special interest.”

Several years ago, those trade groups squealed like stuck pigs over moves in Congress to better police the sector, which harbors its fair share of organizations hooked on wealth, power, excess and cronyism but remains virtually unregulated.

The findings from the study by Fidelity Charitable simply reflect the fact that true philanthropists, regardless of the size of their income, bank account or donation, give because they want to help people and places in need, not because they are looking for ways to save money on their taxes.

Instead of engaging in scare tactics that exaggerate the potential impact on nonprofits of proposed reductions in tax breaks for wealthy Americans, the sector’s leadership should be looking for ways to help nonprofits better adapt to a changing world and shrinking government support by developing new partnerships and revenue sources, better engaging donors, and helping donors see that their support will help address urgent social and global problems.

Civic engagement tied to economic resilience

2011-10-24T04:34:00.000-05:00

By Todd Cohen

Volunteering may be good for the economy.

A new report by the National Conference on Citizenship says that states with higher levels of civic engagement are more resilient against unemployment.

The report looked at eight economic factors likely to predict unemployment since 2006, as well as five measures of civic engagement, including volunteering, attending public meetings, working with neighbors to address community problems, registering to vote, and voting.

States and localities with more civic engagement in 2006 saw less growth in unemployment between 2006 and 2010, the report says.

An increase of one point in volunteering, for example, was associated with 0.192 point less unemployment when the economic factors were controlled.

While the correlations do not prove that civic engagement lowers unemployment at the state level, and there are other explanations for those correlations, the report says, civic indicators strongly predicted unemployment change, while none of the economic factors were significantly related to employment change.

A possible explanation for those relationships is that “having stronger civic health helps states weather recessions better,” the report says, adding that research “supports the plausibility of this hypothesis.”

The report says research has found that participation in civil society “can develop skills, confidence, and habits that make individuals employable and strengthen the networks that help them to find jobs.”

Research also has found that people get jobs through social networks, and that participating in civil society spreads information and is strongly correlated with trust in other people, the report says.

And research has found that communities and political jurisdictions with stronger civil societies are “more likely to have good governments,” and that civic engagement can “encourage people to feel attached to their communities,” the report says.

“Investors may be more willing to create jobs locally if they trust other people and the local government, if they know about opportunities and can disseminate information efficiently, and if they feel that the local workforce is skilled,” it says. “All these factors correlate with civic engagement.”

A recent report by the Corporation for National and Community Service, and the National Conference on Citizenship, found that Americans continue to play and active role in civic life and to work with others to improve their communities.

Between 2008 and 2010, 62.7 million Americans, or 26.5 percent, volunteered with an organization, says the 2011 Civic Life in America Report, while 20 million, or 8.4 percent, worked with a neighbor to fix a community problem.

Volunteers are the lifeblood of the charitable marketplace, and are indispensable to the work of nonprofits and the effort to make our communities better places to live and work.

While the idea that volunteering and other forms of civic engagement are good for the economy may be “circumstantial, suggestive and far from conclusive,” as the National Conference on Citizenship concedes, that idea makes a lot of sense.

Either way, volunteering matters and makes a big difference in our communities.

Board role key to assessing impact

2011-10-17T04:33:00.001-05:00

By Todd Cohen

Foundations are falling short, yet again, carrying out the work they also are demanding from nonprofits.

Nonprofits in recent years have faced escalating demand from foundations to measure the impact of their work.

That is a reasonable expectation because, by tracking and understanding the difference they make, nonprofits can figure out how to do an even better job while also showing funders the results they can expect from investing their dollars.

But while making that demand of nonprofits, foundations are not doing as much as they can to gauge their own impact.

So foundations are wasting a big opportunity to better understand and improve the effectiveness of the strategies they use to invest in their communities.

Among 173 CEOs of U.S. foundations making at least $5 million in grants a year who responded to a recent survey by the Center for Effective Philanthropy, over 60 percent say too few foundations understand their overall performance, and 56 percent say nonprofits should be held to higher standards of evidence to show the effectiveness of their work.

