Category Archives: Cross-Disciplinary Conversations

Investors vs Donors III

February 29, 2008 – 9:41 am

To recap, my questions from my earlier post were:

  1. Why do investors take credit for picking great investments (”look how smart I am, I bought XYZ stock!”), while philanthropists, especially foundations, claim that the credit goes to the nonprofits they fund (”the grantee did all the work”).

  2. Why is it acceptable for investors to talk about investments they think are bad (”Don’t buy ABC stock, their management is terrible!”), while philanthropists never badmouth nonprofits, even if they think they are ineffective?

  3. Related to #2: Why do public companies generally ignore all the talking heads who say negative things about them, while nonprofits find it intolerable to have a prominent person speak negatively about them in public?

The responses from readers can be found here.

The primary response to Question 2 was that funders/donors do say negative things about nonprofits behind closed doors and within private circles. But that they do not do the same publicly for fear of damaging their relationship with grantees. The point was made that funders (unlike investors in public companies), must maintain a healthy relationship with grantees to do their job well. Most readers seemed to appreciate the positive long term impact on the sector of public criticism and general truth telling, but worried that in the short term it would be a large negative.

I think this is an entirely solid argument. Philanthropy is currently much more like venture capital than investing in the stock market (it is no coincidence that venture philanthropy approaches have gained a lot of credence in recent years). Venture capitalists invest in private companies where funding comes primarily from a small set of large funders. They also have an active role and continuing relationship with the companies they fund. This is different from stock market investing where most investors are passive holders of stock and do not interact with the company at all.

Within the context of philanthropy as a private marketplace, I think the arguments for why public criticism does not work are valid.

I don’t think philanthropy is going to be a private marketplace for much longer.

Individuals already give seven times the amount that foundations give each year. Combining the Fidelity and Schwab donor advised funds (representing organized individual giving) gives you an annual grantmaker that rivals the Gates Foundation. Most high net worth individuals are only in the early stages of realizing that giving is something they can approach with a strategy that maximizes impact and tactics that make the most of what they have.

Public criticism of publicly traded companies is no big deal because the shareholder base is so broad. But a venture capitalist going on TV and knocking a private startup might cause it to go bankrupt as funding dried up.

Philanthropy is not yet a public market. The arguments presented against public criticism are all valid and correct today. We need to be preparing for tomorrow.

Venture Capitalists do talk about startups that they think are great. So do some foundations. Note the constant promotion of Nurse-Family Partnership by the venture philanthropy focused Edna McConnell Clark Foundation. You can read a great article about their approach here (note the reporter labels it as “controversial”). Maybe this positive commentary is a bridge to future criticism. Reader “young staffer” writes:

Foundations and donors actually don’t do enough to tout their successes and to make a strong, public case championing the relative effectiveness and strength of their best grantees. It’s not just that the grantees did all the work; it’s that we talk only about how our grantees do good things and yours do too. I think it would be way easier to get the ball rolling towards more criticism if it started from a place of making a case for the best social investments rather than highlighting the worst.

So why then don’t more “expert grantmakers” (mainly large foundations) publicly promote their knowledge? Reader Renata Rafferty writes:

Philanthropy in our society is frowned upon if it is considered self-serving. Therefore, to boast about one’s wise philanthropic investment “picks” would be, well, boastful and self-serving.

Look, if you have a billion dollar endowment and 30 employees working on a focused set of issues, it is not “boastful and self-serving” to talk about your “wise philanthropic investment picks”. If you are not making wise philanthropic investment picks there is something seriously wrong. I assume that large foundations are smart grantmakers. I’m not suggesting that they shout from the rooftops how great they are in an attempt to convince people. I just want there to be a public conversation about social investing the way we have a public conversation about the stock market.

Don’t forget that we’re talking about all of this within the context of a country where most people think nonprofits waste donations. It is hard to imagine that criticism could be all that damaging. You can’t fall very far once you’re already laying on the floor. Maybe Americans would have a better view of nonprofits if they heard experts talk negatively about some of them and positively about others. Realize that the underlying assumption that donors who want low “overhead expenses” from nonprofits is that the nonprofits are a value destroying entity that just gets in the way of the money going to the actual cause.

