Category Archives: Cross-Disciplinary Conversations

Philanthropedia: Capturing Expert Recommendations of Nonprofits

March 9, 2010 – 9:15 am

This is my newest column for the Chronicle of Philanthropy. You can find the archive of my past columns here.

A Philanthropic Network Passes On Recommendations of Worthy Charities
March 7, 2010 | Chronicle of Philanthropy

In all the talk about measuring results in philanthropy and how best to determine which nonprofit groups are effective, a simple fact is often overlooked. All across the country, foundation program officers, senior nonprofit staff members, and academic researchers know which nonprofit groups are doing great work.

Now a new group called Philanthropedia is working to capture this knowledge about top nonprofit groups and make it available to everyone.

This sort of information, personal recommendations from people in a good position to pass judgment, is a fundamental process that people use to make decisions.

Getting recommendations from experts can mean asking your friend who loves to eat out what she thinks about the new restaurant in town or consulting a book review in The New York Times before choosing your next novel. Recommendations from trusted experts are so valuable that we often pay large amounts of money to gain access to them before making critical investment, legal, or medical decisions.

Philanthropy itself is largely built on recommendations. Studies show that one of the main reasons donors give to certain groups is that a friend asked them to do so.

When those friends are fellow supporters of organizations and not professional fund raisers, they are in effect recommending a group that deserves support. But while those sorts of recommendations motivate action, they are not unbiased or delivered by an expert.

Philanthropedia is working to make expert recommendations of nonprofit groups as accessible as the expert recommendations that help shape our decision making about which movies to see, restaurants to patronize, or retirement strategies to deploy.

Working with a quickly expanding network of experts that includes grant makers, nonprofit staff members, scholars, and other experts, Philanthropedia is making available expert recommendations on topics that include organizations working to curb climate change, improve education, extend small loans to struggling entrepreneurs abroad, and reduce homelessness in the San Francisco Bay area.

Co-founded by Howard Bornstein, a former employee of the Bill & Melinda Gates Foundation, and Deyan Vitanov, an entrepreneur who had previously built an online community for computer programmers, Philanthropedia began operations last year with extensive support from the William and Flora Hewlett Foundation.

The Philanthropedia team uses a survey methodology similar to one developed by the RAND Corporation to use expert recommendations in situations involving a large degree of uncertainty.

Given the nonprofit world’s current inability to systematically measure the effectiveness of nonprofit programs or even agree on what attributes make for a well-run organization, Philanthropedia’s approach makes a lot of sense.

The big weakness in Philanthropedia’s model is that the recommendations it offers are only as valid as the expertise of the organization’s network.

Because so much of philanthropy is not based on evidence, it is quite possible that the nonprofit groups recommended by the organization’s experts are not truly the most effective ones. It could be that the people in the network have biases that produced flawed ideas about what makes a nonprofit group successful.

However, in a recent background paper, Philanthropedia showed that the nonprofit groups it recommends have little in common based on how much money they raise, how well known they are, and their age, number of employees, and accountability ratings from Charity Navigator.

This means that the experts are picking up on something else. Given that the experts are foundation employees whose job it is to analyze nonprofit groups, researchers who have spent years studying conservation, education, poverty, and other topics, and nonprofit senior staff members who see firsthand the activities of their peers, it seems likely that many of the groups Philanthropedia recommends are among the best.

In the wake of the Haitian earthquake, the Gates foundation, the Ford Foundation, the charity research group GiveWell, the University of Pennsylvania’s Center for High Impact Philanthropy, and the nonprofit Acumen Fund all made grants or offered recommendations of which organizations were in the best position to help.

Each of them listed Partners in Health as one of their choices. While this fact does not guarantee that Partners in Health is the most effective nonprofit organization working in Haiti, it does offer a useful piece of information for donors trying to decide what groups to support.

Philanthropedia offers the potential to gather this sort of information for different causes and to offer recommendations that are international, national, or local in scope.

What is fascinating about Philanthropedia is that its process is not only effective but it is also inexpensive to run and easy to expand.

Other organizations working to identify outstanding nonprofit groups by conducting original research may offer some advantages compared with Philanthropedia.

But Philanthropedia’s system allows it to analyze far more nonprofit groups by simply bringing to light what experts already know.

Philanthropedia could quickly become a great way for donors to learn from the people in the best position to know which organizations are the most effective.

Sean Stannard-Stockton is chief executive of Tactical Philanthropy Advisors in Burlingame, Calif., and author of the Tactical Philanthropy blog. He is a regular columnist for The Chronicle of Philanthropy.

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By Sean Stannard-Stockton | Also posted in Chronicle of Philanthropy Column, Effective Giving, Evaluation, Information Sharing, New Philanthropy, Philanthropy | Comments (0)

Crowdsourcing the SoCap Conference

February 17, 2010 – 9:34 am

Within minutes of announcing that there would be a Tactical Philanthropy track at this year’s SoCap Conference we started getting emails from people who had suggestions for panels and speakers. So I’m glad to say that our plans for designing the track include soliciting your ideas and comments.