While foundations are doing more than they did a decade ago to assess their performance, the report by the Center says, “we still do not understand the degree to which foundations’ efforts to assess their effectiveness result in genuine changes that lead to heightened foundation impact.”

Over half the CEOs surveyed want their boards to be more involved in assessment, with nearly three in 10 saying the biggest obstacle to greater board involvement is a lack of understanding of the issues areas their foundations address.

“The challenge of how best to engage boards in the important work of performance assessment is not simply about involvement for the sake of involvement,” the report says.

“CEO’s who report impediments (other than resource allocation) to board involvement in assessment,” it says, “tend to believe that their boards have a less accurate understanding of the impact the foundation is having on the communities and fields in which it works.”

Assessment is important for nonprofits and foundations alike because it can serve as a guide to working smarter and, for nonprofits, as a tool to help secure the resources it needs.

To make assessment work, nonprofits and foundations need their boards to understand the value of assessment and to be engaged, strategically and in a meaningful way, in the job of making it work.

Assessment also can take significant time and resources.

So nonprofits should be building those costs into funding requests they make to foundations.

And foundations should be including those costs in the grants they make, while building into their own budgets the cost of assessing their own work.

Ultimately, assessment matters because it can help foundations and nonprofits better serve people and places in need.

Nonprofit leadership needed

2011-10-10T04:33:00.000-05:00

By Todd Cohen

Nonprofits need to lead, and quickly.

At home and abroad, we face serious threats from multiple, cascading crises, including shattered economies and financial systems; toxic and gridlocked politics; poverty, disease and illiteracy; global terrorism; natural and ecological disasters; and, in the U.S., a culture infected with greed, blame and intolerance.

Missing in action in taking on those problems is leadership, a role that nonprofits can and must play.

Yet with the social and global needs they exist to address escalating rapidly, nonprofits themselves are stressed and increasingly broken by crises of their own over who will lead them, the role their organizations should play, and the business models they will need to survive and thrive.

The challenges facing nonprofits are huge, and meeting them will require leadership that is exceptional.

Nonprofits need leaders who can help rebuild their organizations; set a vision for what they aspire to accomplish; and identify and develop partners and supporters they will need to effectively take on community problems.

But nonprofits as organizations also need to be leaders.

In a speech last month at the annual conference of the N.C. Center for Nonprofits, James Joseph, former U.S. ambassador to South Africa and a former president of the Council on Foundations, urged nonprofits to help fill the void in the U.S. in moral leadership.

To do that, nonprofits need to shape a “post-crisis narrative” about the role they will play, get over their “fear of public life” by getting involved in policy work and public debate, and recognize that their assets consist of more than simply financial capital, said Joseph, a professor emeritus of the practice of public policy at Duke University.

The nonprofit sector is the “custodian of values and resources,” and the “conscience of our democracy,” he said, and should serve as an “independent moral voice” and develop messages to “build the national will” in addressing the urgent problems we face.

To be effective leaders for social and global change, however, nonprofits first need to get their own shops in order.

Also last month, at the first session of the second annual course offered by the Leadership Gift School, an initiative in Charlotte, N.C., to build the philanthropic culture of local nonprofits and the community, fundraising consultant Karla Williams told teams of staff executives and fundraisers from a dozen local nonprofits that leadership and philanthropy are “philosophically intertwined,” rooted in an innate desire to fix a problem or improve a cause.

So truly advancing a nonprofit’s mission requires a business model that integrates strategies for building the capacity of the organization and for serving the community.

That requires leaders who can build relationships and communicate, both within their own organizations and in their communities.

Leaders, whether individuals who lead organizations, or organizations that exercise moral leadership, can lead effectively if they can and will listen, share, include, think ahead, and take risks that make sense.

Leaders in the nonprofit sector must help develop and share the story of the community needs their organizations address.

They must develop partners and supporters who care about community and can work together to identify critical assets and resources, and put them to productive, innovative and collaborative use.