When a hedge fund manager goes on CNBC and talks about her favorite stocks, it is not “boastful and self-serving”. She is an acknowledged expert and the public appreciates (whether they agree or disagree with her picks) the opportunity to hear her thoughts.

By Sean Stannard-Stockton | Also posted in Effective Giving, Grantmaking, Media, New Philanthropy, Philanthropic Capital Markets, Philanthropy, Transparency | Comments (13)

NetSquared Update

February 28, 2008 – 3:38 pm

From the NetSquared Blog:

Google’s engineers, product and project managers want to help bring your NetSquared Mashup Challenge idea to life!

Next Friday, March 7th, NetSquared Mashup Challenge applicants have an incredible opportunity to participate in a Hackathon at the Googleplex in Mountain View, CA from Noon-5 PM.

A group of Google engineers, product and project managers will be available to help you think through your idea, answer questions, give advice and start building your mashup for social change!

Are you excited? We are!

To attend you need to submit your project idea to the NetSquared Mashup Challenge. The application process is just that, a process. Fill out what you know now, and begin soliciting feedback from others to move your idea to a completed mashup.

Once your project idea is submitted, you can register for the Hackathon by sending an email with the subject line: “Google Hackathon Registration” to net2@techsoup.org…

Click here for all the details.

A Hackathon at the Googleplex? 95% of my readers eyes just glazed over. 5% are in nirvana and just ran out the door to buy a case of Red Bull. 100% will be fascinated by results that show up at NetSquared in May.

By Sean Stannard-Stockton | Also posted in N2Y3, Philanthropic Technology, Philanthropy, nptech | Comments (0)

Investors vs. Donors II

February 28, 2008 – 12:36 pm

Yesterday I asked some questions about why donors behave differently from investors. The feedback has been wonderful. I’ve posted excerpts below (you can read the full comments here). I’d love to get additional comments on this issue. I’ll be posting my further thoughts on the topic soon.

Amy Sample Ward
I have a hard time reconciling the contradiction of all the hard work, time, energy, etc that program staff put in for the up-front due diligence in reviewing a proposal and then, if they find that the organization’s project isn’t one that the program staff and trustees decide to grant because of the information discovered in the due diligence process, the decision and background information informing the decision isn’t shared. When it is a corporate entity, people always advocate for openness and the opportunity for the public to say both good and bad things so that the company will publicly explain why and how for their good and bad press. But with nonprofits, and grantmaking, it’s a closed circuit.

Pete Manzo
The clear sense I have received from many foundation presidents and program officers is that they do indeed talk about the nonprofits they do and don’t fund, among their peers. They clearly do talk, they just don’t share their perceptions with the broader public. So I interpreted your question to be why don’t foundations share their positive and negative perceptions outside of their private conversations. One reason might be not wanting to harm grantees, as the program officer you interviewed mentioned. Another reason may be that they don’t want to publicly stand behind what they say in private, or more likely, don’t want to put their foundation “on record” for their views; they may not feel they would have the foundation’s support if there is a backlash, and also, just imagine trying to work through a foundation’s governance and communications channels to get approval for making those kinds of statements.

Renata Rafferty
It’s all about what I call “The Tyranny of Nice.”

1. Philanthropy in our society is frowned upon if it is considered self-serving. Therefore, to boast about one’s wise philanthropic investment “picks” would be, well, boastful and self-serving.

2. Donors and institutional funders have two different reasons for not spreading “the bad news.”

Donors don’t do it because they do not want to insult, offend, or upset board directors and executives who may be their neighbors, friends or business associates whom they have to face. Why would a donor risk PO’ing a group of people in order to “save” the greater community of the faceless from making an unwise donation.

Foundation’s don’t do it because it doesn’t jive with the essential philanthropic resolve –the world can and will be a better place, and even poorly-performing charities hold the promise of getting better if they are not buried first.

Also, as foundations routinely deny grants for a host of reasons, publicly showing cause in some cases and not in others would cast doubt on ALL denied grantees — not to mention creating a whole lot more work for foundation staffs.

