The Nonprofit Dilemma

I get to read a lot in my job, and every once in a while I come across something that articulates, concisely and authoritatively, the challenge confronting nonprofit organizations at the beginning of the twenty-first century. This excerpt from the introduction to Barry J. McLeish's book Yours, Mine, and Ours: Creating a Compelling Donor Experience (Hoboken, NJ: John Wiley & Sons, 2007) is an example:

Notions of change are common to those who work in the nonprofit world, as is the pressure to change. What feels new, however, is the ever-increasing sense that some nonprofit leaders have that they must change; that maintaining the status quo is not only ill-advised but harmful and, in some cases, destructive to their institutions. This sentiment is continuously reinforced by the for-profit business press, seminars, and many consultants, who imply that organizations mut be constantly going through some sort of introspective, serious, and ongoing managerial and operational transformation to be properly managed.

Nonprofit institutional leaders are not immune to these pragmatic, psychological pressures. The reasons for this are quite simple. In many nonprofit institutions there is no longer a quality gap between the services they provide and those being provided by similar groups with like-minded societal visions and casual offerings. Not only are there multiple nonprofit organizations providing the same or similar services, but donors, customers, and volunteers can typically find significant cross-sector overlap with the services being provided by for-profit and governmental institutions....

These marketplace conditions have contributed to creating more discerning donors and customers who possess a higher expectation of what to look for -- and demand from -- nonprofit customer services. What is called "shareholder value" or "brand equity value" in the for-profit world...is also being felt and expressed in the nonprofit world....[where] it takes the form of consumer and donor expectations of better stakeholder experiences, service, timeliness of response, vision, and performance on the part of institutions they support and are interested in. The need to create a compelling philanthropic experience and bond -- whether for a donor, a volunteer, a board member, or a customer -- is the benchmark that most organizations must set their sights on and operate against....

-- Mitch Nauffts

NY Times Annual 'Giving' Section

It's back, and bigger than ever. I'm talking about the New York Times' annual Giving section. This year's installment weighs in at 40 pages -- 22 of which are devoted to advertising (proof, as if it were needed, that philanthropy is big business) -- and boasts 33 contributors, including the likes of Stephanie Strom, Robin Pogrebin, Geraldine Fabrikant, Claudia H. Deutsch, and Jennifer 8. Lee.

The scope of the coverage is equally impressive, with articles on the spend out-vs.-perpetuity debate ("How Long Should Gifts Just Grow?"), philanthropy and Web 2.0 ("My Network, My Cause"), Ruth Lilly's eye-opening $100 million gift to the Modern Poetry Association ("A Windfall Illuminates the Poetry Field, and Its Fights"), the potential of so-called prize philanthropy ("Win Fabulous Prizes, All in the Name of Innovation"), and the growth of the nonprofit blogosphere ("In the Fund-Raising Game, Blogs Cut Both Ways" -- What? No PhilanTopic?!).

As always with the Times, the writing and editing are first-rate, and the whole package is reason enough to pick up a copy of today's paper, regardless of where you may live.

-- Mitch Nauffts

Trouble in Paradise?

Interesting article about nonprofits and mergers by Stephanie Strom in yesterday's New York Times. What got my attention wasn't the stuff we already know -- mergers of nonprofits present special challenges (no real financial incentives for executives, potential alienation of loyal donors and committed employees) -- but the suggestion that the much-publicized merger between the Peninsula Community Foundation and the Community Foundation Silicon Valley has hit some bumps in the road.

Announced in the summer of 2006, the merger, which created the Silicon Valley Community Foundation, received broad support from stakeholders in the community and five Bay Area foundations -- Hewlett, Packard, Irvine, Skoll, and Omidyar -- each of whom put up $1 million to pay for consultants, new offices, and other expenses. But, writes Strom,

three months after the merged foundation moved into its new home, those supporters have soured because of staff departures and discontent among donors and local nonprofits. Emmett D. Carson, its new leader, recently was grilled by officials from the foundations that encouraged the merger, and his future is now in question, those officials said.

