PhilanTopic

Weekend Link Roundup (July 11 - 12, 2009)

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

Communications/Marketing

According to the Cone Nonprofit Power Brand 100, the "first public ranking in the United States to value nonprofit organizations by more than financial standing alone," a solid brand identity helps an organization tell its story, gain attention, foster relationships, and ensure its long-term survival. And one of the the best ways to build a solid brand, writes Fast Company blogger Alice Korngold, is to build a strong board with the right organizational leadership (CEO and board chair), the right board composition, clear roles and responsibilities, and a highly focused agenda. (Thanks for the tip, Alice.)

In a recent op-ed piece, New York Times columnist Nicholas Kristof argued that "toothpaste is peddled with far more sophistication than the life-saving work of aid groups." Allison Fine disagrees. "The problem isn't that [nonprofits] don't sell causes like toothpaste," writes Fine, "the problem is that we too often DO sell them like toothpaste." Instead of acting like tone-deaf Tropicana, which spent millions not listening to customers and repackaging a brand in a way that was universally panned, says Fine, "Cause organizations...[should focus] on building strong, trusting relationships and really connecting with...regular folks."

Economy

As the "green shoots" of spring turn yellow and calls for a third stimulus package mount, the Century Foundation's Thomas Smyth weighs in with his ideas of what it should include:

• An extension of unemployment benefits
• More money to hire -- or re-hire -- teachers
• Big prizes for better batteries; cheap, clean electricity; and other clean energy innovations
• A payroll tax holiday
• Political stimulus to lay the groundwork for public acceptance of an additional economic one

Impact/Effectiveness

According to a new study on nonprofit and philanthropic infrastructure issued by The Nonprofit Quarterly,

the current financing system for nonprofit infrastructure -- including foundation funding -- favors organizations that support and represent the larger nonprofits of the sector (which make up a small fraction of nonprofits overall) while networks and infrastructure organizations that serve tens of thousands of small to midsize nonprofits have been consistently under-funded....

Which leads Rosetta Thurman to suggest on her blog that while "current financial models seem to be 'working' for some nonprofit infrastructure organizations, they are certainly not working to address the overall capacity building needs for the majority of the nonprofit sector." Yes, a number of infrastructure groups have begun to offer free or discounted training programs, adds Thurman, but is that enough? 

Nonprofit Management

Heading a nonprofit for the first time? On the Nonprofit Leadership 601 blog, Heather Carpenter offers an "overabundance" of resources for everything from planning to building governance to financial and accounting tips.

Philanthropy

In late June, Ponzi scheme mastermind Bernie Madoff was sentenced to a hundred and fifty years years in prison for his crimes. On the Nonprofit Board Crisis blog, Mike Burns wonders "What good is Mr. Madoff's imprisonment to the foundations and nonprofits [that] must now proceed without the levels of support previously afforded them?" Since Madoff isn't likely to serve all 150 years -- maybe not even 10, adds Burns, wouldn't it be smarter to let him "use his obviously special skills to earn these foundations and nonprofits some of their money back?" Hmm...

On the New York Times' DealBook blog, Steven Davidoff offers a different take on the degree to which some foundations and nonprofits were "victims" of Madoff. "It is now being alleged that certain charitable foundations and individuals on the whole reaped profits in the millions, if not billions of dollars, from Mr. Madoff’s misdeeds," writes Davidoff. "And much of this money may have been subsequently donated to innocent charities. This situation raises some of the most troubling questions about Bernie's legacy. First, did charities on the whole benefit from Mr. Madoff's crime? And second, do these innocent charities have a moral or legal obligation to return the money?"

Are foundation assets public or private funds? Writing on the Chronicle of Philanthropy's Give and Take blog, Ian Wilhelm notes that a new report from the Philanthropy Roundtable, How Public is Private Philanthropy: Separating Myth from Reality, argues that "the 'public-money' claim is not well founded in legal authority...[and] threatens the independence of philanthropy, which is key to its success." In a press release, Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy, disagrees with that conclusion and argues that foundation assets are in part public money and that "taxpayers should have a partial say in how [grant dollars] are spent." As debates go, it's a hardy perennial -- but one that has assumed new urgency in light of the funk in which the economy is mired. 

Recently, Facebook Causes surpassed the $10 million mark in funds raised for good causes. Causes co-founder Joe Green explains on the Causes Exchange blog why "this is only the beginning" for the application.

Guest blogging on Sean Stannard-Stockton's Tactical Philanthropy blog, Katherine Lorenz of the London-based Institute for Philanthropy announces a new program called Next Generation Philanthropy that will focus on young people (ages 18-30) who have inherited waelth and are looking to make change through their philanthropy.

And on her Philanthropy 2173 blog, Lucy Bernholz suggests that the most important question any strategist, funder, program officer, or board member can ask is, "What we are we not doing? (And why?)"

Regulation/Oversight

On the National Committee for Responsive Philanthropy blog, Gary Snyder, managing director of the Nonprofit Imperative in West Bloomfield, Michigan, challenges the rating systems of charity watchdog organizations such as Charity Navigator and the BBB Wise Giving Alliance). Writes Snyder:

Because of different criteria, the rating agencies recommendations often conflict. One even sells its seal of approval on a sliding scale. Moreover, all fail to address in any substantive manner many of the issues that have gotten the nonprofit sector in trouble -- scandals and inadequate governance....

In the future, adds Snyder, maybe watchdogs should measure "objective data that support board members and staff dedication and diligence to do good governance." (Thanks for the tip, Gary.)

Social Innovation

In an excellent post on his Tactical Philanthropy blog, the tireless Sean Stannard-Stockton explains the significance of the Social Innovation Fund launched by the White House last week and why it is needed.

Social Media

Social media guru Beth Kanter has taken a short break from blogging to move her family to California. (And it sounds like everyone -- and everything -- made it safely!) In her abscence, a number of well-known bloggers (Allison Fine, Hildy Gottlieb, and Kari Dunn Saratovsky, to name a few) have been keeping the social media conversation going.

More good news. The first statistaclly significant longitudinal study of social media usage by large U.S. charities finds that they "are still outpacing the business world and academia" in their use of these tools.

