Philanthropy’s Data Dilemma

(Bradford K. Smith is president of the Foundation Center.)

When McKinsey & Co. released its seminal study Big Data: The Next Frontier for Innovation, Competition, and Productivity, the firm confidently predicted that the world was "on the cusp of a tremendous wave of innovation, productivity, and growth, as well as new modes of competition and value capture -- all driven by big data as consumers, companies, and economic sectors exploit its potential." While the study covered every segment of the economy, from "accommodation and food" to "wholesale trade" and even government, philanthropy -- an industry that, in America, controls over $600 billion in assets and makes close to $47 billion in grants every year -- wasn't even mentioned, most likely because no one thought to include it.

It's not that philanthropy doesn’t have anything to bring to the Big Data party. Think about it. Foundations possess resources, something most people do not. And they possess something even fewer people have, flexible resources. As a consequence they are surrounded by those hoping for their support, an endless stream of the brightest and most committed talent on the planet, people with amazingly creative ideas about how to solve the world's pressing social, economic, and environmental problems. But what's visible to the outside world -- the rare project that is actually approved and whose one-line description eventually makes it on to a foundation tax return and (maybe) a foundation Web site -- is merely the tip of the iceberg. (And a surprising number of foundations don't have Web sites at all.) Moreover, most of the (increasingly digitized) concept notes, project proposals, progress reports, evaluations, research, and strategy deliberations produced by foundations are unavailable for mining within individual foundations, across the field, or by anyone else interested in understanding philanthropy's immense contribution to making a better world.

When it comes to data, foundations have the defects of their virtues. They are endowed, independent institutions with the freedom to innovate, experiment, and stick with challenges for the long run. But their independence too often creates isolation: whatever data they do collect remains locked within thousands of knowledge silos. America's foundations are changing, to be sure, but while many are still focused on catching up with the paradigm shift from giving money away to social investment, the next wave of change is already crashing over them. Either the philanthropic sector masters the technology of managing information and develops the habits of generating and sharing knowledge, or it risks being left behind. Yes, it will continue to do good in the world, but do we really want to settle for being, as Bart Simpson put it, an "underachiever and proud of it?"

That said, getting philanthropy to embrace the era of Big Data need not be a Herculean challenge. Technology is on our side, and by not doing some things we can free up time and resources to start doing others. Here is a partial list of what that might look like.

STOP trying to be unique

At a recent meeting of some of the largest staffed foundations in the country, I was struck by how many said they were developing their own taxonomies with which to classify the subjects of their grants, strategies, approaches, beneficiary populations, etc. Foundations don't compete in the ways that most people think of competition, but they do seek to differentiate themselves from each other. In doing so, they tend to invent their own terminologies to describe and internally align what they do. As a result, philanthropy is much more archipelago than sector, a vast sea of information islands, each with its own language. A colleague at the Foundation Center recently examined 160,000 grant records and identified 82 unique ways in which foundations describe "general operating support." Not only has there got to be a better way, there is a better way. Read on.

START aligning your data with the outside world

While working for the Ford Foundation in the mid-'90s, I found myself arguing vociferously, during one of the quadrennial coding wars that the foundation seemed to engage in, against adopting the taxonomy and codes of the Foundation Center (where I now work). For the record, I repent. Before plunging headlong into developing expensive and elaborate data systems of their own, foundations should look at the systems in use by other foundations and sectors, particularly those with whom they seek to partner and leverage resources. This is beginning to occur. The Gates Foundation now reports grants to the Organization for Economic Cooperation and Development, the Hewlett Foundation converts its grants data into a format compatible with the International Aid Transparency Initiative, and the Ford Foundation has worked with Foundation Center staff to build a "crosswalk" between the two organizations' taxonomies. If philanthropy is really serious about transformation, change, impact, making a difference, and all the other terms we use to distinguish it from traditional charity, then foundations need to align their data with each other and with the outside world.

STOP developing custom grants management systems

Historically, data in foundations has been related primarily to grants management -- processing proposals, cutting checks, getting reports, and closing out files. A number of the large, traditional foundations invested considerable resources in developing their own custom grants management systems when there was little quality software to choose from. In the years since, commercial software has gotten much better and today 11 grants management software vendors have modules built into their products that make it possible for a foundation to export grants data directly to the Foundation Center. Those products include GIFTS, the market leader, and FLUXX, a new cloud-based open-source grants management solution. In the era of Big Data, "interoperability" is a key concept. Having your own unique taxonomy locked inside a custom software platform is two strikes against you.

