Category Archives: Foundations

Glass Pockets: A Revolution in Foundation Transparency

January 29, 2010 – 9:52 am

“We think the foundation should have glass pockets.” – Russell Leffingwell, Chair, Carnegie Corporation, 1952

Hot on the heels of rolling out real time tracking of foundation grants in support of Haiti, the Foundation Center has quietly launched a new project with the whimsical name Glass Pockets.

With a mission to “bring transparency to the world of philanthropy” Glass Pockets offers reports on how transparent large, well known foundations are. These reports rate the foundations across 28 elements of transparency and accountability such as whether they explain their grantmaking process, provide a public assessment of the foundation’s performance and whether they offer a knowledge center that shares program evaluations and lessons learned.

You can currently find reports for:

Most importantly, the reports offer direct click-thru access to each element. So users can quickly find the Gates Foundation’s investment policies, the Ford Foundation’s grantmaking policy, or the Hewlett Foundation’s knowledge center.

Glass Pockets also offers a fascinating Foundation Transparency 2.0 database that shows the social media tools being used by over 400 foundations. From the database you can directly access the Twitter feeds, Facebook pages, blogs, e-newsletters and other tools being used by some of the countries largest funders.

Finally, the site offers a Google-based search tool that lets users search the websites of thousands of private foundations. For instance, a search for the term Haiti brings back The Boston Foundation’s Haiti Relief & Reconstruction Fund, The Gates Foundation’s statement on their response to the earthquake and the Case Foundations blog post on ways that individual donors can support Haiti.

This is fascinating stuff! Not only is Glass Pockets suddenly the most important way to access important information about foundations, but the reports begin to set a level of expectation for large, staffed foundations to share more about their activities and what they know with the public. For instance, the reports note that the Ford Foundation does not make its 990-PF available, the Kellogg Foundation does not have a mechanism in place to allow grantee feedback and none of the foundations being reported on share an assessment of their own performance with the public.

Talk about information overload. Glass Pockets offers users direct links to a deep library of information about foundations. I could get lost for days exploring this place!

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By Sean Stannard-Stockton | Also posted in Philanthropy, Social Media, Transparency | Comments (4)

How to Fail with Style in Philanthropy

January 13, 2010 – 8:26 am

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

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

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

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

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

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

Originally published in Philanthropy News Digest

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

Let me start with a confession.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Upside of Philanthropic Failure

December 10, 2009 – 8:37 am

Back in May of 2008 I wrote a piece for the Stanford Social Innovation Review about Jim Canales of the Irvine Foundation and his challenge to philanthropy to fail more frequently. Jim’s point is that failure goes hand in hand with taking risks and if philanthropy never fails it means no risk is being taken and if no risk is being taken then the chance to produce high levels of social impact are off the table. My article followed up on a podcast I had recorded with Jim that generated significant commentary from readers.

So why don’t more foundation’s talk openly about failure? One obvious reason is the worry of reputational damage. In my article I took this concern on:

There is a risk to reputational damage if all of your colleagues refuse to recognize mistakes and foundations pretend to be infallible forces for good. Canales and Paul Brest (from the Hewlett Foundation) both published reports on their mistakes last year. As far as reputational risk, what they got for their trouble was coverage in The New York Times, an op-ed in The Chronicle of Philanthropy, and an enhancement of their already stellar reputations. Their colleagues hung them out to dry, but the lack of other foundations taking similar steps makes Canales, in his own words, “the poster child for failure in philanthropy.” Still, he hasn’t suffered any reputational damage. Instead he is asked to lead sessions at philanthropy conferences.

But now we have a new advocate for the upside of failure: Pittsburgh Foundation president Grant Oliphant. In a new video interview produced by the Communications Network, Grant makes the case for failure.

If you are viewing this post via an email subscription, click here to watch the video. This video is a four minute highlight reel from the full thirty minute video which you can find here.