Social Justice

Last but not least, Albert Ruesga, president and CEO of the Greater New Orleans Foundation, offers some additional thoughts on his blog about social justice philanthropy. "I'm convinced that one of the first steps toward effectiveness as a grantmaker," writes Ruesga, "is conceptual clarity, beginning with clarity about what it is we mean by 'social justice' and, by extension, 'social justice philanthropy.' " He goes on to offer "nine different frameworks for thinking about social justice and, by extension, [how we engage] in social justice grantmaking." Good stuff.

What did we miss? Use the comments section to let us know about your favorite recent posts. And have a great week!

-- Regina Mahone

The 'Equity Factor': The Power of Perception in Employer/Employee Relations

(Just back from a week in the Midwest, where the weather was glorious and my Internet connection sporadic. Unfortunately, the economic outlook -- there or anywhere -- is as uncertain as when I left. The "official" unemployment rate, at 9.5 percent, is the highest it has been in a quarter-century -- and likely to go higher. Layoffs and furloughs have become a too-familiar story in many industries, and, as much as we'd like to deny it, nonprofits challenged by falling revenue and increased demand for their services are likely to face their moment of truth in 2010. As Carol Kinsey Goman suggests below, how nonprofit leaders choose to lead in those circumstances and the behavior they model will determine to a considerable degree whether individual organizations survive the economic mess we find ourselves in.)

Let's play a game. Here are the rules: We'll be asked to split a sum of money. I get to make the split and you get to choose whether to accept or reject the split. And if you reject it, both of us will walk away empty-handed.

Rationally, I should realize my advantage and offer a lopsided split in my favor and you should accept the uneven split -- because any amount of money is better than nothing. Right?

Wrong. If we're like everyone else who plays the game, we'll end up with an even split.

Here's why:

While the fairness of the split shouldn't logically affect the second player's decision, it nearly always does. If offered a lopsided split, the second player will reject the deal, and neither player will get any money. So most people end up offering a fifty-fifty split to the second person.

To find out why people react in this way, a team of Princeton researchers attached players to functional MRI machines. They discovered that when people are offered an unfair split, a primal part of their brains known as the anterior insula sends out signals of disgust and anger. It doesn't matter one little bit that rejecting the split -- regardless of how unfair -- is an irrational financial decision. It feels right.

That's the power of what I call "the equity factor." And it has everything to do with leadership in turbulent times.

A close look at the psychology of relationships reveals that most individuals automatically attempt to keep a mental balance between what they contribute to a relationship and what they get back from it. When employees believe that they are putting more into their company than they are getting back, or when they do not perceive the rewards distribution to be equitable, engagement slips dramatically.

When employees look for balance through equitable treatment, it is their perception of the treatment, rather than the treatment itself that defines reality. I once interviewed employees at a public utility where workers were negotiating a 2 percent raise that management was resisting. At that same time, the fleet of corporate vans was being repainted. Instead of viewing this as a necessary expense, the employees' perception was that it was unfair of the company to spend money on vehicles while it argued about a salary increase with employees: "How dare they throw money at those trucks and then quibble about a lousy 2 percent raise!"

The CEO of a chemical manufacturing company put it this way: "As a leader you must make it a routine part of your decision-making process to ask the question: Will this action be perceived as equitable?"

As companies [and nonprofits] downsize, restructure and refocus, employees are asked to do more and work harder. And they have, on the whole. But their resentment is most frequently seen in their reaction to executive compensation. Big disparities in pay between executives and the work force, especially in times of downsizing and plant closures, can destroy employee engagement -- just when it is most needed.

Here's how one employee sees it: "The biggest budget cuts were employee-focused. They eliminated all our merit increases, rewards and recognition programs. And then the top management got bonuses. I used to be a 'gung-ho' employee. Now I think my loyalty has been misplaced."

-- Carol Kinsey Goman

(Carol Kinsey Goman, Ph.D., is an executive coach, author, and keynote speaker who addresses association, government, and business audiences around the world. Her latest book is The Nonverbal Advantage -- Secrets and Science of Body Language at Work.)

Women Are Bright Spot Amid Economic Gloom

(Christine Gumm is president and CEO of the Women’s Funding Network, a global movement of 145 women’s foundations on six continents with a shared commitment to creating lasting social change by unleashing the power and potential of women and girls. In her previous post for PhilanTopic, she wrote about some of the women who are changing the face of philanthropy.)

It came as no surprise to learn via the latest report from Giving USA that philanthropic giving in 2008 fell by the largest percentage in five decades. All around, news of philanthropy's retreat after one of the worst market declines in living memory weighs on us. But already there are signs of a re-emergent philanthropy, a "New Philanthropy" that is more democratic, more robust, and right-sized for the new millennium.

And women are leading the way. A growing number of philanthropic institutions are realizing that investing in women and girls serves to lift up entire communities -- something that women's funds have known and practiced for thirty years.

A new report produced by the Foundation Center in partnership with the Women's Funding Network validates this trend. The report, Accelerating Change for Women and Girls: The Role of Women's Funds, found that giving by and for women is growing more rapidly than overall giving. Funders -- including innovators like the Bill and Melinda Gates Foundation and Jennifer and Peter Buffett's NoVo Foundation -- are increasingly tuning into the potential for accelerating social change by using a gender lens in making funding decisions. They realize that social investments placed in the hands of women mean that the children of those women will be educated, their families will be more stable, and their communities will be strengthened. We're not talking about making a difference for half the world's population; we're talking about all of it.

The report holds up this new, more democratic model of philanthropy as a beacon for all, re-imagining philanthropy as a horizontal collaboration of trusted equals. Too often over the years, philanthropy was dispensed top-down and vertically, and was not informed by the wisdom of solutions cultivated at the grassroots. Women's funds, like no other area of philanthropy, have for three decades pioneered and developed a democratic model of giving, with donors and grantees sharing grantmaking decisions. Most of those grants, the Foundation Center report finds, are focused on economic justice and sustainability.

