Category Archives: Effective Giving

Online Grant Applications

June 25, 2008 – 10:10 am

Flaw #9 from the Project Streamline report:

More than 80 percent of the grantmakers who responded to our survey reported that they have taken steps to make their information gathering practices “more efficient and streamlined for nonprofit applicants.”

…Many streamlining strategies have turned out to be useful to foundations and their grantees. Yet others, notably online applications and common grant applications, have produced mixed results, creating new issues for grantmakers and grantseekers alike.

…Common grantmaking forms for application and reporting (here, generically referred to as CGAs), which provide a single set of application and/or reporting questions that a substantial number of funders in a region (or funding area) will accept, have seemed like a logical time and resource saving tool for philanthropy. Yet our research found surprisingly little support for common grantmaking forms as a strategy for effective streamlining. CGAs are accepted (or, much less frequently, required) by 34 percent of foundations that responded to our survey.

Common grant applications is one of those ideas that make so much sense on the surface. But then I think about how any investment manager would reject the concept of having a standard template of information on which to base their decisions. Every person has at least slightly different criteria for making an investment or grantmaking decision.

But investors do have a very important infrastructure in place that philanthropy lacks. Investors in publicly traded markets know that every company will file their financials with the SEC. Unlike nonprofits’ 990s, SEC filings are not documents focused on compliance and IRS driven issues. SEC documents are designed to inform investors (the recent changes to the 990 did move them in this direction). In addition, companies host quarterly conference calls to discuss their business. While every investor has their own criteria for investing, they have a common set of information they can obtain about any company.

But here’s the critical difference. A common grant application means that there is a standard set of information that nonprofits can send to funders. In the stock market, the common set of information is available for investors to go get. This switch from passive receiving of information to proactively going out to find what you want is one of the core changes that the internet (and especially web 2.0) bring to the world. A common grant application misses the whole value of the internet. Instead of having nonprofits fill out and submit lots of grant applications, why don’t they just post a single set of common information for any funder to download? The 990 could serve this purpose, but why should funders let the IRS dictate what information is important? Why can’t the philanthropic community design their own “impact report” template that every nonprofit could complete and keep updated? (I asked Brian Gallagher, CEO of United Way of American, this question in a recent podcast.)

Personally I think that most funders should do away with even accepting most grant requests. I think it would be boring to be deluged with requests, most of which I wasn’t interested in. Sounds like spam to me. I’m much more interested in proactively identifying and researching the investments (for-profit or nonprofit) that I am interested in. It sure would help if I could pull up good information about nonprofits on Google Finance the same way I can pull up good information on stocks!

Update: I should be more clear when I say foundations should not accept grant applications. What I believe is that the system of philanthropy should switch from a system of where nonprofits ask for money to one where funders proactively seek out grantees. I layed this thesis out in a Financial Times column earlier this year. But within the current context, I realize there are ramifications if a single foundation stops accepting requests.

By Sean Stannard-Stockton | Also posted in Foundations, Fundraising, Grantmaking, Information Sharing, New Philanthropy, Open Source Philanthropy, Philanthropic Technology, Philanthropy, Social Media, Tactical Philanthropy, nonprofits, nptech | Comments (2)

Due-Diligence Redundancy

June 19, 2008 – 1:15 pm

Flaw #8 from the Project Streamline report:

Since it is difficult to determine exactly what is needed for due diligence (and since the list regularly changes), grantmakers tend to play it safe at the recommendation of their legal and financial advisors, requiring redundant and often unnecessary documentation from grantseekers. According to one foundation focus group participant, the foundation’s auditors give such confusing and contradictory advice that “we just make everyone go through the same process just in case, even though it seems like a waste of time for some of these grants.”

For example, the Tax Determination Letter—the original letter from the Internal Revenue Service (IRS), establishing an organization’s tax status—does not prove that the organization is still in good standing with the IRS. The only real way for grantmakers to verify an organization’s standing is to research the nonprofit before each payment to be sure that the letter has not been rescinded. The IRS suggests that granting organizations either access the Business Master File (a file that is updated monthly) from the IRS, or rely on a third-party (such as GuideStar’s Charity Check) to verify that the organization remains in good standing. However, most grantmakers, often at the insistence of their legal and/or financial counsel, continue to collect the Tax Determination Letter for each grant request.