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By Sean Stannard-Stockton | Also posted in Philanthropy, Transparency | Comments (6)

Paul Brest on General Operating Support

November 20, 2009 – 9:11 am

The newly released William & Flora Hewlett Foundation’s annual report includes an essay about forms of philanthropic support from the foundation’s president Paul Brest. In the essay, Paul pushes back against groups such as Independent Sector, Grantmakers for Effective Organizations, and the Nonprofit Finance Fund, who have advocated strongly for funders to provide nonprofits with general operating support rather than offering them restricted grants that can only be used for certain programs. On this blog, I’ve frequently argued in favor of general operating support as the default grant type that funders should use.

Brest writes:

For all of the value of general support, however, there are often good reasons to fund specific projects. Proponents of unrestricted support tend to be so single-mindedly focused on its benefits that they forget that it is not an end in itself but rather one of a number of tools of philanthropy, useful for some purposes but not others.

This essay is premised on the belief-or at least the hope-that if funders better understood the rationales for different forms of philanthropic support, they would behave in a more nuanced way. It argues that the appropriate form of funding depends mainly on the alignment of a funder’s goals and strategies with the grantee’s mission and activities. Alignment is a function of the breadth of a funder’s goals and is also affected by the substance of its goals and the time horizons in which it pursues them…

Alignment Between Funders and Grantees

There are two essentially different forms of philanthropic funding. When a foundation provides general support-also known as unrestricted or core support-its funds back the grantee’s entire mission. Alternatively, a foundation may support specific programs or projects carried out by the organization. Here is a simple example:

  • A funder interested in promoting medical education and research in general might give general operating support to a free-standing research institute or medical school. (A grant to a medical school within a university would not constitute general support, because it would not provide unrestricted support for the institution as a whole-though most universities would be quite pleased to have an unrestricted grant to one of their major schools.)
  • A funder interested in cancer research might provide project support to a cancer center within a medical school or a medical institute, or provide general support to an institution whose sole mission is cancer research.
  • A funder interested in supporting research on a particular form of cancer might provide project support for the work of an identified researcher or her research group in one of these institutions.

General support is the most effective grantmaking tool when an organization’s mission is essentially identical with, or contained within, the funder’s goals in a field. Clearly, a funder interested in cancer research would greatly dilute its grant by providing general support to a university, which devotes only a tiny fraction of its work to this research. But the funder could achieve its goal through either a project grant or through general support to an institution exclusively devoted to such research.

You can read the full essay here.

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

Purpose Prize: Liz & Steve Alderman

November 1, 2009 – 4:48 pm

The Purpose Prize, provides five $100,000 and five $50,000 awards to social innovators over 60 in encore careers. Encore careers combine personal fulfillment, social impact and continued income, enabling people to put their passion to work for the greater good. It is the nation’s only large-scale investment in social innovators in the second half of life.  Rather than a lifetime achievement award, the Purpose Prize is a down payment on what these social innovators will do next.

This year, Liz & Steve Alderman were among the top five prize winners. I wrote about the Aldermans in one of my Financial Times columns last year. I’m republishing the column today in honor of their award.

‘Blood money’ that became a force for good

By Sean Stannard-Stockton
August 12, 2008 – Link to original Financial Times column

Like everyone who lost a loved one on 9/11 Steve and Liz Alderman were devastated when their 25-year-old son, Peter, was killed in the World Trade Center attack. Like many, they chose to honor their son’s memory by creating a foundation in his name.

Of the 303 non-profit organizations launched in response to 9/11, only 27 were still operating five years later, according to a study by the NonProfit Times. What has kept the Peter C. Alderman Foundation going is his parents’ focus on maximizing the impact of their foundation through rigorous analysis. In the words of Peter’s father, Steve: “We will abandon anything that doesn’t work.”

When the Aldermans received $1.4m from the September 11 Victim Compensation Fund, Liz thought of it as “blood money” and almost turned it down. She told me recently that she used to lie awake at night thinking about the people she wanted to kill to avenge Peter’s death. But, with Steve’s encouragement, they accepted the money and launched a private foundation to help victims of terrorism and mass violence round the world.

“Using the money for a good cause was the best revenge,” Steve told me. “The only way for us to counteract great evil was with great good.”

