PhilanTopic

Introducing the 'Open Places' Initiative

(Kenneth H. Zimmerman is director of U.S. programs for the Open Society Foundations. The post originally appeared on the OSF's Voices blog.)

Across the United States, local communities face an ever more challenging environment: dramatic shifts in federal and state funding, advances in technology, and large-scale demographic change. Each of these affects how low-income communities and communities of color are able to access political, economic, and civic opportunities. In response to these shifts, the Open Society Foundations is launching a new effort, the Open Places Initiative, to advance the ability of local communities to achieve equal opportunity and promote vibrant democratic practices.

As part of the initiative, planning grants of roughly $100,000 each have been awarded to eight sites. The awards will enable an assortment of nonprofits in each of these places to plan how to create sustainable change in areas such as effective and accountable government, civic engagement, criminal justice reform, and equal educational opportunity.

In late 2013, OSF will award up to five of these sites long-term implementation grants of up to $1 million a year, for a minimum of three years -- and, potentially, a full decade.

The eight sites selected to receive grants are Albuquerque, New Mexico; Buffalo, New York; Denver, Colorado; Jackson, Mississippi; Louisville, Kentucky; Milwaukee, Wisconsin; San Diego, California; and Puerto Rico. We are pleased with the geographic diversity of these sites as well as the diversity of communities represented.

The Open Places Initiative begins with the premise that local knowledge and assets are fundamental to the creation of inclusive and open places. Yet, local conditions are changing significantly. Local governments face unprecedented demands due to budget constraints, and the nonprofit sector is facing significant funding challenges. At the same time, increased access to information is transforming community engagement on pressing issues. Nonprofit organizations, government agencies, and civic groups need to adapt to the new circumstances. One of the primary goals of the initiative is to increase the ability of each place to extend beyond current agendas, strategies, and capabilities.

The initiative draws on our experience with our urban social justice laboratory, OSI-Baltimore, which tests the effectiveness of various place-based strategies to address some of the biggest challenges facing Baltimore and other urban centers in the U.S. We are also drawing on the experience of other foundations and public-sector efforts, and look forward to collaborating with them going forward.

During the next few months, each site will select its specific areas of focus in response to pressing local priorities -- and, in each case, will incorporate multiple issues and tools into its planning.

While the sites are just now beginning the planning process, they have already noted some areas of focus. In addition to increasing local civic capacity to bring about long-term change, the preliminary goals of the different projects include advancing fair and inclusive economic development and fiscal policy, integrating immigrants into the larger community, reducing rates of incarceration, helping high school students graduate in greater numbers, addressing the enduring impact of residential segregation, and creating pathways to the middle class for low-wage workers.

We anticipate the initiative will enable the collaborations to identify and address needed skills and capacities, effectively access national and local resources, and further develop the approaches needed to address complex issues. In doing so, the Open Places sites will successfully develop more innovative and coordinated approaches to these and other challenges over the long term. While local equity and justice issues are likely to vary over time, what will remain constant is the need to bring together different groups -- residents, business leaders, state and local officials, nonprofits -- to mobilize and advance needed reform.

We are committed to supporting the Open Places sites as they develop and refine their approaches to making lasting and positive change. In addition to financial resources, we will be providing technical assistance as well as facilitating connections among sites and introductions with leading national organizations and institutions.

We heartily congratulate the groups that won planning grants. We look forward to gleaning lessons from the work that comes out of the initiative for replication in other cities, regions, and states, and believe that work has tremendous potential to help all of us chart a new course for our cities and regions.

-- Kenneth Zimmerman

[Review] 'Charity Case: How the Nonprofit Community Can Stand Up for Itself and Change the World'

(Chuck Bartelt is electronic grant information liaison at the Foundation Center. You can read some of her other reviews here, here, here, and here.)

I'm about to shock you. Twice.

First, did you know that telemarketing firms that solicit donations for charitable causes typically keep 90 percent of the money they raise? That's right: for every ten dollars you donate to a cause through one of these firms, only one dollar actually makes it to the charity in question. And did you know that a substantial percentage of the remaining dollar can be eaten up by executive salaries, advertising, and other overhead, leaving only pennies for the cause you thought you were supporting?

These are just a few of the facts revealed in Dan Pallotta's new book, Charity Case: How the Nonprofit Community Can Stand Up for Itself and Change the World. And if you're like me, you're probably feeling a little cheated right now.

But here's the second shock: according to Pallotta, there's nothing wrong with that.

How can that be? Pallotta argues that executive compensation and overhead expenses cannot be considered in isolation when gauging an organization's effectiveness or efficiency. On the contrary, embracing the tools of capitalism (competitive salaries, advertising, lobbying, etc.) may be the best way for charities to maximize their donations and ultimately deliver superior services and programs.

It's an ends-justifies-the-means approach that many will find at odds with the spirit of the social — or, as Pallotta calls it, humanitarian — sector, and it's one Pallotta embraces unapologetically in his book.

Not surprisingly, Pallotta has had personal experience with these issues. As a younger man, he was an admirer of Werner Erhard, whose Hunger Project was criticized for being self-promotion disguised as philanthropy. Then, in 1994, he founded Pallotta TeamWorks, a for-profit organizer of fundraisers for breast cancer and AIDS charities that eventually closed its doors after a dispute with the Avon Products Foundation. He has since founded Advertising for Humanity, which offers business strategy and branding services to nonprofits, and writes a blog for the Harvard Business Review that, like his earlier book, Uncharitable, champions the view that the tactics and methods of capitalism are not incompatible with social sector work; in fact, adopting them is best thing that could happen to it.

But is a mashup of capitalism and do-gooding really possible?

Take the case of executive compensation. Pallotta persuasively argues that cost-benefit analysis must be used when analyzing executive salaries within the nonprofit sector. Regarding the much-criticized salary of Roxanne Spillett, president emeritus of the Boys and Girls Clubs of America, he says, "How can you judge if a $510,744 salary and bonus are worth it if you don't inquire into what the person receiving the salary achieved? A first-year business school student would be kicked out of class for such egregious non-analysis."

Similarly, in the case of overhead, Pallotta argues that there is a tendency to define a charity's "cause" too narrowly. As he puts it: "[I]f hunger, then soup — but not the spoon, the bowl, the stove, the fundraiser that got the money for the stove, or the postage on the thank-you note sent to the donor who donated the money for the stove. Just the soup molecules themselves."

As for the whopping 90 percent of your donated dollar claimed by many fundraising firms, Pallotta argues that for little-known causes with few resources, telemarketing may be the only realistic way of generating any revenue at all. "In many cases," he writes, "the telemarketing firm will essentially advance the upfront costs: it will take the financial risk associated with the possibility of zero donations and accept payment on the basis of only those people who do contribute, eliminating the need for the charity to invest in staff, space, telephony, and technology."

It all makes sense — although it doesn't necessarily make it more palatable to potential donors interested in supporting a cause rather than funding infrastructure.

Which begs the question: Should the general public be informed or shielded from this kind of information? Here Pallotta seems to be of two minds. On the one hand, he embraces the concept of transparency, arguing that if the public were better educated about the economics of charity work, it would be less offended by competitive salaries and high overhead. On the other hand, too much information can create a false image of greed or waste that can drastically stem the flow of donations to a charity or limit them to specific projects or activities.

Indeed, Pallotta argues, unfair media coverage of these kinds of fundraising practices as "extravagant" and "wasteful" has caused charities in general to be held in low esteem by the American public. And one response to this unfavorable coverage — legislation requiring greater transparency on the part of charities through the filing of more detailed financial reports — has had the unfortunate consequence of increasing the very overhead that charities are encouraged (and expected) to minimize.

Pallotta's solution to this conundrum? The establishment of an anti-defamation organization for the nonprofit sector that works to rebut these charges through promotional efforts similar to the "Got Milk?" campaign; the creation of a legal defense fund for the sector; and the creation of an organization that would develop and lobby for a "national civil rights act" for charities. In addition to defending the sector's "rights," the latter would serve as a repository of information for its use, including a "comprehensive national charity database that includes every operating tax-exempt organization in the country and is accessible to everyone and easy to use."

Actually, though, what Pallotta is presenting here is not so much a proposal as a fait accompli. The organization he describes already exists in nascent form, named and incorporated by Pallotta himself. As a result, Charity Case reads more like an advertisement for his own Charity Defense Council than a disinterested defense of the social sector. And that, ultimately, is the book's greatest weakness. By so heavily promoting his new organization (to the point of soliciting donations, recruiting volunteers to perform daily tasks, and hawking merchandise such as t-shirts, flags, and bumper stickers), Pallotta dilutes the persuasiveness of his case.