“I know that we could stop asking for the IRS letter, and could use a system like GuideStar. However, our auditors ask for the tax letter to be in each file!”
—Grantmaker

I’m an advisor to foundations and other grantmaking entities. I want to help them be as efficient and effective as possible. But more than anything, I want to make sure they do not get into any trouble. Even though my firm is not directly charged with managing their compliance, I do everything I can to help my clients gain access to the tools and services they need to insure they never run afoul of the IRS. So I understand why this “flaw” exists.

It seems to me that one of the solutions to this sort of issue rests in the idea of nonprofit “stock exchanges”. I’m not convinced that there is a viable concept behind the idea of nonprofits “trading” on an exchange. But I do think that an “exchange” could emerge that would essentially make the promise to funders that listed nonprofits had passed a level of due diligence to qualify and were required to submit regular documentation of their ongoing compliance. It would not be the responsibility of the exchange to judge the impact of the nonprofit (that would be the funders job, just like the New York Stock Exchange does not suggest that every company is a good investment). But at least funders could dispatch with all the run of the mill due diligence and the IRS could extend a sort of safe harbor to funders who gave to listed nonprofits.

I wrote more about this idea in the Financial Times column titled The Donor Landscape of 2033 is Bright.

By Sean Stannard-Stockton | Also posted in Foundations, Grantmaking, Information Sharing, New Philanthropy, Philanthropy, Transparency, nonprofits | Comments (1)

Fundraising Gymnastics

June 18, 2008 – 3:46 pm

Flaw # 7 from the Project Streamline report:

The most commonly cited effect of the foundation funding system is that nonprofits continually reinvent their programs—at least on paper—in response to foundations’ preference for the “new and different,” and reluctance to pay core operating support. Application and reporting requirements also cause nonprofits to develop strategies that are the opposite of what foundations intend. For example, nonprofits learn to work around grantmaking staff to ensure that their proposal is considered. They devote time and energy to board mapping, described by one nonprofit representative as “looking for the second cousin twice removed” who can help the nonprofit avoid the standard hoops and get straight to the funder’s board. Grantmaking staff find it troublesome when a nonprofit organization circumvents the normal application and reporting process in this way, but nonprofits continue to do it because they find that it works.

This might be the best example yet of the difference between looking at philanthropic giving through the lens of consumer behavior (donors are “buying” the “good” that nonprofits “sell”) vs. investing (donors are “investing” in the nonprofit organization and the “return on investment” is the “good” the nonprofit does). As I mentioned in prior posts, I tend to use the investing framework. A smart friend of mine disagrees and uses the consumer model. My friend George Overholser, who is one of the best thinkers on this topic, thinks that some donors are “customers” and others are “investors”. George probably has it right. But as he suggests in his paper Building is Not Buying, it is important for funders to recognize if they are builders (investors) or buyers (customers) and act accordingly.

The “flaw” outlined above sets funders up as customers. Investors in a business don’t ask the organization to bend and mold to what the investor wants. Investors compete to invest in organizations that they think are doing a great job already. Warren Buffett is famous for investing in a company and then getting out of the way so they can keep doing what they were doing before he came along.

Customers on the other hand ask organizations to do whatever they want. As a customer, you don’t care what the most cost efficient way for Starbucks to serve you a cup of coffee is. You want the best purchasing experience and best cup of coffee at the best price (and who cares if Starbucks is making or losing money as long as you get what you want). Smart businesses don’t try and serve every customer, they seek out the niche of customers who the business can serve profitably.

So looking at the “flaw” above I’d suggest that if a foundation views themselves as an investor, then the flaw is spot on. It is inconsistent to believe you are a philanthropic investor while at the same time requiring your grantees to perform “fundraising gymnastics”. If on the other hand you are happy being a philanthropic consumer — paying nonprofits to do social good — than I don’t see anything wrong with the fundraising gymnastics routine. As a customer, you have the right to ask the organization you are purchasing from to serve your needs. But smart nonprofits will refuse to serve those “customers” who are not profitable (ie. those customers whose net grants are not worth the trouble).