Sadly, many nonprofits lack true leaders and themselves fail to lead, stuck in the mindset that they and their causes are victims.

Instead, nonprofits need to look for ways to grow and partner, and to find the community assets they can use and share to make a difference.

At the Leadership Gift School, Williams cited Max De Pree, former CEO of Herman Miller and author of Leadership is an Art.

The first job of a leader, he said, is to “define reality,”

The second is to be a “servant.”

To successfully navigate today’s crises, nonprofits must step up and lead by telling the story of the urgent social and global problems we face, and serving their communities by shaping the vision, and developing the partnerships and resources, needed to fix those problems.

Fundraising should be about community

2011-10-03T04:33:00.000-05:00

By Todd Cohen

To raise money in the deepening economic gloom, nonprofits need to work harder to better understand donors, educate them about urgent community needs, and help them see how supporting their organization will help address those needs.

And community problems are escalating as the broken economy hurts a growing number of people who then turn to nonprofits for help.

So in addition to rising costs, anxious donors and uncertainty about the best way to raise money, nonprofits also face growing demand for services.

Three recent reports suggest the fundraising climate will continue to be bleak, while two others suggest the best fundraising strategy will be to connect donors to community needs in ways that reflect a deeper knowledge of donors and their interests and values.

In June, Giving USA reported charitable giving grew slightly last year after dropping for two straight years, but that it still trails pre-recession levels.

And if its growth continues at last year’s pace, giving still could take five to six years to return to pre-recession levels, according to Patrick Rooney, executive director of the Center on Philanthropy at Indiana University, which prepared the report in partnership with the Giving USA Foundation.

The Philanthromax Atlas of Giving also reported last spring that while giving grew in April from the previous month and from April 2010, it would begin slowing in June and keep dropping throughout the year.

Finally, a recent study conducted by Campbell Rinker for Dunham+Company reported that nearly seven in 10 Americans would give less to charity in coming months, and one in 10 planned not to give until the economy begins to recover.

Now, two new studies suggest the kinds of approach nonprofits should take with donors.

The 2011 Fundraising Effectiveness Survey Report, an initiative of the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute, says nonprofits did a better job acquiring and keeping donors in 2010 but continued to lose money because they lost donors and secured gifts that were smaller than in 2009.

Andrew Watt, president and CEO of the Association of Fundraising Professionals says nonprofit lose nearly 60 percent of their donors each year and depend heavily on new donors, a dynamic that represents one of their biggest challenges.

Because it costs a lot less to keep and “inspire” existing donors than to find new donors, he says, “charities should focus on stewarding their current donors and reducing losses there.”

The other new report, by the Center for Effective Philanthropy, finds a “gap between rhetoric and reality” in the strategies community foundation use to work with donors, a gap that may be driven by competition for donors and may result in “a focus on donors as an end in itself rather than as a means to an end.”

In contrast, the report says, community-foundation CEOs who are strategic “seek to educate and inform donors, rather than being simply responsive to what donors prefer.”

One lesson from all these reports is that nonprofits should stop wasting time pandering to donors or treating them like automated teller machines, particularly in this grim economy, and instead should be working hard to get to know donors, help raise their awareness of community needs, and show them how supporting their organization can make a difference in helping to fix community problems.

Benefiting the public can be good business

2011-09-26T04:39:00.000-05:00

By Todd Cohen

A growing number of businesses are expanding how they gauge their bottom line, counting not just profits but also their social and environmental impact.

And a small but growing number of states are changing their laws to make it easier for those kinds of companies to incorporate.

Laws that let for-profit companies that have the dual goals of maximizing shareholder value and making a positive social impact incorporate as “benefit corporations,” or “B corps,” have been enacted in Maryland, Virginia, New Jersey, Vermont and Hawaii, and are in the works in New York, California and North Carolina.

Under traditional state laws, boards of directors of companies that do not focus only on maximizing profits put themselves at risk of challenges from shareholders.