Carson, whom PND interviewed shortly after he was tapped to lead the new entity, "defended decisions he has made, like requiring everyone on staff to reapply for their jobs and reducing the number of executives who report directly to him.

"Mergers take time," he told Strom. "We have to merge investment portfolios that have been managed differently, we have two incompatible and antiquated IT systems --

and then we have the dreaded 'C', the cultures of two organizations that both climbed the mountain very effectively but very differently. [That] is the hardest part.

It certainly sounds like it.

-- Mitch Nauffts

One-Post Challenge (Week #1 Update)

Tactical Philanthropy's One-Post Challenge is off to a great start. After ten days, there have been five substantive posts and, more importantly, 14 comments (the real point of the exercise, as I understand it).

Here are links to the first five entries in the competition:

Rob Johnston argues that Guidestar should be acquired by a company with Internet interests and be made into a true hub of nonprofit information and community.

The anonymous author(s) of the Gates Keepers blog (which is dedicated to tracking the activities of the Bill and Melinda Gates Foundation) suggest that the best/only way to "amplify" civil society voices on the Bill and Melinda Gates Foundation and Big Philanthropy is to blog anonymously.

Sam Huleatt, who blogs at LeveragingIdeas.com, notes that giving among young alumni is at historic lows and suggests that new technologies may be the key to reversing the trend.

Carla Dearing of GivingNet (formerly Community Foundations of America) argues that for there to be a philanthropic capital market, there must be philanthropic products, looks at who defines those products, and introduces a Web 1.0 to Web 2.0 framework for understanding them.

And Trista Harris, the voice behind newvoicesofphilanthropy.org, a blog about next generation philanthropy issues, proposes "nothing short of a revolution in the philanthropic field" based on the premise that “work is something you do, not somewhere you go.”

As I say, a great start. But November is still young. So don't be shy. Head on over to Tactical Philanthropy and leave a post or comment.

A First Look at Foundations' Direct Charitable Activities

Though anecdotal evidence suggests that non-grantmaking operating programs -- otherwise known as direct charitable activities (DCAs) -- within the foundation field have been growing for some time, actual evidence of the fact has been hard to come by. That's due, in part, to limitations of IRS Form 990-PF, which private independent foundations are supposed to file annually.

In an effort to shed more light on these types of activities, the Foundation Center has released a new study, More Than Grantmaking: A First Look at Foundations' Direct Charitable Activities (10 pages, 815 kb, PDF) that tracks the growing role of DCAs in the work of American foundations. Authored by Loren Renz, the center's senior researcher for special projects, and research associate Rachel Elias, the report found, among other things, that:

• Foundations engage in three main types of direct charitable activities -- convening conferences and other events that serve a broad audience; providing technical assistance or training to grantees; and supporting the service of staff on the advisory boards of other organizations or public commissions.
• Of the 684 independent and family foundations surveyed, half of those with giving of $10 million or more said they conducted such activities, and nearly all of those (95 percent) that operate such programs are staffed.
• While more than a third of independent and family foundations rely to some extent on consultants to conduct their DCAs, foundation staff plays by far the principal role.
• Community foundations reported far higher levels of DCAs (61 percent) than did either independent foundations (25 percent) or corporate foundation (16 percent).

Not everyone thinks foundations should be engaging in such activities, particularly when they involve direct service provision or policy formulation. (One of those is Douglas Besharov, a scholar at the American Enterprise Institute, whom I mentioned in yesterday's post.) I'll save that debate for another day, but certainly reasonable people can disagree.

In the meantime, if you'd like to learn more and/or want to download the report, click here.

-- Mitch Nauffts

PhilanTopic Wants You!

Dear friends:

It's been two months since we launched our little blog, and things are go swimmingly: Traffic is up, the hot/hat tips are streaming in, and plans are being made to kick things up a notch.

The only thing missing is you. That's right. We really want to broaden and deepen the conversation about philanthropy we've begun here, and to do that we need you. And you. And you.