By Sean Stannard-Stockton | Also posted in Fundraising, Grantmaking, New Philanthropy, Philanthropy, nonprofits | Comments (2)

Unnecessary Reports

June 16, 2008 – 10:59 am

Flaw #6 from the Project Streamline report:

Despite funders’ stated desire to use reporting and evaluation for monitoring compliance and measuring impact, results from a 2004 study of funders’ attitudes and practices found that only about half of foundations surveyed used results strategically, either to influence future grantmaking or to share with the field. Our research came to the same conclusion: grantmakers indicated that they use most of what they collect primarily to monitor compliance.

“We assume that they feed everything to a giant fiery furnace.”
—Nonprofit Executive

I can imagine nothing more boring than requesting, organizing, recording and filing information that was of no use to me. That’s called busy work and it is the kind of work that is given to people who simply need to be kept out of trouble. If you are a program officer at a foundation and you are engaging in this kind of busy work; demand better. You are too smart to waste your time this way and your are wasting the time of smart people at nonprofits who have better things to do.

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

Tactical Philanthropy Podcast: Brian Gallagher

June 13, 2008 – 8:48 am

Today’s podcast is with Brian Gallagher, CEO of the United Way of America. In the interview, Brian discusses how United Way is transitioning from a fundraising organization to having a focus on community impact. He comments on the prediction I made in the Chronicle of Philanthropy that the nonprofit field would adopt a United Way impact statement as a potential reporting replacement for the 990. And he explains the way he thinks the changes at the United Way will affect nonprofits.

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Sean Stannard-Stockton: Hello and welcome to the Tactical Philanthropy podcast. I’m Sean Stannard-Stockton, author of the Tactical Philanthropy blog and principal and director of tactical philanthropy at Ensemble Capital. My guest today is Brian Gallagher. Brian is the Chief Executive Officer of the United Way of America. United Way of America is the national organization charged with leading the 1,300 local United Ways. Brian has spent his entire career, going back to 1981, at the United Way, and as chief executive since 2002, has been busy redefining the role of the organization. In May of this year, the United Way announced a new 10-year plan that focused the organization on a specific set of new goals. Brian thanks for being here today.

Brian Gallagher: Sean, it’s great to be with you. Thanks.

Sean Stannard-Stockton: Why don’t you begin by talking about the transition of the United Way from a fundraising conduit to an organization focused on community impact and explain the role of your new 10-year plan, titled “Goals for the Common Good” in that shift.

Brian Gallagher: Sure. You know, we really started – local United Ways started this shift 10 or 12 years ago, probably, to get to the real beginning. As a United Way movement, we started it formally just before I came into the CEO role. And fundamentally, it was because of the economic shift in the country. As we move from an industrial to a service to a global knowledge economy…

Read More »

By Sean Stannard-Stockton | Also posted in Fundraising, Philanthropy, podcast | Comments (1)

Bill Somerville on CBS

June 11, 2008 – 10:55 am
A producer at CBS read my Financial Times column about Bill Somerville and asked Bill to take them on the same field trip that he took me on. The result is this three minute video with the news crew visiting all the same places that I mentioned in my column.

Click here to view the video.

You have to watch the video just to hear Bill compare the grantmaking process of most foundations to someone trying to milk a cow upside down. The Project Streamline report seems to suggest that description is pretty accurate.

By Sean Stannard-Stockton | Also posted in Foundations, Grantmaking, Impact Measurement, Media, Philanthropy, Venture Philanthropy, video | Comments (0)

Outsourcing Administrative Costs to Nonprofits

June 11, 2008 – 9:24 am
Flaw #4 in the Project Streamline report looks at the way foundations often “outsource” the burden of evaluation to nonprofits.
Because the “net grant” is often small, it is particularly problematic when grantseekers are required to do what is essentially the grantmaker’s work without compensation. We refer to this phenomenon as outsourcing the burden. Although many grantmakers do not want their grant money used for administrative and fundraising purposes, application and reporting often require labor- and time intensive activities of the grantseeker, activities that frequently can and arguably should be done by grantmakers.