Today the Peter C. Alderman Foundation, in partnership with Harvard University, builds mental health clinics and provides local doctors with the tools they need to treat the emotional wounds of victims of terrorism and mass violence in places such as Cambodia, Uganda and Rwanda. Its work has attracted partners such as the US Department of Health and Human Services and the pharmaceutical company, Eli Lily.

When I spoke to the Aldermans about their foundation, I was struck by the fact they, unlike most philanthropists who talk about the grants they have made, talk about the effect they have had. With an annual operating budget of $500,000 they have set out to help people across the globe. Liz and Steve found that, to have the impact they were seeking, they had to identify outstanding partners and find ways to leverage their giving.

“Starting a foundation was like starting a small business,” Steve said. “Our daughter, Jane, even got her MBA when she realized that we didn’t know enough about business.” She is now the foundation’s executive director.

The Aldermans represent the vanguard of philanthropy – individuals who have recognized that philanthropy is not defined by the act of giving but by the achievement of impact. It is both an emotional act of love by the giver as well as a strategic investment in our social fabric. The Aldermans have discovered that the most emotionally satisfying philanthropy is a gift that has impact.

Unlike many relatively small foundations, the Peter C. Alderman Foundation has an in-depth strategic plan. Through its mental health clinics, the foundation has reached 65,000 people with traumatic depression. Many grantmakers simply measure themselves by the scope of their activities, but the Alderman foundation goes further and documents that it has seen 80 per cent of the people it has treated return to productive lives.

In Cambodia, where the legacy of the genocidal Pol Pot and the brutal Khmer Rouge still grips the populace, the Aldermans have proved they can treat traumatic depression. Demand has been so large that the foundation created a second clinic to eliminate the 14-month waiting list. Importantly, the Aldermans have shown they can achieve their mission cost effectively; the Cambodia clinic system provides services at a cost of $50 per patient.

The Peter C. Alderman Foundation is not the first to have a strategic plan, strong partners and demonstrated impact. But it is part of an emerging group of relatively small family foundations that are demonstrating how to use effectively these tools.

The Aldermans have shown that the most effective way both to help people and soothe their own emotional wounds is through a focused strategy and measurement of impact.

I was struck by how the Aldermans talked like seasoned social action experts with impact data and leverage statistics dominating our conversation. But, in the end, the Aldermans are grieving parents trying their best to make sense of a devastating loss. “I’ve realized that you can’t cry when you’re working on the computer,” Liz said. “You get the keys all wet.”

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By Sean Stannard-Stockton | Also posted in Effective Giving, Impact Measurement, Individual Giving, New Philanthropy, Philanthropy | Comments (1)

Can Increasing Payout Rates Save the Day?

September 28, 2009 – 8:56 am

One of the responses to my post on Friday, in which I argued that staffed foundations should share their knowledge to offset the decline in their investment assets, was from people suggesting that foundations should also increase their payout rate. As a general prescription, this is probably a bad idea.

Foundations are required to pay out 5% of their investment assets each year. Why 5% and not some other number? One of the reasons is that there is a rule of thumb in finance that says that a pool of assets invested in a diversified manner has a very high likelihood of sustaining a 5% payout rate forever without depleting the assets. The 5% minimum is essentially the highest level that can be required of foundations without eliminating their option to exist in perpetuity.

I don’t think that all foundations should plan to last forever. But I do think their are valuable benefits to institutionalizing knowledge and creating long lasting organizations. That being said, there are also good arguments to be made for foundations to elect higher payout rates. While doing so may force them to spend down and disband the organization, they may be able to achieve more impact through this strategy.

Too often, proponents of higher payout rates pretend that their is no trade off involved. They imply that foundations can simply pay out higher levels of grants with no impact on future giving. In the comment below, Aaron Dorfman, the executive director of the National Committee for Responsive Philanthropy makes the case for higher payouts. Personally, I think Aaron’s argument ignores the hard reality that foundations that follow his advice are making a simultaneous decision to increase the likelihood that they spend down. But Aaron and NCRP are well positioned to lead the charge on this issue and I’m happy to highlight his views.

