Category Archives: Effective Giving

CNBC on Obama’s Charitable Giving

March 16, 2010 – 6:18 am

On Friday, the Obama administration announced the charities that would receive the $1.4 million that president Obama was awarded when he won the Nobel Peace Prize. Interestingly, CNBC, the leading financial news channel looked to cover the news and brought on Chronicle of Philanthropy staff writer Ian Wilhelm to talk about the picks.

What transpired was interesting because CNBC thought they had a “gotcha moment” when they pointed out the overhead expense ratios of some of the organizations were not perfect according to Charity Navigator. They even singled out College Summit, one of the most well regarded education charities, to ask about its seemingly low percent of revenue going to fund programs.

To Ian’s credit, he quickly pointed out that many people, even Charity Navigator, do not believe overhead expense ratios are the best way to evaluate nonprofits and do not capture how effective they are.

The video clip is interesting because it demonstrates how woefully ignorant the financial news media is about philanthropy. Considering philanthropy is a $300 billion a year industry and nonprofits book $1.5 trillion in revenue each year, the financial news media is dropping the ball on a major segment of the economy.


(Full disclosure: I’m on the advisory board to Charity Navigator helping them launch a new rating methodology.)

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By Sean Stannard-Stockton | Also posted in Philanthropy | Comments (4)

Curmudgeonly Comments: Online Capital Markets for Nonprofits?

March 15, 2010 – 9:13 am

This is a guest post from George Overholser of the Nonprofit Finance Fund. This post follows the bullet point format George used when he wrote the Bullet Point Manifesto guest post last year.

By George Overholser

George Overholser
  • Someone recently defined nonprofit “mid-caps” as organizations with revenues in the $5 million to $25 million range.
  • We need to keep in mind that the definition for for-profit mid-caps is 200 times as big:  revenues in the $1 billion range.
  • This matters because there are metaphors flying around that we need our nonprofit mid-caps to provide more financial disclosure to the “capital market”, just like for-profit mid-caps.
  • This is the equivalent of asking a guy who owns a couple of pizza restaurants ($5 million in revenues) to begin publishing detailed quarterly public reports of his financial and quality assessment results.  Problem is, his office is the kitchen table, and he needs to get up at 6am every morning to roll the dough.
  • Wall Street is the wrong metaphor for an online “nonprofit capital market”.  Wall Street only works for companies that are literally hundreds of times bigger than typical nonprofits.  Wall Street companies get easy access to equity, precisely because they are already so advanced that they can afford to provide exceedingly high levels of financial transparency.  But the vast majority of firms (for-profit and nonprofit alike) are nowhere near the size required to afford the cost of making these types of disclosure. That’s why the vast majority of firms are capitalized privately, by intimate investors who get to know them personally.
  • Let’s not kid ourselves into thinking that strategic equity-like investments should be made based on the snippets of data that an exhausted executive director posts on a web site.
  • If information is to be shared online, the better metaphor is Amazon.  The better information to share is more akin to marketing information than to investor information.  Keep it simple:  What am I buying with my donation?  What gets done as a result?  What does it cost?  And… for those very few that have gone through the arduous and expensive process of scientifically documenting impact, yes, what is the impact?
  • DonorsChoose is a great example of this.  Check it out:  a highly intimate and transparent giving experience that has no need to share information about the financial health of the DonorsChoose enterprise, management team, strategic plan or theory of change.
  • Simply “asking harder” for information does not address the issue.  The problem is not one of candor.  Rather, the data does not exist, and cannot be afforded by such small and stressed-out organizations.  Asking harder merely adds to the trauma.
  • If a prospective investor comes along, who is prepared to write a big equity-like check, then have a face-to-face meeting, so that real due diligence can take place.  In the meantime, I would love to see online marketplaces focused on products and services… like Amazon and DonorsChoose!

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    By Sean Stannard-Stockton | Also posted in Capital Market Philanthropy, Impact Measurement, Philanthropic Capital Markets, Philanthropic Equity, Philanthropy, Social Capital Markets, Social Investing, Transparency | Comments (8)

    What Drives Philanthropic Success?

    March 12, 2010 – 8:31 am

    Peter Frumkin is the author of Strategic Giving, an excellent book that I reviewed last year. Earlier this week, Peter wrote a post on the Philanthropy Central blog calling into question some of his own assumptions about what drivers are most important to successful philanthropy.

    Peter wrote:

    …I am increasingly troubled by a recurrent worry. It is a worry about what actually drives philanthropic success.

