Well, well. Is Jacob Harold an outstanding thinker or what? I think one of the best things about the way Jacob outlines his ideas is that he paints the possibility of a philanthropic capital/information market without invoking the idea that philanthropy needs more “business thinking”.
I’m back from vacation and while sitting in the sun I read an advance copy of Paul Brest’s (The CEO of the Hewlett Foundation, where Jacob works) forthcoming book Money Well Spent. I’m not going to comment on the book now, but I was struck by a study cited in the book that showed how powerful the framing of an issue can be. The study presented the classic game of The Prisoner’s Dilemma and watched how it was played depending on what it was called. The Prisoner’s Dilemma is a study in “game theory” in which two players can either behave in a cutthroat way or a collaborative way. They must make their choice without knowing what the other player has chosen. In the study cited in Brest’s book, the researchers found that if they told participants the game was called The Wall Street Game, players tended to select the cutthroat choice more frequently than if they told the players it was called The Collaboration Game. The game didn’t change, but the players significantly changed their behavior based only on what they believed the game was called.
This ties into earlier conversations we’ve had on this blog about renaming nonprofits (for-benefit organizations?). But it also shows how Jacob (as an employee at a foundation) is better able to discuss the topics he focused on than I am as the owner of a wealth management company. We’re both talking about them same things, but we present them with different frames.
All of this ties back to the debate around Philanthrocapitalism. I think that the area between disciplines yield the most interesting discoveries. I believe that “consilience” is the key to the advancements in philanthropy that are starting to kick into gear. But the next big thing is not to force philanthropy to be more “business-like”, nor is it to get capitalism to be “more good”. The next big thing is mining the knowledge of the two fields and creating something completely new.
I think Jacob is one of the people who is well ahead of most of us in understanding what that “something new” will look like.
Following up on Jacob Harold’s posts, Lucy Bernholz drops me a note:
Sean
This topic is all the rage all of a sudden - see RPA’s linkages newsletter and the posts at Philanthropy2173 on “data, data” everywhere. Just want to invite you and your readers to join the online discussion group that formed to talk through these issues of data standards, openness, ownership et al in the social capital markets. Discussion group is here (titled: Social Capital Data Discussion).
Thanks Lucy. I applied for membership in the discussion group today.
(Sean Stannard-Stockton is on vacation. This is a guest post from Jacob Harold, a program officer at the William and Flora Hewlett Foundation.)
They say that if all you have is a hammer, the whole world looks like a nail. Let me add: if you have a toolbox, the whole world can look like an opportunity. The nonprofit sector—with its diversity of skills, relationships, and methods—is our collective toolbox for social change. And philanthropy is society’s attempt to pick the right tool at the right time: allocating precious resources to issues, organizations, and interventions.
But an individual donor trying to make a good philanthropic choice is like a carpenter reaching into a toolbox in the dark while wearing thick mittens. And at the bottom of the toolbox are well-crafted, well-made tools (nonprofits that are not just well-meaning, but also well-run) mixed in with tools ill-suited to the task.
So, to perhaps over-use the metaphor, the Hewlett Foundation’s Philanthropy Program is trying to do two things: first, get donors to take off their mittens and learn how to use their fingers to find the right nonprofit; second, shine a light into the toolbox and make it clear which organizations are the strongest.
As a guest blogger next week on Tactical Philanthropy I’ll share some about our thoughts and questions and questions about improving the practice of philanthropy. I’m looking forward to your feedback—and any clever mitten-removal and light-shining strategies you might have.
Steven Mayer is one of the people behind the Pathways to Progress website, dedicated to social justice philanthropy. Albert Ruesga wrote recently that “metrics based” philanthropy and “social justice” philanthropy are often viewed as two warring camps. But Albert suggested that in fact, “We fail to appreciate how closely united these two camps are in their rejection of philanthropy as usual.”
Today I want to highlight a recent essay by Steven Mayer that I think shows an approach to metrics that has the potential to bridge the divide between “metrics” and “social justice”. Because of the way Steven frames his approach to evaluation, I think he even presents a way to think about these issues that bridge the gap between the participants in the philanthrocapitalism debate.