Aaron wrote:

For me, your post reinforces the necessity for everyone in our philanthropic community to create an expectation that private foundations do more than is legally required of them.

There was a moment when the recession’s effects first began to be felt when foundations were debating what to do. A few put a halt to grantmaking entirely, realizing that legally they didn’t actually have to make any grants this year to meet their payout requirement. But then nonprofits became more vocal about the threat to their operations in a time of increasing demand and decreasing revenue. A few courageous grantmakers started making public there commitment to maintain grants payout for 2009 at 2008 or 2007 levels. And they did this even though it means their payout rate for 2009 may be 7% or 9% of assets or higher. And this responsible approach became the most socially acceptable response in foundation circles.

We need to start now working to ensure that it becomes unpalatable for foundations to consider cutting back their grants payout in 2010, even if it would be legally permissible. Nonprofits will still be struggling financially well into next year, and they’ll need grantmakers to step up to the plate.

The moral obligations of private foundations go far beyond the legal requirements. Leaders of many private foundations realize this and will act responsibly. We need to highlight their stories and challenge other grantmakers to follow their lead.

Philanthropy requires making tradeoffs. There are good arguments for why foundations should engage in countercyclical grantmaking (giving more during bad times and less during good times). There are also good arguments for planning on spending down. But simply raising payout rates doesn’t tap into a pool of free money. We don’t want to create an environment where it is “unpalatable” for foundations to preserve their very existence. We want an environment where philanthropic actors make tough decisions based on a thorough understanding of the tradeoffs involved.

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By Sean Stannard-Stockton | Also posted in Grantmaking, Philanthropy | Comments (6)

The 2010 Crisis in Philanthropy

September 25, 2009 – 9:21 am

Lucy Bernholz, the most prescient analyst of future trends in philanthropy, is working on a book about the future of philanthropy and the social economy. So she has been using Twitter to ask people the following question:

“What trend, change, entity, idea will matter most to social sector in 2010?”

I thought I’d answer the question here and invite you to add your thoughts.

Foundations as Social Impact Knowledge Brokers

Foundation giving is going to fall off a cliff in 2010.

Private foundations are required to give away 5% of their investment assets each year (the average amount given is about 6%). The 5% is based on the average value of their investment assets from the previous year. That means that foundation giving in 2009 is based on 2008 asset levels and 2010 giving will be based on 2009 asset values.

The average value of the S&P 500 (the most important indicator of the stock market):

  • 2007: 1477
  • 2008: 1219
  • 2009 (if the market closes the year at today’s value): 940

That means we can estimate that required giving from foundations fell 17% this year compared to last [See correction at end of post]. 2010 is going to see another massive leg down. If the market trades exactly sideways for the rest of the year, required foundation giving in 2010 is going to fall another 23% compared to 2009.

It gets worse.

This year, many foundations decided to keep giving levels constant with last year or at least gave more than the required 5%. It was clear that the need for charitable giving was higher than normal and many foundations stepped up with additional giving. To the extent their giving exceeded 5%, they can count it towards next year’s required giving.

An example: A 2009 payout of 7% means that the 2% that exceeded the 5% minimum can count towards 2010 and so the foundation can legally distribute only 3% next year.

In other words, from the standpoint of foundation giving, more than half of the impact of the stock market crash has yet to be felt.

But even with 40% or so less grant dollars, foundations’ knowledge about philanthropy is just as strong.

As we’ve been developing the Tactical Philanthropy Knowledge Network, I’ve been talking to foundations about their role in the philanthropic sector as due diligence experts. Lets look at the Firelight Foundation as an example.

The mission of the Firelight Foundation is to support and advocate for the needs and rights of children who are orphaned or affected by HIV/AIDS in Sub-Saharan Africa. They have a portfolio of roughly 200 African based grantees on which they’ve performed extensive due diligence and continue to monitor results. On their website, they already list their grantees along with a short description of each organization. Other foundations already make grants to Firelight as a way to leverage their due diligence (a form of regranting, which we discussed earlier this week).