    Let’s define two categories of philanthropic processes. The first is technocratic, rationalistic, and ordered: It includes program positioning and issue research, alignment and coordination across initiatives, logic model drafting, white paper or concept paper development, proposal reviewing, adapting and applying new information technologies, program evaluation design and implementation, and all the other day-to-day professional work that goes into modern philanthropy…

    Now consider what might be called the more humanistic, interpretive, and adaptive work in philanthropy, which really comes down to judging the capacity, character, resilience, intelligence, and resourcefulness of the people who seek philanthropic funds. This is the kind of ill-defined and untheorized work that comes down to judgment and gut assessment by the donor of the person sitting across the desk from them. Call this Category Two work.

    Now to my worry: What if Category One philanthropic work really only explained a small part of philanthropic effectiveness and social impact? What if Category Two work explained a vastly larger percent of outcomes? If this were a social science morel, we might ask what the r-square statistics of these two types of philanthropic work are if the dependent variable is effectiveness. The r-square statistic ranges between 0 and 1 and tells us how much variation in the dependent variable is attributable to changes in the independent variable (here, that would be Category One and Two philanthropic work).

    My concern is that the growing philanthropic industrial complex—made up of consultants, researchers, trainers, and advisors—believes, earnestly believes, that the r-square statistic for Category One work is high, perhaps up to .75, and this justifies the substantial amounts of money invested in building up and supporting this work. But I have come to doubt this assumption over time and now think the r-square statistic might actually be very low for Category One work. I am more and more of the belief that Category Two work has the big r-square and explains a lot more of the achieved social impact than anyone wants to admit. The problem is that Category One work has an army of salespeople out and about selling tools and frameworks, while there is virtually no infrastructure to support Category Two work.

    What I think the field really needs is a systematic guide to the difficult art of assessing the innate ability and capacity of grant seekers  to conceive wisely a vision and then actually carry out their plans. If donors cannot judge character and capacity correctly, all the tricks of the philanthropic trade will not help them achieve their goals. What such a guide would look like I do not know, but I doubt the current philanthropic industrial complex has the will to design and deliver it.

    This is a dramatic declaration on Peter’s part. Peter is the kind of academic who talks about r-squared statistics in blog posts. For him to write that the “untheorized work that comes down to judgment and gut assessment… explains a lot more of the achieved social impact than anyone wants to admit,” is a shot across the bow of the philanthropy industry from someone who should more naturally side with the philanthropic process folks.

    Personally, I think Peter is right. It isn’t comfortable to believe that the intangible art of judgment and gut assessment is the most important driver of philanthropic success. It would be far easier if we could all just learn specific, repeatable processes, that while complicated, insured that our giving was effective. But I think the evidence from other fields fully supports the importance of judgment over process.

    In investing, Warren Buffett has a process, but it is his intangible gift for spotting value that makes him great. If the reverse was true, then anyone who read the vast literature covering the process that Buffett uses could fully expect to replicate his success.

    In writing, novelists around the world study the writing styles of the greats. But The Elements of Style won’t make you Ernest Hemingway.

    In economics, thousands of men and women run rigorous studies in an attempt to predict how the economy will behave. Yet we know that this process fails them time and again and fails to even adequately explain historical events.

    This is not to suggest that process doesn’t matter. In the book Blink: The Power of Thinking Without Thinking, Malcolm Gladwell explains the incredibly important role of judgment and gut assessment in expert decision making. But he does not declare process and rigor is not important. In seems to me that systematic processes are necessary but not sufficient building blocks on which to develop effective philanthropy.

    Unless we heed Peter’s warning that “judgment and gut assessment… explains a lot more of the achieved social impact than anyone wants to admit",” all the efforts to build a more effective philanthropy will do nothing more than create elegant mental models that sound great, but fail to make the world a better place.

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    By Sean Stannard-Stockton | Also posted in Grantmaking, Impact Measurement, New Philanthropy, Philanthropy | Comments (9)

    Does Logic Impair Philanthropic Effectiveness?

    March 11, 2010 – 9:00 am

    One of my favorite new (to me) blogs is the fantastically named Full Contact Philanthropy, authored by David Henderson, CEO of Idealistics Inc. and social enterprise consultant Dan Elitzer. In the wake my back and forth with Martin Brookes over the role of guilt in social investing, Dan left a comment that I want to share.

