Category Archives: Transparency

connec+ipedia

June 23, 2008 – 6:00 am

For some time now I’ve been talking about the need for large foundations to share their knowledge base with the general public. While some people have made this argument from the standpoint of obligations that foundations have to the public, I’ve thought that foundations will find that they are able to more effectively further their own mission by sharing their knowledge base. Since individuals give seven time more money each year than all the foundations in the country combined, it stands to reason that foundations who share their knowledge with the public might influence some of these vast flows of funding to support the mission of the foundations.

Recently the Meyer Memorial Trust, a $700 million+ foundation that has proven innovative in a number of ways, launched an attempt to share their knowledge base with anyone who is interested. The project is called connect+ipedia. Rather than explain the project myself, I asked Amy Sample Ward - Communications and Learning Associate at MMT and author of the foundation’s New Media Blog - to share her thoughts with Tactical Philanthropy.

By Amy Sample Ward

If you are looking for some introductory information about after school programs, for example, and you do a Google search for that term, you would get 40,200,000 results. But, if you use connec+ipedia, you get 111, all of which are cards on the topic or organizations involved in such work. So, what is connec+ipedia?

Let’s start at the beginning: A few years ago, Meyer Memorial Trust (a private, regional foundation based in Portland, OR) recognized the need to explore the world of knowledge management. A full program staff turn over in a short amount of time (with program officers retiring after decades of service) meant an irrevocable loss of institutional knowledge, and the adoption of a knowledge management tool could ensure that such loss did not happen again. Marie Deatherage, Director of Communications & Learning, was tasked with the investigation and discovered that foundations around the country were investing a lot of dollars (millions, even) to develop tools that only the organization could use and that often faced little-to-no staff buy-in.

MMT had shown a commitment to both supporting open source software and to supporting the broader philanthropic and nonprofit sector through grantmaking and other projects, so, when Marie met the two great minds behind Grass Commons who were working on an open source wiki tool that incorporated database functionality, the choice seemed clear. What was also clear to the Trust, was that this wouldn’t be a tool for internal use only, but would be completely open. Other foundations, nonprofit organizations and state agencies were often all working on the same kinds of programatic work, so it would make sense that they should be able to collaborate online, in a way that allowed for sharing of best practices, data, standards, and other information—that these parties should all have access to the same information when working to make informed decisions about work that effected the field.

Wagn is the free, open source software that connec+ipedia runs on, combining the editable functionality of a wiki (like Wikipedia) with ‘tagging’ or referencing functionality of a database. Anyone (with Intern access) can view, search, and read the site. Users (request an invitation!) can edit, create and contribute content, all organized through people, places and things, as well as the intersections between them. Back to the initial example: If you wanted to find out about after school programs, searching Google may be too much information. Searching on connec+ipedia, instead, could mean a more easily digestible avenue to tailored information. Users from across MMT’s service area and beyond, in foundations, nonprofits, state agencies, as well as corporations and public citizens are already making connec+ipedia a resource. The Oregonian has even gotten behind it!

By Sean Stannard-Stockton | Also posted in Foundations, Information Sharing, New Philanthropy, Open Source Philanthropy, Philanthropic Technology, Philanthropy, Social Media, 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 Effective Giving, Foundations, Grantmaking, Information Sharing, New Philanthropy, Philanthropy, nonprofits | Comments (1)

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, Effective Giving, Foundations, Grantmaking, Philanthropy | Comments (6)

Foundation Research for All!

May 20, 2008 – 7:33 am
Yesterday I wrote about foundation consultant Tom David’s practice of posting reports he has been commissioned to create by large foundations on the web for anyone to read. Turns out Blueprint Research and Design, the consulting firm run by Lucy Bernholz (who blogs at Philanthropy 2173) posts all of their reports online as well. They also do something else; their standard contracts include intellectual property rights language that REQUIRES foundations to agree to the release of a public version of the report.

The business people out their are already questioning how a business plan works that instantly makes valuable information available for free (why don’t the foundations all sit around waiting for someone else to pay to have a report created and then use the free version?), but that’s because of a fundamental difference in for-profit and philanthropic marketplaces. In the for-profit arena, “controlling” valuable information is the key to high profit margins. In philanthropic market places, “spreading” valuable information is key to creating impact. This is because the “returns” that philanthropists generate from applying knowledge accrues to everyone. When you pay to have a report created and others use your work to generate social good, that social good is a result of your work and so you have created more impact.

In Lucy’s words this practice of information release “directly leverages the initiating foundation’s investment with other funders money.”

PS: I think what Tom and Lucy (and I’m sure other consultants as well) are doing is great. But I want to clarify that my longer term argument for foundation transparency is focused on the idea that foundations can enhance their impact by making their accumulated knowledge available to the public. This does not mean they have to spend a lot of money to package the information for general consumption. Just as GuideStar and Charity Navigator packaged up 990 info for the public, I’m sure that third parties would emerge to package up foundation information and market it to the public.