With their grantmaking budget decimated in 2010, forward thinking foundations are going to look for ways to leverage other sources of charitable assets. Encouraging other foundations to support their grantees is the easy path. It is also a bit like rearranging the deck chairs on the Titanic. The big opportunity, the real lifeboat that can significantly offset the effects of collapsing asset values, is for foundations to extend their due diligence to major donors. Individual donors give $6.30 for every dollar foundations give. Helping these charitable dollars flow towards high performing, well vetted nonprofits is the most dramatic way that foundations can leverage their own giving.

I don’t think most foundations are going to pursue this path. But some groups get it. Firelight clearly does. Just yesterday a representative from a major San Francisco Bay Area foundation approached me to say just how much she supports this concept.

The full effect of the financial crises will not hit the foundation sector until next year. When it does, the thing that will matter most to the social sector will be whether the influence of the collective expertise of foundation employees is greatly diminished or whether foundations step up to the plate and find creative ways to get their knowledge into the hands of major donors.

9/28/09 – 8:30am – CORRECTION

In this post I suggested that the value of the stock market was the determining variable in valuing foundation assets. However, foundations invest in a wide range of asset classes. While directionally my comments are correct and while I stand by the thrust of the post, the percentage decline of the stock market overstates the degree to which foundation giving will be impacted.

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By Sean Stannard-Stockton | Also posted in Information Sharing, Philanthropy | Comments (10)

Why Would You Give Money to Bill Gates?

September 21, 2009 – 10:48 am

In June I wrote a post about Olivia, a 7-year-old girl who had given $35 to the Gates Foundation. Last year, the Gates Foundation received $10.4 million in gifts from donors like Olivia. In the post, I pointed to these unusual gifts as evidence that individual donors are focusing more and more on the impact of their giving.

At the time, I wrote:

Why did Buffett give money to the Gates Foundation? He thought they were better donors. Why did 7-year-old Olivia donate to the Gates Foundation? She thought they were better donors.

The Gates Foundation actual encourages people to give money directly to their grantees rather than to the foundation. But at least some donors seem to think that entrusting their money to the Gates Foundation is the best way to go. When these donors think that the Gates Foundation is a better donor, what does this mean? That the Gates foundation knows which nonprofits are better than others.

Investors regularly entrust their money to professionals with the belief that these professionals are better at managing it then they are. There are reasons that I think most donors will not want to do this with their philanthropy. But I do wonder whether large private foundations might become high profile “brands” that represent excellent giving. If they could attract outside donations, they could commit more capital to the organizations they fund. In fact, they could permanently increase their payout rate.

Now Jacob Harold of the Hewlett Foundation addresses this concept (which he calls “regranting”) in a recent article in Alliance Magazine:

In the US alone, there are over 97,000 foundations and grantmaking public charities. About 5,000 of them have paid staff. Like all institutions, they vary in effectiveness. But in that group are some superb professionals – people with decades of experience on the world’s most complex social issues, who are plugged into vast networks that include the best of the old and the new, the North and the South. They are not necessarily smarter, but they are better positioned to make philanthropic decisions than an average donor – no matter how brilliant that donor may be in her day job as a teacher or doctor or cabinetmaker…

US foundations are required by law to publicly disclose their grants, but disclosure is not enough: donors also need tools and products to make information usable and regranting easy.

For example, a ‘side-by-side fund’ could allow a donor to mimic the giving of one programme area of a particular foundation. Like an index fund, it would distribute dollars in proportion to another portfolio, in this case a foundation programme area. Or donors could skip the middleman altogether if they could easily find out where and why institutional givers gave their money. Organizations including Nonprofit Knowledge Network, Partners for Change and Root Cause are working to design such products.

…Most individual donors are not yet inclined to give up control of their giving. But with better information and more convenience they just might. Every year, millions of people give up control of their financial investments to professionals. Outsourcing to professionals is just another form of control: you pick the person or the institution instead of feeling overwhelmed by the choices before you.