What's more, that case, when all is said and done, isn't that persuasive. Speaking for myself, I simply don't want to give ten dollars to any charity where almost every dollar goes to fundraising infrastructure or executive salaries, no matter how worthy the cause or how rational the economic justification. We all draw different lines in the sand, and while we may not be able to articulate the difference between acceptable and excessive overhead, most of us, as Supreme Court justice Potter Stewart famously said about pornography, know it when we see it.

Shock me once, shame on you...

-- Chuck Bartelt

[Commentary] If Nonprofits Fail

Jennifer Talansky is vice president of knowledge and communications at the Nonprofit Finance Fund, a national nonprofit that provides a continuum of financing, consulting, and advocacy services to nonprofits and funders nationwide. Talansky held previous marketing positions at Credit Suisse Asset Management, Partnerships for Parks, Hearst Magazines Brand Development, and JP Morgan's Private Client Group.

Recently, the Nonprofit Finance Fund released the results of its 2012 State of the Nonprofit Sector Survey. The response to those results has varied widely based on who is interpreting the data. While many who are well-acquainted with the long history of the sector's financial woes saw the results as confirmation of their own experiences, some saw the results and told us, "That doesn't look so bad!" This divergence of perspective about what constitutes a healthy nonprofit sector begs the question: What is an acceptable level of instability -- or even failure -- within the sector?

Nonprofit financial health can be an abstract and technical subject. Let me start with a look at something more familiar. I live in New York City, where there's a pizza joint on almost every corner. Unless she has a favorite or is a friend of the owner, most New Yorkers don't blink if one of these pizza places goes out of business. Heartless as it may seem, it's the kind of economic Darwinism that one grows used to in a city with high commercial rents and an overabundance of almost everything.

Yet, there are repercussions to this kind of churn beyond a more limited pizza choice. The revenue once generated by the shuttered pizza joint supported the owner or group of owners, their families, other dependents, and employees. Its taxes contributed to the maintenance and expansion of the city's infrastructure, including teachers, police, and trash pickup. Perhaps the owners also donated to a local charity, or gave their time to a local business association. And because their basic needs were covered, the pizza shop owners and employees probably did not need to access some of the social safety-net services that a growing number of people in the city have come to rely on. With the failure of that one pizza place, the community lost all the economic and social good that was bound up in it.

Now let's take my example a step further and shift our thinking to the nonprofit sector. Like the pizza place, nonprofits contribute to their local economies in a variety of ways, including rent, the regular purchase of supplies, job creation, and more.

But imagine that the "business" at risk of failing is a domestic violence shelter. And that we're no longer in New York City but instead in a rural community in the Midwest. And that this particular shelter is the only safe haven for women and children within fifty miles. Is it acceptable from a community perspective if the shelter only has enough money to cover the next thirty days of its expenses, as is the case for one in four of the more than forty-six hundred organizations we surveyed? Or that it's like the 50 percent of survey respondents that don't expect to have the resources to keep up with demand for their services in 2012?

One of the more powerful aspects of the survey is its reflection of the collective voice of the organizations working to provide some of the most critical social services in our communities. But we mustn't succumb to statistical numbness: the survey numbers aggregate many individual stories, and each of those stories has local -- or wider -- meaning. For instance, it sounds great that "only" 20 percent of the organizations responding to the survey had to reduce or eliminate programs in the past year. Yet among these nine hundred organizations, 63 percent were unable to keep up with demand for their services. From Georgia to Texas to Montana, this simple fact has serious repercussions for the populations and communities that depend on those organizations and services.

Indeed, consider what a leader of one of those organizations told us: "We have seen a dramatic increase in the need for our services. As available resources decrease across the country, the demand for basic needs continues to grow....Domestic violence is the leading cause of homelessness among women and children in the nation. It takes more than a roof over [one's] head to break the cycle of homelessness, particularly when domestic violence is involved....Our greatest challenge is securing a steady stream of revenue and funding for services and programs."

So when we look at the numbers, it may seem like a small victory that "only" 31 percent of survey respondents finished 2011 with a deficit -- which means the other 69 percent either broke even or ended the year with a surplus. And yet, among the more than twelve hundred organizations that said they ran a deficit in 2011, 39 percent were human services organizations -- precisely the kind of organizations that provide the basic safety-net services that the most vulnerable in our communities rely on -- while another 15 percent work to educate our children.

And as if that's not sobering enough, when respondents filled out the survey in late January, 34 percent of those with a deficit in 2011 were already anticipating operating in the red in 2012. Are the rest of us willing to accept the possibility that, with two (or more) consecutive years of deficits on the books, many of these organizations may have to shut their doors? Do we, as a society, have a plan to replace the critical services they provide? The answers to those questions are unclear, the stakes are high, and, unfortunately, failure is a possibility.

NFF launched its annual sector survey in January 2009, during the darkest days of the recession. The nonprofit financial picture painted in the response to that first year's survey was pretty grim. Our hope, as the economy improved (albeit slowly) in the three-plus years since then, is that we would see a similar positive shift in the nonprofit sector's finances. That has not been the case and any improvements along the way have been modest.

Let's be honest: Business as usual is not working. The business models, revenue sources, and practices that have long been mainstays of the nonprofit sector are no longer adequate to see us through the challenging times that lie ahead. We must consider other approaches that tap new sources of money, generate new cross-sectoral partnerships and ideas, and help identify new solutions to persistent social problems. Because without fundamental change -- change that involves both innovation and more risk taking -- we will see the same disappointing results year after year. And that's a prospect that none of us should be willing to tolerate.

To see the results from the most recent NFF survey and from past annual surveys, please visit http://nonprofitfinancefund.org/survey. For individual stories behind the numbers, the "In their Words" section is likely to be of special interest. And for a more localized look at a particular sub-sector or state, we encourage you to check out our new NFF Survey Analyzer, which lets you easily filter the data in multiple ways.

-- Jennifer Talansky

Which Nonprofits Are Most Ready for Capacity Building?

(Alice Hill, a senior consultant at the TCC Group, has over twelve years of experience in the philanthropic and nonprofit sectors, with specific expertise in program design and implementation and nonprofit organizational capacity building. Hill served as project manager of the Challenge Fund for Journalism initiative.)

With funds limited, foundations must constantly assess how their money is best spent -- and support for organizational capacity-building support is no exception. How can a funder determine which nonprofit is most likely to benefit from this sort of investment? After all, change is something many talk about, but few actually accomplish. It turns out that, at least in the nonprofit world, desire to change trumps many other factors that are used to gauge "readiness."

A recent study of an initiative to strengthen nonprofit journalism organizations found that mindset matters most. It is not just a willingness to change, but an embrace of the often-messy work of transformation that is the most important indicator of capacity-building success.

The Challenge Fund for Journalism, which I managed, was an innovative funder collaborative that provided matching grants and capacity-building support to fifty-three nonprofit media organizations. Launched in 2004, the initiative brought together and pooled funding from the Ford, Knight, McCormick, and Ethics and Excellence in Journalism foundations and enlisted the management consulting firm TCC Group to provide one-on-one coaching and other resources to participants to guide them on a journey of change.

Collectively, CFJ helped the organizations leverage $3.6 million in grants into almost $9.5 million in matches. Eighty-five percent of the grantees reported that they experienced some positive organizational change, and 90 percent stated that they were able to maintain the progress they had made in diversifying revenues.

My colleagues at TCC and I decided to dig deeper to understand which factors were most important to success. We examined nine criteria that were used to determine readiness at the beginning of the initiative, such as turnover in leadership and management, financial stability, and prior experience with organizational development efforts. Based on experience, we had a sense of what we would find, and our hunch was confirmed. Only one factor significantly correlated with positive outcomes: leaders' motivation to change. The initiative achieved the greatest impact with nonprofit media groups that were ready for transformation at the outset of our engagement with them.

What did this motivation look like? Those groups that flourished most had at least one leader who embraced adaptation and was able to give voice to the need to overhaul business models. He or she was able to turn this recognition into a bold vision for the organization's future. Just as critical, these leaders had the ability to inspire this mindset in others and mobilize teams of supporters. In other words, a leader who could do what so many have found elusive: take the idea of change and turn it into action.

One group I coached, the Wisconsin Center for Investigative Journalism, was one of these success stories. The center's leaders were highly motivated to confront difficult questions, listen to new ideas, and engage in the complicated work of shifting their practices. They devised innovative approaches to both fundraising and earned income. They articulated a compelling vision and worked at better involving their board, building their networks, and engaging in planning. Executive director Andy Hall notes that "the greatest value of the initiative was that it enabled the center to try out new strategies for growth. Ultimately, we wound up changing our business model."