“young staffer”
Foundations might damage relationships with all their grantees if they start publicly criticizing those that encounter problems. My colleagues and I want our grantees to come to us with problems and challenges; if they don’t, we can’t help them (and we also can’t do any damage control with our own board if things are really getting rough). Foundations have a hard time building honest and open relationships with nonprofits because of the power dynamics. If you become the foundation that might “out” a struggling grantee and hurt or kill their fundraising, you stand to lose that trust. Now you’ve got grantees covering up problems. That makes it harder to be a good grantmaker. It’s also scary - foundation staffers worry about backing a grantee to their board that ends up on the front-page of the newspaper for its problems.

So criticism of grantees potentially hurts a lot of grantee/funder relationships, which makes a foundation staffer’s job harder both in terms of supporting their grantees and being responsible to their board.

A lot of nonprofits are fighting an uphill battle and doing it with the best intentions. They are under-capitalized, the staff are underpaid and overworked, and they are trying to serve the public. Criticizing them in public can feel like kicking a dog when it’s down, even if the results would be a more effective sector in the long run. You’ve already denied funding, which hurts. It’s hard to then advocate that others should deny funding too when you know these people mean well, face tough circumstances, and are probably meeting a need for some community members. Even if you think it’s not fixable, do you really want to tell a well-meaning staff that its efforts are not worth it and then turn to the people they are serving and say they should look elsewhere?

I think Sean’s first question, then, is the most interesting. Foundations and donors actually don’t do enough to tout their successes and to make a strong, public case championing the relative effectiveness and strength of their best grantees. It’s not just that the grantees did all the work; it’s that we talk only about how our grantees do good things and yours do too. I think it would be way easier to get the ball rolling towards more criticism if it started from a place of making a case for the best social investments rather than highlighting the worst.

Maggie F. Keenan
Why do investors take credit for picking great investments (”look how smart I am, I bought XYZ stock!”)…because they have something to sell!

While philanthropists, especially foundations, claim that the credit goes to the nonprofits they fund (”the grantee did all the work”). I whole heartedly concur with Renata… we are not self-serving.

Why is it acceptable for investors to talk about investments they think are bad (”Don’t buy ABC stock, their management is terrible!”)… because their marketplace is competitive.

While philanthropists never badmouth nonprofits, even if they think they are ineffective? Who told you they don’t? They do internally and I am certain info is shared among circles. My FAVORITE WORD MOKITA -a New Guinea word for “the truth that everyone knows but speaks nothing of.”

Tidy Sum
As noted, foundations DO talk about crappy nonprofits all of the time. It is part of in the old due diligence handbook that you have buried next to that bottle of Jack Daniels in your desk.

Foundations, if they do their work well, also talk pretty frankly with other nonprofit organizations.

Got NPO gossip? The nonprofit community LOVES to dish about their peers, their competitors, their collaborators and non-collaborators.

And those of us who suffered through a typical philanthropy conference find that the syrupy self-congratulatory vibe is filled with funders/donors patting themselves on the back about their latest and greatest investments, discoveries, and grassroots heroes of the day.

Jump into the conversation by adding your own comments to the list.

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

Social Marketplace Architecture

February 22, 2008 – 9:48 am

Reader Simon Marsh, shares his thoughts on the “Social Marketplace Architecture”:

The idea

A dynamic user led and focused software platform/environment for grant givers and grant seekers to interact and compete could be developed wherebytheir real time objectives and organisational identities interact and compete for the best ideas and resources. A second generation internet platform whereby a Foundation’s (for example) publicly available governanceand philanthropic objectives are matched (automatically) with various university (for example) academic objectives, personnel and events bothproactively and reactively.

You can read his complete comments here.

By Sean Stannard-Stockton | Also posted in New Philanthropy, Philanthropic Technology, Philanthropy, Social Media, nptech | Comments (0)

NetSquared N2Y3

February 20, 2008 – 9:34 am

NetSquared, the community of technology/nonprofit collaborators hosted by CompuMentor/TechSoup is hosting their third annual conference in May. I attended the first two and they are amazing. While each conference has had a different focus, they seem to bring out some of the most innovative people I’ve ever met.