But grantmaking is not all this new model entails. As the report makes clear, women's funds assert their leadership beyond funding by promoting the wisdom of collaboration in larger contexts -- whether at the community, national, or international level. They also recognize that their work is further strengthened by advocacy and by thought leadership that inspires ever greater scale in advancing solutions to create social change.

Part of what is energizing funding for women is the growing phenomenon of women's financial independence and financial power. And women's funds are leading the way in fostering and directing that power by developing and imparting deep expertise on the subject of women and money. Donors to women's funds and leaders of those funds realized decades ago the connection between money and solving the critical challenges facing women.

Despite much progress made by women's funds, however, many critical challenges still remain. For example:

• Women comprise 70 percent of the 1.5 billion people living on less than $1 a day.
• Women grow half the world's food, but own just one percent of the world's farm land.
• The gender-wage ratio in the United States has not improved significantly for nearly two decades. Women are still paid only 77.8 cents for every dollar a man makes for full-time work. The disparity is even greater for women of color: African-American women make 63 cents and Latinas make only 52 cents for every dollar that a white male earns.

Women's funds spotlight glaring inequalities like these by funneling money and other resources -- knowledge, best practices, and connections to peers, allies and advocates -- to women-led organizations on the ground that have the ideas and solutions to improve their communities. As women's funds have grown, they have gained reputations as financially savvy innovators that know how to utilize money for the greater social good.

We have only begun to see what is possible as women at all levels of giving come to see themselves as philanthropists in partnership with women's funds. The most dynamic recent example of this is Women Moving Millions, a campaign led by the Women's Funding Network in partnership with Helen LaKelly Hunt and her sister Swanee Hunt that focused on raising gifts of $1 million and more from high-net-worth women for women's funds around the world.

Even amid the current economic crisis, the campaign exceeded its $150 million goal earlier this year, raising a total of $180 million from individual women donors. In Dallas alone, the Dallas Women's Foundation grew its number of million-dollar-and-up gifts from one to an astonishing eighteen. Such an achievement suggests enormous dynamism among high-net-worth women. And yet it is but part of a larger picture in which women at all levels of society and means recognize and embrace the importance and power of funding positive social change.

Women's funds have a rich history of redefining philanthropy and expanding the ranks of those participating in it as well as benefiting from it. Today, they and the larger philanthropic community are poised to translate this leadership into real impact through greater investments in women and girls. In a troubled time for philanthropy, it is women's leadership that is shining a bright light on creative solutions to inequity and a path to justice.

-- Christine Gumm

PND Job Board Statistics

A couple of people have asked for a graphical treatment of the trends mentioned in Alice Itty's Friday post, Job Boards vs. 'People Searching,' so here you go:

(The June '09 number is a projection based on actual activity over the first fifteen days of the month.)

As always, we'd love to hear your thoughts....

-- Regina Mahone

Job Boards vs. 'People Searching'

(Alice Itty manages the PND job board. This is her first post for PhilanTopic.)

I came across a blog post by Dan Schawbel recently that resonated with me. Schwabel, a Gen Y marketing professional and author of the Brazen Careerist blog, takes a dim view of the usefulness of online job boards. Instead, he favors an unplugged approach he calls "people searching." A "people searcher" methodically identifies the top companies or organizations she wants to work for, finds people who are employed at those companies, and networks like crazy until she gets a job offer. Schawbel's post spells out the ten steps a jobseeker should take to get the process rolling.

Okay, I'll admit it, after reading the post I was a little nervous. I've spent the last eight years of my professional life posting jobs (among other responsibilities) to the PND job board, and from where I sit there's still a place for a service like ours.

Sure, if you want to stand out from the crowd -- especially in these recessionary times -- you have to schmooze and network and, like Blanche DuBois, rely on the kindness of friends and acquaintances, if not strangers. But for the newly unemployed, many of whom are overwhelmed by the prospect of having to find another job, online boards are a convenient and comfortable place to start their search.

They're also a handy, if completely unscientific, barometer of what's going on in the economy. I've been tracking the number of submissions to the PND job board for almost eight years and while I hesitate to call our board a proxy for the nonprofit economy, I do think the numbers have an interesting story to tell. Submissions had grown steadily over the last few years, with 2007 being a banner year for the board, with just over 6,200 jobs jobs submitted. But submissions started to tail off in December of 2007, just as the mainstream media was suggesting the economy had slipped into recession. The number of submissions continued to decline in the first half of 2008, and then, coincident with the collapse of Lehman Brothers in September, things fell off the table, with the number of jobs submitted during the last three months of the year down 25 percent, 50 percent, and 44 percent, respectively, compared to the previous year.

I'm not going to say the worst is behind us, but the number of jobs submitted to the board has been trending slightly higher since March and suggests that the "green shoots" everyone is talking about may not be a mirage. Who knows, maybe the nonprofit sector -- which, as a recent report suggests, has become the largest private employer in New York City, adding more than 50,000 jobs to the local economy between 2000 and 2007 while the rest of the city’s private economy lost jobs -- may lead us out of the funk we've been in. Not likely, but given massive spending by the government, the growing needs of so many people, and the generosity of Americans, I wouldn't say it's impossible.

In the meantime, if you work at a nonprofit with a job to fill, the PND job board is a great place to start. Postings, which stay on the site for two months (unless you instruct us otherwise), are free for all domestic nonprofit and educational organizations, and will even feature your logo if you ask.

-- Alice Itty

Strategies for Hard Times: The Case for Sustainable Funding

(Michael Seltzer is a regular contributor to PhilanTopic. In his last post, he answered some frequently asked questions about how nonprofits stand to gain from the economic stimulus package.)

The news from the nonprofit sector is not good. Despite a year-to-date return of more than 5 percent in the S&P 500 that may have brightened the mood for some on Wall Street, there has been little to cheer on Nonprofit Street, where funding and donations are down, demand for services is up, and the future is uncertain. Indeed, a recent article in Crain's New York Business ("Nonprofits Gird for Long Battle," Miriam Souccar, June 7) underscores just how deep and long-lasting the impact of this economic downturn on nonprofits is likely to be.