Below you’ll find a number of session concepts for the Tactical Philanthropy track. We would love to hear your feedback on these concepts, ideas you have for other sessions and your opinion of whether these sorts of concepts will draw the savvy donors, foundations and nonprofits who have in past years not been strongly represented at SoCap.

Nonprofit Analysis: Beyond Metrics

Nonprofit analysis, the evaluation of nonprofits to gauge their social investment potential, is a holistic process that does not lend itself well to simplistic financial measures. This panel will explore how donors should go about deciding which nonprofits to support and how much bang a donor can expect for their philanthropic buck.

Philanthropy Fail

The best laid plans don’t always work out so well. Since philanthropist can generate social impact through sharing what they’ve learned with others, sharing failure is a critical impact strategy. Join this brave group of donors and nonprofits as they share ways in which they’ve failed and what they’ve learned.

Information Sharing in Social Capital Markets

Profit is often derived from a firm’s access to proprietary information. However, social impact is often maximized by sharing important information with other market participants. This panel will explore how socially relevant information is valued differently in social capital markets and will offer strategies social capital market participants can use to maximize the social value of intellectual capital.

Replication vs. Diffusion: Does scaling social impact require scaling organizations or not?

A successful for-profit organization must maintain ownership of its concept while it scales in order to capture profit. But social impact accrues to the public, not the firm that owns the process that generates the impact. How should social enterprise weigh the tradeoffs between scaling their organization or scaling impact through sharing their process with others?

The Role of Philanthropy in the Social Enterprise Capital Structure

Most social enterprises receive either philanthropic capital or profit seeking capital. But there can be a role for each in both for-profit and nonprofit capital structure. What role can philanthropic capital play in helping social enterprises gain access to traditional market rate capital? What role does philanthropic capital have in kick starting new market driven industries?

Mission Related Investing: Why Foundations have NOT taken up MRI.

Mission related investing is seen as a way for philanthropic entities to align the 95% of their assets that they do not give away each year with their social impact goals. Yet for the most part MRI has not gained traction with the vast majority of funders. This panel will explore what is holding funders back and whether mission related investing will ever become mainstream.

The Changing Media Landscape for Philanthropy and Social Enterprises

Philanthropy has historical be covered by the mainstream media as a human interest story that either focused on “do gooders” or charitable fraud. But recent years has seen a growing interest within the mainstream media to examine philanthropy and the emergent social capital markets with a more analytical eye. Join our panelists as they explore the role of the media in the social capital markets.

Donations as a Sustainable Revenue Stream: Ending the Fixation on Earned Income

Charitable donations are less volatile then the overall economy, so why are they rarely seen as a sustainable revenue stream? Join our panelists as they discuss how nonprofits should view the role of charitable donations within a sustainable business model. Are donations a more sustainable source of revenue than the sought after “earned income”? Are donations not “earned”?

Individual Donors: Navigating the Social Capital Markets

Many of the most sophisticated, active participants in the social capital markets are institutions. But individual donors have fewer institutional constraints and can bear more social risk. Join three individual donors who are doing cutting edge work in the social capital markets without the help of a large staff.

When to Invest & When to Give

For all the talk of producing a blend of social and financial value through giving and investing, little is known about when a social investor can maximize their blend returns through a donation and when an investment is a better option. Given the choice to lend money to a nonprofit or make a donation, how should a social investor choose?

Please leave your thoughts as a comment to this post. Thanks for your input!

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By Sean Stannard-Stockton | Also posted in Capital Market Philanthropy, Effective Giving, Evaluation, Impact Measurement, Individual Giving, Information Sharing, New Philanthropy, Philanthropy, SoCap10, Social Capital Markets, Social Investing | Comments (20)

How to Fail with Style in Philanthropy

January 13, 2010 – 8:26 am

I’ve long written about the value of learning to fail as an element of successful philanthropy. I believe that endeavors which are difficult (such as effective philanthropy) must be approached with a mindset that recognizes that failure is an inevitable side effect of taking smart risks.

One of the first posts of mine that “went viral” in some small way within the philanthropy community was Demonstrating Impact: Philanthropy’s Urgent Call to Action in which I discussed a Council on Foundations conference panel in which panelist James Knickman said “We need to frame our release of “failures” as an attempt to learn. No one tells scientists they are a failure when one of their experiments don’t work!”

Later I recorded a podcast with Irvine Foundation CEO Jim Canales about his foundation’s efforts to share problems they were facing with the field. (I later called Jim Canales, who was also on the Demonstrating Impact panel, the “Poster Child for Failure in Philanthropy”, in which I took at swipe at other foundation executives for not joining Canales in embracing the inevitability of failure).

But in all my writing on the subject, I feel that I never quite got my point across as well as Larry Blumenthal of the Robert Wood Johnson Foundation did recently in an essay he wrote for Philanthropy News Digest in which he argues that philanthropy needs to learn to “fail with style.”

So, with permission from the kind editors of Philanthropy News Digest, I’m publishing Larry’s essay in its entirety here.

A Helpful Guide to Failure in Philanthropy. Use Carefully.
By Larry Blumenthal, Director, Social Media Strategy, Robert Wood Johnson Foundation

Originally published in Philanthropy News Digest

If you try to fail…and succeed, what have you done?
— Phil Proctor

Let me start with a confession.