    My objection to Martin feeling guilty about making a non-optimized charitable donation focused on the need for empathy in philanthropy to not be displaced by logic. But Dan took the argument a step further and argues that ignoring the empathic urge undermines philanthropic effectiveness.

    Dan writes:

    Rather than look at Martin’s gift as a betrayal of his social investment ideals, I think it is more productive to see it as a positive act of consumption and parenting. Instead of viewing his donation to the donkey sanctuary as replacing a more effective act of philanthropy, look at it as replacing the purchase of a toy or movie or other consumer product or service unconnected to charity. Certainly the joy he and his daughter received from his donation to the animal sanctuary was more “meaningful” than an equivalent amount of joy from some non-philanthropic activity.

    I agree that the logical conclusion of Martin’s line of thinking would be that “we should all feel bad that we spend a penny on anything discretionary.” Inequality and injustice would cease to exist if we all felt compelled by the same moral compass that directs Martin. Unfortunately, we don’t all feel that way, and it is unproductive for people like Martin to spend too much time self-flagellating over such matters. Denying ourselves all “unnecessary” comforts does not lead to a mental state in which we are suited to effect good works on a larger scale. Granted, we all need to find the right balance for ourselves between absolute hedonism and strict abstention, but wasting too much time ruminating on the subject just prevents us from moving on with the important work we have to do.

    To Sean’s larger questions about the role of guilt in the nonprofit sector and the obligation to right inefficiencies vs. giving with our emotions, I say we need to be aware of the role of guilt and other emotions (both rational and irrational) and better understand how they affect giving. Network for Good and Sea Change Strategies recently put out a fantastic (and free) ebook by Katya Andresen, Alia McKee, and Mark Rovner, which uses learnings from the discipline of behavioral economics to help explain why people so often make irrational decisions, especially when it comes to charity. The title is Homer Simpson for Nonprofits, and you can download it here. It offers actionable steps for nonprofits to better align their communications and fundraising strategies with the way people actually make decisions, not the way we think they SHOULD make decisions.

    One of the principals discussed in the book is the relative strength of social norms over market norms. If we deny the role emotions play in philanthropy, we step away from effectiveness, not towards it. Rather than beat ourselves up when we give “inefficiently,” let’s strive to direct that energy to better understanding what led us to make that irrational choice and how we can better help our rationally preferred causes take advantage of the factors that drove us to give to our emotionally preferred cause.

    Dan brings up the role of the emerging discipline of behavioral economics in helping us understand how people actually behave rather than how we think they should behave. Behavioral economics is a favorite topic of mine and one that I think can lead to great insights in philanthropy (I’ve just downloaded the eBook Dan points to).

    As I work to craft the Tactical Philanthropy track at the Social Capital Markets conference, I want to follow up on the suggestion of Duke University’s Ed Skloot to include a session about what philanthropy can learn from behavioral economics. But I’m at a bit of a loss about how to structure such a panel and focus the conversation.

    Do you have any thoughts about how to create a fantastic panel discuss about the intersection of behavioral economics and philanthropy? If so, leave a comment or shoot me an email!

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    By Sean Stannard-Stockton | Also posted in Behavioral Economics, Philanthropy | Comments (1)

    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, Cross-Disciplinary Conversations, Evaluation, Information Sharing, New Philanthropy, Philanthropy | Comments (0)

    Social Innovation Fund Finalizes Guidelines

    February 19, 2010 – 8:29 am

    Key Points

    • The final Social Innovation Fund guidelines recognize the limited availability of evidence in the social sector.
    • The guidelines lower the minimum grant size to broaden the range of grantmakers who can apply.
    • The Social Innovation Fund offers a chance for smart grantmakers to demonstrate effective philanthropy on a national stage and influence public perceptions about philanthropy.

    Last month, the Social Innovation Fund released a draft of the guidelines they would be using to distribute grants and solicited public comments. They received over 200 comments and I hosted a number of those comments publicly here at Tactical Philanthropy.

    To a large extent, the final guidelines have not changed dramatically. However, the Fund did make two key changes and attempted to clarify the level of evidence they expect from nonprofits receiving funds (the level of required evidence was at the heart of the comment I made on the draft guidelines).

    This is what the Fund had to say about the level of evidence they expect:

    Over 50 public comments were received on the use of evidence of effectiveness and impact in the SIF. Many of the comments encouraged the Corporation to be more inclusive about the types of evaluation that would produce strong evidence of impact. The Corporation has captured these insights in its Frequently Asked Questions (FAQ), a companion document to the NOFA. The FAQ clarifies that the Corporation expects subgrantees to demonstrate some level of impact in order to receive a grant, but does not expect that most initial subgrantees will have the strongest level of evidence.The SIF is designed to build the evidence-base of programs over time using rigorous evaluation tools that are appropriate for the intervention.The Corporation is committed to ongoing discussion about evidence moving forward through learning communities and other forums.