So, how can funders screen for something as hard to pin down as motivation? At TCC Group, we start with listening. During an in-depth conversation, one can begin to detect whether a nonprofit leader wants a check -- or "seal of approval" from a foundation -- as opposed to being genuinely interested in improving organizational effectiveness. For example, does he or she resist the results of an organizational assessment or challenge the validity of the tool or process? Does a leader invite senior staff and board members to join the conversation? Does a leader demonstrate at the outset a basic understanding of how the organization could grow and improve

In our experience, having a competitive process to select grantees, even if it involves a few relatively simple steps, goes a long way toward weeding out groups and leaders who lack motivation. It's helpful to conduct an organizational assessment upfront, talk about the findings with key leaders, and agree on what needs to be addressed. In this way, funders can be more intentional about looking for the mindset that will put an organization on the path to success.

-- Alice Hill

5Qs for...Alandra Washington, Deputy Director, W.K. Kellogg Foundation

In January, the W.K. Kellogg Foundation, with support from Rockefeller Philanthropy Advisors, released a report based on the work of its Cultures of Giving program, which since 2005 has supported identity-based funds that serve groups traditionally underserved by larger philanthropic institutions. Among other things, the report, Cultures of Giving: Energizing and Expanding Philanthropy by and for Communities of Color (112 pages, PDF), offers a glimpse into the strategies and lessons learned by the largest single funder of identity-based funds in the country and challenges other funders to develop new ways to collaborate with and advance identity-based philanthropy.

As the report suggests, philanthropy in the United States is becoming more diverse -- not only because there are more ways to give than ever before, but also because giving by communities of color is on the rise. And while those communities have supported leadership development and social change initiatives for decades, the growth in identity-based funds has boosted the visibility of such giving. "Communities of color are overflowing with practices of philanthropy and giving, and have been for a long time," says Alandra Washington, deputy director at the Kellogg Foundation. "But very few people in communities of color define their traditions of giving as 'philanthropy.'"

Washington, who joined the foundation in 2002 and oversees its Family Economic Security and Education and Learning programs, served for five years prior to that as CEO of the Greater East St. Louis Community Fund and before that led the New Spirit Organizing Office, also in St. Louis. PND recently spoke with her about the report.

Philanthropy News Digest: From your perspective, what has been the biggest change in philanthropy over the last twenty years?

Alandra Washington: As the report points out, how we define philanthropist and philanthropy have changed a lot over the last twenty years. Today, we're seeing members of communities that are most at-risk pool their resources to address problems in those communities. Small gifts, when combined, can be quite effective in addressing local issues. And, of course, the explosion of new technologies and platforms, things like mobile giving, has made it easier for individuals across the socioeconomic spectrum to give.

PND: How do you and your colleagues define identity-based philanthropy? What are some of the advantages of an identity-based approach for communities of color? And what are some of the challenges?

AW: At its most basic level, identity-based philanthropy is a collective investment in a community by members of that community focused on addressing problems -- across race, class, gender, or whatever else it might be -- affecting that community. One advantage of this type of giving is that it allows individuals who already are giving back to their communities to organize and pool not just their resources but also their knowledge, influence, energy, skills, and pride to build social capital.

At the same time, as with any group working to actualize social change and address specific injustices, our identity-based grantees have come up against a number of social, political, and economic challenges. Volatility in the stock market, for example, has been a challenge for identity-based funds. Even so, they have been able to work around the ongoing economic uncertainty and raise and distribute a record amount of money.

PND: Did the recession have an effect on identity-based philanthropy?

AW: The whole sector was affected by the recession. Unlike traditional donors, however, communities of color continued to give at increasing rates and levels. As the report shows, 63 percent of Latino households now make charitable donations, as do nearly two-thirds of African American households, to the tune of about $11 billion per year. While communities of color weren't immune to the economic downturn, a 2005 paper by John J. Havens and Paul G. Schervish found that aggregate charitable giving by African Americans was increasing at a faster rate than either their aggregate income or wealth. In fact, identity-based funds now raise and distribute nearly $400 million annually, which, as our report notes, is roughly the same as what a foundation with $8 billion in assets would award in grants annually.

PND: The report examines not only what worked for the Cultures of Giving program at the Kellogg Foundation, but also what didn't and why. What was the biggest surprise for you in the report? And what does the foundation hope to gain by sharing this information with the public?

AW: I was most surprised by the resiliency of these organizations and how they learned from their challenges, learned from their failures, and were willing to go back to the drawing board to figure out innovative solutions when confronted with challenges.

By sharing this information with the public, the foundation hopes to show funders and donors alike that there are resources, networks, influencers, and change strategies happening across these communities. We're hoping that others seek out and partner with identity-based groups and leverage their resources. People should walk away from the report knowing that communities of color and identity-based groups have power, influence, and resources, and that they are a great go-to partner.

PND: What advice would you give to funders looking to support identity-based funds?

AW: I would tell them to approach communities of color with a listen-and-learn attitude. It is important for them to understand that this is an emerging field and that there is a lot to learn. Yes, they should also look for ways to partner and collaborate, but first they need to learn as much as they can about the communities they are looking to fund, what's most important to them, and what their approach is to giving. Finally, I would say that funders should try to identify opportunities to leverage the human resources of these communities. All grantmakers, not just those supporting communities of color as part of their mission, should know that there's a cadre of folks in these communities who are willing, able, and ready to partner with them.

-- Regina Mahone

Can Philanthropy Put Humpty-Dumpty Back Together Again?

(Michael Edwards is a leading expert on global civil society and the author of Small Change: Why Business Won't Save the World. This is the second in a series of posts in which he looks at different aspects of the Bellagio Initiative, an effort funded by the Rockefeller Foundation to produce a new framework for philanthropic and international development collaboration in pursuit of human well-being. Click here to read the first post in Edwards' series, "Well-Being and Philanthropy," and here to read/download the Bellagio paper from which the quotation below is taken.)

"The more one disaggregates the components of well-being into smaller and more manageable pieces...the more each piece can be measured and controlled in order to improve returns....[B]ut the same pieces can't simply be re-arranged to the same effect in different contexts...."

One of my most important career lessons was taught to me by Sithembiso Nyoni, an activist in Zimbabwe. "No country in the world has developed itself through projects," she said, reflecting on the tendency of NGOs to fund their own small bits and pieces of development and hope that they add up to something more substantial over time.

Unfortunately, because the larger structures of society evolve organically rather than in assembly line fashion, they rarely do. The long and messy processes that drive our politics, culture change, and institution-building can neither be predicted nor controlled, especially if the outcome is something as complex as well-being. In that sense, development is poetry and foreign aid is prose.

Of course, a clear sense of purpose and direction is important to success. In contrast to Zimbabwe, that was one of the things that distinguished South Korea, Taiwan, and other societies that developed quickly after World War II. But as the experience of those countries also shows, clear goals were balanced by the flexibility to pursue them in lots of different ways as circumstances changed. "Evolution is always surprising," wrote Whole Earth Catalog creator Stewart Brand, "so make room for it. If you let things flourish you get a wild ride, but you also get sustainability." That's been true of all game-changing experiences in development right up to the Arab Spring.

Tension between "local ownership" and "outside intervention" has been woven through the history of development efforts for half a century or more, and it's unlikely to disappear as long as foreign aid is a tool in the foreign policy toolkit. Accountability to taxpayers, concerns about corruption, and a desire to show more "value for money" have all reinforced a project-by-project mentality that a decade ago seemed to be fading in favor of unrestricted support. Projects that are carefully planned and monitored do offer the prospect of more control, even if their influence over the deeper drivers of development is weak. On the plus side, there are many ways to leverage the impact of projects -- including through policy advocacy, capacity building, networking, and knowledge-creation -- so that they become more than small pieces in a jigsaw that can never be completed.

Nevertheless -- and here's the link to current trends in philanthropy -- the idea that successful projects can be "replicated" or "scaled-up" has, for reasons I don't entirely understand, become an article of faith. There are striking similarities between the Millennium Villages Project in sub-Saharan Africa, for example, and the Harlem Children's Zone in New York City. Both have received significant injections of resources in an effort to demonstrate that good results are possible without broader changes in the surrounding environment. The same goes for school-reform efforts and the Obama administration's Social Innovation Fund. Other schools and communities will learn from these experiences and follow a similar path, or so the theory goes.