By Sean Stannard-Stockton | Also posted in Effective Giving, Foundations, Grantmaking, Impact Measurement, Information Sharing | Comments (5)

Sharing Information in Philanthropy

May 19, 2008 – 9:05 am
I’ve been writing for awhile about information sharing in philanthropy and the way that institutional foundation can leverage their accumulated knowledge about “doing good” by sharing it with the public.

Tactical Philanthropy reader Tom David is a foundation consultant and emailed this week to share the fact that he has been making reports he has been commissioned by large foundations to create available on his website. They are free to the public. The reports cover subjects like The Craft of Grantmaking, Philanthropic Strategy and Evaluation. They were commissioned by foundations such as the Bill & Melinda Gates Foundation, the Marguerite Casey Foundation and The California Wellness Foundation.

This is an example of the way that third parties will step forward to aggregate and present information in a user friendly way if foundations simply permit the release of internal information. This isn’t a perfect example because Tom of course is the author of the reports. But it is still a useful way for the public to benefit from the research paid for by foundations. Transparency is not about accountability, it is about increasing impact.

You can find Tom’s website here.

By Sean Stannard-Stockton | Also posted in Information Sharing, Philanthropy | Comments (1)

The Growing Blog Team

April 24, 2008 – 9:03 am

After the success of last year’s One Post Challenge, I thought that putting together a large blog team for the upcoming Council on Foundations conference might lead to a more dynamic conversation. So far, the list of people signing up has been excellent. You can read some background on what I’m looking for here and here. If you’ll be at the conference and would like to sign up to participate, shoot me an email. The conference this year combines the annual events for corporate philanthropy, community foundations, family foundations and private foundations. I would particularly like to add some representatives from family foundations to the list below.

The confirmed bloggers are:

My hope at last year’s conference was to open a “portal” into the event through which non-attendees could participate. While I think I was at least partially successful in providing a view into the event, the “participation” I was hoping for (for instance, a reader posting a question which I could then ask at a session and then blog about the answer) did not really occur. After the huge success of the One Post Challenge in creating reader debates around certain issues, I’m hoping that this year, we might get more of a back and forth going.

Let me know if you want to join the team and mark May 3-7 on your calendar for an explosion of activity on this blog as I begin posting entries from 10+ bloggers.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Foundations, Giving Blogs, Philanthropy, Social Media | Comments (0)

Letting Donors Vote for Board Members

March 27, 2008 – 8:43 am

A couple weeks ago we discussed the idea of letting donors vote for nonprofit board members. Some people liked the idea, others were concerned that nonprofits should be serving the needs of the broader public, not simply responding to donor’s desires. I’m mixed on the idea. On the whole, I think that to the extent nonprofits want to access social capital market money, the form of that capital must be designed differently than a donation. A lot of imagination still has to go into this process, but I have a hard time understanding how a nonprofit could ask for an “investment” instead of a “donation” and yet treat the transaction the same. That’s just marketing. If investing in a nonprofit is more than just spin, than the transaction involved must live up to the words that describe it.

Jeff Brooks, at Donor Power Blog, writes regularly about how nonprofits can “empower” donors in ways that help the nonprofit further their mission. Yesterday, Jeff weighed in on the donor voting debate and he’s given me permission to repost his thoughts here:

I think it’s a dynamite idea, even though the choice of board members is not likely to be very exciting to most donors. Really, on what basis would the average donor choose one board member over another?

Even so, I’ve never yet seen giving donors power of any kind not work. My guess is very few donors would exercise their proxy vote. But that they’d appreciate the chance, and that would lead to more giving, higher gift amounts, and better retention. That’s what happens pretty much every time you show donors that you respect them.

Commentary at Tactical Philanthropy seems to be running against the idea, because of the assumption that given the chance, donors are going to do something stupid. Like elect a moron to the board. Or force the nonprofit to betray its own mission.

Worst-case scenario thinking always takes you to such bogus places.

If I ran a nonprofit, I’d look for every way possible to involve donors. I’d want more than their money. I’d want their ideas, their hearts, their thinking.

If you’re afraid your donors are going to screw you, you’re in trouble. While you’re protecting yourself from your donors’ predations, they’ll be flocking to the smart organizations that respect them.

In the comment section to Jeff’s post, some reader suggested that it is unrealistic to think that donors would be able to make an informed decision about which board members to support. I think this is correct UNLESS the nonprofit was able to effectively communicate the organization’s mission, the steps the were taking to further that mission and the progress and setbacks that they faced. That sounds like the kind of nonprofit that I would be excited to support!

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

Do Nonprofits Want Funders to Be Critical?