Last time we discussed why it is a mistake for foundations to not consider nonprofits’ costs of obtaining a grant when they think about their strategy. Today I want to point out when “outsourcing” makes sense within the context of philanthropy and when it does not. Outsourcing is generally a strategy that is used when a third party is able to produce goods or services at lower cost (or better quality) than the party in question. In the context of foundation due diligence it is likely that foundations can achieve lower costs since they are making grants in larger volume than most of their grantees are receiving grants. Since, as we discussed last time, it is not relevant whether the cost falls on the foundation or the nonprofit, foundations should be seeking the low cost location for the work to be done.

But I would suggest that a more important issue is that foundations can likely produce higher quality due diligence by performing it themselves rather than by asking nonprofits to supply it. Nonprofit grant seekers have an incentive to paint the very best picture of themselves. Foundations on the other hand, presumably would take a more objective approach to gathering due diligence.

At Ensemble Capital we have our own systematic approach to analyzing potential investments. We gather a lot of data and qualitative information from material provided by the companies we are looking at and we often speak directly to management to get answers to our questions. But if a company submitted a prepared response to our request for information, I would see it for what it was; a marketing job intended to convince us that they were a good investment.

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

Net Grants

June 10, 2008 – 7:54 am
Flaw #3 identified in the Project Streamline report examines the concept of “net grants”
Nonprofits don’t really receive grants. They receive “net grants”—the total amount of funding minus the true cost of getting and managing the grant. Nonprofits must weigh the possibility of funding against the cost of seeking it…

…The grant and organization size were not found to be good predictors of the time spent during application and reporting: small and large grants can be equally time consuming, according to CEP’s data. In fact, nonprofits in our study reported that smaller foundations can be harder to work with: despite small grants, they often have highly specialized requirements.

In a recent post I mentioned that a friend of mine (who’s opinion I respect very much) disagrees with my use of “investing” as a frame for understanding philanthropy and thinks that philanthropy is better understood through models of “consumer behavior” (ie. donors do not invest in nonprofits, they “buy” the “social good” that nonprofits are creating). [quick tangent: George Overholser thinks both views are correct and differentiates between the two viewpoints in his article "Building is not buying"]. When thinking about the concept of “net grants” it is useful to look at the issue through the investing frame. If you are buying a product, you do not care about the seller’s costs. You just want to get the best value. But as an investor in a company, you want to help them as much as possible. Therefore you should be interested in reducing their costs. You want the size of your “net grant” to be as large as possible.

If you are buying the services of my firm Ensemble Capital, you don’t care what our company’s “client acquisition” costs are. But if you are investing in the company, you care very much about these costs. Another way to think about it is this; all of the money in a foundation has already been given to nonprofits, it is just being held for future delivery. This is factually the cases since the IRS only grants an income tax deduction for gifts to nonprofits because the gift is considered a “completed gift” to a nonprofit. That money literally belongs to the public. So whether a cost is paid for by a nonprofit or paid for by a foundation, the end result is the same. We know that foundations care very much about keeping their own administrative costs down, so the logical extension of this decision would be to minimize the cost to nonprofits of obtaining grants.

I think the concept of “net grants” is a powerful one and something foundations should understand when they think about their grant making. Realize too that the costs of the nonprofit that actually obtains the grant are not the only relevant costs. If 100 nonprofits spend $1,000 each to pursue a $100,000 grant, they the net grant would be $0. Nada. Nothing gained. In effect the foundation has just taken $1,000 away from the 99 nonprofits that failed to get the grant and delivered the money to the winning grantee.

By Sean Stannard-Stockton | Also posted in Foundations, Grantmaking, Philanthropy | Comments (1)

Grant Proposal Requirements Aren’t “Right-Sized”

June 4, 2008 – 2:29 pm
Flaw #2 from the Project Streamline report:
We asked foundations whether their requirements varied depending on the size and type of grant requested. The majority (66 percent) don’t vary their requirements depending on the size of the grant given… Nearly three quarters (72.4 percent) also reported that they do not have a streamlined process for previously funded organizations, requiring long-time grantees to apply for repeat grants as though applying for the first time.

I generally use financial markets as a frame of reference when thinking about philanthropy. I think that while for-profit investing is not (in the least) a perfect analogy when talking about philanthropy, it can provide a useful frame for thinking about our field. But a friend of mine has argued to me that consumer behavior is a better frame of reference than investor behavior. That might be correct. So let’s think about the statement above from the standpoint of a consumer.