Except that they don't, because the resources aren't there, or because the same innovation doesn't work or isn't valued when transported to another setting, or because those broader forces have a nasty habit of kicking the ladder away just when you least expect it.

If that's the case, why do pilot projects (or "policy experiments," as they are often referred to in the U.S.) continue to exercise such a powerful hold on the imagination of philanthropists? Perhaps it's because they accomplish other things that are important, like building support for their favored approaches, strengthening networks of people prepared to back them, and keeping alive the comforting thought that social progress can be removed from the influence of politics, economic restructuring, and social struggle.

Even if it could, it would be something of a pyrrhic victory, threatening to sacrifice long-term improvements in the infrastructure of problem-solving for short-term advances in services and other material indicators of success. As fifty years of trial and error in development make clear, however, investing in people's capacities to innovate is much more important than replicating any particular innovation.

But how we do measure success in that kind of scenario? And is there a way to knit all these different approaches together in a positive and constructive fashion? That's the subject of next week's posts.

-- Michael Edwards

2011 Year in Review: Foundations Bet Big on New Initiatives

Global, public-private, collaboration, thinking big -- these were some of the themes in play as foundations sought to boost their impact while addressing some of the most pressing challenges at home and abroad in 2011.

In the field of international development, the Chevron-sponsored Niger Delta Partnership Initiative Foundation and USAID pledged $50 million in February to support programs that promote economic development, improve the capacity of government and civil society institutions, and help reduce conflict in the oil-rich Niger Delta region. A month later, the Conrad N. Hilton Foundation announced a five-year, $50 million commitment to help improve water conditions for more than one million people in sub-Saharan Africa and areas of India and Mexico -- a commitment that included a grant to the Foundation Center to build an online portal to serve as a central hub for information about water-related issues. In July, the Bill & Melinda Gates Foundation stepped up its own commitment to WASH issues by awarding grants totaling $41 million in support of efforts to increase access to affordable long-term sanitation solutions for millions of people in the developing world. And in October, George Soros and the Open Society Foundations pledged $27.4 million to the Millennium Villages Project to boost development in villages across rural sub-Saharan Africa.

Closer to home, a number of foundations announced major initiatives benefitting underserved communities and vulnerable populations. In April, the Home Depot Foundation launched a three-year, $30 million initiative to address veterans' housing issues; in May, the New York City-based NoVo Foundation announced a ten-year, $80 million initiative to strengthen the movement to end violence against women and girls; and in July, the California Endowment announced the creation of a $200 million public-private loan fund, the California FreshWorks Fund, to support efforts to increase access to healthy and affordable food in underserved communities.

Filmmakers and performing artists also were beneficiaries of bold thinking on the part of foundations in 2011. In January, the New York City-based Ford Foundation committed $50 million over five years to help identify and support a new generation of documentary filmmakers; in February, the Howard Hughes Medical Institute in Chevy Chase, Maryland, announced a $60 million documentary film initiative of its own; and in October, the Doris Duke Charitable Foundation announced a ten-year, $50 million commitment to support more than two hundred individual artists in the field of jazz, theater, and contemporary dance.

Finally, in the area of health and health care, in September the Robert Wood Johnson Foundation, the nation's largest healthcare philanthropy, announced the launch of a three-year, $100 million "impact" fund to help its grantees leverage additional funding from multiple sources and share solutions that actually improve health and health care for all Americans. As part of the effort, RWJF awarded $10 million to NCB Capital Impact, a national Community Development Finance Institution (and the program administrator for the California Endowment's FreshWorks Fund), to create a low-interest credit facility that will support the development of Green House nursing homes over the next ten years.

"Our goal with this initiative is to go beyond traditional grantmaking, to drive social change, achieve measurable impact, and collaborate with partners who can help us achieve our mission," said RWJF president and CEO Risa Lavizzo-Mourey. "This commitment allows us to better leverage our funding and spread innovative models, like the Green House Project."

Related Links

Ford Foundation Announces $50 Million for Documentary Film Initiative (1/19/11)

HHMI Launches Documentary Film Unit (2/08/11)

Chevron, USAID Pledge $50 Million to Improve Living Standards in Nigeria (2/21/11)

Hilton Foundation Commits $50 Million to Help Improve Global Water Conditions (3/23/11)

Home Depot Foundation Launches $30 Million Initiative to Address Veterans' Housing Issues (4/14/11)

NoVo Foundation Establishes $80 Million Initiative to End Violence Against Women and Girls (5/20/11)

Latin American Water Funds Launched With $27 Million in Funding (6/15/11)

Gates Foundation Announces $42 Million to Address Global Sanitation Issues (7/20/11)

California Endowment Announces $200 Million Public-Private Loan Fund (7/22/11)

Rockefeller Foundation, Partners Launch Initiative on Role of Philanthropy in International Development (8/10/11)

Robert Wood Johnson Foundation Establishes $100 Million Impact Capital Fund (9/12/11)

Soros Pledges $27.4 Million to Aid Development in Rural Africa (10/04/11)

Doris Duke Charitable Foundation Commits $50 Million to Support Individual Artists (10/21/11)

The Foundation Center Turns 55!

(The following post was written by Inés Sucre, reference/outreach librarian at the Foundation Center-New York.)

Five years ago, when the Foundation Center celebrated its 50th anniversary, we published a nifty timeline that looked at the history of the center side by side with milestones in U.S. and world history. Take a look -- it's quite wonderful!

The idea of change can sometimes be over-hyped. Even so, the last five years do seem to have brought rapid shifts in the way the Foundation Center serves its mission. Maybe I'm wrong, but consider that…

Back then, in 2006, we didn't have any blogs, not one. Now look at us! The Foundation Center communicates through eight blogs, including the Nonprofit Literature Blog, the first of our blogs to launch; PhilanTopic, a blog of opinion and commentary that draws contributors from all over the country; and our field office/library blogs.

Back then, we didn't tweet -- no one did. But today we're tweeting from our offices in San Francisco and New York -- and lots of places in between, too, like Cleveland, Atlanta, and Washington, D.C. And our main Twitter feed (@fdncenter) has more than 15,000 followers, from all over the world!

Of course, foundations are tweeting and blogging as well. So Foundation Directory Online Professional now has a Social Media tab for feeds and links to all this great content.

Back then, we had one Web site -- foundationcenter.org, which I've always loved (even before I worked here). Now, in GrantSpace, we have a new site dedicated to nonprofit grantseekers, to forging an online community, and to offering a "a robust, accessible knowledge bank for the sector."

Back then, we did very little training online. Now, our full curriculum of free classes is available in the form of webinars, with classes conducted by the same wonderful instructors who lead classes in our five learning centers.

Back then, we didn't have a standalone Web site to promote greater transparency in philanthropy. Today, Glasspockets opens the world of foundations and philanthropy to all.

Back then, although we focused our training and reference work on the topic of collaboration, we didn't have an online portal dedeicated to it. Now, thanks to our partnership with the Lodestar Foundation, we maintain the Nonprofit Collaboration Database. Check it out!

Back then, we had about 230 Cooperating Collections in our Cooperating Collections network. Today, we have over 450 and have even opened Cooperating Collections in nine countries. This network of libraries, service organizations, and community foundations provides funding information and training -- as well as access to the center's databases and core publications -- to nonprofits across the U.S. and in an ever-growing number of countries.

Back then, we didn't have the highlighted text below as part of our mission statement:

To strengthen the social sector by advancing knowledge about philanthropy in the U.S. and around the world.

Now, we do, and our data collection and dissemination efforts are being expanded and becoming more international in scope. This not only serves to broaden the audience for our servces and publications, it also helps to inspire an open flow of information about global philanthropy and global needs. Our data is also being put to greater use in our new mapping tool, Philanthropy In/Sight®, which maps the impact of (and shows the need for) philanthropy around the world.

On December 10, 1956, the Foundation Library Center, as we were known then, opened its doors with the goal of collecting, organizing, and making available to the public "reports and information" about foundations. An article in the New York Times heralded that beginning as "an important event in the history of American philanthropy … it can and should do a great deal to forward the cause of 'full disclosure' in a field where it is needed" (New York TImes, 12/11/1956).

As Foundation Center president Brad Smith wrote in announcing Foundation Center 2020, our new strategic plan, "If you believe, as we do, that philanthropy is an engine for positive social change, then please join us in our effort to nurture it, to support and advance the work of those around the world who transform lives and make the world a better place."

Happy fifty-fifth anniversary, Foundation Center!