The release earlier this week of the Giving USA Foundation’s annual survey of charitable giving further confirmed what nonprofit leaders already knew. Overall charitable giving in 2008 dropped 5.7 percent (in inflation-adjusted terms) -- the first decline in overall giving since 1987 and only the second since Giving USA began publishing annual reports in 1956. Given current giving trends and the real prospect they could persist into 2010 and beyond, what steps can and should grantmakers take to help their grantees -- past, present, and prospective -- survive and thrive in these very tough times?

One idea that has begun to gain traction among donors is to think beyond the historic constructs -- project/program, general support, unrestricted, capital, etc. -- that we, as a field, have used to conceptualize our grants.

Instead, a growing number of foundations are beginning to think of themselves as "builders" rather than "buyers." At the risk of oversimplifying the distinction, buyers award grants with an eye to achieving specific programmatic outcomes, while builders, always mindful of outcomes, seek to help grantees strengthen their organizational capacity so as to achieve greater impact in the future. To the extent that "buying" is limited to a relatively short-term transaction rather than a longer-term interest in the organizational well-being of the grantee, it is not an especially productive activity. Which leads me to ask: What foundation would want to be a buyer rather than a builder in today's environment?

The good news is that, regardless of the type of support it provides, any foundation can be a builder as long as it seeks to bolster the sustainability of the organizations it supports. With that in mind, a growing number of leaders in the sector have made the case for general operating support as integral to a nonprofit's ability to survive and thrive -- in any kind of economic environment. Unfortunately, unrestricted grants comprise less than 20 percent of all grantmaking dollars, compared to the more than 50 percent of grantmaking dollars awarded for specific programs or projects or campaigns (Foundation Giving Trends, 2009 edition, Foundation Center).

While calls for more general operating support should not be ignored, there are steps that foundations interested in funding specific projects can take to beef up the "builder" side of their activities:

1. Revisit your program descriptions to make sure your priorities and strategies are described as clearly as possible; doing so will make it easier for prospective grantees to submit stronger proposals.
2. Make sure your grantees have the latitude to adequately account for their indirect costs.
3. Expedite your grant approval process to reduce the lag time between submission of a proposal and action on that proposal.
4. Expand the period of your grants to more than a year.
5. If you are providing partial support for a project, be sure to share the responsibility with your grantee of securing the remaining dollars from other funders.

Extraordinary times call for extraordinary measures. Today, as much as at any time in recent memory, it is vitally important for foundations and corporate grantmakers to do everything they can to build the capacity of their grantees and the nonprofit sector for the long haul. The suggestions listed above are a starting point. Have other ideas? We'd love to hear them....

-- Michael Seltzer

Quote of the Day (June 9, 2009)

"The story of today’s deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years.

"You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush's policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama.

"The first category -- the business cycle -- accounts for 37 percent of the $2 trillion swing. It's a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists' assumptions about how much in taxes the government would collect in future years.

"About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.

"Mr. Obama's main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies -- together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama -- account for 20 percent of the swing.

"About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas...."

-- Dave Leonhardt, "Sea of Red Ink: How It Spread From a Puddle" (New York Times, June 9, 2009)

Dan Pallotta Defends His Thesis

Last week, I had the pleasure of attending the third installment of Jayme Koszyn Consulting's Give Five Speaking Series, featuring Dan Pallotta, author of Uncharitable: How Restraints on Nonprofits Undermine Their Potential, and moderator Leonard Lopate, host of the highest-rated public radio talk show in New York City.

By 7:10 P.M., the audience had not quite filled the orchestra section of Columbia University's Miller Theater. But Lopate was eager to get started and immediately asked Pallotta to set the record straight about Pallotta TeamWorks, the controversial for-profit special events company founded by Pallotta in the early 1990s. Controversial because, in addition to coming up with the idea for AIDSRides and Breast Cancer 3-Days to raise money for AIDS and breast cancer research and services, the company was known for taking a hefty chunk of the gross to cover its overhead costs. Eventually, a number of the company's most important clients, including the Avon Products Foundation, got tired of sharing the proceeds with Pallotta and his colleagues and cancelled their contracts. The company collapsed shortly thereafter.

As you'd expect, Pallotta defended the fees charged by the company. The money spent on overhead, including items such as "extravagant" advertising, was integral to the success of its fundraising efforts, he said. And, as he was quick to point out, successful they were: over the course of nine years, Pallotta TeamWorks raised over half a billion dollars and netted $305 million in direct charitable contributions for AIDS and breast cancer organizations.

"We went a long time walking around in the airport without wheels on our suitcases," he said, before adding that his company was ahead of its time.

Uncharitable, Pallotta's first book, has stirred considerable discussion (here, here, and here, for example), not least because it argues there are five flaws in the nonprofit sector's value and belief system: constraints on compensation; prohibition on risk; discouragement of long-term vision; discouragement of paid advertising; and prohibition on investment return. (You can learn more about Pallotta's views on his blog, Free the Nonprofits.)

Pallotta's book argues that adopting a for-profit approach to fundraising would help nonprofit organizations inspire more people to give, which in turn would mean more money available for making real change. The sector struggles to make an impact, he argues, because the percentage of GDP allocated to philanthropy has remained the same for years. In other words, charity is not growing its market share and therefore is limited in how much it can do to reduce suffering around the world.

How does the argument that charity should behave more like business hold up against the backdrop of a prolonged economic crisis caused by deregulation, lax oversight, and an every-man-for-himself mentality, Lopate wanted to know. "The method for fixing a leaky boat does not change in the rain," Pallotta replied. Charity has been broken for a long time, he added, and our current economic straits do not absolve of us of the responsibility for fixing it.

Toward the end of the event, after Pallotta and Lopate had begun taking questions from the audience, someone asked why young people should commit to the nonprofit sector rather than take their talents to the for-profit sector, where they might actually be rewarded for their efforts and ideas. "It's up to young people to take a stand and say they will not sacrifice their lifestyle to work for lower salaries," Pallotta answered.