Recently, at a conference on building communities online, I was asked to discuss the biggest mistake I had made in social media. I was last in line on the panel so I had time to think, but I couldn’t come up with anything other than sweat rings under my arms and an urge to wet myself. When my turn came, I had nothing. Zip. An empty plate. I failed at failure. If you too have faced this problem, I’m here to help. I want to offer my handbook to failing at philanthropy. First, an explanation.

For the most part, foundations tend to be a cautious lot. We hold lots and lots of meetings. Pile on layers and layers of review and approvals. Solicit opinions from everyone. "Let me just check with that guy waiting for a bus over there. The one wearing only one shoe. He might have some insight I missed."

When we do fail, we generally keep it to ourselves. Smarter people than me have offered explanations for this phenomenon. Most recently, Pittsburgh Foundation president Grant Oliphant, Robert Wood Johnson Foundation chief learning officer Bob Hughes, and Robert Giloth and Susan Gewirtz of the Annie E. Casey Foundation (who wrote Philanthropy and Mistakes: An Untapped Resource) offered their insights. While there are a few "good" reasons like protecting grantees, we all know the main explanation comes down to embarrassment (and ego). Few people are comfortable admitting failure. I want to add one more possibility to the literature. Perhaps foundation staff members don’t know how to fail.

I don’t mean to imply that we don’t fail. We fail all the time. Sometimes in little ways. Sometime we go down in an impressive conflagration of failures. (See the latest edition of the Robert Wood Johnson Foundation anthology To Improve Health and Health Care for several case studies of programs that "seemed like a good idea at the time.") No, maybe the problem is that we don’t know how to fail in a good way. Failing with style. Failure as success.

So, always wanting to be helpful, I offer my four steps to failing well based largely on some things I have learned working in social media.

Fail small. Social media expert Clay Shirky, author of Here Comes Everybody, warned recently about foundation staffers who claim to be working on a grant that will change the nature of life as we know it (or something equally ambitious). His advice is to lock that staff member out of the building until he or she comes back with a bunch of smaller ideas that might lead to the big one. Why? Because when an idea is that audacious, failure is out of the question (and probably assured). It’s akin to the Hollywood blockbuster that has five screenwriters and is on its third director but won’t die because the studio already has too much invested. Michael Organ, who headed online advertising for Barack Obama’s presidential campaign, says his goal from the beginning was to fail in small ways eight out of ten times. He calls it microfailure. So here is my advice: Think big (that’s important), but embrace microfailure. Look at all of your work as an experiment — a pilot — and plan upfront for several review points along the way that allow you to correct your course or exit altogether. First drafts are rarely your best work. It is the thousand little edits and mid-course corrections that create excellence.

Fail publicly. There is a whole world of wisdom out there, and it has become easier and easier to tap into it. Put your thoughts and ideas out for feedback early and often, don’t worry that they may still feel half-baked. Don’t be afraid to publicly ask for help. It is better to find out early that you are off track than when you have a full head of steam. There are plenty of people who can redirect you. Plenty of people with good ideas. Plenty of people besides the usual suspects.

Fail to win. Learn from mistakes. Turn them into successes. One of the stories in the RWJF anthology mentioned above concerns the foundation’s efforts to improve the care of dying hospital patients. Clearly, it was a noble cause, but a formal evaluation of one of the first major efforts — a $31 million program called SUPPORT funded between 1988 and 1996 — found that little had been accomplished. The foundation could have walked away. Instead, then-president Steve Schroeder encouraged the program officer to take a careful look, gather the lessons learned, and try again. He reasoned that the goal was too important to not keep trying. The result was a $170 million effort that is credited with building the field of palliative care. Such an accomplishment might not have happened without an honest assessment of what had failed the first time out, and the drive to learn from it.

Fail proudly. Share your mistakes with gusto. Think of my buddy Bill who couldn’t wait to tell everyone about the blind date who jumped out of his car as he was pulling up to her apartment building at the end of the evening. "Dude, the car was still moving." Smart failures are a badge of honor. You took a risk. You lost. You learned something. Your teachers and parents told you that the best way to learn was by making mistakes (then promptly asked, "What were you thinking?"). They were right about the first part. You remember the mistakes. They stay with you. Take calculated risks. If they don’t turn out, that’s okay. Share what you learned, and share the fact that you tried and it didn’t work. If you are a manager, celebrate your staff’s failures. Take everyone out bowling for the day. Discuss mistakes openly at the weekly meeting in an educational way (and without criticism or finger pointing). It will encourage others to do the same. It will drag failure out of the back alleys and into the light of day at your organization.

One last piece of advice. If you fail, and others with sour faces don’t see it as the triumph it truly is and need a little encouragement to take some risks as well, feel free to share with them the following quote from Theodore Roosevelt:

"Far better it is to dare mighty things, to win glorious triumphs even though checkered by failure, than to rank with those poor spirits who neither enjoy nor suffer much because they live in the gray twilight that knows neither victory nor defeat."

Maybe it will work. Maybe it won’t. Take a chance. Nobody wants to live in the gray twilight.