We're not looking for much: A post every other week (to become a contributor) or on occasion (to become a guest contributor). And here's the beauty part: Because we're a broad-minded group, interested in pretty much anything having to do with philanthropy (in all its guises and permutations), the playing field is wide open. Believe me, once you get started, you won't want to stop.

To learn more, drop me a line at [email protected]. And let the games begin!

A Conversation with Ed Skloot (and Friends)

Though I don't share his politics, I'm a fan of Bill Schambra's. Schambra, the director of the Bradley Center for Philanthropy and Civic Renewal at the D.C.-based Hudson Institute, is a smart and generally fearless provocateur who over the last few years has made a name for himself challenging -- in op-ed pieces and through a series of live, lunchtime panel discussions at Hudson -- many of the assumptions that inform the work of foundations in the U.S.

A week or so ago, Schambra invited Ed Skloot, the recently retired head of the New York City-based Surdna Foundation (and a provocateur in his own right), to take the Bradley Center stage and share his thoughts about the profession and practice of philanthropy. Skloot was joined on stage by three other "philanthropoids" -- Joanne Scanlan, a longtime officer at the Council on Foundations and now a principal at the eScanlan Company; Albert Ruesga, vice president, programs and communications at the D.C.-based Eugene and Agnes E. Meyer Foundation and chief blogger at the always entertaining White Courtesy Telephone; and Douglas Besharov, a professor at the University of Maryland School of Public Policy and the Joseph J. and Violet Jacobs Scholar in Social Welfare Studies at the American Enterprise Institute.

The conversation, which took as its starting point Skloot's Waldemar Nielsen lecture from 2001, "Slot Machines, Boat Building, and the Future of Philanthropy," was frank in its appraisal of the strengths -- and weaknesses -- of contemporary American philanthropy, and it seemed to end with the participants agreeing that foundations, while not as effective as they might be, generally were a positive force in American society.

That glosses over many of the more interesting and/or provocative comments made during  the event, as when Skloot suggested that "foundations don't have much incentive to change what they do, and [that because] they tend to live in perpetuity, they can keep their old ways in perpetuity, too." Or when Scanlan argued that "Historically...foundations have worked best with organizations that are most like them, organizations that are staffed by middle-class and upper-middle-class people who are articulate, well educated, and comfortable in formal organizations. Partnering across lines -- [whether] economic, race, class, gender, sexual identity, disability, or organizational -- those are going to continue to be challenges." Or when Ruesga noted that "In the foundation field...we tend to affirm and recreate the world rather than challenge and remake it. Foundations reproduce external hierarchies internally." Or when Besharov stated that "the process of program development, policy development, has to start with the idea that it will fail...over and over and over again. And the role of foundations has to be to be prepared to fail and to learn from failure."

But don't take my word for it. You can read or download the complete edited transcript (2.9 mb, 30 pages, PDF) here.

And if you have any thoughts about whether foundations (specifically) and philanthropy (in general) are effective agents of social change and/or are positioned to serve as such in a rapidly changing world, we'd love to hear them.

-- Mitch Nauffts

Web 2.0 and Congressional Oversight

Gabriela Schneider, who used to work in Media Relations at the Council on Foundations, e-mailed me the other day with news about her new employer, the Sunlight Foundation, which, as its Web site states, "was founded in January 2006 with the goal of using the revolutionary power of the Internet and new information technology to enable citizens to learn more about what Congress and their elected representatives are doing."

Gabriela wanted me -- and you -- to know that her organization is making mini-grants of $1,000 to $5,000 available to nonprofit organizations, individuals, and informal groups of citizens to fund original ideas, tools, Web sites, and blogs that further Sunlight's mission of using the Internet "to create a better, more dynamic relationship between members of Congress and the citizens they represent."