Easier said than done. After reading Uncharitable and hearing Pallotta speak, I can't help but wonder how my generation of nonprofit professionals is expected to react to the news that "the system is broken." Should we throw in the towel, go for the big corporate paycheck, and hope that we can revive our passion to make a difference ten, twenty, thirty years down the road when, presumably, we have "feathered our nests"? Or should we bite the bullet, accept the low salaries, marginal benefits, and diminished lifestyle expectations that come with a nonprofit job and be grateful we have a job, any job?

Pallotta would reject that choice as a false dichotomy. In fact, he would say that we need more people in the trenches, not fewer, to fight for a more effective charitable system. As he writes in Uncharitable:

I am not saying we don't need charity. I am saying we don't need a separate set of rules for its conduct. We need to help the poor. We need all the good people and organizations that are presently trying to help them. We just don't need a different ideology for doing it. We need to cure the disease. We don't need a different set of rules for doing it. Indeed, to the extent we are curing the disease, it is largely on the basis of for-profit ideology....

What do you think? What advice would you give a young nonprofit professional who wants to make a difference, who wants to tackle some of the big social and environmental challenges that confront us, but who is worried that she might not be able to afford a decent home, send her kids to a decent high school or college, or be able to afford retirement? We'd love to hear your thoughts....

-- Regina Mahone

U.S. Philanthropy and the Global Economic Crisis

(Amina Evangelista Swanepoel, a project consultant at Anthony Knerr & Associates, has significant experience in the nonprofit sector, especially within the fields of human rights and public health. This is her first post for PhilanTopic.)

In the last few months countless articles, papers, studies, and surveys have been published about the adverse effects the economic crisis is having and will continue to have on nonprofit organizations in the United States. A growing number of nonprofits have declared bankruptcy and many more are expected to shut their doors due to significant endowment losses and steep declines in grants and donations. Studies and anecdotal evidence confirm that bankruptcies are on the rise within the sector and that many organizations, particularly social service agencies, are struggling to stay afloat while providing assistance and support to an ever-growing population of poor and needy people.

And the United States is still the richest country on earth. What about the rest of the world, where needs, especially those related to health and social services, often are greater than those that exist in the U.S., but where many of the existing nonprofit organizations and programs are supported mostly or entirely by American philanthropy? With basic needs in the United States increasing, how will international programs supported by U.S. philanthropy fare?

Situations vary. For larger, more established nonprofits, the picture may not be so bleak. But smaller grassroots organizations more dependent on individual donations are facing tough times.

Groups such as the Bill and Melinda Gates Foundation, the Ford Foundation, and the Open Society Institute continue to provide billions of dollars to nonprofits and nongovernmental organizations around the world. Unfortunately, obtaining a grant from foundations like these is extremely competitive; the process is rigorous and requires applications and reports to be submitted in English, which prevents many smaller organizations without strong administrative support from applying for and winning grants. Typically, these types of organizations rely more heavily on individual giving. But with the unemployment rate in the U.S. approaching double digits and trillions in household net worth having been vaporized, individual donations are expected to decline dramatically. The result: hundreds, if not thousands, of smaller nonprofits in developing countries will be forced to close their doors.

The Obama administration’s 2010 budget doubles total foreign aid, and a small portion of USAID funding is usually available to nonprofits abroad. It's a step in the right direction, but as a percentage of the country's total income (or GNI), American foreign aid isn't even 0.05 percent of the federal budget. Indeed, among developed nations, only Greece gives less than the U.S. as a percentage of GNI. And while the Obama administration's plans to increase foreign aid are commendable, the majority of American foreign assistance will come, as it has for decades, from foundations and individual donations.

At the same time, U.S.-based organizations with both domestic and international programs are likely to cut back on their international activities in the months to come. Given increasing needs here in the U.S., groups such as Heifer International, Habitat for Humanity, Mercy Corps, and Save the Children may soon be forced to allocate more of their resoruces to their domestic work. In fact, a December 2008 article in the Chronicle of Philanthropy suggested that donations to international aid organizations on a per annum basis could fall by as much as $1 billion going forward. Charlie MacCormack, president of Save the Children, even told the Chronicle that a prolonged global economic crisis (i.e., longer than sixteen months) could be disastrous for many international aid groups. "If jobs are still going away," MacCormack said, "and equity is still going away, and people say 'I don't have a lifeline myself any longer', then it will be tough."

In a recent blog post, Foundation Center president Bradford Smith wrote about the Dalit Foundation, which grew out of the National Campaign on Dalit Human Rights and which received critical endowment support from the Ford Foundation. Dalits, or "untouchables," are a marginalized group of people in India who despite recent political gains still face discrimination on the basis of caste at the hands of the larger Indian population. NCDHR recognized the positive impact it could have by providing small grants to Dalits through support provided by Ford.

The point is, even as we focus on issues and problems here at home, we must not forget the nonprofit and nongovernmental organizations struggling to provide invaluable (and often life-saving) services and assistance in other countries. Given the financial and economic threats confronting many international NGOs, it is imperative that foundations fortunate enough to have large endowments broaden their funding criteria and extend grants to smaller nonprofits and NGOs that have been excluded from their consideration in the past. The Dalit Foundation is just one example of how much good a nonprofit can do with what, in America, would be considered a relatively small amount of money.

Just as the economic crisis has been global in nature and demands international solutions and coordination if it is to be fixed, the approach to social problems should also be global and requires worldwide cooperation and input. To succeed, the new face of philanthropy will have to be global as well. As it did in the years immediately following the end of World War II, U.S. philanthropy has an opportunity to provide visionary leadership that will make a difference in the lives of millions around the globe. Will it hear the call? 

-- Amina Evangelista Swanepoel

Weekend Link Roundup (May 16 - 17, 2009)

Here's our latest roundup of noteworthy posts from and about the nonprofit sector. Enjoy....

Communications/Marketing

Do you wish your board members were better communicators of your organization's mission? On her Getting Attention blog, Nancy Schwartz offers the following tips:

1. Make sure they know your organizations's talking points and elevator pitch cold.
2. Share your marketing strategy with them and tell them what they can do to advance it.
3. Teach, don't tell. Have a real, sit-down training session with new board members to give them some practice and increase their comfort level with their role

AdWeek recently reported that the more than 60 percent of the people that try Twitter, the popular microblogging platform, do not return after the first month. On his Donor Power Blog, Jeff Brooks argues that while nonprofit organizations should take some time to learn what Twitter is about, they shouldn't get their hopes up when it comes to using it to motivate action and raise funds. "If I had to place a bet on which will go away first -- Twitter or postal mail," writes Brooks, "I'd bet that the post will outlast."