Do you spend more time thinking about and gathering information to prepare for a purchase of a new car or for a tube of toothpaste? It makes all the sense in the world to connect the amount of research you do with the size of your purchase (grant, investment, etc). And what about previously funded organizations? Don’t you have certain brands of products that you grab right off the shelf because you’ve bought it in the past and have already done your research? Humans are able to learn from experience. Imagine the inefficiency of going into a grocery store and looking over and evaluating every brand of every product you’re considering instead of spending your time evaluating what is new. You’d spend all your time deciding what to buy instead of benefiting from your purchases!

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

Project Streamline Chairman Responds

June 3, 2008 – 8:54 am
Richard Toth, of the Robert Wood Johnson Foundation and chairman of Project Streamline, comments on my recent posts:
Sean, thanks for reporting on this project. I am the Chair of the Project Streamline and I am particularly interested in what you and your readers have to say about our conclusions. I think your comparison to the investment industry is very relevant. Do foundations really need data in different formats or is it just ³the way it has always been done?² Is it possible that foundations like investors could all be given the exact same information but the decision making process will be determined by how foundations look at the data? Can you imagine if publically traded companies were required to rewrite their financials for each of their major funders? Or draft a different prospectus for each hedge fund? It seems absurd. Yet, essentially that is what non-profits are facing. The question Project Streamline is trying to address is how can we improve this process?

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

Givers: Go Out and See For Yourselves

June 3, 2008 – 7:34 am
This is my most recent column from the Financial Times. You can find the full archive of past columns here.

Givers: go out and see for yourselves

By Sean Stannard-Stockton

Published: May 31, 2008 (link to original Financial Times article)

I recently left behind my office, with its constantly ringing phone and glowing computer screens, to visit some of the non-profits funded by Philanthropic Ventures Foundation, a public charity founded and led by Bill Somerville.

As we stood in line at a soup kitchen in our dress slacks and collared shirts, the other men and women turned curious eyes our way. “I’ve brought people here in the past who worry that these people won’t want to be stared at,” Somerville said, “but as you can see, it is you and I who are the ones sticking out.”

A nationally recognised expert in creative grantmaking and author of the new book, Grassroots Philanthropy: Field Notes of a Maverick Grantmaker, Somerville has spent the past 17 years as the head of PVF. There he has replaced the bureaucratic shackles that hamper much foundation work with creativity.

Earlier that day, we went on a “field trip” to North Fair Oaks, an unincorporated area of San Mateo County mid-way between San Francisco and Silicon Valley where many newly arrived immigrants make their home. As we travelled from a new, privately funded school for immigrant children and their mothers, to a Catholic Workers house where a young family battling drug addiction had recently found refuge, we passed a seedy motel.

“I stayed there one night before an early morning trip to collect food for the soup kitchen,” Somerville told me. “By the time I woke in the morning the police were pounding on the door trying to figure out why I was staying there!”

In Somerville, I found a risk-taking, venture philanthropist fused with a roll-up-his-sleeves social worker. The mixture is a philanthropic force of nature.

In Grassroots Philanthropy, Somerville describes in engaging prose how to be an effective philanthropist. With no agenda other than his need to set things right in the world, he lays out a series of principles that can be adopted by both endowed national foundations and those with lesser means, providing they have an urge to use their wealth to improve the world.

Recently, a lot of effort in the philanthropic world has gone towards analyzing non-profits via an examination of their financial results. By separating how much an organization spends on “overhead” versus “programs”, some people hope to identify the non-profits that most deserve funding.

But Somerville never discusses this concept in his book. Instead, he urges readers to “locate outstanding people doing important work”. To accomplish this, he suggests visiting non-profits to evaluate the people working there. Every community has people who accomplish amazing social missions on limited funding. Just as mutual fund manager Peter Lynch once told individual investors they had an edge over Wall Street in knowing what products were the hot new thing, it seems to me that individual donors have an edge over foundations in knowing who the outstanding people are in their community. To remedy this, Somerville suggests that foundation program officers should spend at least 30 per cent of their time away from their offices getting to know the people they are interested in funding.