One such example is the Google Earth mash-up that Sunlight itself rolled out today. Drawing on data from its EarmarkWatch.org site, the application plots the locations for almost 1,500 earmarks in the 2007 House Defense Appropriations bill -- and gives anyone with Google Earth on their computer the ability to investigate whether individual earmarks address pressing needs, favor political contributors, or are simply pure pork. In true Web 2.0 fashion, the application also allows users to post comments and notes or contribute his or her own research on any earmark. How can you not love that?

Believing that if you're in the transparency business it's especially important that you be transparent, Sunlight's co-founder and executive director Ellen Miller also blogs daily.

To learn more about the organization's grants and mini-grants, click here and here. And to start navigating earmarks in 3-D, download the Google Earth application and then download Sunlight's House Defense file.

-- Mitch Nauffts

Annals of Wealth (part 3)

BusinessWeek (citing the Business Standard, India's leading business daily) reports that the title of Richest Man in the World passed, on October 30, from Mexican tycoon Carlos Slim Helu to Indian industrialist Mukesh Ambani. I don't know how these things are calculated, but thanks to the strong performance in 2007 of the Bombay stock exchange, Ambani, chairman, managing director, and largest shareholder of Reliance Industries, now apparently boasts a net worth of $63.2 billion, edging out Slim and Bill Gates, number three on the list, each with a net worth of about $62.3 billion.

Ambani -- who gave his wife an Airbus jetliner for her birthday, is rumored to be building a $1 billion residential compound for his family in Mumbai, and, according to The Independent in London, has left "no obvious evidence of any philanthropy" -- denies the claim and is said to be "very upset by all the speculation about his wealth..."

Understandable, though I find it difficult to muster much sympathy for him. The problem, as I see it, is that Mr. Ambani is too much a product of our multicultural, hyper-sensitive, post-modern times. Imagine how much easier his life would be if he just followed the example of Cornelius Vanderbilt (1794-1877), America's first industrial-age tycoon.

When he died in 1877 at age 83, writes Edward Renehan on George Mason University's History News Network, "The Commodore" was worth $105 million. To control the same percentage of GDP today, says Renehan, the author of Commodore: The Life of Cornelius Vanderbilt (Basic/Perseus, 2007), one would have to have $168.4 billion in the bank -- almost three times what Bill Gates is worth.

But Vanderbilt was no bleeding heart philanthropist. As Renehan writes:

No cult of charity claimed [him]; no temptation toward benficence beckoned. Once, when asked to give aid to people standing on line for a distribution of free food, he noted his own impoverished beginning on Staten Island and, without a hint of irony, said: "Let them do what I have done." Not long after this, in an editorial for Packard's Monthly, Mark Twain admonished Vanderbilt to "go and do something [that will] shine as one solitary grain of pure gold upon the heaped rubbish of your life....Go, boldly, grandly, nobly, and give four dollars to some great public charity."

Several years before he died, the Commodore gave $1 million (less than 1 percent of his net worth) to fund what became Vanderbilt University. And though he didn't bother to attend the dedication ceremonies in the autumn of 1875, his gift was hailed as "the largest single act of philanthropy in American history to that time." But it wasn't without strings. Says Renehan:

Attention to the fine print...revealed that a substantial percentage of the $1 million endowment was, by Vanderbiltian order, to be kept in the first mortgage bonds of Vanderbilt's own New York Central & Hudson River Railroad.

It would be hard to imagine, say, a Texas oilman doing something like that today. But Vanderbilt wasn't through. Not long before his death, writes Renahan, the Commodore confided to one of his doctors that he had been "insane on the subject of money-making" all his life. He then drew up a will that left 95 percent of his fortune to just one of his eleven surviving children. Says Renahan:

Vanderbilt said he intended to keep his property "compact...I will not have it scattered. I will leave it as a monument to my name." Thus he left behind him the legacy he most coveted: a vast hoard of stocks, bonds, greenbacks and railroads, but next to nothing in the way of good works or improvement of society.

In other words, he died, in Andrew Carnegie's formulation, disgraced.

-- Mitch Nauffts

Will Money Solve Africa's Development Problems?