Economy

Rick Cohen takes a closer look at the Obama administration's proposed FY2010 budget, which includes several programs of importance to nonprofits.

Education

The margin for failure in the education sector is virtually nonexistent, writes Chris Murakami Noonan on the Philanthropy Potluck blog. Noonan agrees with a finding from Lessons in Education Philanthropy: Proceedings from BHEF’s Inaugural Institute for Strategic Investment in Education that "strategically targeted philanthropic resources can serve as a vital catalyst for positive, lasting and high-impact change in public education." But without transparency, says Noonan, the successes achieved by private philanthropic dollars -- which, after all, are small compared to overall support for education -- are easy to miss. The question, then, is what can private philanthropy do to enhance its commitment to transparency so that others can learn and build on that work?

On the White Courtesy Telephone blog, Albert Ruesga asks readers to consider: Which sector has had the bigger say "in framing the purpose of K-12 education," business (Homo economicus) or government (homo democraticus)?

Leadership

Seth Godin's talk at this year’s TED conference has been posted online. On the Social Citizens blog, Kari Dunn Saratovsky says the seventeen-minute talk is "a good introduction to [Godin's] book Tribes: We Need You to Lead Us." In both, adds Saratovsky, "Godin argues that lasting and substantive change can be best effected by a group of people connected to each other, to a leader, and to an idea."

Nonprofit Management

Dan Pallotta, author of Uncharitable: How Restraints on Nonprofits Undermine Their Potential, has started blogging for the Harvard Business Review. And in his first post, he urges the nonprofit sector to -- surprise! -- re-visit its "fundamental canons." "It's time," writes Pallotta, "to give charity the big-league freedoms we really give to business. The fight for these freedoms must be our new cause, because without them, all of our causes are ultimately lost." Or not. Jump over to the HBR site to join the conversation.

On the Social Venture Partners blog, Lynn Coriano offers a nice summary of the recent Money Matters conference in New York City, including discussions of whether grantmakers are "buyers" of services and programs or "builders" of nonprofit enterprises.

Social Entrepreneurship

In response to a recent post by Allison Fine, Root Causes' Andrew Wolk argues that the government's recently announced Social Innovation Fund could be helpful in breaking down some of the existing "silos" in the social impact arena and is a good first step toward realizing more sustained and collaborative public-private partnerships.

Tony Wang, a researcher at Blueprint Research & Design (Lucy Bernholz's shop), argues that for-profit businesses are better at creating social impact than aid and nonprofits/NGOs -- and is thoughtfully engaged in debate by Tony Pipa (in the comments) and Nell Edgington, among others.

Social Media

Social Actions, in partnership with the Skoll Foundation, PopTech, ideablob, and Civic Ventures, has launched the Social Entrepreneur API, a new resource that will make it easier, says Sean Stannard-Stockton, for people interested in social entrepreneurs to “follow the smart money.”

Retailer Target has launched Bullseye Gives, its first giving campaign on Facebook, and from May 10 through May 25 is inviting everyone to help it decide how to allocate $3 million among ten large institutional charities. On her blog, Beth Kanter wonders whether these types of contests are moving philanthropy forward via the use of new technologies, or further exhausting an already cause-fatigued crowd. Writes Kanter:

On the one hand, I think competition is healthy and pushes us to take a few risks, innovate and explore these new tools, particularly if the potential reward $ is big. On the other hand, online contests remind of an experience I had in Hawaii feeding fish and makes [me think] about the drawbacks like cause fatigue, transactional vs relational, and promoting scarcity thinking....

Katya Andresen shares some key findings from the eNonprofit Benchmarks Study, a new study by M+R Strategic Services and NTEN that examined the effectiveness of online nonprofit fundraising in 2008. Here are a few of her takeaways:

• Online fundraising was up 26 percent in 2008
• E-mail fundraising and advocacy response rates held steady, compared to declines in previous years
• The average online gift size was $71, down $15 from the previous year. The decline was most pronounced in the fourth quarter of the year (as the economy fell off a cliff)
• Fundraising e-mails sent to previous donors generated response rates more than three times as high as those sent to non-donors
• For most organizations, almost one-third of all online actions are taken by the most active subscribers, who comprise just seven percent of all donors
• E-mail click-through rates fell in all issue sectors

That's it for now. Have a great week!

-- Regina Mahone

TED on Sunday: Barry Schwartz on the Paradox of Choice

In this wryly amusing talk, psychologist Barry Schwartz interrupts his morning jog to explain why more personal choice in almost every domain -- work, healthcare, entertainment, lifestyle decisions -- is making us less happy and more dissatisfied. It's a problem peculiar to affluent, industrialized societies, says Schwartz, but the consequences are global and increasingly destructive, psychologically as well as environmentally. So remember, when Mom or Dad tells you everything was better back when everything was worse, they just might be on to something. (Filmed: July 2005; Running time: 19:37)

Liked this talk? Then try one of these:

• TED on Sunday: Alex Tabarrok on the Benefits of Globalization
• TED on Sunday: Majora Carter on Environmental Justice
• TED on Sunday: Al Gore on Climate Change
• TED on Sunday: Sylvia Earle on Saving the 'Blue Heart' of the Planet
• TED on Sunday: James Howard Kunstler on the Death of Suburbia
• TED on Sunday: Clay Shirky on Epochal Change
• TED on Sunday: Mark Bittman on How We Eat
• TED on Sunday: Hans Rosling on the Dimensions of Development
• TED on Sunday: Sir Ken Robinson on Education and Creativity

-- Mitch Nauffts

New Rules for a New Age

Just started reading What Would Google Do? by Jeff Jarvis and have to say that Jarvis has captured much of what I've learned about the Internet, economics, and the psychology of networks in ten easy-to-grasp rules:

• Customers are now in charge. They can be heard around the globe and have an impact on huge institutions in an instant.