Steve Mayer:
Our website JustPhilanthropy.org presents many productive avenues for pursuing social justice using the resources of philanthropy. Funders, nonprofits, and potential donors exploring these options frequently ask, “How can we evaluate these efforts?”Needed: useful evaluation questions
“What is being achieved through this effort?” and “What kind of results are you getting?” are worthwhile questions that must be addressed to be fair to those who support this work. But demands for “measurable impact” and “outcome measures” are inappropriately placed on separate, local efforts; they apply more to the bigger picture, the picture indicated by disparities data. This is not to avoid the questions, but instead to find better ways of answering them. More satisfying data that inform next steps, stimulate innovation, engage participating stakeholders, and make better use of scarce philanthropic capital would come from asking for “evidence of progress” or even “early signs of impact.”
Think courtroom, not science
To appreciate these better questions, try this mental exercise: assume the program you support or operate has been accused of being trivial or ineffective, doing nothing to reduce disparities or improve social justice. What evidence could you provide in its defense? Think of a parade of witnesses testifying from their unique expertise, vantage point, experience, and vested interest. What “portfolio of evidence” could make a case good enough to persuade a jury of peers that this work, when considered in context, is useful and necessary for closing a key disparity?
No less rigorous or accountableAsking for “evidence of progress” is by no means a diminished demand for rigor. Instead, it frames evaluation in more familiar and approachable terms. Data of all kinds can be considered — numbers, stories, graphs, pictures, records, opinions, artifacts, etc. There is no single “measure” that communicates effectiveness or truth, just as in a courtroom no single witness provides all the testimony. In a court, multiple lines of evidence are entered and judged on their merits, resulting in conclusions that stand tests of credibility and accountability.
I’ve seen lots of frameworks borrowed from different disciplines in an attempt to find a good way to evaluate the effectiveness of nonprofits and philanthropy. I even once suggested that we should turn to movie critics as a model of how evaluation should be performed. But I think that Steven’s court room framework is elegantly simple and captures the way I think of evaluation and impact analysis better than I have ever been able to describe.
The fact is, I think that the best way to evaluate the social sector is via a system similar to investment research on publicly traded stocks. But to most people, this is an alien system that they incorrectly believe is concerned only with quantitative evidence. In actuality, stock market analysis is much more like the idea that Steven presents, “Data of all kinds can be considered — numbers, stories, graphs,
pictures, records, opinions, artifacts, etc. There is no single
“measure” that communicates [the potential of an investment idea].” But most people do understand that in court rooms all sort of evidence is presented and evaluated as a composite whole.
Steven’s framework is brilliant. The one point I would make (I think Steven would agree although he doesn’t make this point explicitly) is that in the court room things musted be proved “beyond a reasonable doubt.” This makes sense because the ramifications for deciding incorrectly are very high. But in the nonprofit/philanthropy world, we simply need to get to a point where it can generally be agreed that some funding opportunities are better than others.
Bravo Steven!
Matthew Bishop of The Economist coined the word Philanthrocapitalism in early 2006. Earlier this year, Michael Edwards of the Ford Foundation published Just Another Emperor: The myths and realities of philanthrocapitalism, which was highly critical of the concept.
Today, the Global Philanthropy Forum hosts an online debate between Bishop and Edwards with comments open to the public. Give the two sides a read and leave your thoughts. I think that the intellectual struggle over the idea of philanthrocapitalism is one of the most important debates going on today. How the world comes to define and understand the phrase (and especially the tools and knowledge frameworks of the concept), may very well define philanthropy in the 21st century.
You will find the debate here.
Update: the debate is churning along and regular readers will recognize a number of Tactical Philanthropy readers in the mix. Come join the conversation!
My recent column in the Financial Times has sparked the biggest response of my year old career as a newspaper columnist. I’ve gotten a ton of email, comments and the Chronicle of Philanthropy featured the column in Philanthropy Today. The response (of people who have contacted me directly) has been overwhelmingly positive. But I hear through the grapevine of at least a couple prominent people who don’t like the column. I’d love to hear any negative feedback that’s floating around our there.