This year’s contest will focus on Mashups for Good:

This year’s NetSquared Conference will bring together a unique mix of people from the public and private sectors to develop and release Mashups designed to provide deeper insight into the social issues affecting communities around the globe.

Those “people” are you — members of the NetSquared universe working on behalf of communities everywhere and the technical experts who care about these issues.

If we’re successful, we’ll learn something about cross-sector collaboration, meet new and interesting people, and build a unique gallery of Mashups that citizens, schools, and community-based groups everywhere can learn from, replicate, and build upon.

For more about Mashups, see Wikipedia’s definition.

For a better sense of what we mean, let’s take a look at a few of our favorite Mashups.

Go ahead, click on the examples below. Read the “about” pages to get a better sense of the project’s goal/mission, and how the site works. (Yes, this is kind of technical, but we’re going to help make sense of that. Enjoy!)

    * Maplight.org, a winning NetSquared project from last year, displays the link between money and politics by bringing together information about campaign contributions and legislative votes.

    * ChicagoCrimes.org is a browsable database of crimes in Chicago that lets users see information displayed on a map.

    * ActiveTrails shows visitors a list of active hiking and biking trails across the United States. Users play a big role in supplying information.

    * Tunisian Prison Map pulls from a variety of sources to locate the prisons on a map and links to videos and other information relating to the prisons.

On February 1, the Mashup Project Submission process for the NetSquared Mashup Challenge opens. Nonprofits and other social-change agents will be expressing their visions of how data can be recombined to advance social missions. NetSquared’s team will make sure that everyone gets the appropriate help they need to define their vision in a way that will be accessible and attractive to technical volunteers.

On March 14 at 5 PM, PST, the ability to publish a Project Submission will close.

03/17/08 - 03/21/08: Voting for the Mashup Project Challenge. Like last year, registered NetSquared users will be able to vote for their favorite Projects.

03/24/08: The top 20 Mashup Projects will be announced on March 24 and the winners will be invited to attend this year’s NetSquared conference in San Jose, CA, scheduled for 5/27 and 5/28. Each of the top 20 projects gets an allowance for travel (including airfare to and from the conference, along with a hotel room for two nights).

05/27/08 & 05/28/08: At the conference, Project Teams will have an opportunity to display and discuss their Mashups and attendees will vote to select the top three. All 20 projects at the conference will receive a share of $100,000 in prize money. The share will be determined by voting at the conference. Of course, there will be more legalese regarding the prize and its allocation after we open the application process on February 1, 2008.

By Sean Stannard-Stockton | Also posted in N2Y3, New Philanthropy, Philanthropic Technology, Philanthropy, Social Media, Transparency, nonprofits, nptech | Comments (1)

Alumni Giving Trends

February 20, 2008 – 8:48 am

Inside Higher Ed covers alumni giving trends today in “Donations Are Up, But Not From Alumni”. Examining the behavior of younger alumni, the site quotes an entry to my One Post Challenge:

Writing last year as a guest at the blog Tactical Philanthropy, Sam Huleatt, co-founder of a company that builds social networks for private schools, wrote that many colleges “instantaneously lose their relevance upon a student’s graduation.” New graduates have little interest in the alumni magazines, he wrote, that are a major way colleges communicate with alumni. “Why wait four months for ‘class notes’ when you could simply check Facebook to see what a friend is up to?” Further, while many colleges have online giving programs, many also still communicate with alumni as if writing a check is the normal way to give. “It likely shocks most development officers as to the percentage of young alumni who don’t write checks, or own stamps,” he wrote.

Huleatt also suggested that colleges need to think about ways to engage alumni who may not want or have the ability to make a financial gift. “Schools need to reevaluate what constitutes ‘giving.’ A recent graduate may not be able to afford an annual gift of $200, but if they help a rising senior find a job, isn’t that worth something? When was the last time a school published a list of alumni who helped find other alumni or students jobs over a given year? Don’t these people deserve credit?”