    While the final guidelines still express an preference for nonprofits that have strong evidence that their programs work, the summary of the guidelines says that the Fund expects grantmaking intermediaries that it funds to:

    Complete a competitive subgrant selection process within six months of award
    that seeks subgrantees with either preliminary, moderate or strong evidence of
    impact and effectiveness… [and] Have an intentional approach to improving measurable outcomes that relies on evidence in decision-making and leverages the strengths of distinct innovations.

    In addition to the shift in language around evidence, the Fund is making two changes based on public comment:

    • A lowering of the minimum grant award to $1 million from $5 million in the draft NOFA.
    • The elimination of an explicit preference for intermediaries that have already selected their subgrantees at the time of application.

    The lowering of the minimum was the subject of a number of the comments hosted here on Tactical Philanthropy, notably those authored by Adin Miller and Eileen Ellsworth.

    My reading of the new releases and the public comments made by the people running the fund is that they get the tension that exists between requiring evidence and funding innovation and that they appreciate the fact that very few nonprofits exist today that have a rigorous base of evidence that prove their effectiveness.

    I think that the Fund is off to a great start. I applaud the vast majority of the choices made in designing the fund. I hope very much that grantmakers who pride themselves on supporting and scaling innovative nonprofits will apply to be a Fund intermediary. Not just because they could use the additional funds, not just because it will help clarify the link between private philanthropy and public sector funding, but because the Social Innovation Fund offers an opportunity to showcase an effective approach to philanthropy on a national stage.

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

    Innovation & Effectiveness in Philanthropy

    February 9, 2010 – 7:39 am

    This is my most recent column in the Chronicle of Philanthropy. You can find an archive of my past columns here.

    More Than Money, a Lack of Research Hampers Nonprofit Innovation
    By Sean Stannard-Stockton | Chronicle of Philanthropy

    The federal government will soon release guidelines to spell out how it will award $50-million through its new Social Innovation Fund, one of the Obama administration’s signature efforts to aid promising, innovative nonprofit groups.

    But if the draft version of the guidelines, released in December, is any indication, the fund’s approach is geared toward a view of the nonprofit world that does not reflect reality.

    Like many other donors who try to apply investing techniques to their grant making, the Social Innovation Fund operates on the assumption that the major reason the nation is not filled with high-performing nonprofit groups is that too little money goes to such groups. That may be true, but the far bigger problem is that most nonprofit groups lack the incentive or the money to measure their results and get beyond anecdotal evidence to determine whether their programs are truly effective.

    The Social Innovation Fund has the potential to exert a major positive influence on the field of philanthropy, but it will need to take another approach if it expects to succeed. Its guidelines seek rigorous evidence that the programs it finances work. While it acknowledges that “in many fields and in many parts of the country, such evidence is not available,” it seems to think such cases will be the exception, when they are indeed the rule.

    It is possible to hold both a constructive vision of the potential future of the nonprofit world to be based on rigorous evaluation, while also recognizing the constraints of the current reality.

    For instance, Nancy Roob, the chief executive of the Edna McConnell Clark Foundation, which states on its Web site that it believes that the most effective approach to philanthropy is “to make large, long-term investments in nonprofit organizations whose programs have been proven to produce positive outcomes,” conceded in a recent post on the Philanthropy Central blog that “most nonprofits, including a majority of the Clark Foundation’s grantees, do not yet have convincing quantitative evidence of their programs’ effectiveness.”

    Rather than demand evidence that by and large does not exist, foundations should seek to support organizations that base their programs on research about what works, actively collect information about the results of their programs, systematically analyze this information, adjust their activities in response to new information, and operate with an absolute focus on producing results.

    Nurse-Family Partnership is the nation’s premier example of an organization that has “rigorous evidence” of effective programs.

    Over 30 years, the group worked to conduct research to prove that sending nurses to teach child-rearing and other skills to impoverished mothers would help ensure that their children would become healthy, productive members of society.

    In fact, Nurse-Family Partnership’s evidence is so strong that President Obama has called for its program to be expanded to cover all low-income, first-time mothers and has requested $8.5-billion over 10 years to finance the effort.