• People can find each other anywhere and coalesce around you -- or against you.

• The mass market is dead, replaced by the mass of niches.

• "Markets are conversations" (The Cluetrain Manifesto). That means the key skill in any organization to day is no longer marketing but conversing.

• We have shifted from an economy based on scarcity to one based on abundance. The control of products or distribution will no longer gurantee a premium and a profit.

• Enabling customers to collaborate with you -- in creating, distributing, marketing, and supporting products -- is what creates a premium in today's market.

• The most successful enterprises today are networks -- which extract as little value as possible so they can grow as big as possible -- and the platforms on which those networks are built.

• Owning pipelines, people, products, or even intellectual property is no longer the key to success. Openness is.

Over the last decade, we've seen those "rules" disrupt and reshape industry after industry, from computers to photo processing to classified advertising to recording and music distribution. Philanthropy? Not so much. But change is coming, and more quickly than we may want to admit.

So here's your weekend assignment. Which of the above rules is likely to be the most disruptive in terms of philanthropy as currently practiced in the U.S.? Which has no application to philanthropy at all? And what would you add to the list?

-- Mitch Nauffts

From the Answer Desk: What Do I Need to Know About Collaboration?

(In yesterday's post, we suggested that while the worst of the economic storm may have passed, the nonprofit sector can expect heavy weather for the next year or two. In this post, Katie Artzner, the Foundation Center's online librarian, pulls together some terrific resources for nonprofits contemplating a merger or collaborative enterprise. Katie's post was originally posted on our Philanthropy Front and Center-Cleveland blog.)

Q: In the current economic climate, nonprofit organizations are being urged more than ever to work together in new and creative ways. Why?

A: Demand for services is up along with competition for financial resources, making the drive toward efficiency increasingly important. Duplication of services is viewed as wasteful. Strategic alliances, like collaboration, are equated with cost-savings. And the complex issues that nonprofits address are presenting themselves on a grand scale, calling for scaled-up solutions.

Gaining a basic understanding of the types of strategic alliances is a good first step in determining a fit for your organization. There's general agreement that the types of strategic alliances follow a continuum, from those that are informal to those that require high levels of intensity, complexity, and formality. The following types are based loosely on the work of Dr. John Yankey, Ph.D., emeritus professor, Case Western Reserve University:

• Endorsement: Providing approval or support of a concept or action already conceptualized or completed by another organization (letters of support).
• Co-sponsorship: When two or more organizations share (although not always equally) in the offering of a particular program or service.
• Affiliation: A loosely connected system of two or more organizations with a similar interest(s).
• Federation/Association: An alliance of membership organizations established to centralize common functions.
• Coalition: An alliance of independent organizations that usually share a political or social change goal.
• Consortium: An alliance of organizations and individuals representing customers, service providers, and other agencies who identify themselves with a specific community, neighborhood or domain.
• Network: An alliance of organizations that share resources for mutual benefit such as service provision.
• Joint Venture: A legally formed alliance in which member organizations maintain joint ownership (generally through a joint governance board) to carry out specific tasks or provide specific services.
• Acquisition: An alliance in which an organization acquires a program or service previously administered by another organization.
• Divestiture: When one organization "spins off" a program or service to another organization.
• Merger: When one organization is totally absorbed by another.
• Consolidation: When two organizations combine to form an entirely new organization.

Based on the work of Michael Winer and Karen Ray (Collaboration Handbook: Creating, Sustaining, and Enjoying the Journey) and David LaPiana (Nonprofit Mergers Workbook), the Fieldstone Nonprofit Guide to Forming Alliances uses these categories:

• Cooperation: Informal arrangements and relationships with no change in organizational structure of participating entities.
• Coordination: More formal arrangements and relationships that focus on specific programs or projects and are accompanied by plans and a shared mission.
• Collaboration: Longer-term, formal arrangements and relationships where separate organizations are brought into a new structure with a shared mission.
• Merger: An arrangement in which two organizations become one.

The resources below are excellent places to start to learn more about the costs and benefits of strategic alliances.

Collaboration -- Fieldstone Alliance
Provides free access to useful articles and tools related to planning nonprofit collaborations.

"Collaboration Strategies for Nonprofit Organizations" -- Curtis Thaxter LLC
Briefly examines the preliminary questions that all nonprofit organizations should address before engaging in a collaborative effort and outlines collaboration strategies available to nonprofits.

Managing Collaboration Risks -- Nonprofits’ Insurance Alliance of California
Explores the kinds of collaborative relationships that nonprofits typically engage in and how to manage or avoid the risks associated with them. Published in 2002; 18 pages, PDF.

"The Reality Underneath the Buzz of Partnerships: The Potentials and Pitfalls of Partnering" -- Stanford Social Innovation Review
Shares findings from a study of nonprofit partnerships and examines why most failed to fulfill participants' expectations. Published: Spring 2005.

In addition, the following print publications can be found at Foundation Center libraries:

• Forming Alliances: Working Together to Achieve Mutual Goals by Linda Hoskins and Emil Angelica
• Uniting for Survival by Don Haider
• Time to Merge? Fundraising and Financial Implications by Priscilla Hung

Still have questions? Ask us.

-- Katie Artzner

Now What?

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other to total extinction. Let us pray we have the wisdom to choose correctly."
-- Woody Allen

Okay, so maybe the world isn't coming to an end. The sense of impending doom that hung over the economy last fall and the early part of this year seems to have dissipated. We have a new president committed to minimizing the human costs of the recession and to correcting many of the mistakes and practices that contributed to the mess we find ourselves in. Some have even spotted "green shoots" of recovery amidst the wreckage of the boom-turned-bust. "It's bad," we tell ourselves, "but we'll get through this." Then we knock wood and try to focus on something less depressing.

We will get through it -- though when and in what shape remain to be seen.