The new B-corporation laws, however, let boards set social goals in addition to maximizing profits, and require B corporations to prepare an annual report spelling how they carry out their public-benefit purposes.

The laws also would require the board of a B corporation to include an independent director who would have to certify annually that the company acted according to its public-benefit purposes.

In North Carolina, where the state Senate this year unanimously passed a bill to let B corporations incorporate in the state, the state House is expected to take up the bill in its short session that begins next May.

The bill is based on model legislation promoted by Pennsylvania-based B Lab, a nonprofit that receives significant support from the Rockefeller Foundation.

The measure was introduced by Republic and Democratic leaders in the N.C. Senate, and has been endorsed by a broad range of companies and organizations, including the Chapel Hill-Carrboro Chamber of Commerce and the N.C. Center for Nonprofits.

Kevin Trapani, president and CEO of The Redwoods Group, a North Carolina-based insurance provider that focuses on YMCAs, Jewish community centers and nonprofit resident camps, says the proposed legislation would provide an important protection for companies that make it part of their business to provide a public benefit.

B corporations, he says, provide a “competitive but more sustainable return to investors” than do traditional companies motivated by having to produce short-term financial results.

B corporations also provide a return to the community by providing a “more stable employment environment,” he says.

People who run those kinds of companies “are not going to want capital that will require them to run their businesses in a way that conflicts with their values,” Trapani says. “This bill enables us to attract capital and recognize multiple stakeholders.”

A company that is “built to recognize a balance of interests between multiple stakeholders – including shareholders but also customers, employees, the environment, the community – puts itself at risk when it makes balanced decisions,” he says.

By removing that risk and requiring that B corporations pursue a public benefit into addition to maximizing shareholder value, Trapani says, the bill would help create jobs because it would “allow community-focused companies to grow by giving them access to capital that aligns with their mission.”

Finally, he says, B corporations provide a return to the public “by passing on fewer costs to the community at large.”

Traditional companies “have learned how to private profits while socializing costs,” Trapani says.

Large companies, for example, typically provide health benefits “to as few as possible of their employees in order to maximize profits, thereby passing on the costs for adequate access to health care for their employees to the taxpaying public,” he says. “Socially-conscious companies don’t do that. We simply look at it in a more balanced ways.”

Rather than passing on those costs to taxpayers, he says, a socially-responsible companies that wants to provide its employees with adequate access to health care needs to bear the costs of that health insurance.

In the turbulent and troubled economy, nonprofits are looking for ways to be more business-like and entrepreneurial, and businesses are looking for ways to be more socially responsible.

The Committee Encouraging Corporate Responsibility, for example, is promoting a social-enterprise strategy known as “sustainable value creation.”

By applying their business thinking to their philanthropy, and using their philanthropy to address social problems underlying their business problems, the group says, companies can be more effective in their business and their philanthropy.

The growing interest in B corporations reflects the growing convergence of nonprofit organizations with an entrepreneurial focus and for-profit companies with a public-benefit focus.

Allowing the incorporation of this new kind of social enterprise should be good for business and good for our communities.

AFP aims to boost collaboration, education

2011-09-19T05:05:00.002-05:00

By Todd Cohen

Collaboration and access to information and education are the key components for successful fundraising, and the new chief of the Association of Fundraising Professionals wants the organization to help make the latest innovative thinking and research about fundraising more accessible.

The 30,000-member AFP offers a broad range of resources on its website, is part of a national research collaborative, and is working to expand its membership, particularly to younger professionals and college students, says Andre Watt, who served as deputy chief executive of the Institute of Fundraising in Britain before joining AFP in 2006.

For the past 18 months, he says, AFP has partnered with a handful of other leading philanthropic groups in a new initiative known as the Nonprofit Research Collaborative.

The Collaborative partners -- which also include the Center on Philanthropy at Indiana University, Center for Charitable Statistics at the Urban Institute, Council on Foundations, GuideStar and Blackbaud, and soon will include Giving USA – had been duplicating to some extent their respective research efforts and now aim to provide a common platform that anyone can use to find that information, Watt says.