Blog content and user generated content continues to increase its mainstream relevancy as Mitch Nauffts notes today.

By Sean Stannard-Stockton | Also posted in Fundraising, Philanthropy, Social Media, Youth | Comments (0)

Best of Stanford Social Innovation Review

February 16, 2008 – 10:58 pm

The Stanford Social Innovation Review is a must read if you care about philanthropy. They manage to straddle the line between offering academic journal type articles while at the same time offering up compelling, engaging writing. They even play host to a large group of philanthropy bloggers (including me).

You have to subscribe to the magazine to read most of the articles. But the SSIR is currently offering their five most read articles of 2007 for free:

Creating High-Impact Nonprofits

Conventional wisdom says that scaling social innovation starts with strengthening internal management capabilities. This study of 12 high-impact nonprofits, however, shows that real social change happens when organizations go outside their own walls and find creative ways to enlist the help of others.

Microfinance Misses Its Mark

Despite the hoopla over microfinance, it doesn’t cure poverty. But stable jobs do. If societies are serious about helping the poorest of the poor, they should stop investing in microfinance and start supporting large, labor-intensive industries. At the same time, governments must hold up their end of the deal, for market-based solutions will never be enough.

How Nonprofits Get Really Big

Since 1970, more than 200,000 nonprofits have opened in the U.S., but only 144 of them have reached $50 million in annual revenue. Most of the members of this elite group got big by doing two things. They raised the bulk of their money from a single type of funder such as corporations or government—and not, as conventional wisdom would recommend, by going after diverse sources of funding. Just as importantly, these nonprofits created professional organizations that were tailored to the needs of their primary funding sources.

Social Entrepreneurship: The Case for Definition

Social entrepreneurship is attracting growing amounts of talent, money, and attention. But along with its increasing popularity has come less certainty about what exactly a social entrepreneur is and does. As a result, all sorts of activities are now being called social entrepreneurship. Some say that a more inclusive term is all for the good, but the authors argue that it’s time for a more rigorous definition.

A New Era for Business

More and more business leaders recognize that their company’s future is increasingly intertwined with the needs and demands of society. What many executives don’t understand is how best to manage that changing relationship. In this article, McKinsey & Company consultants provide a model for incorporating sociopolitical issues into the strategic decision-making process.

By Sean Stannard-Stockton | Also posted in Impact Measurement, Media, Philanthropy, Social Entrepreneurship, microfinance | Comments (0)

Student Philanthropy Blog

February 16, 2008 – 10:15 pm

Dr. Linda Harvey teaches Fund Raising & Philanthropy at Kansas State University school. This semester her students are authoring a group blog about what they’ve learned and their class discussions. I encourage readers to check out the blog and leave comments for the students. In response to my email, Dr Harvey writes back:

I encourage students to blog in all of my classes. While I don’t have delusions that everyone likes blogs/blogging, I do try to instill in them the relevance of blogging to both public relations and fundraising.

My students, I believe, find that they do indeed not live in a vacuum.They are quite amazed when they read the commentary placed by others, either on their blogs, or in the blogs they ultimately read.Please continue to read what my students are saying.

We’d love to hear from you more!

Check out the blog and leave some comments by clicking here.

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

More on CalHospitalCompare.org

February 11, 2008 – 9:00 am

Last week I mentioned CalHospitalCompare.org, a website that shows comparative rankings for the effectiveness of California hospitals.

A reader emails today with some thoughts on problems with the measurements used by the site. He points out that the vaunted Cedars Sinai of Beverly Hills has only an “average” ICU mortality rate according to the site. The site assumes that a hospital should strive for a lower mortality rate (less patients dying is good right?):

Why are we pedantically told “lower is better”?  Why is lower better?  Is this not exactly, specifically, the dead-nuts center of the “metrics” conundrum?

If the Cedars ICU mortality rate was 50%, wouldn’t that mean Cedars must be where everyone in the know knows to go when intensively sick??????  Included among them, obviously, are the intensively sick at death’s door — thus inflating the ICU mortality rate with folks whose only hope is for more time in ICU — not escape from it.  “Mortality” measures nothing meaningful about the care and skill and hand-holding services provided AT DEATH’S DOOR in the Cedars ICU!