    But that is not the sort of organization that the Social Innovation Fund or any grant maker focused on supporting “promising, innovative nonprofit organizations” should seek to support.

    Instead, grant makers should look for the next Nurse-Family Partnership, financing management improvements that allow promising organizations to build programs that can pass rigorous studies to prove their approach works.

    One of the most common mistakes donors make is that they diagnose their problems to fit the tool at hand instead of finding a tool that fits the problem. Doing so creates the illusion of success but fails to fix anything.

    Much of the debate over the Social Innovation Fund has focused on the tension between supporting “innovation” and “proven programs.”

    But because so little money is available to help groups conduct research and gather evidence to make their programs more effective, what would be truly innovative is giving organizations money to prove their programs work.

    If grant makers want to be assured their dollars will be used effectively, they should support organizations like Nurse-Family Partnership. But if President Obama and private donors really want to make a difference, they should provide support for organizations that simply have the potential to develop proven programs.

    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, Evaluation, Innovation, Philanthropy | Comments (2)

    The Rise of Smart Giving

    January 25, 2010 – 10:15 am

    Key Point

    • The Haitian Earthquake marks a turning point in American philanthropy where donors are now expected to “give smart,” not just give.

    Something fascinating is happening in philanthropy in the wake of the Haitian Earthquake. After most disasters, the public responds to a steady drumbeat from the mainstream media and prominent leaders to support those in need. But this time, the message is different in an important way. The new message to the American public is to give smart.

    The first indication of the new trend came from former president George W. Bush, when during the press conference announcing the his partnership with former president Bill Clinton to raise money for Haiti, one of the first things he did was to urge people to not make in-kind donations.

    From the New York Times:

    “I know a lot of people want to send blankets or water,” Mr. Bush said. But he reiterated what the relief organizations have been saying for days. “Just send your cash.” He promised that he and Mr. Clinton would “make sure your money is spent wisely.”

    This small remark might have been an interesting footnote if it were not for the sustained message from the mainstream media that donors need to do more than just “support Haiti.” They need to be smart donors.

    Examples:

    • The New York Times article Teaching Americans What Haiti Needs: Money, begins: “Don’t send shoes, send money. Don’t send baby formula, send money. Don’t send old coats, send money. Nonprofit groups rarely look a gift horse in the mouth, and the relief effort in Haiti is desperate for resources. But the experience of wasteful giving in the past, coupled with the ease of speaking out via blogs,Facebook and Twitter, have led to an unprecedented effort to teach Americans what not to give.” The article goes on to quote international aid bloggers Saundra Schimmelpfennig and Alanna Shaikh on the problems with in-kind gifts.
    • The New York Times article Three Steps to Making Smart Haiti Donations, took a more positive approach and offered donors tips on smart giving. The article pointed to top-rated organizations operating in Haiti (including Partners in Health, which we had recommend in our Haiti post), and pointed readers to GiveWell, GreatNonprofit, Tactical Philanthropy Advisors, the Center for High Impact Philanthropy, GuideStar and other sources of information on smart giving. The article also pointed to Charity Navigator, but warned readers that relying on a charity’s overhead expense ratio was a “rookie mistake.”
    • The Miami Herald ran a feature on vetting charities, which quoted me and the director of the Center for High Impact Philanthropy. The article accompanied a database of charities to consider, which included overhead expense ratio data, but warned donors that the information needed to be considered in context. The database also indicates whether each organization has previous experience in Haiti.
    • The Financial Times article Efforts to channel Haiti donations pay off, examined the changes in corporate philanthropy since the Indian Ocean Tsunami. The article highlighted the better coordination of resources going to Haiti and efforts to educate corporate and individual donors about the problems with in-kind donations.
    • The New York Daily News featured the advice of their financial columnist in an article titled How to make donations to Haiti wisely, which reminded donors that disaster relief was not the only need. Haiti will need extensive assistance to rebuild.
    • Investment News looked at the role of advisors to donors in structuring effective support for Haiti and reminded donors that ongoing long term support was needed. The article examined the role of donor advised funds and highlighted the advice of Arabella Philanthropic Investment Advisors.

    The importance to all these stories is captured in Stephanie Strom’s article in the New York Times where she pointed out the rarity of nonprofits “looking a gift horse in the mouth.” Historically, American culture has been loath to do anything other than pat people on the back for trying to do good. But in the wake of the Haitian Earthquake, we’re seeing an unprecedented move towards asking that donors do more than just give. Donors are now expected to give smart.