Larry Blumenthal is director of social media strategy for the Robert Wood Johnson Foundation. He blogs and tweets (@lblumenthal) regularly about philanthropy and social media.

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By Sean Stannard-Stockton | Also posted in Effective Giving, Foundations, New Philanthropy, Philanthropy, Transparency | Comments (0)

Social Innovation Fund Comments

December 21, 2009 – 8:35 am

On Friday, the Corporation for National & Community Service released a Draft Notice of Funds Available (NOFA) for the Social Innovation Fund. This document lays out the application process for the $50 million in grants to be available in 2010 from the Fund.

The document is pretty user friendly and at 24 pages is certainly digestible by anyone who is interested. Note that this is only a “draft”. The Corporation is soliciting comments from the public until January 15. The final NOFA will be released in February 2010.

In July, I wrote a post explaining what the Social Innovation Fund is and another about why I think it matters. What I’d like to do now is kick start a public debate on the NOFA. If you plan to offer comment on the document directly to the Corporation (which simply entails sending them an email at SIFinput@cns.gov), then I’d like to suggest that you forward me a copy of your comments for publication. Rather than simply have the comment process be one of the public sending responses to the Corporation (who understandably has said they won’t respond to each comment), let’s turn the process into a public conversation.

I realize that this week and next will be dead quiet on this blog and others. So I’ll plan to kick start this conversation in January. In the meantime, if you do submit a comment on the NOFA, please forward me a copy at sean@tacticalphilanthropy.com.

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By Sean Stannard-Stockton | Also posted in Capital Market Philanthropy, Grantmaking, New Philanthropy, Philanthropy | Comments (3)

Flashback: Tactical Philanthropy Forum 2008

December 16, 2009 – 9:33 am

We sold over 20% of the tickets to the coming Tactical Philanthropy Forum in the last 24 hours. The 2008 event sold out in seven days, so if you are interested in attending I encourage you to register now.

For a little taste of what the event is all about, check out the video from the Tactical Philanthropy Forum we held in 2008 with Paul Brest and Bill Somerville.

Full video

A highlight of Paul Brest

A highlight of Bill Somerville

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By Sean Stannard-Stockton | Also posted in Philanthropy, Tactical Philanthropy Forum | Comments (0)

Tactical Philanthropy Forum

December 15, 2009 – 6:42 am

I’m happy to announce the return of the Tactical Philanthropy Forum. Last year’s very successful event featuring Paul Brest and Bill Somerville sold out in just seven days and drew over a hundred people to the lively debate in San Francisco. You can see the video of that debate here.

Today we’re announcing a new Forum debate on January 20 in San Francisco. I hope you can join us!

* * * * *

You’re invited to a special Tactical Philanthropy Forum with the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal.

In this session of the Tactical Philanthropy Forum we will introduce the concept of Unconstrained Philanthropy. Should donors and funders see their role as one of correcting and optimizing existing social systems or do they have an opportunity to remake the social fabric?

This Tactical Philanthropy Forum event brings together William Schambra of the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal, Bill Somerville of the Philanthropic Ventures Foundation and Paul Shoemaker of Social Venture Partners. The panel will engage in a robust debate of the appropriate role of donors and foundations in the complex systems of the social sector.

Sean Stannard-Stockton, CEO of Tactical Philanthropy Advisors, author of the Tactical Philanthropy blog and columnist for the Chronicle of Philanthropy will moderate. The conversation will examine the practicality of funders striving to fix the root cause of social problems and the tradeoffs between focusing on tangible community issues versus tackling systematic interventions.

Like all Tactical Philanthropy Forum events, the conversation will center on real world applications and is designed for a cross-disciplinary audience. Anyone and everyone interested in a new and better social sector are encouraged to participate. Both social sector professionals and individual donors will enjoy the evening’s event. All attendees are asked to follow a strict policy of non-solicitation.

This event is offered in partnership with the Foundation Center and is being held in the World Affairs Council’s conference room. Please join us beginning at 6:00pm for wine and hors d’oeuvres.

Click Here to Register

When:  January 20, 2010 from 6:00 PM – 9:00 PM
Where: The Foundation Center, 312 Sutter Street, San Francisco, CA 94108

Past Tactical Philanthropy Forums have benefited from invitation recipients forwarding information about the event to friends and colleagues. You can easily forward this blog post by clicking on the Email This Post icon below.

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By Sean Stannard-Stockton | Also posted in Philanthropy, Tactical Philanthropy Forum | Comments (0)

Using Your Head & Your Heart in Philanthropy

December 9, 2009 – 8:16 am

This is my latest column for the Chronicle of Philanthropy. You can find an archive of my past columns here.

Making Charitable Appeals to Donors’ Hearts and Heads
December 10, 2009 | Link to Chronicle of Philanthropy

A growing number of nonprofit experts are urging donors to channel more of their money to high-performing organizations, with the goal of making philanthropy more effective.

But embedded in this movement is a worrisome concept  — the idea that donors should give with their heads instead of their hearts. In fact, this is a false dichotomy and one that threatens to undermine a movement that otherwise is sorely needed.

When donors are urged to give with their heads rather than their hearts, they are being told to give in a rational rather than an emotional way. The assumption is that rational giving is effective giving and emotional giving is ineffective.