That 50% ICU croak rate might just mean Cedars is the place to go to be kept ticking long enough for all my family stragglers and long-losts to fly in and come kiss me goodbye?  I’d still add to the croak rate, but…  Wow!  What service!

What the hell kind of “metric” measures that PRICELESS service???!!!

What about the exact opposite “metric” finding:  Suppose Cedars ICU mortality rate was 1%.  This means, of course, if the “average” is 13%, that Cedars is either magical — or lying.  Let’s say they’re just wonderful.  And…  so…  via “metrics” getting into the hands of salesmen…  everyone discovers how wonderful Cedars ICU can be.  So business goes up on the word — logically, in the fullness of time.  Now…  More and more people at death’s door come to them for those precious last few hours or days…  But.  In the end, folks croak.  So?  Little by little, Cedars ICU mortality rate gets back in line with “average” and, like all intended measurements for goodness, is rendered meaningless.

Why, why, why, why so much time on this obsession with measuring The Good?

The emailer then takes me to task for focusing on measuring nonprofit outcomes. I found his argument above excellent. This is a great example of how important it is to measure the right things. We cannot depend too heavily on any one metric. There is no magic, simple way to determine how effective a nonprofit is.

Right now, any decent economist could give you a long list of statistics that show we are in a recession… and a list of statistics that suggest we are not. That doesn’t mean that metrics are worthless. It does not mean we should not strive to seek knowledge. It means that understanding our world is hard. But through understanding our world, we can create a better one.

By Sean Stannard-Stockton | Also posted in Effective Giving, Evaluation, Impact Measurement, Philanthropy | Comments (0)

GlobalGiving Weighs in on Kiva Issues

February 5, 2008 – 8:21 am

Writing on the GlobalGoodness blog, GlobalGiving co-founder Dennis Whittle quotes my recent post on Kiva.org and adds his own thoughts:

In the financial markets, there are rules that if a particular exchange is unable to execute an order, they must route that order to a competing exchange immediately.

This is from a nice blog post by Sean Stannard-Stockton. He points out that in the nascent philanthropic financial markets, there is no obligation to re-route donors to another philanthropic exchange under similar circumstances.

At GlobalGiving, we have informal agreements with a number of other exchanges, and we do refer donors to partners when it makes sense. This helps us meet our pledge to donors that they will be satisfied with their experience at GlobalGiving. It also helps our partners grow, and it generates goodwill for all involved, which pays off over the long term.

Together with a loose coalition of other philanthropic exchanges from around the world, we have been exploring whether it makes sense to develop a formal inter-operability framework. This framework might include common standards and the ability to automatically fulfill donations referred by other exchanges.

Sean is right: making the non-profit social capital market more effective means that this type of collaboration needs to be accelerated.

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

Financial Times Philanthropy Conversation

January 30, 2008 – 9:38 am

The first guest column to the Financial Times for the philanthropy series put together by my editor Lauren Foster, was published recently. Rick Cohen, a national correspondent for Nonprofit Quarterly and former executive director of the National Committee for Responsive Philanthropy, is the first author. He takes on the presidential candidates’ commitment to philanthropy.

Throughout the New Hampshire presidential primary, non-profit activists questioned the candidates about their commitment, if elected, to promote charity and philanthropy.

Barack Obama said he would create a social entrepreneurship fund to support innovative, non-profit projects. Rudy Giuliani endorsed continuing federal tax deductions for charitable contributions and overall favourable tax treatment for non-profits. Mike Huckabee confirmed that non-profits certainly will have a place in his White House.

Yet most candidates’ past histories of non-profit and philanthropic engagement tell more…

You can read the full story here.

If you are interested in contributing to the series, read my prior post on the project.