About a month ago, I wrote about an expensive two-page spread in the New York Time's Week in Review section taken out by the John Templeton Foundation. The foundation had used the space to launch a series of conversations involving leading scholars and scientists about the "big questions" -- for example, whether the universe has a purpose or not.

The foundation has purchased another two-page spread in today's Times and used it to ask the far more interesting (and important, in my view) question, Will money solve Africa's development problems? Here are some excerpts from that conversation:

"Yes. If it is invested in enhancing African capabilities to integrate the continent into global networks of knowledge and creating prosperity and stability. This will mean confronting and overcoming a triple failure: corruption and abuse of power by African governments, predatory practices by extractive industries, and the waste of resources by an uncoordinated and ineffective aid system...." (cont. online)

-- Ashraf Ghani, chair, Institute for State Effectiveness and former finance minister of Afghanistan (2002-04)

"No. In fact, after fifty years of trying and $600 billion worth of aid-giving, with close to zero rise in living standards in Africa, I can make the case for 'No' pretty decisively. Aid advocates talk about cheap solutions like the 10-cent oral rehydration salts that would save a baby from diarrheal diseases, the 12-cent malaria medicine that saves someone dying from malaria, or the $5 bed nets that keep them from getting malaria in the first place. Yet despite the aid money flowing, two million babies still died from diarrheal diseases last year, more than a million still died from malaria, and most potential malaria victims are still not sleeping under bed nets...." (cont. online)

-- William Easterly, professor of economics and co-director of the Development Research Institute, New York University

"I thought so. But now I don't. There is that thread-bare maxim: If you hold a hammer in your hand, every problem looks like a nail. What happens, then, when all we hold in our hand is a checkbook...?" (cont. online)

-- Michael Fairbanks, co-founder of the OTF Group and the Seven Fund

"No. Not as long as there are issues such as prolonged violent conflict, bad governance, excessive external interference, and lack of an autonomous policy space. Alone, money cannot solve Africa's development problems. Proof, if any was needed, is the fact that many of Africa's natural resource-rich countries score very low on human development indicators...." (cont. online)

-- Dr. Donald Kaberuka, president, African Development Bank

"Yes. But only if the money comes as investment. Africa doesn't need aid from governments and international agencies. Over the last 40 years, aid to developing countries has reached $2.6 trillion, 25 percent of which has gone to sub-Saharan Africa. It has notably failed to eliminate poverty. Philanthropy should have only a limited role -- for disaster relief -- and helping policy makers promote good governance, the rule of law, and property rights...." (cont. online)

-- Professor James Tooley, president, Education Fund, Orient Global

"No. By now we should have learned. Donor nations have spent billions of dollars for development schemes in post-colonial Africa, yet there is little to show for this beyond dependency and corruption...." (cont. online)

-- Edward "Ted" Green, director, AIDS Prevention Research Project at Harvard's Center for Population and Development Studies

"Only if it empowers citizens. African entrepreneurs are the key to solving Africa's development problems. It is they who can drive their continent's economic growth and it is they who can make their governments better. If money is invested engaging the organic and transformative potential of local entrepreneurs, Africa will flourish...." (cont. online)

-- Iqbal Z. Quadir, founder, GrameenPhone and the Legatum Center for Development and Entrepreneurship at MIT

"No way. The problem in Africa has never been lack of money, but rather the inability to exploit the African mind. Picture a banana farmer in a rural African village with a leaking roof that would cost $100 to fix. If one purchased $100 worth of his bananas, the farmer would have the power and choice to determine whether the leaking roof is his top spending priority. On the other hand, if he is given $100 as a grant or a loan to fix the roof, his choice would be limited to what the owner of the big money views as a priority...." (cont. online)

-- James Shikwati, founder and director, InterRegion Economic Network

What do you think? Will money solve Africa's development problems? Or will more aid and philanthropy impose a donor-country agenda on poor countries already traumatized by colonialism and deepen what some see as a fatal dependency on foreign flows of capital? Does Africa need a hand up? More investment and entrepreneurship? Or a little tough love?