A better way to understand the head-heart analogy is by understanding it as left-brain and right-brain functions. Left-brain functions include analytical thought, logic, and math. Right-brain functions include holistic thought, intuition, creativity, and emotions. In many ways, the 20th century was focused on propagating left-brain functions. Rationality and logic ruled the day.

But in recent years it has become clear that right-brain functions are actually high-performance decision-making tools, not aspects of our humanity that we must learn to suppress lest they interfere with our logical thought processes.

Antonio Damasio, director of the Brain and Creativity Institute at the University of Southern California, pointed to this shift in thinking when he was quoted in The New York Times in July. “Not long ago people thought of emotions as old stuff, as just feelings — feelings that had little to do with rational decision making, or that got in the way of it. Now that position has reversed. We understand emotions as practical action programs that work to solve a problem, often before we’re conscious of it. These processes are at work continually, in pilots, leaders of expeditions, parents, all of us.”

Ignoring the role of emotions in decision making is a mistake in all fields, but doing so in philanthropy is especially dangerous.

In a 2007 paper, three scholars — Deborah Small, George Loewenstein, and Paul Slovic — described the way logical thought can reduce charitable giving.

The study found that potential donors gave more money if they were asked to give to support a 7-year-old girl named Rokia facing starvation in Mali, Africa, than if they were asked to support the three million children facing starvation in the country. Worse, the study found that if the fund-raising appeal showcased Rokia but included statistical information about overall need in the country, donors gave less than they did when the statistical data were left out.

But the real threat of pushing too hard for donors to give with the head instead of the heart is most clearly illustrated in the final experiment of the study, which found that simply activating logical thought processes reduced charitable giving. When donors were asked to complete five simple logic problems before they were told about Rokia, they gave significantly less money than if they had not been “primed” with a left-brain exercise.

The Rokia study points to a real danger in the movement to encourage donors to give more rationally. While most everyone would like to see donors allocate their money based on a logical understanding of the problems they hope their gifts will solve, it turns out that encouraging donors to act this way may thwart their natural urge to give.

What then are we to do? Must we choose between increasing giving by avoiding logic or decreasing giving while making it more effective? I don’t think we can yet answer this question. But if there is a way through this paradox, a way to encourage high levels of rationally informed giving, the path will be one that embraces both left-brain and right-brain functions.

Today, charitable donations do not flow automatically to the organizations that produce the best results. Instead, fund raising is often a function of effectively pulling the heartstrings of donors. For those of us who wish to see a more robust social-capital market in which smart donors support high-performing nonprofit groups, the key will be to recognize the value of donors’ using both their heads and their hearts. While giving based only on emotions is not effective, giving based only on logic and other left-brain functions is giving with only half your head.

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By Sean Stannard-Stockton | Also posted in Effective Giving, Individual Giving, New Philanthropy, Philanthropy | Comments (19)

Paul Brest & Paul Shoemaker Debate General Operating Support

November 20, 2009 – 9:36 am

In my last post, I profiled Paul Brest’s new annual letter about the merits, or lack thereof, of general operating support grants. In the weeks before the annual report was released, Paul emailed a copy of the essay to a group of people who work in philanthropy. Paul Shoemaker of Social Venture Partners replied with extensive comments and a debate ensued between Shoemaker and Brest.

With the permission and encouragement of both Pauls, I’m republishing an excerpt of the debate below. Just to be clear, any emails sent to me are strictly off the record unless permission is requested. Brest’s email was a private email among a group of people. I republish it here only after Paul B. suggested the idea and Paul S. gave his permission.

Please see yesterday’s post for the “medical school example” referred to below. Note that Shoemaker does not write in all caps because he is yelling at Brest, but to distinguish their remarks during inline comments within the emails (although Shoemaker does love using all caps, emoticons and bold, italicized text in most of his emails!).

Paul Shoemaker: In the scenario, e.g., where the funder is interested in cancer research within a medical school, who else then funds the overall school’s “overhead,” administrative, etc. expenses?

Paul Brest: That’s just what overhead rates are for. In the case of universities the overhead rates are well defined.

Paul S: “OVERHEAD” RATES, IMHO, ARE LARGELY A FALLACY. NO ONE HAS ANY DEFINTION OF OVERHEAD THAT IS REMOTELY CONSISTENT. AND ONE PERSON’S OVERHEAD IS ANOTHER PERSON’S INVESTMENT IN HUMAN CAPITAL. EVEN IF SUCH RATES WERE DEFINABLE, HOLDING A NON-PROFIT TO X RATE, PRE-DEFINED, IS ARTIFICALLY CONSTRAINING AND LESSENS THE NON-PROFIT’S ABILITY TO ADJUST ITS SPENDING BASED ON CURRENT CONDITIONS AND OPPORTUNITIES. I JUST DON’T THINK OVERHEAD RATES ARE A VALID, USABLE, TRULY DEFINABLE THING.

Paul S: I know the analogy never translates 100%, but one thing I constantly recycle in my mind is some entity – VC, bank, individual investor, etc. – putting money into a private sector company but telling them they can only use the money for X, but not Y. How does that company ever build a whole, fully-functioning company, even if only some of their investors attach such requirements?