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

Information Sharing in Philanthropy

January 23, 2008 – 11:45 am

I wrote a post a while ago called Paul Brest Needs a Blog (Paul is the head of the Hewlett Foundation). I’ve been an advocate for more people in philanthropy to start blogging in general. In the above mentioned post I wrote:

So why should foundations blog? It seems to me that the imperative is not for them to embrace technology so much as it is for foundations to join and begin to drive the online philanthropy conversation. [But] it is the two-way flow of information that blogs encourage that is important, not blogs themselves.

Even so I’ve noted recently that some people feel that I’ve pushed blogging rather than information sharing. As the conversation we’re all having unfolds I think it is important to take a step back and make sure we haven’t missed the forest for the trees. I wish I had expressed my thoughts with more clarity.
When Phil Cubeta recently asked why nonprofits should blog, astute reader Michele Moon asked:

I’m not entirely sure why it’s blogging, in particular, that’s the focus of discussion, especially because it’s now considered a little bit old-hat, Web 1.5. What is it about the format that makes it so essential to transparency and its tyrant? Is it actually blogging you want to see - personal, real-time updates and editorials, followed (if you’re lucky) by people who read, comment, and sometimes stick around to converse?… Why should it be blogging that we aim to do, or is that shorthand for more complicated online interactivity?

I’m guilty of using “blogging” as short hand for information sharing. I’ll stop making that mistake.

When economists speak about efficient markets they are talking about a situation where money flows to the organizations that can put it to the best use. Widely available, robust information is a critical factor for a functioning efficient market. Recently, in a conversation with Phil Buchanan and other readers on this issue I wrote the following (you can find the full thread here. The Chronicle of Philanthropy recently highlighted the conversation):

In an efficient market, investing is a zero sum game. Maximum returns are generated globally so the only question is matching an investor’s risk/return preferences. In inefficient markets, higher returns accrue to more “effective/smarter” investors. In a public benefit market, since all returns accrue to everyone, investors should desire an efficient market within which they could align their social investments with their personal values/goals.

The philanthropic capital markets are highly inefficient. Far more inefficient than any for-profit marketplace.

Therefore, it seems to me that making the philanthropic capital markets more efficient should be the number one priority of large funders who desire to be effective…

I’m not arguing that the public will make better decisions than the “experts”. I’m saying that efficient markets will produce better outcomes than inefficient markets. In the for-profit world, inefficient markets are great for “expert” investors because they can exploit superior information to generate outperformance of investment returns. But these inefficient markets reduce the total returns in the market by preventing capital from flowing to the best performing investments.

What I’m saying is that unlike in the for-profit market, “expert” philanthropist enjoy no advantage from superior information. The returns they generate accrue to the public, and so no “outperformance” is possible. Instead, they should be interested in the total market functioning at a higher level, since that is the only way to increase the social return on investment that accrues to everyone.

This is the challenge we face as a field. How can we ensure that the $300 billion that is given to charity each year is flowing to the organizations that can put the money to its best use? The key will be our ability to supply market participants with widely available, robust information. Blogs are one tool in this work. There are many others.

By Sean Stannard-Stockton | Also posted in Effective Giving, Evaluation, Foundations, Giving Blogs, Grantmaking, Impact Measurement, New Philanthropy, Open Source Philanthropy, Philanthropic Capital Markets, Philanthropic Technology, Philanthropy, Transparency | Comments (18)

Consilience in Philanthropy

January 17, 2008 – 12:39 pm

I wrote a post for On Philanthropy that appears today. You can read the story here.

Have you ever heard someone say, “We need to get out of our silos and work together”? The silo effect is one of those over used metaphors of the business world, but the issue it raises is real. In short, silo thinking refers to a situation (common in most organizations) where people do not communicate across departments.

In large private foundations, there has long been a silo effect across program and investment staff. But recently, some foundations are trying to overcome this barrier and encourage the two departments to work together.

I believe the key to unlocking the potential of philanthropy is to break out of our silos and embrace consilience. Consilience means “unity of knowledge” (or more literally the “jumping together” of knowledge). The phrase was popularized by famed biologist Edward O. Wilson in his aptly named book Consilience: The Unity of Knowledge. What consilience recognizes is that every field of study captures only a snapshot of reality. While economists might believe that economics is the study of the production, distribution and consumption of goods and services, the fact is economic theory does not actually describe reality until you begin to take into account the biological, psychological, and sociological behaviors of humans. Even then, a broader systems approach is needed to understand how the market affects the environment and human culture, as well as the moral implications of market outcomes.