Now, the Collaborative is set to launch its third survey.

Watt also says the charitable marketplace is best served by a range of approaches to professional development, including various options for certification, as well as academic programs.

AFP, for example, has made a huge investment over the years in the U.S. in the voluntary Certified Fund Raising Executive professional-certification program, or CFRE, which focuses on helping fundraisers “identify a body of knowledge” and “demonstrate that they are aware of and understand the body of knowledge,” Watt says.

In other countries, such as Britain, fundraisers seeking certification are asked “to demonstrate that you can apply the body of knowledge through testing,” he says.

Both approaches, Watt says, are valid and “attractive to difference audiences, and there are many ways that people can demonstrate an ongoing commitment to professional development.”

Younger fundraising professionals, for example, “are interested in learning but don’t necessarily perceive the value of certification,” he says, “so they want to demonstrate that they have a commitment to learning through educational programs and opportunities, but they don’t necessarily as yet feel that certification is the only way they can demonstrate that commitment.”

And a growing number of younger professionals are interested in academic programs that lead to a degree or diploma, including master’s programs.

“There is great value in certification but there also is great value in demonstration of commitment in undertaking a master’s degree, and the two things are not necessarily mutually exclusive,” Watt says. “Different cultures and different environments dictate different solutions to similar needs.”

He says he does not believe “there will ever be a market for one consistent approach” and that “there’s always going to be a need for different approaches.”

AFP currently is developing a three-year business plan focusing on its strategies for membership, its annual conference, and new products and services, and expects to present that plan to its board in October.

The primary focus, Watt says, will be to create a program “that is accessible to as broad a range of fundraisers as possible, and so the focus has to be on the new membership structure and on the communications around that.”

He says AFP hopes to continue to offer memberships to individuals, including through organizational memberships both to large and small shops.

And it plans to create a new membership program for young professionals, and to continue to develop collegiate chapters and educational programs.

In the two years since it launched its program on college campuses, AFP has enlisted 26 collegiate chapters.

Watt says the turbulent economy can be a promising time for fundraising.

“Times of extreme change are always times of great opportunity, and there’s seldom been a more exciting time for the fundraising professional than the one we’re in at the moment,” he says. “And if we see it as an opportunity to develop new and innovative approaches to our key audiences, we’ll look back at this as being one of the most influential moments in the last 50 years of fundraising.”

Fundraising needs innovative strategies

2011-09-12T04:39:00.001-05:00

By Todd Cohen

To continue to be effective, fundraising professionals in the U.S. no longer can rely only on their professionalism but must strive to be more innovative.

And with the economy leaving people anxious about giving, fundraisers need to be much more creative about how they approach donors, and to pay attention to the way charities in emerging markets have made innovative use of technology for fundraising in the face of limited organizational resources.

That is the view of Andrew Watt, the new president of the Association of Fundraising Professionals, or AFP.

Watt, a native Scot who served as deputy chief executive of the Institute of Fundraising in Britain before joining AFP in 2006, says the 30,000-member organization aims to make information and resources about fundraising more accessible to professional fundraisers, and to offer more options for them to become AFP members.

“What we’re trying to do is provide platform that gives access to as much new thinking as possible to fundraisers,” he says. “And we’re constantly exploring the ways in which they wish to access information.”

In the eyes of the world, the U.S. has been “an exemplar for fundraising,” Watt says, “but not for innovative or lateral thinking.”

Because the scale of the domestic market in the U.S. is so much larger than those in the rest of the world, he says, achieving growth of 1 percent or 2 percent in fundraising required individual nonprofits to be professional more than creative.

But that has changed, he says, because of a generational shift “that is going to lead to a more discriminating audience” that “wants to be wooed,” and because the unstable economy will require a much more focused approach to donors.

Younger generations have a different sense of “community value” then previous generations, Watt says.

“So they need to have a case made to them,” he says. “They need to have a value statement that wasn’t necessarily required before.”