Paul B: The nonprofit and business sectors aren’t identical. If I were to use a business analog, though, a project grant is more like purchasing services than investing in the company.

Paul S: THEY ARE CERTAINLY FAR FROM IDENTICAL, I AGREE. BUT EVEN WHEN I AM PURCHASING GOODS OR SERVICES FROM A FOR-PROFIT COMPANY, I CANNOT THEN TELL THAT COMPANY HOW TO SUBSEQUENTLY AND SPECIFICALLY USE THOSE FUNDS (E.G. USE MY MONEY FOR R&D, BUT NOT SALES & MARKETING). AND IF THE FOR-PROFIT WORLD DID WORK THAT WAY, IT WOULD BE SIGNIFICATLY LESS SCALABLE AND EFFECTIVE THAN IT IS TODAY (AND NO, I DON’T THINK CAPITALISM / FREE MARKETS ARE “PERFECT” BY ANY MEANS J). THE FUNDAMENTAL PROBLEM WITH ANY KIND OF RESTRICTIONS ON FUNDING ARE HOW MUCH THEY HANDICAP AND CONVOLUTE THE NON-PROFIT’S ABILITY TO OPTMIZE ITS OWN SPENDING TO ACHIEVE ITS GOALS AND SOCIAL OUTCOMES.

Paul B: And now a question for you. If you made, say, a $1000 GOS [general operating support] grant to a university the chances are that about a penny would go to cancer research. So what should someone who wants to support a university’s cancer research program do?

Paul S: THE WAY I WOULD HOPE THE WORLD WOULD WORK IS THAT A NON-PROFIT / UNIVERSITY, ETC WOULD BE VERY CLEAR ABOUT THEIR GOALS, WHAT THEY INVEST IN, HOW THEY WILL USE THEIR FUNDS, ETC. AND THEN A  FUNDER WOULD MAKE GOS / UNRESTRICTED GRANTS BASED ON THAT INFORMATION. IF ALL FUNDERS BEHAVED IN THAT WAY, THEN ULTIMATELY MY GOALS FOR CANCER RESEARCH WOULD BE MET.

I WOULD NOT BE ABLE TO SAY MY $1,000 LED TO X, BUT THE ULTIMATE PURPOSE FOR MY $1,000 WOULD BE MET. AND IF I LATER LEARNED THAT THE UNIVERSITY WAS NOT INVESTING IN THAT RESEARCH EFFECTVELY, I WOULD DECIDE TO DISCONTINUE FUNDING (UNLESS THERE IS SOME OTHER “PRODUCT” THAT I STILL VALUED). MAKING MY GRANT FOR CANCER RESEARCH A “PROJECT GRANT” DOES NOT, ON THE WHOLE, MAKE MY GRANT ANY MORE EFFECTIVE WHILE IT DOES RESTRICT / CONSTRAIN THE ORGANIZATION’S ABILITY TO BUILD A FULLY-FUNCTIONING ORGANIZATION.

Paul B: [referencing the medical school example] A grant to Stanford Medical School is not GOS under the IRS definition; only an unrestricted grant to Stanford University as a whole is. Stanford will allocate a GOS grant among millions of activities based on what it sees as the needs of the time: teaching Italian, particle physics research, the women’s lacrosse team, the law school, overseas campuses, you name it. Even if Stanford had the best cancer research center in the world, the institute would only receive a trivial part of a GOS grant to the University, given these other needs. If a donor particularly interested in cancer research could only give GOS, he or she would wisely seek an institution that only does cancer research so all of the funds would go for that purpose.

The way Stanford keeps its core operations functioning, even when most grants are restricted, is by charging overhead costs. With respect to government grants, overhead is defined extremely precisely by OMB Circular A-21 and the rates are negotiated with universities. (There’s a similar circular for nonprofits other than universities.) Individual donors and foundations try, usually successfully, to circumvent the overhead rates. Well, shame on us! I tried to get IS [Independent Sector] interested in the overhead problem some years ago, but it never caught on. It would be great if organizations like SVP [Social Venture Partners] and GEO [Grantmakers for Effective Organizations] got interested. They’d certainly have my support.

Paul S: OK, within a monolithic / huge institution, especially public, like a university, I see some of your logic for non-unrestricted support. Yes, an unrestricted grant in such a scenario has the potential to be spread across a great range of potential purposes. I will say that, taken to the extreme, if EVERY funder to a university ONLY funded their piece of research, etc. they wanted to focus on, we would be back to the same fundamental problem of “who will sufficiently fund the administration, infrastructure” then?”

But on institutions of significant complexity / diversity of work AND scale, I can see some logic, Paul. I am almost ready to say I’d be willing to live with the downsides you correctly describe in return for the upsides of completely unrestricted funding (with explicit organizational, published goals and institutional accountability). I also confess I’m too ignorant about funding streams for large public educational institutions

I will say that “With respect to government grants, overhead is defined extremely precisely by OMB Circular A-21” is an expression that, prima facia, seems doomed to inaccuracy, inaccuracy, severe rigidity, and a lack of understanding that will lead to all kinds of debilitating handicaps and restrictions. Same goes for “a similar circular for nonprofits.” And if in fact, they often successfully circumvent the overhead rates, and we all know they do, then what a ridiculous waste of time and resources in the first place.