Today, philanthropy is faced with the coming together of traditional models of giving with market based social good production. While this systems based approach to philanthropy is promising, too often it seems that…

You can read the full article and leave comments at On Philanthropy by clicking here.

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

United Way on Google Finance

January 10, 2008 – 9:57 am

After reading a United Way blogger’s reaction to my prediction that UW would develop an industry standard, narrative outcome measurement form and my discussion of Google Finance, I’ve started a discussion thread on the Google Finance page for United Way.

The United Way’s focus on Outcome Measurement is wonderful. I wish  there were more resources like the ones you list at http://www.unitedway.org/Outcomes/  elsewhere on the web. I was wondering if someone at United Way could  explain to me a little bit about how your organization thinks about  qualitative vs. quantitative evaluation of nonprofits. It seems to me  that quantitative metrics are probably easier to measure, but less  valuable than more difficult to measure qualitative outcomes.

Any help you can provide in thinking through this issue would be  wonderful. Thanks!

FYI: While the Red Cross has stopped posting to the thread I started on their page, I understand from sources that they are taking the questions about their effectiveness quite seriously.

I wonder how the United Way will respond?

By Sean Stannard-Stockton | Also posted in Effective Giving, Impact Measurement, Philanthropic Technology, Philanthropy, Transparency, nptech | Comments (3)

Rebooting Nonprofit Evaluation Debate

January 7, 2008 – 9:46 am

A lively debate about nonprofit evaluation and metrics has been raging in response to my request for input on my meeting later this week with Google.org. However, the conversation has splintered into a debate over whether a systematic, “metric” driven process of scientific measurement is needed, or whether the frame of scientific measurement is “an epistemologically impoverished frame” through which to understand nonprofit evaluation.

I personally believe evaluating nonprofits is mostly about evaluating their output (the social good they produce). Since it is difficult (impossible?) to quantify this output, I think the focus on metrics as a framework for evaluation is misplaced. Metrics can be used, but they should be designed on a case-by-case basis for each situation. That being said, I think the conversation has fallen into the trap of being constrained by historical frames of reference.

I want to have a different conversation.

I’m interested in what information is available to donors who want to evaluate a nonprofit and which of this information is useful. Google.com is mostly a resource that points to information; they don’t tend to create a lot of their own content. So if we imagine a future version of the nonprofit data inside of Google Finance, I don’t imagine it will be some new metric that we design. Instead, it will point to existing information on the web. When I first wrote about nonprofit info in Google Finance, I said I hoped they would not display Charity Navigator ratings (although I would support them noting if a nonprofit had a zero or one star rating since I do believe that a Charity Navigator rating at this level is a significant red flag)

So the conversation I want to have is what information do readers think that donors should consider when evaluating a nonprofit? Then secondly, where or how can this information be captured online so that it can be displayed in Google Finance?

Open Invitation to Foundation Employees

I realize that if you work at a foundation, you may not want to jump into a conversation that involves telling another foundation what to do. However, the conversation we’re having here is really important and would not be complete without the input of the army of program officers (ie. Nonprofit evaluators) that read this blog. So please consider commenting anonymously (just let us know you’re a program officer) or comment publicly and realize that we’re having a broad conversation about nonprofit evaluation that goes beyond Google.org and Google Finance

Open Invitation to Nonprofit Employees

A conversation about nonprofit evaluation would not be complete without the input of the nonprofits being evaluated. What information do you, as nonprofits, what donors looking at when they evaluate you? It could be that someday the Google Finance website about your organization becomes the top ranked search result on google for your nonprofit. What do you want on that page?

By Sean Stannard-Stockton | Also posted in Grantmaking, Impact Measurement, New Philanthropy, Philanthropy, Social Media, Transparency, nonprofits, nptech | Comments (70)