I would like to clarify something in the column that I think deserves further attention (I only get 800 words in the Financial Times, so I have to leave out some points). In the column I say that donors do not understand how social impact is created (they tend to think it is the money they give, so they want to eliminate nonprofit costs, instead of recognizing that it is what the nonprofit does with their money that creates impact). I then state that for-profit investors have a better understanding than donors do of how the input of money (an investment or a donation) is transformed into an output (profit or social impact).
Here’s the important point that I hope is implicit in my column, but that I want to make explicit: for-profit investors and donors are the same people! I’m not suggesting that “for-profit investors” are smarter than philanthropists. I’m saying that when most people put their donor hat on, they also put on some bizarre kind of glasses that make them see the nonprofit world in a completely dysfunctional way. Instead of seeing nonprofits as firms that create value, the way we see for-profit organizations, they see nonprofits as bureaucratic entities that destroy the value of our donation as it travels from us to the “cause” we hope to support. It is only through this Alice in Wonderland looking-glass approach to understanding the social sector that we could possibly justify underpaying nonprofit employees, demanding that nonprofits only spend our donations on their “program”, and worry intensely about “overhead expenses.”
But I am not in the least suggesting that “business people” or “investors” have a better approach. Business people and investors are donors too and they view the nonprofit sector just as bizarrely as other donors. My discussion of how investors understand that for-profits are organizations that produce value is meant as a template for understanding how donors should view nonprofits as organizations that produce value. My additional point is that many of the behaviors that for-profit firms exhibit in their pursuit of maximizing value production (Handsomely rewarding employees in order to attract the best, for instance) are viewed as scandalous in the nonprofit sector.
In short, a system has emerged—a system that is widely accepted and rarely challenged. Yet
the cumulative effect of countless carefully wrought Requests for Proposals, grantmaker-specific
practices, mission-centered questions, and unique requirements creates a staggering burden on
nonprofit grantseekers…Our study found ten ways that the current system of grant application and reporting creates
significant burdens on the time, energy, and ultimate effectiveness of nonprofit practitioners.
Flaw #1: Enormous Variability
Nonprofits encounter a dizzying range of practice—both within and among funders—when it comes to the types of information they are required to provide.
For example, according to Center for Effective Philanthropy (CEP) data, some foundations require
financial information from over 90 percent of their prospective grantees, while others require it of only a small fraction or none at all. Even within foundations there is variability. The majority of foundations CEP studied require nonprofits to submit a Letter of Inquiry (LOI) between 34 percent and 55 percent of the time—meaning that even within one foundation, a grantseeker may or may not be asked to submit an LOI.
The report describes various types of foundations (”The Mystery Foundation”, “The Fickle Authority”, etc) who have different reasons for asking for some much info. You can find the full report here.
There has long been talk of a “common grant application”, whereby foundations would adopt a single, common form for grant applications. Many universities have done this to some extent for college applications. But I’m not so sure this is a good idea. As someone who researches investments in publicly traded stocks, I know that there are lots of smart investors that have VERY different criteria than my firm does. There is not a simple, standard approach to grantmaking (or stock market investing) that can be distilled down into a single form. But I do think that it makes great sense for foundations to very clearly lay out their grantmaking guidelines. Then they should reject early and often, explaining clearly why the potential grantee did not make the cut (A paragraph or two of honest feedback is most likely all that is needed). Then request the detailed, customized information that the foundation needs for the small pool of applicants that made the cut.
If you are the kind of foundation that funds 1 out of 3 or 5 or so applicants, than by all means you can have a completely customized process for each one. But if you are trying to screen through 10’s or 100’s of applications for each grantee you fund, let’s create some screens and don’t waste your time or the time of all those nonprofits who don’t have a chance.
As one nonprofit employee says in the report, “Just as foundations don’t want to receive proposals
that don’t fit their mission, nonprofits don’t want to spend time preparing proposals that aren’t going
to go anywhere.”
The Project Streamline report begins:
A national organization has dozens of foundation funders, each with a distinct application process, different requirements, and its own cycle for funding.
As part of their annual report to a funder, staff from a nonprofit service agency have to categorize their clients according to the funder’s specifications, even though the categories are not the same ones that the nonprofit uses.
Three times each year, a family foundation with broad funding guidelines receives 70-80 proposals in the mail. This overwhelms the single staff person, as well as the board members who serve as program officers.