START going beyond the 990-PF

Although philanthropy often seems like an impossibly diverse sector that ranges from the proverbial husband, wife, and a checkbook to the Gates Foundation with more than a thousand employees, all American foundations have one thing in common: they file a 990-PF tax return with the Internal Revenue Service. No foundation has ever proclaimed great love for the 990-PF and there have been various proposals for its reform. But because the 990-PF is a compliance document not a data collection instrument, the care with which it is filled out varies wildly, and several years can pass between when a foundation’s fiscal year closes and usable knowledge can be produced from it, philanthropy is a $600 billion industry that relies on two-year old trend data. In an effort to make more current information available, more than 700 foundations are now exporting their grants data directly to the Foundation Center on a monthly, quarterly, or yearly basis. And seven foundations -- Mott, Hewlett, Kellogg, Rockefeller, MacArthur, Getty, and the Energy Foundation -- are going a step further by publishing near-real-time grants data in machine readable format.

STOP treating data and communications as two separate things

Years ago, a program officer told me about how he had shocked the room when, after analyzing hundreds of grants, he informed his colleagues that the foundation was doing far less to help the poor than they thought. Back then, there was little concern that such an insight might leave the building and end up in the public domain. Today, in contrast, foundations work in a world where, one way or another, the data they have designed for internal purposes increasingly is made available to others and used to inform narratives that may be different from the carefully crafted ones foundations create themselves. To say this is reality doesn't make it any easier. In general, philanthropy came late to communications, and foundations have labored to move beyond speech writing and to embrace strategic communications. Now, just as the messages are getting more sophisticated and soaring through cyberspace on the wings of social media, foundations will have to make sure their data supports their stories, and vice versa.

START thinking about your data as open

By and large, foundations tend to think of open data and transparency as something they should fund rather than do. There are a growing number of foundation efforts to make government more transparent, create information-driven social capital marketplaces, and so on, but little effort is being made to liberate foundation data itself. For years, the Foundation Center has been painstakingly capturing data from foundation tax returns, cleaning it, standardizing it, and producing reports and (more recently) data visualizations. It is only a matter of time, however, before those tax returns are available online in digital form, making it easier than ever for anyone to grab the data and mash it up however they choose. Even today, there is nothing to prevent industrious data miners from scraping foundation data directly from your Web site.

The time has come for foundations to start thinking about everything they do as data. This post has understandably focused on grants data, the principal "output" of foundation activity. But as I noted at the outset, foundations are sitting on vast stores of information that go far beyond grants data and are potentially of equal or greater value. As file cabinets disappear from foundation hallways and all that information migrates to hard drives and the cloud, philanthropy has an incredible opportunity to answer the question a young philanthropist recently posed to me: "How can we know what other foundations know?" If, and only if, foundations are willing to create the habits and systems needed to more freely share their information with each other and with others will the industry that is philanthropy fully be able to take advantage of the era of Big Data and all that it promises.

-- Brad Smith

Comments

[Bruce Trachtenberg]

Brad,
Thanks for your very intriguing comments about what you wish for as the ideal interplay between data and communications in foundations. I hope readers weigh in with examples that show how data and communications are working in tandem.

[Mitch Hurst]

Great post. I recall an email exchange I had years ago with a foundation exec just after the foundation had made the decision to post a copy of its Form 990 on its Website. In my infinite wisdom I offered up a number of options for how the document could be formatted in order to make viewing its hundreds of pages more user-friendly. One of the options I posited was to post the salary list as a separate document, and I justified the approach by stating the salary information is what most people looking at the 990 cared about.

The response I received to my suggestion, "Hey, I have an idea. Let's just paint a big target on the side of the foundation building," revealed I had become a bit over-zealous about new possibilities for transparency, even for information already publicly available.

Foundations have always been slightly delusional about what the outside world knows about them. The nonprofit community is deferential to grantmaking entities for all the obvious reasons. There are a million stories that will never be told outside the small circles of those who know them. The culture of individual institutions and the sector at large, along with a pretty fierce protection of reputations and the notion that it's unbecoming to criticize altruistic endeavors, limits the data available for honest debate and discussion.