For 98% of non-profits. I’ll stand my ground J (and I know you’d stand with me on much of that). I will also add that so many of these discussions about GOS / unrestricted vs. project-specific grant focus on the negatives and risks of unrestricted grants and not enough on the significant positives and benefits. Much less staff resource wasted, much greater flexibility in resource allocation / optimization, trust placed in the hands of non-profits who are closer to the real work, ability to fill in gaps in infrastructure, etc. There are more. And the ultimate purpose for unrestricted funding is it is a significant advantage of helping a non-profit build a much stronger, sustainable and salable organization.

Paul, when you say “I tried to get IS interested in the overhead problem some years ago, but it never caught on. It would be great if organizations like SVP and GEO got interested. They’d certainly have my support” I was vaguely aware of that, but I’d love to hear more and in fact, maybe we are ready to take that on collectively

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By Sean Stannard-Stockton | Also posted in Grantmaking, Philanthropy | Comments (3)

Trust in Philanthropy

November 19, 2009 – 7:56 am

My colleague Bill Somerville talks a lot about trust in philanthropy. Bill feels that funders do not trust grantees enough and that the reams of paperwork required by funders is simply a mark of their lack of trust.

To the cynical person, trusting someone is equivalent to being naive. Trusting someone can be criticized as demonstrating a lack of rigor. But it turns out that trust is at the core of what makes systems function.

From a recent Forbes article titled The Economics of Trust:

Imagine going to the corner store to buy a carton of milk, only to find that the refrigerator is locked. When you’ve persuaded the shopkeeper to retrieve the milk, you then end up arguing over whether you’re going to hand the money over first, or whether he is going to hand over the milk. Finally you manage to arrange an elaborate simultaneous exchange. A little taste of life in a world without trust–now imagine trying to arrange a mortgage.

Being able to trust people might seem like a pleasant luxury, but economists are starting to believe that it’s rather more important than that. Trust is about more than whether you can leave your house unlocked; it is responsible for the difference between the richest countries and the poorest.

"If you take a broad enough definition of trust, then it would explain basically all the difference between the per capita income of the United States and Somalia," ventures Steve Knack, a senior economist at the World Bank who has been studying the economics of trust for over a decade…

How could that be? Trust operates in all sorts of ways, from saving money that would have to be spent on security to improving the functioning of the political system. But above all, trust enables people to do business with each other. Doing business is what creates wealth.

One thing we know is that philanthropy is a dysfunctional system. Resources do not flow to those who can best utilize them. While I’m all for the efforts to quantify the effectiveness with which various organizations deploy resources so that we might better direct our giving, it is just as important that we inject more humanness into the workings of our field.

Trust isn’t a human weakness that analytical donors must overcome, it is a fundamental attribute of functioning systems. According to Forbes, the financial system would collapse without trust. Maybe more trust is just what we need to build a functioning social capital market.

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By Sean Stannard-Stockton | Also posted in Capital Market Philanthropy, Philanthropic Capital Markets, Philanthropy | Comments (2)

Causes, MySpace & ideablob

November 16, 2009 – 8:06 am

In recent days, Causes has left MySpace and IdeaBlob has shutdown. To some, these events were unimportant. In reaction to the Causes announcement, Economist bureau chief Matthew Bishop tweeted “Who knew it was on MySpace?” to which New York Times reporter Stephanie Strom tweeted back “No kidding.”

But to many people active in online social action communities, these events had deeper meaning. This is a guest post from Amy Sample Ward, NetSquared’s Global Community Development Manager

By Amy Sample Ward

The Effect on Community in Community Platforms

There’s something in the wind, other than in-coming winter, that has my attention. It’s something I can only wrap my mind around by talking to others and hope that this is a chance to further a very important conversation. First, let’s start at the beginning:

Causes Leaves MySpace

Two weeks ago, Causes, the application that lets individuals and organizations campaign and fundraise, removed itself and all Causes-related content/data from MySpace. (Read more about Causes leaving MySpace here.) This separation came with no public announcement, either before the move or when it happened, except for a very short email sent a couple days beforehand to account administrators as a warning. The message explained that Causes would be focusing on only providing service to the Facebook platform, encouraging any MySpace users that wanted to continue using the application to migrate, too. and then… 

ideablob Shuts Down

By now, you may have heard about the very abrupt closedown of ideablob, a competition and promotion platform for entrepreneurs. Late last week, registered users, interested supporters and social changemakers participating in a funding competition were all greeted with the message below when visiting the ideablob website:

 ideablobclose

Users (whether they were people with a project in the competition, those that had voted to support an idea, or were general registered users of the site) received no notice that the closure was coming, or even when it happened. The only bread crumbs to find were some business reports about Advanta declaring bankruptcy, like this one, that don’t even mention ideablob. Here’s a bit of John Brennan’s story (an ideablob member who was competition in the competition) from his comment on my original blog post:

"It’s upsetting that companies like this aren’t actually thinking or caring about the real people and ideas they are effecting. This week our idea was up for the sprint and in the top 3. Why did they even start the competition when they already were going through bankruptcy talks?"