As a result, fundraisers will need “to understand what it is those people are looking for from us,” he says. “We can’t just assume they are going to buy the message we are giving them.”

Fundraisers increasingly “need to understand what motivates them, the environment they live in,” Watt says. “We need to understand much more about the way in which they connect than we have done in the past.”

That means that the “old tried-and-trusted mechanism – direct-marketing, cold mail, telemarketing campaigns – are not necessarily going to work the way they have in the past unless we truly understand the messages we’re putting out there and how they fit with those people,” Watt says.

With the economic collapse hurting nonprofits and donors alike, he says, fundraisers in the U.S. can learn a lot from fundraising outside North America.

Using text-messaging and other technologies for fundraising has been tried and tested for many years in Latin America, the Asia-Pacific region and Eastern Europe, Watt says, “because all those have been emerging markets where the need has become very great, and therefore the corresponding need for innovation has been critical.”

In the past, fundraisers have “relied on professionalism,” he says. “Professionalism is no longer enough to carry us through. What’s needed is the innovation and creativity that we see in emerging markets throughout the world.”

Thriving, not just surviving

Despite the fact that the U.S. economy has been in free-fall over the past three years, North Carolina-based Habitat for Humanity of Forsyth County has pursued what at first glance might seem like the counter-intuitive strategy of looking for ways to grow.

To learn about steps nonprofits can take to thrive in tough times, please join the Philanthropy Journal on Sept. 21 for a webinar presented by Sylvia Oberle, executive director at Forsyth Habitat.

To register for the webinar, click here.

Nonprofits must invest in their leaders

2011-09-06T04:41:00.000-05:00

By Todd Cohen

Nonprofit executive directors and boards, and their funders, need to be smarter about professional development.

Sustaining nonprofits for the long term depends on leadership, which will require that executives and boards invest the time and resources to support, better understand and work with one another.

That investment, including support from funders, is even more critical in the current economic crisis, with 84 percent of nonprofits reporting they are financially weaker from the recession and 26 percent saying they pared their annual operating budgets because of reduced funding, according to Daring to Lead 2011, a new report by CompassPoint and the Meyer Foundation.

Based on an online survey in the fourth quarter of 2010 that generated responses from over 3,000 executive directors, the report also says executive directors are suffering from recession-related anxiety and burnout, and are delaying transitions out of their jobs.

It also finds that a significant minority of executives are “not deeply financially literate.”

And while they reported relatively high levels of financial oversight at the board level, compared with other potential aspects of board engagement such as fundraising or public policy, executive repeatedly said it was a challenge to get boards to full understand their organizations, with 39 percent saying that lack board engagement in strategic decision-making.

“Overall, the recession has underscored the endemic weaknesses in many nonprofit business models,” says a brief following up on the report. “The degree to which board leaders are partnering with staff on fundamental questions of business model and sustainability remains in question.”

While 91 percent of them are very happy in their jobs or have more good days than bad, the report found, executives tend to be more energized by job functions that focus outside the organization, yet they still struggle to spend enough time on them.

And while they had a lot of good impressions about their boards, most executives reported strong board participation in only a handful of areas, and most do not spend much time working with and supporting the board, despite evidence from the report that executive directors’ satisfaction with board performance shows a strong positive correlation with time spent supporting the board.

What is to be done?

A series of briefs following up on the report call for executives and boards, as well as foundation program officers, to improve their own financial literacy, and for boards to expand their role beyond financial oversight to include “deeper engagement in questions of sustainability.”

They also call for nonprofits to integrate into leadership development into the way their do business, including budgeting, mentoring, performance reviews and succession planning.

And they call for executives to invest more time supporting and working with their boards; for boards take steps to improve their performance, such as job descriptions and periodic training; and for funders to increase the attention they pay to boards and to become “more explicit in their expectations around effective governance.”

Nonprofits are serious business, and executive directors and boards need to make it their business to get the training and support they need to better understand their business and make it succeed.

For their part, funders need to understand that investing in the professional development of nonprofit executives and boards is essential if their organizations are going to survive and thrive.