I believe that there is deep knowledge about good philanthropy in the professional grantmaker community, but that there are few incentives and minimal structures in place to share their knowledge with individual donors. What that means is that the knowledge is being used to influence the 13% of charitable dollars that foundations control, but not influencing the 82% of charitable dollars that individuals control. Transferring this knowledge from professional grantmakers to individual donors is something we’re working on with the Tactical Philanthropy Knowledge Network.

One of the core ideas behind Jacob’s piece is that the knowledge of which nonprofits to fund is the fundamental knowledge that is valuable. I think this is one type of valuable information, but practicing effective philanthropy means much more than just picking nonprofits to fund. Given a nonprofit landscape that includes well over a million nonprofits and given that donors don’t want to just “do good” in general, but instead want to focus on specific issues (from economic development in Africa to supporting disabled veterans in Modesto, CA), it is more important that we transfer the knowledge of “good philanthropy” rather than offer “good picks” of nonprofits to fund.

But sidecar funds or regranting as Jacob pictures it are important tools that deserve to be more widely used. The biggest obstacle to my way of thinking isn’t getting people to “give up control of their giving” as it is “branding” the regranting opportunities in ways that offer donors the emotional satisfaction and connection that making a grant to a single nonprofit does. The Gates Foundation has developed this brand whether or not they meant to intentionally. For the people who gave Gates $10.4 million last year, it was emotionally satisfying to support the foundation. You might suppose that these givers were robotically, logical donors, but there’s no doubt in my mind that 7-year-old Olivia felt emotional satisfaction from her gift to Gates.

Successful portfolios of the type that Jacob describes will not be simple pass through entities, they will be groups like New Profit and Acumen Fund who have established themselves as entities worth investing in not simply as a regranting opportunity, but as a worthwhile direct investment.

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By Sean Stannard-Stockton | Also posted in Effective Giving, Grantmaking, Individual Giving, Information Sharing, New Philanthropy, Philanthropy | Comments (2)

Learning From Foundation Tweets

August 18, 2009 – 8:09 am

Beth Kanter (currently a visiting scholar at the Packard Foundation), recently analyzed the list of “foundations that tweet” on the Philanthropy411 blog. Beth gives a really interesting breakdown of the various ways the foundations are using Twitter as well as takes a look at the “profiles” the use.

She breaks the profiles into four types:

  1. Pure Foundation Brand
  2. Foundation with Personality
  3. Employee with Foundation Association
  4. Pure Personal Account

Personally, I generally think options 1 and 4 are boring. Profile 1 types tend to be versions of press release distributors. Profile 4 types tend to tweet about their cats, what happen on a TV show last night and other personal conversation that doesn’t interest me (I’m not referring to the profiles that Beth uses as examples, just making a generalization).

But Profile 2 and 3 types are really interesting. These are either foundation branded Twitter profiles that clearly are authored by a real person writing like a normal human does or individual branded Twitter profiles where the person’s connection to a foundation is clearly noted.

I think the lesson to be drawn here is that in the search for how best to share knowledge, the key thing is to put humans at the center. Knowledge is not some sort of physical element that we can stack in a room somewhere and index easily. Knowledge is a concept that is rooted in the very fact that we are human.

Information we can stick into databases and take humans out of the equation. Knowledge on the other hand (or dare we say wisdom?) cannot be separated from the human element in which it is rooted.

As we strive to build a more effective philanthropy, to share knowledge and support what works, let’s not become disconnected from the human element that drives philanthropy. Any hope we have to build a philanthropic field that is high performing and high impact must be built on a framework that embraces our humanity rather than tries to overcome it.

It is a messy world out there. But humans are uniquely good at organizing, contextualizing and identifying patterns in messy information landscapes.

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By Sean Stannard-Stockton | Also posted in Information Sharing, Philanthropic Technology, Philanthropy, Social Media, nptech | Comments (20)

Investors & Researchers in Philanthropy

August 7, 2009 – 7:15 am

In his guest post, John MacIntosh of SeaChange Capital Partners made an important point:

The tools for evaluating for “impact” and “performance” come from different disciplines. “Impact” is a concept from social science where ideally we define the treatment, develop measures of impact (wages, employment rates, test scores, etc.), identify a comparison or control group, worry about selection and omitted variable biases, organize for large Ns, and hope for p-values above 2.0!