-- Inés Sucre

Making Smart Investments in Human Capital

This article is a summary of Making Smart Investments in Human Capital (12 pages PDF), a report co-authored by James Weinberg, founder and CEO of Commongood Careers, and Dana Hagenbuch that draws on a series of four regional convenings organized by Commongood earlier this year. At those meetings, nonprofit executives, HR practitioners, evaluation experts, and funders sat down to discuss best practices, challenges, and emerging issues related to the subject of hiring and cultivating nonprofit employees. Over two hundred attendees representing a hundred and sixty-two organizations participated in the conversations.

In the nonprofit sector, the focus on demonstrating and quantifying programmatic impact has never been greater. As grantmakers, foundations, government partners, and other intermediaries emphasize accountability for programmatic outcomes, nonprofits are stepping up to the plate with key performance metrics for assessing the impact of investments. This response to evolving philanthropic decision-making has spurred a culture shift throughout the sector resulting in an increase of data-driven, results-oriented programmatic strategies, particularly among social entrepreneurs and organizations seeking to make a major and measurable difference on the communities they serve.

While organizations have developed sophisticated models, systems, and tools for measuring program impact, little attention has been paid to measuring other types of organizational investments. This failure to invest in holistic organizational development has its roots in the historical reticence of the foundation community to make investments in the key functional areas often categorized as "overhead." Investments in programs are highly visible and have a direct impact on the constituent community, and that's good. But when managed correctly, every dollar invested in a nonprofit plays a role in organizational outcomes. This is especially true when it comes to human capital. Without investments aimed at getting the right people in the right roles, as well as efforts to support employee performance and drive a positive work culture, an organization cannot effectively deliver on the promise of its programs. If this is true (or at least generally accepted), why don't organizations invest more in their people?

In our "Uncommon Conversations" meetings this spring, 95 percent of participating organizations indicated that they had made at least some investments in human capital over the past few years, but mostly in such baseline areas as building organizational culture and hiring staff to manage transactional HR functions. Significantly fewer participants indicated they invested in enhancing management systems, catalyzing leadership development, and hiring senior human capital leaders -- some of the most strategic investments possible.

When asked about the human capital outcomes that are most important to their organizations, respondents overwhelmingly indicated staff performance as the most important, and staff satisfaction and retention among the least important. This mindset is typical of the dynamic that has led to high burnout and turnover expenses in the nonprofit sector; it is shortsighted thinking that has significant long-term consequences for the sector.

Across the convenings, there was tremendous enthusiasm for exploring a range of strategies that impact the ways we recruit, develop, and retain our people, as well as ideas about ways to measure the effectiveness of these investments. Some ideas that received the most enthusiasm included:

Invest in a strategic human capital hire. Sam Cobbs, CEO of First Place for Youth, expressed the value of investing in a senior management hire: "Bringing on a Director of Talent Management met a need we didn't even know we had. This hire has been instrumental in creating and implementing a performance management framework for mapping strategic organizational goals to department and individual work plans. As a result, we've been more effective at closing performance gaps and creating a talent-driven culture. We've seen higher levels of staff engagement, which translates to the frontlines of our programs."

Build integrated systems to drive performance. Today, many organizations rely on limited, disparate systems that are unable to respond to the evolving needs of an organization as it grows. A strong performance management system tracks and evaluates individual performance against larger organizational goals, provides employees with an understanding of what's expected of them, and let's them know how their individual goals fit into the bigger picture.

First "what," then "how." Organizations must first set clear goals about what it is they wish to measure, and then determine how to measure that. There was an overall sense that we are not doing enough today to measure these investments, and attendees recognized the importance of taking a results-oriented approach to their human capital systems and practices.

Taking the Next Steps

Identifying investments in human capital is easy. Taking the next steps is hard. The following are a few suggestions to help leaders determine, implement, and measure the right set of human capital investments for their organization.

1. Human capital mind shifts happen from the top down. When it comes to prioritizing investments in human capital, there is no substitute for a highly engaged CEO. In addition, an engaged committee of an organization's leadership is instrumental in gaining the support of staff, funders, and other influential stakeholders. Some organizations have created a position on their board to play the role of treasurer of human capital, mirroring the treasurer of financial capital that all boards are required to have.

2. Get funders involved. In the pre-event survey, respondents indicated that the key influencers of decisions related to human capital are executive team members (98%) and board members (62%) but not funders (12%). There is an opportunity for grantees to lead funders through an education process that illustrates the costs of turnover, poor performance, and low staff satisfaction, and how these conditions negatively impact program deliverables.

3. Budget for investments. Build line items in the budget that are devoted to human capital investments such as costs associated with consultants, systems, retreats, trainings, and surveys, as well as budgeting for a leadership role like Chief Talent Officer. In addition to creating an expense budget, predict cost savings, such as decreased recruitment and turnover costs, into budgets as well.

4. Build the case for the outcomes you want to achieve. Employee survey data, focus groups and stakeholder interviews are effective ways to determine the greatest needs for investments. Involving both internal and external stakeholders will make it easier to gain support for these initiatives.

5. Build better models for evaluation. The nonprofit sector can borrow much from the work that has been done in the private sector in this area. Some of these models include the Bain RAPID Decision Model, McKinsey Capacity Assessment Grid, Goal Alignment Cascade, and TCC Group's Core Competency Assessment Tools.

Conclusion

Throughout these conversations, organizational leaders readily conceded that human capital was their number one success-determining factor, but not their number one organizational priority. The sector has worked to professionalize other functional areas, most notably finance, fundraising, communications, technology, and strategy. Strategic human capital still lags behind. Nonprofit HR today harkens back to a time of basic, tactical, and transactional personnel management. Only by assessing the investments that will have the greatest impact on our organizations can we hope to make the most progress along these lines and secure the philanthropic support that we need. By prioritizing strategic human capital and making investments accordingly, organizations unlock their potential for growth and social impact.

-- James Weinberg and Dana Hagenbuch

A Bifocal Lens: The Value of Investing in Both Networks and Organizations

(Paul Connolly is chief client services officer at the TCC Group, a consulting firm that provides strategy, evaluation, and capacity-building services to foundations, nonprofit organizations, and corporate community involvement programs. A version of this post originally appeared on the Foundation Center's Transparency Talk blog.)

What do the Arab Spring uprisings, the Tea Party, al-Qaeda, and Occupy Wall Street have in common? They all stem from flexible networks of people and groups rather than just a single organization. And they all have powerfully influenced society lately. As technology has enabled more connection and coordination, networks are playing a greater role in tackling social and environmental problems, galvanizing change, and enhancing civil society. At the Grantmakers for Effective Organizations conference "Growing Social Impact in a Networked World" a few weeks ago, funders discussed how they are changing their perspectives and practices to support and participate in networks.

One foundation leader remarked that observing a network is like looking at a Monet painting: up close, the brushstrokes can be blurry and seem disconnected, but when you stand back the power of the full picture becomes clear. Another speaker advised that funders need to view networks with a different type of lens than what they use for organizations. Networks tend to have more distributed ownership and expertise, less linear decision-making processes, more fluid boundaries, and results that are harder to measure. Funders therefore need to tailor how they assist networks -- for example, by investing at multiple levels, providing for additional improvisation, relinquishing some control, and focusing less on causal attribution of outcomes.

Along these lines, the Robert Wood Johnson Foundation has provided funding to foster a network of activists across the nation working to reduce childhood obesity by improving eating habits and increasing physical activity. In doing so, the foundation has learned that shifting from a mostly one-way broadcast mode to a more robust and interactive dialogue with constituents who are connected to the coalition has required more effort, openness, and trust. At the same time, foundation staff members have strived to listen actively to network participants and create authentic feedback loops -- both online and in-person -- to help advance the effort.

Similarly, the San Francisco-based Jim Joseph Foundation has nurtured Reboot, a network of thought leaders and culturally influential Jewish people working to engage a younger generation in "rebooting" Jewish culture, rituals, and traditions. The foundation's strategy was to get the right mix of people in the right space and then allow for serendipity. With a bold overarching goal, the foundation backs the network's process and does not try to micromanage the specific means chosen by members or the content they produce.

The Packard Foundation studied their existing portfolio of grantees and realized they already had a broad spectrum of models, about a third being networks for wide-ranging causes with varying types of needs. As Packard program director Stephanie McAuliffe noted, "Our grantee the Ocean Conservancy did not want to strengthen their organization's brand, but the ocean's brand." The foundation has improved its own network approach through an online wiki, transparently sharing data about certain programs and engaging others in their strategy development and evaluation work. [Ed note: You can learn more about the Packard wiki at the Transparency Talk blog.]