Most grantmakers take their responsibilities to support nonprofit and other public-serving organizations seriously, and spend considerable time thinking about how they can be most effective. Stories of highly productive, warm, and mutually satisfying partnerships between organizations and their funders abound. Yet the grantmaking process is rife with inefficiencies such as those suggested in the above stories, and these inefficiencies mean that everyone is wasting time and money that could be devoted to accomplishing missions.
The Project Streamline report goes on to outline how incredibly inefficient the grantmaking process of foundations are and says:
Determined to address the great waste of time and energy caused by inconsistent and inefficient reporting and application procedures, eight organizations representing grantmakers and grantseekers came together to form Project Streamline. Project partners include the following organizations:
- Grants Managers Network
- Association of Fundraising Professionals
- Association of Small Foundations
- Council on Foundations
- Forum of Regional Associations of Grantmakers
- Foundation Center
- Grantmakers for Effective Organizations
- National Council of Nonprofit Associations
Together, these diverse partners commissioned a scan of grant application and reporting practices, their impact on grantseekers and grantmakers, and the implications for the field. This report is the result. Its goal is to spark thinking and dialogue on this topic across a wide range of grantmaking stakeholders of all shapes and sizes. (Emphasis from the original).
The report cites “Ten Flaws in the System” and three “Creative Approaches” to fixing the system. Given the readership of this blog includes a pretty even split of funders and grantees, I thought I’d run with the reports hope to “spark thinking and dialogue on this topic” and start discussing the report here. I’ll start Monday with “Flaw #1″. Some initial comments on the report can be found on the Project Streamline website (is comment #1 ironic? I sure hope so!)
One quote from the report caught my eye. It is one of those things that is both shocking as well as unsurprising to anyone who knows philanthropy.
“The administrative burden placed by funders on community nonprofit organizations is so heavy and so unrelenting, and places so many constraints on their ability to operate that it is a wonder they can deliver any services effectively.”
—Lynn Eakin, from We Can’t Afford to Do Business This Way
Question from Jeff, via Philanthropy Today:
How do you think emotional marketing by non-profits compares to campaigns that are more focused on performance capabilities and demonstrable impact?Seth Godin:
Marketing is about storytelling. And the thing is, different people need to hear different stories. Some people respond to a cold hard number (like the Gates Foundation). Others want to see the happy kid with braces. The challenge is in telling the right story to the right people in the right way at the right time.And…
Question from Yvonne S. Sparks:
What are the three biggest mistakes charities make in marketing besides not doing it?Seth Godin:
Marketing doesn’t equal advertising. Marketing is the act of interacting with people and the creation of products (or in your case services) that people choose to talk about. The biggest mistake non profits make is that they’re so busy not making mistakes they end up being boring. Boring and selfish and self-absorbed, all while they’re working so hard to make the world better. It’s ironic, but true. Kiva.org works primarily because it’s not boring. They make it easy to talk about what they do, and people choose to do so. Thus, the idea spreads.
“The biggest mistake non profits make is that they’re so busy not making mistakes they end up being boring.” Wow. What a line. The same is true of foundations and for-profit businesses too.
Let’s not be boring. Let’s make mistakes. Paul Brest and Jim Canales make mistakes. They aren’t boring, they’re leaders. What are you going to do today that might end up being a mistake?
I believe that in many aspects of life, a kind of pendulum effect exists. This effect describes the way in which people’s opinions tend to swing back and forth around reality. Rather than reflecting reality, people’s views vacillate in an arc around true reality. This creates a kind of boom/bust scenario that is very evident in the stock market (dot com stocks will make me rich! Ahh! Dot com stocks are poison!), but also shows up in politics, educations, pop culture, etc. I ran across a well put description this morning on Yahoo Answers:
I think the idea is that: somebody gets a good idea, and then a whole lot of people 1/2 understand it, and make it absolute, taking it to an extreme. Until somebody discovers “another” great idea, (the way things were originally done), and everybody jumps on that runaway train to hell.The lesson: Moderation. A little common sense goes a long way. Don’t just “swing with the pendulum” of fashion in teaching/learning methods.