Individual donors who are used to writing checks in response to a fundraiser’s appeal may not realise that many foundations take six to nine months to respond to a grant request. In the chapter asking donors to approach grantmaking with “speed and grace”, Somerville admits an “intense aversion to pointless paperwork” and tells the story of PVF’s “fax grant” program.

When a donor gave the foundation $100,000 and asked it to tackle California’s education problems, Somerville knew that the amount of the grant could not address the large structural issues behind the state’s education woes. But he could help teachers pay for much-needed supplies and field trips. Thus was born the foundation’s “immediate response” grantmaking program whereby teachers could fax in requests for funding to buy such things as science equipment, make-up for the theater department, or funds to take students to the zoo.

By responding to requests in a shockingly short 24-hour timeframe, the foundation was able to deliver money directly into the hands of the people responsible for educating our children. To date, PVF has given out $3.5m in immediate response grants.

“Take risks. Move quickly. Get out of the office and into the field.” The philanthropy practiced by Somerville is energizing, creative and clearly effective to anyone who spends a day visiting the people he funds. In a philanthropic world being revolutionized by new approaches to giving, Somerville is both a throwback to simpler times and a leap forward towards high-impact, efficient giving that embraces imagination and risk-taking.

The writer is a principal and director of tactical philanthropy at Ensemble Capital Management and author of the blog TacticalPhilanthropy.com

By Sean Stannard-Stockton | Also posted in Financial Times Column, Foundations, Grantmaking, Impact Measurement, Philanthropy | Comments (3)

Enormous Variability in Foundation Grantmaking Process

June 2, 2008 – 11:32 am
The Project Streamline report (see my introduction) points to 10 “flaws” in the system of foundation grantmaking:

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.”

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Foundations, Grantmaking, Philanthropy, Transparency | Comments (6)

Project Streamline

May 30, 2008 – 8:09 am

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

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Evaluation, Foundations, Grantmaking, Impact Measurement, Philanthropy, nonprofits | Comments (2)

NetSquared and Philanthropy

May 29, 2008 – 9:02 am
I almost didn’t go to the NetSquared conference this year. Big mistake, I’m glad I went.

Two years ago I attended NetSquared (which that year was a learning conference about how nonprofits could use social media tools). I, like most people attending, heard about YouTube and Facebook for the first time. And more importantly, I learned how to launch a blog.

This year, the conference focused on “mashups” for good. At first I thought the conference had become a hardcore tech conference (I like technology, but it is not my profession and I don’t attend tech conferences). But as I looked more at the structure (two days of presentations by 21 projects that had already been culled down by online voting, followed by winners being announced with cash awarded) I realized that what I was really looking at was an early example of the “nonprofit roadshow” concept that I wrote about in my Financial Times column about philanthropy in the year 2033.

TechSoup (the producer of NetSquared) CEO Daniel Ben-Horin confirmed this view of NetSquared in an email to me:

One point I want to make to you is that from where we sit this year’s conference is much *more* about philanthropy than the past conferences. We think we’re working up a model for distributed philanthropy that is, in fact, highly congruent with ‘the next great wave of philanthropy.’ The “distributed” part works three ways–(a) the projects can be anywhere; (b) the people contributing can be anywhere; (c) by ‘contribution’, we mean both cash and what is actually just as if not more valuable–terrific technology talent committed to social change.

In fact, what we’ve 3/4-built, 1/4 wandered into is a new business offering - running N2-like challenges in a variety of formats. So, without really pushing this, we already have 5 clients for this product—including Yahoo and Case Foundation. They all want to hire us because (a) we have the engine; (b) we have the technical community; (c) we have access to philanthropy and investment.

You can check out an overview of the conference and see the winning projects here. Note that Peter Deitz’s project Social Actions was a big winner (Peter was a member of the Tactical Philanthropy Blog Team that covered the Council on Foundations conference.)

By Sean Stannard-Stockton | Also posted in Fundraising, N2Y3, New Philanthropy, Philanthropic Capital Markets, Philanthropy, Social Media | Comments (0)

Seth Godin at The Chronicle of Philanthropy

May 21, 2008 – 7:01 am
Seth Godin, my favorite non-philanthropy blogger and author of a bunch of outstanding books, was the guest on the Chronicle of Philanthropy online live discussion yesterday. Some sample Q&A:
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?

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Philanthropy | Comments (0)