Although networks have many distinctive features, they also share many of the same characteristics as organizations. In fact, many networks are actually collections of organizations, or at least are comprised of individuals who see their participation through a specific organizational perspective. So networks can be both capable in their own right, as well as reflect the performance of the particular organizations involved. TCC Group's research on nonprofits and coalitions have found that the highest-performing ones share such central characteristics as distributed leadership, inclusive mindsets and practices, cross-fertilized programs, learning cultures, and adaptability.

Specifically, we found that the strongest nonprofit organizations:

• have a clear vision;
• understand community needs and services well;
• are deeply engaged and forge alliances with external stakeholders;
• encourage reflective inquiry; and
• amplify their impact by not only expanding their own programs, but also disseminating replicable practices and models and by influencing policies and systems.

Our study of coalitions for the California Endowment determined that the most successful ones:

• have a lucid mutual purpose and value proposition;
• collaborate and manage conflict well;
• conduct ongoing assessment;
• have transparent decision-making processes; and
• are action-oriented.

Far-sighted grantmakers see that scaling social impact will not happen just by growing high-performing nonprofit organizations one at a time. Increasingly, strong networks will be needed, and their respective efforts will have to intersect more and more. Meanwhile, nonprofit organizations are still the predominant vehicle for achieving philanthropic support, and many networks involve sets of them. To see organizations and networks -- the individual brushstrokes as well as the full painting -- clearly rather than through two different sets of optics, funders need better bifocal lenses. Without them, they'll be hampered by fuzzy vision and blind spots, reducing their potential to magnify positive change.

There's much yet to discover about harnessing the combined potential of organizations and networks. What tools, frameworks, and training are needed to sharpen our collective bifocal vision? How can we learn more about organizational and network effectiveness and the places where they intersect -- and do a better job of applying what we already know? How can grantmakers support networks' efforts to build superior shared learning systems and performance measurement within particular fields? Share you thoughts and suggestions in the comments section below.

-- Paul Connolly

Funding for Capacity Building: 5Qs for Karen Brown, Fairfield County Community Foundation

(Karen Brown is vice president of programs at the Fairfield County Community Foundation, where she is responsible for overseeing grantmaking and providing philanthropic advisory services to donor-advised fundholders. Laura Cronin, a regular contributor to PhilanTopic, interviewed Brown recently.)

Laura Cronin: Nonprofit executives have been managing against a backdrop of economic turmoil for three years years now. What have the most successful Fairfield County groups been doing to keep it together during these difficult times?

Karen Brown: One key element of navigating this economic climate is transparency. Funders need information from grantees in order to make the case internally for all the grants in their portfolio. One exemplary executive director in our area has done something very simple and smart along these lines. After each of his board meetings, he sends a synopsis to us and to his other funders. It doesn't include every single detail of the meeting, but it gives a full picture of what transpired, and when I read it I feel as if I was there. It keeps me in the loop, and it's probably a document he needs to create anyway, so it's efficient. It's just an example of how communicating with funders and donors can be managed in a cost-effective way that gives them the information they need to make informed decisions.

LC: While great management is no substitute for a robust economy and a healthy fundraising environment, what kind of strategies should nonprofits pursue to ensure that they have the capacity to manage through tough times?

KB: We've been urging grantees to continue to invest in staff and professional development and not to look at those kinds of investments as frills. Employee morale and team building are crucial in a difficult economic climate. And funders need to consider supporting these programs in order to help organizations hold the line on their budgets without sacrificing effectiveness.

Other groups we fund are asking for support for short-term strategic planning -- looking two years out instead of the traditional five. This gives them something to focus on and a set of near-term goals that can keep them on track.

Funders can also be helpful by providing support for organizational assessments. We've assisted several grantees in hiring outside experts to come in and take a thorough look at all aspects of their operation, from leadership to fundraising to their business systems. That kind of thorough organizational assessment can help a grantee focus more attention on its key strengths and identify areas in need of improvement. The key is finding the right third-party help.

LC: The Fairfield County Community Foundation has been very involved in promoting capacity building for its grantees. Can you descibe what that looks like? And what kind of results are you seeing?

KB: We give our grantees access to our Center for Nonprofit Excellence, which provides nonprofit executive directors, senior staff, and board members with high-quality, affordable professional development workshops tailored to their experience level. In addition to training, we also fund capacity building, which some foundations regard as outside the scope of their grantmaking but we build in to ours. For example, we provide grants for technical assistance and technology development, as well as financial management assistance for nonprofits with operating budgets under $1 million. And we connect grantees to local organizations that provide pro bono legal services, professional development opportunities, and management expertise.

Last spring, as part of our response to the challenges of the current climate, we offered a workshop on planned giving with one of the best experts on the subject in the state. Planned giving is an important development tool that many nonprofits need to learn more about, especially as their loyal donors age. With that in mind, CNE offered an intensive half-day workshop on the topic and then offered follow-up consulting to a group of our grantees. We did that because we've found that complex workshop topics work best when paired with follow-up consulting, preferably from the same workshop trainer. That kind of approach can make capacity building work a bit more expensive, but we feel it helps our grantees' have greater impact and is well worth doing.

LC: Based on the results you've seen, what advice do you have for funders interested in boosting the capacity of their grantees to meet the demands of the current environment?

KB: There are several things they can do. First, they can set aside a portion of their grantmaking budgets for technical assistance grants to mission-critical grantees. Those monies in turn can be used by grantees to purchase high-quality consulting from experts in any number of areas. It's also helpful for the funder to learn who the quality, experienced consultants in their region are, so they can offer referrals when needed.

Second, funders can design and/or fund cohort learning for their grantees on priority topics. By cohort learning, I mean bringing a group of nonprofit leaders together for a series of sequenced workshops, with required work between the workshops. It helps, of course, if the nonprofits are invited to set the agenda for the workshops.

Last but not least, funders can survey their grantees directly about how they can help them navigate the current environment. Surveying grantees always surfaces ideas that foundation staffers may not have considered, and often many of these ideas are no- or pretty low-cost.

LC: One of the great things about the nonprofit sector is the fact that there are so many people out there in the field doing terrific work to improve the lives of others. In times likes these, it's important to to share those stories. Do you have one you can share with us?

KB: One really exciting project we launched in response to the current economic climate was a new electronic giving circle. We focused it on a very specific community need: to double the number of poor children in Bridgeport, the biggest city in the county and state, who receive nutritious food through the Connecticut Food Bank's Kids' Backpack program. We worked closely with fifteen donors to create the online campaign, with a goal of raising $125,000 for the program, and in one week we were able to more than double, to nine hundred, the number of students receiving food through the program. The giving circle concept made sense to our donor base, and by choosing a concrete goal in terms of how much we wanted to raise and by clearly outlining the need so that donors knew their gifts would help the food bank scale the program to serve more students, we were able to quickly galvanize support for the effort. At the same time, we were able to create a stronger sense of community among donors, which we believe will lead to additional gifts for other community needs in the future.

-- Laura Cronin

Foundations and the State Budget Crisis

States across the nation have been staggered by falling home prices and the residual effects of the financial crisis. From Rhode Island to Michigan to California, declining tax revenues and rising healthcare costs have put the squeeze on state budgets, forcing tough choices on governors and state legislatures. To balance their budgets, states are being forced to cut social services, lay off public-sector employees, and rethink their role in providing a social safety net for the poor, the sick, and the elderly.

Nonprofit organizations that count on state government for some or most of their funding find themselves caught between the rock of declining revenue and the hard place of increased demand for their services. To determine the extent to which foundations see their nonprofit grantees being affected by state budget cuts, the Foundation Center conducted a March 2011 survey of its Grantmaker Leadership Panel. Of the seventy-five foundation leaders who completed the survey, the vast majority (95 percent) indicated that at least some of their grantees had been affected by cuts, while more than half (58 percent) said "all" or "most" of their grantees had. Among the areas that respondents identified as being most vulnerable to cuts were human services and education, followed by health, the arts, and environmental protection.

 

More surprising was the relatively pessimistic view of the economic recovery shared by foundation leaders, with four out of five respondents (81 percent) saying they expected the budget challenges facing many states to continue through 2013 or beyond.

Many foundations have stepped up to help. Indeed, almost half (47 percent) the foundation leaders responding to the survey said their foundations had awarded grants or provided other kinds of assistance in direct response to funding cuts at the state level, while one-third (33 percent) reported that fiscal problems at the state level had influenced how their 2011 grants budget was set and/or how funding was allocated.

 

One of the most vocal of the respondents to the survey was Doug Bauer, executive director of the New York City-based Clark Foundation. In a one-page addendum to the survey findings, Bauer underscored four key needs that emerged in the findings and offered the following thoughts:

1. More general operating support. In a time of seriously constrained resources, our grantees need as much flexibility as possible to manage their programs and finances. The dollars that help the most and go the farthest in this environment are general operating support funds.