I think that there is a strong pendulum effect in philanthropy. I see it at work when we talk about metrics, evaluation, “philanthrocapitalism”, venture philanthropy, etc. Today I want to share with you an excellent article in the Financial Times by Gara LaMarche, the president of The Atlantic Philanthropies. I think LaMarche describes well the way in which approaches to evaluation have “swung too far” and his recommendations for a middle ground makes a ton of sense.
The philanthropic world, poked and prodded by a wave of new donors fresh from success in the business world, is grappling with the issue of evaluation. How do we know that grants – or, as they are now often called, reflecting the influence of the profit-making sector, “investments” – are making an impact?……Evaluation is a learning tool for the organisation and the funder, not a stick with which to beat grantees.
…Doing this correctly takes money… Funders should recognise and support their grantees in their efforts to learn what works.
…Evaluation should measure only what is important. Data should never be collected for the sake of it. The “metrics” obsession that has overtaken some funders has not always recognised this. Funders should never make grantees jump through hoops, distracting them from their core mission and costing valuable staff time, for reporting on trivial things. And there is nothing more demoralising, from the grantee’s perspective, than doing all this paperwork only to have it ignored.
…Both funders and the organisations they support need more humility about cause and effect. Organisations working for social or policy change should understand that no significant change was brought about by one organisation working alone.
…Finally, the most important thing: start with what you believe. If you have a passion about ending the death penalty or the isolation of older people – whatever it is – find a way to advance it first and worry about how to measure it second.
You can read the full, excellent article here.
After the success of last year’s One Post Challenge, I thought that putting together a large blog team for the upcoming Council on Foundations conference might lead to a more dynamic conversation. So far, the list of people signing up has been excellent. You can read some background on what I’m looking for here and here. If you’ll be at the conference and would like to sign up to participate, shoot me an email. The conference this year combines the annual events for corporate philanthropy, community foundations, family foundations and private foundations. I would particularly like to add some representatives from family foundations to the list below.
The confirmed bloggers are:
My hope at last year’s conference was to open a “portal” into the event through which non-attendees could participate. While I think I was at least partially successful in providing a view into the event, the “participation” I was hoping for (for instance, a reader posting a question which I could then ask at a session and then blog about the answer) did not really occur. After the huge success of the One Post Challenge in creating reader debates around certain issues, I’m hoping that this year, we might get more of a back and forth going.
Let me know if you want to join the team and mark May 3-7 on your calendar for an explosion of activity on this blog as I begin posting entries from 10+ bloggers.
I’m at the Global Philanthropy Forum conference today and tomorrow. 500 people talking about international issues. Not the same crowd you get at a lot of these events because the forum targets family foundations. But the kinds of families that draw the Archbishop Desmond Tutu and the Queen of Jordan as opening speakers. Larry Brilliant and Richard Rockefeller are here, but so are Sean Parker (developer of Facebook Causes) and Peter Gabriel (the muscian).
The Forum was started in 2001 with a recession looming as a way to engage donors on international issues that are often abstract. In a recession, donors often pull back from causes that do not offer the immediacy of local issues. What I find interesting about the Forum is that the stated goal is to get the attendees to work together. About half have been giving for 7 years or less, while the other half are mostly multi-generational donors.
To measure the impact of the conference, Forum CEO Jane Wales says that their greatest metric is tracking how influential the attendees become in each others’ future giving. 83% of attendees from last year’s Forum say that an attendee they met was instrumental in a giving decision they made after the conference.
There’s a lot that I believe is brand new in today’s philanthropy, but I agree 100% with Amanda Moniz’s statement from yesterday:
In order to grapple honestly with the strengths and weaknesses of beneficence, it is important to recognise that new and better practices are often old methods that have been revived…
I just happen to think that concept is being applied incorrectly to the debate we’ve been having. A famous phrase of wisdom in financial markets is the often ignored warning to never believe that “Its different this time”. I’m glad to see that at the Forum we have a venue for new philanthropists to learn from multi-generational donors and vice versa.
In response to my recent Financial Times column about new approaches to funding growing nonprofits, the following letter to the editor appeared in the April 5 edition of the FT.