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    By Sean Stannard-Stockton | Also posted in Haiti, Philanthropy | Comments (7)

    Philanthropy’s Role in Haiti

    January 19, 2010 – 10:43 am

    Key Points

    • It is important to figure out why you want to donate to Haiti and what you hope your donation will accomplish.
    • Donors should consider supporting long term development in Haiti or disaster preparedness as a worthy alternative to short term disaster relief.
    • Donors who want to support disaster relief efforts should consider donating to Partners in Health.

    I’ve been asked by many people how they can best provide support in the wake of the Haitian earthquake. However, picking nonprofits on behalf of our clients is really not what we get hired to do. As our website says, “It is not our job to tell you where to give. Instead, we work to empower our clients with the knowledge and expertise they need to make the best decisions about their philanthropy.”

    While which nonprofit you fund has important implications, figuring out what you’re trying to accomplish in the first place is critical. So let’s look at how a donor might think about the role they want to play.

    First off, we need to understand that while the Haitian earthquake has its own unique issues, it is a disaster relief scenario which means we can learn from other similar situations. Tim Ogden had this advice in the the Harvard Business Review:

    Take a look back at the responses to other recent disasters. There is a discernable pattern, and not a good one:

    1. Donations spike in the immediate aftermath.
    2. A huge portion of the funds donated are spent on setting up disaster-relief operations that are no longer the primary need.
    3. A flood of cash and materials cause a logistics nightmare leading to waste and ineffectiveness, if not corruption.
    4. Six months later, reconstruction stalls because the world’s attention has moved elsewhere.
    5. And, finally, a series of reports bemoan the fact that too many funds are devoted to disaster relief and not enough to disaster preparedness and reconstruction.

    I don’t mean to suggest that donors should not send cash now to help in the relief effort. But it is important for donors to realize that doing so is not the only option. The fact is, the Haitian earthquake is just as much a poverty issue as it is a natural disaster as David Brooks pointed out in the New York Times:

    On Oct. 17, 1989, a major earthquake with a magnitude of 7.0 struck the Bay Area in Northern California. Sixty-three people were killed. This week, a major earthquake, also measuring a magnitude of 7.0, struck near Port-au-Prince, Haiti. The Red Cross estimates that between 45,000 and 50,000 people have died (Note: Estimated deaths now at 200,000)

    This is not a natural disaster story. This is a poverty story. It’s a story about poorly constructed buildings, bad infrastructure and terrible public services.

    What this suggests is that donors should consider whether providing support for long term rebuilding in Haiti (or other areas) makes sense for them or whether they might look at disaster preparedness as a cause they want to support. The point here is that the Haitian earthquake is not a simple story. There are many underlying issues and donors should give some thought to what it is about the event that moves them to give.

    The charity evaluation group GiveWell wrote a post over a year ago title The Case Against Disaster Relief in which they looked at how disaster relief is not a particularly cost-effective use of a donor’s gift and why disaster preparedness might be better. But even if this is true, the world needs high performing disaster relief organizations. So donors who want to support the urgent relief efforts would be well served to make an unrestricted gift to an organization that can use the funds now in Haiti and also use them to grow and improve their organization so they are ready to help when the next disaster strikes.

    While there are a number of organizations that are viable options for a donor who wants to support disaster relief, we would recommend that donors consider Partners in Health (PIH). PIH is a community-based health care provider that works with poor people in developing countries. Their flagship project is located in Haiti and is one of the largest nongovernmental health care providers in the country. Partners in Health has received large grants from the Bill & Melinda Gates Foundation and is recommended by GiveWell and The Center for High Impact Philanthropy at the University of Pennsylvania (as well as many other reputable sources). PIH was co-founded by Paul Farmer, a bit of a rock star in the development world, was widely expected to be nominated to run USAID and many people thought was the best pick for the job.

    One of the advantages of supporting PIH is that they are on the ground in Haiti now and can deploy your donation towards near tern relief work and for the long term support of health care needs in Haiti and other poverty stricken, developing nations. While donor’s hearts may go out to Haiti today, when an earthquake next strikes an impoverished nation it is critical that groups like Partners for Health are in top operating condition and ready to help.

    We believe that good philanthropy is a product of having a good plan in place and fully understanding what you are trying to achieve. Which nonprofits you support is of course important, but that question can only be answered once you realize what you are trying to accomplish.

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    By Sean Stannard-Stockton | Also posted in Philanthropy | Comments (11)