I encourage you to read the above essays in their entirety and then to come back and share your thoughts.

-- Mitch Nauffts

Gates Foundation to Fund Survey of the Rich

Robert Frank, a writer for the the Wall Street Journal and author of The Wealth Report blog, reports that the Bill and Melinda Gates Foundation, in partnership with Wachovia, is funding a new survey of the wealthy (i.e., people worth $25 million or more) to be called "The Joys and Dilemmas of Wealth."

According to Frank, the study, which will be conducted by the Center on Wealth and Philanthropy at Boston College (whose director is Paul Schervish), will "go beyond the usual platitudes about wealth and philanthropy." Most studies of high-net individuals, says Frank, come up with the same three findings:

1. The wealthy like to give for various reasons, but mainly because they want to help make the world a better place.
2. They are entrepreneurial in their philanthropy.
3. Philanthropy is important for their "legacy" and for instilling good values in their kids.

Frank offers a half dozen questions of his own that he'd like to see the study address (Do the rich feel guilty? Does money make them happy? Which is more enjoyable -- making money or giving it away?), and then invites readers to suggest questions of their own.

In that spirit, I've got a few:

• How does the manner in which you became wealthy (i.e., made or inherited your fortune) influence your view of poverty?
• To what extent do estate taxes shape your philanthropy?
• Which is more valuable to society, charitable gifts given to address problems in the here and now or gifts used to establish endowments in perpetuity?

What other questions would you include in such a study?

-- Mitch Nauffts

Announcement: November Giving Carnival

I've been away for much of the last week and just learned that the November Giving Carnival will be hosted by Maya Norton, author of The New Jew blog. (Hat tip to Sean at Tactical Philanthropy.)

This topic of this month's carnival is: What business practices should nonprofits adopt to maximize their resources? (Don't know what a Giving Carnival is? This post explains it.)

To participate, e-mail your response to [email protected] and be sure to include:

• your name
• the name of your blog
• the title of your article/post
• a link

-- Mitch Nauffts

WITNESS to launch "the Hub"

On November 7, WITNESS, the award-winning human rights group founded in 1992 by musician and activist Peter Gabriel, the Reebok Human Rights Foundation, and Human Rights First, will launch the Hub, "a participatory media Web site for anyone, anywhere in the world to upload, view, share, discuss, and take action on human rights-related media."

Built with open-source software, the Hub will use a range of Web 2.0 tools -- mobile and Web-based video uploads, online video and content syndication, social networking software, peer reviewing and filtering, and tagging -- to enable people around the world to connect with each other and/or take action -- both online and off.

And while it might be a tad premature to toll the bell for the mainstream media, the emergence of so-called digital media networks like the Hub certainly have the look of the future. As WITNESS co-founder and executive director Gillian Caldwell says:

We are facing an uprecedented possibility with the explosion of digital technology and the participatory culture of citizen journalism it has inspired. There has never been such a remarkable opportunity to use visual imagery and communications technologies to create change.

There are two ways to get involved in the project: by directly uploading human rights-related video, audio, images and resources to the new site; or by contributing your programming skills to help build it. To learn more, e-mail the folks at WITNESS.

-- Mitch Nauffts

Tactical Philanthropy's One-Post Challenge

In an effort to broaden the philanthropy blog conversation, Sean Stannard-Stockton has announced the first annual Tactical Philanthropy "One Post Challenge." During the month of November, anyone who wants to post an entry to Sean's Tactical Philanthropy blog can do so. Just e-mail him your post, with a short bio. According to Sean, "Every coherent, relevant post will be published." But there's more. The post that generates the greatest number of comments will earn the poster $250 and a satchel of new philanthropy-related titles. As many of you know, Sean is one of the more thoughtful (and prolific!) philanthropy bloggers, so let's show him our appreciation by contributing and/or commenting on posts this month.

-- Mitch Nauffts