and so… 

The Conversation

What’s this mean to you as an activist, supporter, volunteer, changemaker, entrepreneur, innovator or *insert preferred title* online? Well, it means a lot. We can see (and learn a valuable lesson about) the way current ecosystem of social media works in regards to transparency, data, and community. To unpack this, let’s narrow in on each:

Transparency
The lack of communication about the actual decision, but more so in the lack of communication about the development, direction and intention of Causes and ideablob indicates that transparency isn’t a part of the package. There are many who approach the online landscape with very different views than their offline business decisions. For example, if ideablob or Causes were a product offline, and you were a funder, an investor, or a consumer/user of ideablob or Causes as offline products providing no integral communication, you would probably not have ever considered participating/consuming. Just because you aren’t meeting offline, in real-time, in the same room with your supporters and the competitors in the ideablob competition, does not mean likewise that you do not need to know if the platform will even be around for your competition to finish. The transparency issue is a steep mountain to climb with social media. Unless you knew that ideablob was part of Advanta, and you were reading the business sections of the papers last week, you wouldn’t have had any idea ideablob was even considering discontinuing. But, transparency is even more than this, and really is a part of the Data and Community, too.

Data

We can count our Twitter followers or how many people have commented on our blog post, or could have counted the number of supporters on Causes or voters on ideablob, but that doesn’t mean we connect with them. Now that Causes removed itself, it’s content, and any related data from MySpace, organizations cannot connect with their supporters who were using Causes. ideablob participants are locked out from seeing any comments or feedback on their ideas. The fact that access to data, whether it’s supporters’ email addresses, tracking actions taken, or anything else, is instantly gone should be a big alert bell to those working in a "networked" way via social media to grow their community. To connect with supporters, organizations and individuals working on projects will need to be sure that data gets back to them. How are you encouraging your supporters all over the web to connect with you directly? For example, when you post a message (whether it’s on Twitter, Facebook, or even Change.org) telling your supporters that you’re ramping up for some big news, a new project or something else, include a link where they can sign up with you to be on the email/announcement list. When supporters sign a petition or take action on your organization’s behalf in social media platforms, include "thank you" and "learn more" links wherever possible that link to ways to connect directly with your organization, ensuring the contact information is in your database, not just Facebook’s.

Community

In the Causes move, the issues around community are very clearly focused on the different demographic groups represented on MySpace and Facebook. With ideablob, it isn’t so much that groups are being separated/segregated, but entirely shut off. These events raise many questions and flags about diversity, opportunity, and even corporate decision-making. Communities on both platforms were clearly not part of the development and communications process, yet they were actively using the platform (for example, a grant from ideablob helped Epic Change implement a technology lab in a school in Tanzania). What is the difference between a community actively using a platform and one actively involved in the evolution of the platform? If a platform were to disappear, would the community be able to continue on? Perhaps so if it had been active in the development and direction (or, perhaps that would indicate that the platform would be more unlikely to disappear or at least not without notice)?

What’s Next

I don’t necessarily want to call for the communities on MySpace or on ideablob to call for the return of the tools. We can see by the issues raised above that the platforms weren’t necessarily operating in the best ethos anyway. But, I do want an arena for the communities to describe what they do want and be an integral part of the process to building and sustaining whatever that is.

How can this work? I can’t speak for others working in the "innovation sector," but at NetSquared we can’t emphasize enough that our Community is what drives us – whether’s it’s online or offline. Community feedback shapes everything from our goals to our website and everything in between. We are able to work as a small team on the organization side because of the passionate, collaborative, dedicated Community. For example, you can follow the website redesign process via the blog where the feedback and directives for the redesign, the people who stepped up to implement, and the step-by-step process have all been open and Community centered. This isn’t about creating a new splash page, this is involving the users in the design of the Gallery where their Projects are housed, showcased and voted on; involving bloggers in the design of the collaborative sharing space they contribute to already; involving Community members in telling us both the bad stuff and the good stuff, so we can work to make it everything they want.

As another example, the Net Tuesday network is now up to 56+ groups meeting every month around the world—a global network of events, bringing the NetSquared Community together offline—and growing in an entirely organic way. That doesn’t mean NetSquared’s perfect, by any measure, but it does mean that a quick abandonment isn’t in store. That also doesn’t mean that NetSquared is the *only* or the *best* place for absolutely everyone to find what they are looking for. It is, though, one example of trying to make it work.

Your invitation: Join this conversation. Tell me what the recent Causes/ideablob announcements means for our sector and for you. And share your ideas with your friends and colleagues to further the breadth of the conversation. The more voices the better! Here are some places to start:

  • Evaluate your use of social media tools: do you encourage your supporters on other platforms to register on your website, ensuring you have their contact details?
  • Evaluate your community: are you reaching a diverse community or operating in a silo?
  • Evaluate your relationship with developers: are you using tools that allow you to surface suggestions, ideas, and useful functionality for development? Do you know what the plans are for the tools you are using?

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By Sean Stannard-Stockton | Also posted in Innovation, Open Source Philanthropy, Philanthropy, Social Media, nonprofits, nptech | Comments (7)