2. More capacity building support. In the aftermath of reduced public support, nonprofits need to rethink, reassess, and restructure their business models. Underwriting capacity building, which tends to be relatively low-cost, can yield high returns. Having access to resources for capacity building can provide nonprofits with the ability to succeed in the "new normal."

3. More working capital. Reduced public support means nonprofit cash flow will be squeezed and operating margins thin. Banks are leery of extending bridge loans or lines of credit when government contracts become unreliable. Foundations need to increase the ability of community development finance institutions (CDFIs) to provide short-term financing to nonprofits. CDFIs, such as the Nonprofit Finance Fund, understand the operating models of nonprofits and have more patience around delayed government contracts or grants. But CDFIs need capital to do this. For their part, foundations can use program-related investments (PRIs) to provide the needed capital without affecting their grants budgets.

4. More advocacy. Sadly, the budget battles of 2011 are not the last ones we will see at the federal, state, and local levels. In some states, the coming years will bring even larger budget gaps. The sector must develop a stronger advocacy effort to ensure that critical initiatives and the most vulnerable do not suffer disproportionately. The rules and regulations on advocacy are clear; we know exactly what we can and cannot do. But our support for advocacy must become broader and deeper, both internally and financially. The staff time, research, dissemination, and related work needed to mount successful advocacy campaigns cost money.

"We are in the nascent stages of a profoundly new era for most of the nonprofit sector," Bauer added. "Old and/or current operational models will not likely work. Having foundations seriously address these four needs will help our grantees begin to cope with, and better understand, the new era. The big question, however, is will foundations step up?"

That is the question. What do you think about the needs identified by Bauer above? Would you add anything to his list? Is the nonprofit sector in the early stages of a "profoundly new era," or is this just a re-run of the 1980s? And what do nonprofit organizations themselves need to do to ensure that the "new normal" doesn't turn into a nightmare?

Sustainability: It Requires More Than Money (Pt. 3)

(This is the last in a series of three posts by Kevin Monroe, founder and managing partner of X Factor Consulting LLC and the Foundation Center-Atlanta's Expert in Residence for July. Before you dive in, catch up on Part 1 and Part 2. Both are excellent.)

I hope it's evident to those who have read my two previous posts why sustainability takes more than money. We began this conversation by focusing on the results that stem from your programs as the foundation for sustainability planning and then proceeded to explore relationships as valuable assets for your organization. In my third and final post, we finally focus on resources. However, even in this post we're looking at more than money.

Think with me for a moment. For those willing to invest the time in an exercise, get a sheet of paper or open a fresh document, select one of the programs your organization provides, and list all the resources needed to deliver that program. (If you're starting up a new program or organization this is a great planning exercise; if you have an existing logic model for your program, this will be a great help, as well.) Now, as you look at the list, what types of resources made your list? You probably included items like:

• staff (paid or volunteer) -- this includes program staff directly involved in service delivery as well as support staff (the folks who keep everything running), executive staff, and board members;
• facilities (whether it's your building or a space that's donated or shared) and all the maintenance and upkeep, including utilities;
• transportation (if you own the vehicles then you also have maintenance, upkeep, and insurance, etc.);
• computer hardware and software (both for your staff and clients, if that's part of your programming -- and, of course, those also require maintenance, updates, and technical support);
• office equipment (telephones, copiers, printers, fax machines, etc.);
• program content or curriculum, and, of course;
• funding.

The list is far from complete, but it's a start. If you already have many of these items, then (good news) you have assets and resources. If, on the other hand, you're in the early stages of starting up a program (or organization), then you probably have a wish list. Wherever you are in your journey, let's explore four possible strategies you might want to consider with respect to resources. These include: protect, conserve, leverage, and diversify (or develop). The first three strategies apply primarily to those with existing resources.

Protect

If you have resources -- especially funding (whether it comes from individuals or institutions) -- you want to do everything in your power to protect those resources. Here are a few approaches that sustainable organizations practice:

Produce excellent results for your investors. Remember people appreciate your work; they invest in your results. Make sure you know the deliverables associated with all grants and do your best to achieve them. If you know you're going to have trouble to meet agreed-upon targets, engage the funder in a discussion and see what options exist for restructuring the grant (e.g., no cost extension).

Provide timely, accurate, and comprehensive reports. Be a funder's best grantee or partner by providing them with the information they need, when they need it. Don't be afraid to go above and beyond the requirements and provide them with supplemental information (but be careful not to inundate them with e-mails).

Engage funders in media and PR (where appropriate). Learn what your funders' preferences are in terms of media exposure (and whether they want to be included in press release mailings and other media events).

Build public support for programs. This is especially important for those with government funding. Collect success stories and testimonials and engage your constituents and supporters as advocates for your organization. Make sure state and local legislators and (where appropriate) your representative know about the great results (there's that word again) your organization is producing.

In turbulent economic times like these, it's almost a given that you'll be unable to secure or hold on to certain resources, which is why it is imperative to conserve and leverage the resources you do control.

Conserve

Many organizations have become prudent to the point of being overly aggressive with their resource conservation measures. Before you start slashing away, consider these options:

Cross train staff and volunteers. Many organizations have found great opportunities to conserve resources and even save jobs by cross-training employees so that they are able to assume multiple job functions for the organization.

Audit the utilization of your facilities, programs, and staff. Make sure you are making wise use of your resources. Perhaps you can save money through creative scheduling of events or employees to reduce energy costs. One of our partners realized they could combine some programs during the summer months and not even run the air conditioning in one of their buildings on certain days.

Wisely reduce expenses wherever possible. Explore options for reducing expenses like service contracts or janitorial services. One of our clients enclosed a note with all their bill payments stating that revenues were down and asking whether vendors were willing to charge them a reduced rate. They were quite pleased by the results. (A note of caution: Think of marketing as an investment rather an expense and be careful about drastic cuts to marketing programs that may diminish the flow of funds to your organization.)

Maximize volunteer service. Explore all options for engaging volunteers in tasks that you might otherwise have to pay to have done. When unemployment is high, there are usually folks looking to fill some of their discretionary time and what may be gaps in their resumes.

Leverage

In addition to conserving resources, look for opportunities to leverage existing resources and assets that have the potential to produce revenue for your organization.

Share facilities and assets. If your organization has surplus office or meeting space explore options for renting it out or sub-leasing it to other nonprofits. Perhaps you have surplus vehicles and would consider selling them or subcontracting transportation services to other organizations. (If you do, please be sure to address all liability issues to prevent exposing your organization to risks.)

Participate in a buying coop. Combine your buying power with other local nonprofits to take advantage of cost savings. Your statewide nonprofit association (if there is one) is a great place to begin your search for coop partners.

Consolidate administrative functions with/for other organizations. Some organizations have been extremely resourceful in their approach to consolidating administrative functions through partnerships or managed service organizations (MSO). The latter build on the premise that not every nonprofit must have its own HR, finance, or facilities management department but rather can share these functions to create cost savings (and better service delivery). The Foundation Center site has a great case study documenting the creative approach two museums in Chattanooga, Tennessee, undertook and how it was a win for both. Read it here.

Explore the possibility of strategic restructuring. Joining forces with another organization may become a necessity for your organization. David LaPiana is a leading expert in this area and is featured in a podcast on the center's site that is an excellent resource for organizations interested in exploring the restructuring option.

Diversify/Develop

Finally, there are always opportunities to diversify existing assets or develop new resources for your organization or program. From my perspective, I see three (and only three) primary sources (or buckets) of funding for nonprofit organizations. Money comes from individuals, institutions, or innovative entrepreneurial efforts. Now, within these three buckets there are literally thousands of possibilities, and it's up to your organization to find the intersection of potential and capacity for fundraising success. That will differ for every organization, because so much depends on and organization's relational assets and capital. If this is your first venture into fund development beyond your current funding strategy, start by identifying opportunities where you are likely to have short-term success (low-hanging fruit). Immediate successes (even if they are small) will build confidence, enthusiasm, and momentum for the longer haul.

Here are a few questions to help identify your low-hanging fruit:

• Which individuals or institutions can you readily approach through your organization's existing relationship network?
• What area of your program outcomes best intersects their needs, wants, and desires and would encourage them to invest?
• How can you mobilize board members (or other key contacts) to dedicate time to identify high-potential opportunities?
• Can you mobilize board members to host small gatherings (house parties, informal luncheons, etc.) of their friends and associates to introduce them to your organization?
• Can you mobilize your board to create a matching gift fund? Could you use such a fund to encourage new investment from potential donors?