“Performance” is about leadership, culture, management information systems, accounting, unrestricted net assets, opportunities for donor engagement, and the like. Few people I have met are equally comfortable in these two domains; very, very few are masters of both.

I would argue that philanthropic institutions are currently geared towards thinking of themselves as impact researchers instead of performance investors. As I’ve tried to make clear, the goal is the same. Both disciplines are needed. A high performance organization that implements ineffective, poorly researched programs will fail to achieve impact. A poorly performing organization that tries to implement proven programs will fail to deliver them with fidelity and/or fail to grow.

But what would happen if funders thought of themselves primarily as performance investors and relied on a mix of internal, external and independent researchers to prove program effectiveness?

I think we’d finally be able to lay real claim to the idea that we are social investors. Calling a grant an “investment” would no longer be just the trendy way to describe what’s always been done. Grants truly would be investments because they would come in reaction to the capital needs of high performance organizations.

Remember the guest post by Kathleen Enright, the head of Grantmakers for Effective Organizations, during the Council on Foundations conference? It was titled The Need for Speed and reflected on the urgency of solving some of our most pressing problems:

This theme of speed and urgency reminded me of an observation that Ami Dar made when he spoke at the GEO/NFF Money Matters conference. He observed that whenever he’s in foundation offices, he never sees anyone walking quickly. The comment drew laughter from the crowd, but the point is an important one.

We need to start asking ourselves what it will take to infuse the kind of urgency in our own work. As it stands, our current modes of operating may get in the way of our ability to play an important role in solving our most pressing problems.

But speed isn’t always a good attribute. I certainly wouldn’t want someone researching the long term effect of multisystemic therapy on youth with behavioral issues to “rush” the study. I wouldn’t want to go into a social science research outfit and find people running down the halls. But investors do appropriately move at high speed. The timing of delivering capital is critical. If an organization needs money today, 9 months from now might not work.

Interestingly, for-profit capital providers work under this model. The vast majority of them focus on understanding companies. The definitely consider whether a company’s products and services “are effective,” but the best investors (like Warren Buffett) tend to assume that the company’s management knows what they are doing and trusts them to make the right decisions about whether to change their product mix or not.

These for-profit capital providers also depend on outside researchers at universities, independent consultants and firms with specialized expertise in areas like retail or biotechnology. The model does not downgrade the importance of academic research or systematic evaluation. It just asks the capital providers to play the role of investor instead of researcher and positions the role of researcher in the hands of other players in the system.

To be clear, there are also specialized for-profit investors who focus on only one niche market (oil and gas companies or media companies for instance). These groups do hire researchers and it is their industry expertise that sets them apart rather than their company evaluation process.

I’ve often heard people say that philanthropy is the research and development (R&D) of the social sector. But I wonder if that is wrong. Maybe we have a different role to play. Maybe we don’t have to invent anything. Maybe we just need to be social investors, providing capital to the most promising nonprofit organizations.

In a comment yesterday, reader Hildy Gottlieb worried that I was pushing a system “of rewards” where “funders decide from the top down what is best for a whole community".” But I actually think that my model aligns the interests of funders and grantees because suddenly rather than directing nonprofits to try different interventions and dangling money with the requirement it be used to the funders satisfaction, funders become deeply interested in providing capital in a way that best helps a nonprofit build a strong organization. In addition, we know from the for-profit market that while capital providers hold the power over early stage companies, it ends up being the investors who chase the highest performing companies and compete for the opportunity to provide them capital.

Nonprofits aren’t laboratories for funders to experiment in. The best are high performing social good generators. It is the job of funders to be the best at finding these organizations and helping them grow. We should take pride not in designing programs, but in being the smartest funder who always seems to find the best nonprofits before anyone else and whose portfolio of grantees thrive and change the world.

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By Sean Stannard-Stockton | Also posted in Capital Market Philanthropy, Effective Giving, Grantmaking, New Philanthropy, Philanthropy, Venture Philanthropy | Comments (7)