While many foundations have become more strategic with their communications, too few have embraced new communications vehicles, such as social media channels, in ways that maximize their potential. This continues the trend Brad mentions of philanthropy coming late to communications; the sector still trails when it comes to innovative use of new communications platforms.

As Brad suggests, there are more and more leaks in the pipes, and as more information becomes available over more communications platforms and networks, foundations need to be ready to talk more openly about the results of their investments. Or others will do it for them.

[Lucy Bernholz]

Fantastic! Thanks, Brad, for leading the way in this space.

The key to all of this, I think, is realizing that data are a basic building block - a raw material - an essential element - for informing the work, shaping the field, innovating, and moving forward. It's as important to think about how these elements are connected and move (the architecture and coding of them) and how we use them to ask old questions in new ways and to ask new questions.

[Rebecca Arno]

Completely appreciate this post. Here at The Denver Foundation, we just added a new staff person to the communications department: the Director of Information Management and Analysis. We did this for many of the reasons you describe, Brad...building transparency, promoting efficiency, tracking and using knowledge -- and we made the decision that this needed to be centralized in the organization, in the department that is responsible for communicating with our diverse audiences. I'd love to know how others are handling this.

[Ed Dodds]

Anybody remember the NP-XBRL initiative?

[Thaler Pekar]

Rebecca, terrific that your Director of Information Management and Analysis is in the Communications department! Data must be analyzed for patterns (and the lack thereof) and can only then be turned into information, and then knowledge, and then meaning. [And meaning is often best communicated through story.]

Brad, fictional stories will never stand up to the true narrative collectively shared through action, information, and "word on the street".

You're absolutely correct: we are at a point in time where we can and should be mining stories for data, and, at the same time, mining data for meaning and creating narratives.

[Susan King]

Brad,
I found this very persuasive as both someone who led communications at Carnegie and now Dean at UNC's School of Journalism and Mass Communication. Data Storytelling is one of the most important, exciting and new forms of journalism. Making complex ideas understandable through data is what our smart students are doing. When foundations embrace it completely I think they will find it powerful both inside for strategic planning, and outside for translating their values and work to the public. Thanks for some good pointers!
Susan King

[Bradford Smith]

Many thanks for such thoughtful comments in response to this post. Years ago, Mitch, Hewlett Foundation made virtue out of necessity by posting Paul Brest's compensation directly on their website rather than leaving people to paw through their 990-PF for it. To Bruce, Rebecca and Thaler I think we will, at least among staffed foundations of a certain size, see gradual convergence as grants management, information technology, and communications break out of their silos. This convergence may gain the label of "knowledge management" as Director, VP or even more senior positions are created with those words in the title. Lucy, you remind me of a point I should have made more explicitly in the post: foundation data is an asset in and of itself. And Susan, "Data Storytelling" is a great way of bridging the divide that has heretofore existed between data and stories as if the two were somehow mutually exclusive.

[Phil Buchanan]

Brad,

This is a terrific post. I agree with your central argumment. I am struck by how much potential for greater effectiveness could be unlocked if funders shared data more openly -- about what they're doing, why, and what they know about results. The reticence you describe, and that Mitch illustrates with his story, seems to me to be something that inflicts many powerful institutions, not just foundations. I also think there is a problem not just of external sharing of data, but also internal sharing, as I describe here. http://www.effectivephilanthropy.org/blog/2012/07/transparency-starts-at-home/

Phil

[Mary Shipsey Gunn]

And all of it about learning and getting better at doing the work......

Great post.

[Scott Thomas, CAP]

I tend to talk to more smaller nonprofits with less than $5 million in annual revenues and many of them have no real data management. Sure they have a computer with Microsoft Office and Quickbooks but they are asking where to start? Many of these are faith based nonprofits and scared on what has happened in past with vendors charging high prices and delivery of inferior and complicated learning ramp up. Thanks for your posting and it points to all of us with creative flare to be unique. Would like to see you post a review of various donor tracking software packages for smaller market.

[Mike]

Brad I agree with you when you say stop trying to be unique. People need to stick with what works. We have all these unique ways with graphs and charts to show growth but what really matters is that there is actual growth.

[Kristi Langdon]

Great great article, thanks for posting!

Kristi Langdon
www.thesimplewheel.com