For the moment, however, the nonprofit sector is hurting. Consider these findings from The Quiet Crisis, a recent report (22 pages, PDF) written by Bruce Reed, president of the Democratic Leadership Council, and John Bridgeland, president/CEO of Civic Enterprises:

• The United Way saw a 68 percent increase over the past year in the number of calls for basic needs such as food, shelter, and warm clothing;
• The state of Arizona reports an increase of more than 100 percent over the past year in the number of people who sought social services;
• More than 70 percent of Michigan nonprofits have experienced increasing demand for their services, while 50 percent report that their financial support has dropped;
• Churches, an important provider of social services to the poor and needy, were expected to raise $3 billion to $5 billion less than anticipated in the last quarter of 2008.

Or these findings from a survey and series of roundtable discussions conducted by the Community Foundation for Greater New Haven earlier this year and in the fourth quarter of 2008:

• Nonprofit organizations are experiencing significant challenges in raising money and a significant decline in donations;
• As a result of the downturn, donors in general have been more focused on giving to basic needs organizations;
• Arts organizations are seen as especially vulnerable during these turbulent times;
• Executive directors are deeply concerned about cash flow;
• There is great concern, especially among larger organizations, about the effect that state budget shortfalls will have on nonprofit revenue streams;
• Executive directors are concerned about the well-being of their staff and their ability to continue to deliver critical services in an increasingly stressful environment;
• Nonprofits are deferring plans for new initiatives and programs;
• Donors are becoming more focused on giving locally.

A "quiet crisis," indeed. As Rip Rapson, president of the Michigan-based Kresge Foundation (and the source of the Woody Allen quote above), remarked to a gathering of YMCA leaders recently:

The nonprofit landscape of yesterday or today will not be the nonprofit landscape of tomorrow. Undercapitalization, chronically a problem, will become a death spiral. When revenues decline by 10 or even 20 percent, a nonprofit can put itself on a diet of discipline and flexibility and emerge at the other end with its mission pretty much intact. When demand skyrockets and revenues decline by 40 or 50 percent, however, you're a different organization altogether.

Generous benefactors will almost certainly rise to the occasion and try to stabilize their organizations of choice. But they can't begin to provide enough support to offset diminished public and philanthropic dollars. And their generosity will flow selectively, leaving outside the rescue pipeline vast numbers of organizations that are largely invisible to most of those donors -- particularly organizations that have traditionally been heavily subsidized by government.

Regardless of which direction you look -- other sources of private capital, the stimulus package, elsewhere -- the result is not so different. Too few dollars, too rapid an unraveling, too little time to plan systematically for thorough-going change. We have to face the very real possibility, therefore, that the kind of re-examination and re-invention demanded by this new world is either not possible or simply too difficult. If that were to become the case, the consequences for our social and economic fabric would be correspondingly harsh, cruel, and disruptive....

Will it become the case? It depends on how we respond, as individuals and as organizations, and whether we believe our actions can make a difference.

In his speech, Rapson outlined the strategies that Kresge, a national funder, will pursue going forward: more flexibility with respect to the way the foundation works with current grantees; closer scrutiny of new funding requests so as to avoid squandering resources; and a greater focus on field-building efforts in its areas of interest.

The Community Foundation for Greater New Haven, a local funder, is taking steps of its own: more operating support grants for key nonprofits in the community and more technical and capacity-building assistance for the nonprofit sector in general; convening and connecting institutions; developing and disseminating knowledge about the sector to donors; promoting collaborations and mergers; and using the current crisis to encourage broader thinking in the region about its economic future.

Our own Michael Seltzer has some wonderful advice for nonprofits (here, here, and here). And Steve Rabin reminds all of us that a little bit of spending, done wisely, can go a long way.

These are great ideas and will make a difference -- especially if implemented by funders, large and small, nationwide. But they're not the final word on the subject. So, now it's your turn. What do you think foundations and other donors should do to address the crisis in the nonprofit sector? And what can nonprofits do to ensure their own survival in these difficult times? Don't be shy...

-- Mitch Nauffts

Annals of Wealth: Nick Paumgarten Deconstructs the Economic Crisis

Nick Paumgarten's piece in this week's New Yorker ("The Death of Kings," May 18, 2009) is long, detailed, and gripping, in the same way Greek tragedy often is. I'm guessing it was researched and written between November and February, a period when the global financial system was on the verge of collapse and the "green shoots" of the past few weeks were a distant hope. But whether you're a beginning-of-an-end type or, like me, an end-of-the beginning gloomster, it's an article everyone should read. Here's an excerpt:

This thing we're in doesn't yet have a name. It's variously called, in placeholder shorthand, the global financial meltdown, the financial crisis, the credit crisis, the recession, the great recession, the disaster, the panic, or the bust. It long ago metastasized beyond the subprime mess, which was merely a catalyst -- the first whiff, the last straw. A text-friendly acronym, ITE, for "in this economy," has started to get around, in sales pitches and head count meetings, but it doesn't do the work.

This thing is enormous and all-pervading, evolving and ongoing, history-altering yet in many respects banal. It is a persistent state, like the weather, or a chronic illness. In some circles -- financial professionals in Manhattan, regulators in Washington, central bankers in Europe, or the owners of cash-strapped businesses, to say nothing of the millions of people who have been laid off or whose houses have been foreclosed on -- this thing is, in its various incarnations, pretty much the only subject of conversation. The loss of a job, a home, a college fund, or one's dignity is both a symptom of the collective disaster and a contributor to its deepening. People assess their own exposure first and then, gradually, the implications for their friends, their town, the social fabric, and, in the darker hours, the fate of the American experiment.

In a way, the financial crisis is like a plague or war, except that the pestilence and carnage are metaphorical. Some have compared it to Hurricane Katrina, but Katrina occurred suddenly, and then all was aftermath. In this case, it's as though the levees failed anew every day. We stay on the porch, carrying on with our card game, in water up to our necks. War...fails as an analogy, too; there is no enemy to shoot at, and the destruction is so gruesome that it is hard to mistake wartime for normalcy. An economic meltdown can camouflage itself in the commonplace. It is more like radiation. It's everywhere, but you can't see or smell it....

Click here for an abstract of the article; the complete article is available only to magazine subscribers. Or you can buy a copy at your local newstand. (What a novel idea.)

-- Mitch Nauffts