Sir, Sean Stannard-Stockton (“Non-profits look to invest in themselves”, March 29) errs when he concludes his interesting column by saying that “while yesterday’s donors were content to give to a non-profit based on emotional appeal, today’s donors want to know their money is really going to have an impact”.Since the late Renaissance and the Reformation era when the conceptual and applied shift towards “modern philanthropy” with its pursuit of rationalised solutions to systemic problems occurred, donors have sought to optimise the outcome of their investments. Today’s “venture philanthropists” promise greater results and more accountability by borrowing from the practices of venture capital, just as “scientific philanthropists” of the late 19th century did by adopting the principles of the reigning intellectual framework of science.
In order to grapple honestly with the strengths and weaknesses of beneficence, it is important to recognise that new and better practices are often old methods that have been revived - because the problem of an unequal distribution of resources endures - and that perpetual frustration with the limits of philanthropy is a prime reason for the continual reworking of ideas.
Amanda B. Moniz,
Department of History,
University of Michigan
Michael Edwards of the Ford Foundation responded to the same sentence in my column saying, “[you] assume that impact considerations are new, when in fact they have been around for fifty years or more - just not expressed in the ways you
think are satisfactory.”
I agree that the concept of impact (attempting to give in ways that can do the most good for your dollar) is not new within institutional philanthropy. Because a lot of my readers work at institutional foundations, consult for these foundations, or work at nonprofits that receive grants from these foundations, I often address issues of institutional philanthropy. But I’m not an expert in institutional philanthropy. My firm, Ensemble Capital, serves individual philanthropists. When I talk about The Second Great Wave of Philanthropy, I’m talking about major shifts going on with individual donors. When I write for the mass audience of the Financial Times, I’m writing for individual donors. But given how my writing on this blog veers into issues of institutional philanthropy on a regular basis, I can see how it is my fault if people perceive that I’m declaring “impact” as a new concept to foundations. It is not.
Individual donors have always been aware of the idea that their donations could do more or less good depending on which nonprofits they funded. While they might not often use the word “impact”, the concept makes sense if it is explained to them. But I reject the idea put forth by Moniz and Edwards that “donors” (and that was the word I used, not “foundations”) have embraced impact considerations for half a century.
If in fact donors understood impact, which at its core assumes that some donations do more than others, than you would assume that these donors would strive to achieve higher levels of impact. Yet there are almost no mass market books that discuss this issue, almost no articles in print or online, almost no organizations that help donors achieve impact.
Now before you send me emails pointing to Inspired Philanthropy or Don’t Just Give It Away, before you point out that I’m writing a mass market column on these very issues at the Financial Times, before you tell me about excellent consultants like The Philanthropic Initiative, Arabella Philanthropic Investment Advisors, or my own firm Ensemble Capital, let me just say that all of that adds up to just a bit more than zero.
Individual donors have access to almost nothing compared to individual investors. Every bookstore in the country has a whole section devoted to personal finance (books on which generally ignore charitable giving while lavishing pages of copy on other obscure financial issues). Every daily newspaper devotes space to advising individual investors and we have many mass market publications targeted directly to the individual investor. Investors issue with investment advisors is not so much finding one (believe me, there are thousands of advisors trying to find you right now), but picking from amongst the many qualified professionals.
Most individual donors don’t even know the difference between a nonprofit and a foundation. Institutional philanthropy actual is making a effort to let people know what they do since most Americans cannot even name a single large foundation. Individual donors with a portfolio of appreciated assets still mostly write checks to charity instead of transfering assets or setting up a philanthropic account (this is similar to saving for retirement in a checking account because an investor had never heard of a 401k).
I could go on and on.
I actual have my own criticism of the sentence in my column that Edwards and Moniz call out. When I wrote “while yesterday’s donors were content to give to a non-profit based on
emotional appeal, today’s donors want to know their money is really
going to have an impact,” I actually overstated the case in the opposite direction of the way they saw it. Edwards and Moniz argued that the statement was false because they believe yesterday’s donors were focused on impact. I would say that my statement was flawed because in fact, not even “today’s donor” knows what impact is. “Tomorrow’s donor” will be the ones deeply concerned with impact. But at least today we have real movement in that direction.