My recommendation is to identify the two or three areas your organization can address that will make the greatest impact on its sustainability. Develop a detailed action plan, and be intentional about its implementation. Document and share your successes and watch the excitement and enthusiasm grow.

On the topic of resources, the Foundation Center has a wealth of information (books, classes, databases, reports, podcasts, chats, etc.) that can assist you. Whether it's online communities, libraries, databases, reports, or staff, all are excellent sources of knowledge as you seek to diversify or develop resources.

We began this series by exploring results. We then turned our attention to relationships and identifying those individuals or institutions that value your results to the point of investing resources in your organization so it can continue to produce results. This, too, is a virtuous cycle. As you tend to all aspects of the cycle, you will grow your network of supporters and enhance the sustainability of your programs and organization.

This concludes my three-part series on program sustainability. I trust the posts have, in some way, stimulated your thinking in regards to program sustainability. Even more, I hope you will use the ideas and concepts in them, as well as some of the other excellent resources I've pointed you to, as jumping-off points for discussion with your staff, board, and funders. Until next time, keep your eyes on the prize.

-- Kevin Monroe

Training for Nonprofits That Sticks? Yes, It’s Possible!

(Susan Misra is associate director of Program and Grants Management and Capacity Building at TCC Group, a national management consulting firm that provides strategy, evaluation, and capacity-building services to funders, nonprofits, and corporate citizenship programs. This post originally appeared on the Stanford Social Innovation Review blog.)

Trainings are hardly a new (or exciting) topic when it comes to capacity building for nonprofits. But sometimes they still hold the power to surprise.

A prime example came up recently in a major capacity-building initiative that my colleagues and I managed in which our data revealed that one-time trainings brought some of the best results. According to conventional wisdom, this shouldn't have been the case. Typically trainings are regarded as an unlikely path to lasting change; the thinking is that whatever learning they produce doesn't stick. For this reason, we decided to try out some new ideas when we helped design the Strengthening Organizations to Mobilize Californians initiative (click here to read the just-released "lessons learned" report).

Funded by the James Irvine Foundation, the William and Flora Hewlett Foundation, and the David and Lucile Packard Foundation, the initiative involved twenty-seven community organizing nonprofits in California, including the Alliance for a Better Community, Communities for a Better Environment, and the Ella Baker Center for Human Rights. Focused on improving organizational capacity, the initiative ultimately sought to meet the funders' broader goal of supporting democracy through more inclusive decision-making.

Trainings were one item on a broad menu of learning community activities provided over two years, from 2008 to 2010. All told, the initiative offered twelve trainings, eighteen peer-exchange sessions, and two convenings. We were eager for the opportunity to compare these different elements. And one of our biggest questions was whether the trainings would succeed, and if so, which ingredients would lead to that success.

Our team found through an evaluation process that trainings generated some of the initiative's biggest gains. Those who attended the sessions on communication, for instance, noted marked improvement in their ability to articulate their organization's vision, develop a communications plan, implement that plan, and manage change over time.

We were pleased -- but we weren't completely surprised. The findings supported ideas about capacity building that our firm, TCC Group, has been exploring for years and increasingly putting into practice. Indeed, our evaluations of more than fifty capacity-building projects over the past decade have shown us that the reason many organizations fail to achieve change is that they focus on preparing leaders, rather than actual implementation. We use the parlance of "Ready, Set, Go." Skills-building, reports, and plans (i.e., "Ready" and "Set"), we have found, will only take people so far. In the end, they need to be able to take action (i.e., "Go").

Our idea was to make sure that "Go" happened during the training. Discussions focused on practices that work. As one participant put it, the dialogue "allowed us to compare our strengths and weaknesses with other peers and learn from their experiences." The trainings also featured hands-on worksheets, role plays, and action planning. Last but not least, they focused on concrete takeaways to guide immediate improvements.

Three other characteristics set the trainings apart. First, they were tailored to small organizations that were struggling to make change with limited resources. The practices presented, for instance, required a reallocation of these limited resources -- not additional time or money. Second, whole teams were encouraged to attend, again underscoring a focus on forging action plans and following through. Third, organizations volunteered to participate. Those that came, as a result, were highly motivated regarding the training topic in question.

"Go" is all about the time and space to think not just about big ideas but the details that really matter in implementing change. Preparing, of course, is important, but execution takes something more -- practice, feedback, realistic expectations, and insights from talking with others about their experiences. "Go" is about rolling up your sleeves and getting down to work, and for our team and many participants it managed to make trainings feel exciting and relevant.

What has your experience with organizational effectiveness training for nonprofits been? Have you been able to make it more action-oriented and "sticky"? What are your suggestions for how funders can go beyond support for assessment and planning ("Ready" and "Set") activities and provide better support for implementation ("Go") work through training, clinics, peer exchange, and coaching? Share your thoughts in the comments section below.

-- Susan Misra

Weekend Link Roundup (July 16 - 17, 2011)

Our weekly roundup of new and noteworthy posts from and about the nonprofit sector....

Capacity Building

At Beth's Blog, Paul Connolly of the TCC Group argues that "fortifying nonprofits' fundraising capability" is not a "no-brainer." In fact, new research conducted by the TCC Group on the Packard Foundation's nonprofit capacity-building efforts suggests that while "fundraising capacity is essential...it needs to happen in conjunction with solid leadership and organizational learning."

Diversity

On the National Committee for Responsive Philanthropy's Keeping a Close Eye blog, Nathan Henderson-James, online director at the Leadership Center for the Common Good, commends the Freedom from Fear Award program for its use of social media tools like Twitter to crowd-source nominations for the award. "Not only does this approach have the ability to help expand the potential grant pool beyond those with the most 'insider' knowledge," writes Henderson-James, "[but] it also has the ability to reach potentially deserving grantees from traditionally underserved communities, because those communities tend to be among the most voracious users of social media."

Fundraising

"Never accept a gift that costs your nonprofit more than it's worth," writes Stephen L. Goldstein on the Fundraising Guru blog. "A gift of a collection of ancient coins to a historical museum may be interesting, but impractical to receive because of prohibitive insurance costs. Sometimes, you must say 'No.'"

On her About.com blog, Joanne Fritz shares findings from the most recent installment of Blackbaud's Index of Charitable Giving, which found that "charitable organizations experienced an uptick in donations in May to the tune of 11.3 percent."

Governance

On his Nonprofit Board Crisis blog, Mike Burns shares a few thoughts about effective nonprofit board governance.

Amy Ellsworth and Lisa Spalding of the Philanthropic Initiative wonder what a new foundation board member is to do when he/she observes "a number of bad behaviors that have become normalized." "How do you approach a difficult subject? How do you determine the best people to talk to?" ask Ellsworth and Spalding. Have you ever been around a situation like the one they describe? What's your advice? Share your thoughts in the comments section below.

Philanthropy

Guest blogging on the Tactical Philanthropy blog, Jacob Harold of the William and Flora Hewlett Foundation reflects on the challenges and opportunities facing program officers, many of whom are well positioned to facilitate collaboration among nonprofits working to address the same problem.

In a three-part series on the Philanthropy Potluck blog, the Minnesota Council on Foundation's Chris Murakami Noonan shares insights from program officers at MCF member organizations, including some of their pet peeves with respect to the grant application process, tips on how to get on a PO's good side, and general advice for development officers.

On Kris Putnam-Walkerley's Philanthropy 411 blog, Richard Woo of the Russell Family Foundation explains why it's important for foundations to frame their "grants, programs, and initiatives" around "the relevance of those offerings and the nature of our relationship with the community." Writes Woo:

What if we offered a grant and no one wanted it?

We must emphasize our relationships even as we deliver grants, programs, and initiatives. When we pay as much attention to authentic relationship development as we do to program development -- there is a greater chance of becoming relevant. Relationships are boundless, programs are finite.

Technology

On the Idealist.org blog, Jeremy MacKechnie lists a number of new Web sites that have adopted the Groupon model to promote social good.

While tools like Visual.ly make it easy for organizations to "show" their data, "You still need to know what kind of data representation (picture) helps make what kind of point," writes Lucy Bernholz on her Philanthropy 2173 blog. "No doubt about it, a picture is worth 1000 words. Especially if it shows us something we can't see in the raw numbers or raw words, shows relationships we wouldn't otherwise find, or sparks new questions. If not, it's just a cool picture."

That's it for now. What did we miss? Drop us a line at rnm@foundationcenter.org. And have a great week!

-- Regina Mahone