March 5, 2008 – 9:25 am

A comment from an anonymous “director of development” was posted today on my Donors vs Investors III post (check out the growing conversation in the comment section of this thread):

Just to bring another perspective to this line of questions, here’s a fundraiser’s take. I’m sure there are lots of forward thinking, transparent non-profits out there who can speak candidly with anyone about mistakes and areas to improve, but my sense is that the vast majority are like my employer: they would never let any  information that might even suggest something less than sparkling about them be publicly revealed.

We have one foundation funder who is openly critical of us, and funds us with a contract and a set of concrete tasks the organization accomplish. I would call this funder a proactive investor. They didn’t just evaluate us, they made their findings known, and better yet continued to offer us money if we made an effort to clean up our act. Many staff are grateful for this funder, and believe our organization has improved with its participation.

So I guess my point is, perhaps a non-profit is best served by funders who can own their criticism, stand by it and use it as a tool. The many many non-profits out there who are less interested in critically evaluating themselves can benefit from proactive investors like the one I have described. And at least when I am in the room with this funder, I am more or less confident that what they say about us at conferences is what they say to my face.

Wow. I might be advocating for a more public dialog, but I’m surprised as anyone to hear a nonprofit employee say their organization has benefited from a major funder being openly critical.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Effective Giving, Evaluation, New Philanthropy, Philanthropic Capital Markets, Philanthropy, nonprofits | Comments (7)

Investors vs Donors III

February 29, 2008 – 9:41 am

To recap, my questions from my earlier post were:

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

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

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

The responses from readers can be found here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Investors vs. Donors II

February 28, 2008 – 12:36 pm

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Fortune Magazine on Kiva

February 27, 2008 – 1:18 pm

If you read one article about philanthropy this month, make it “The only nonprofit that matters” in the new issue of Fortune. Click here to access. It is an excellent review of Kiva.org and other organizations of this type. I found a couple things interesting:

  1. Fortune refers to DonorsChoose as a “peer” of Kiva’s. When I suggested that DonorsChoose, Global Giving and others were competitors, Kiva denied this comparison. I think they are all more similar than different. Global Giving later wrote on their blog that they agreed with my take.
  2. The article notes that DonorsChoose users can elect to send a portion of their gift to DonorsChoose to cover overhead rather than have 100% go to the project. They say 90% of users choose this option. When I suggested that Kiva use a similar pricing mechanism to fix their current supply/demand imbalance, Flannery said (scroll to bottom) that the 100% going to the project was a critical part of Kiva’s value proposition.
  3. Kiva has been criticized for not being “real philanthropy”, because users make loans not gifts. I think Kiva is so important because they’ve figured out how to give users both hard data (default rates on loans) and soft data (info directly from the borrower to the lender on how they’re doing. In the article Flannery says, “We think the users want information more than they want their money back.”

In case anyone is new to this discussion, I want to make it clear that I think Kiva is doing great work. I make the above points because I think that the philanthropy community should care deeply about Kiva’s decisions because I think they are creating a model that will find huge success.

You can read my prior thoughts on this issue here.

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

NetSquared N2Y3

February 20, 2008 – 9:34 am

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

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

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

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

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

For more about Mashups, see Wikipedia’s definition.

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

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

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

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

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

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

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

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

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

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

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

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

Do Nonprofits Trust People?

February 11, 2008 – 8:00 am

A new blog I’ve been following, LifeYears, asks an interesting question today:

Non-profits seem sceptical towards outcome-based indicators of how effective different initiatives and projects are. Is this because they are afraid of what “ordinary people” would think and do if they had this information? And if so, could such a worry be rational?

The author, Ole Rogeberg, poses the question very seriously without passing judgment:

Personally, I hope (and want to believe) that outcome-based indicators would make the connection between giving and accomplishing stronger, that people would not just give in order to “do a good deed” but also start giving to “have an impact on malnutrition” or “reduce malaria” etc. But other people might believe that the consequences would be different. But other people might believe that the consequences would be different. Two possible worries that immediately come to mind:
  • Myopic funding: The more concrete, short-term and certain a program was according to its outcome indicator, the more funding it might receive. This might make it easy to get funding for vaccines and malaria nets, but hard to get funding for investments and development in health infrastructure, education, human rights work with women, etc.
  • Over-focused funding: Some measures may catch the public’s interest far more than others (”go viral”), and this might lead to large shares of funds going to these areas - not because the need is the largest or the impact the greatest, but simply because the indicator is catchy in some way.

Ole ends:

Even if you personally don’t see the problem - how can we answer this fear and develop indicators that don’t have excessive (largely unintended) negative consequences?

Important questions. Change is difficult and often has unintended consequences. Many, many people are resistant to my calls for more measurement and analysis of nonprofit outcomes. How can we handle their concerns? Or might their concerns be right?

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

United Way Responds to Google Finance Question

January 31, 2008 – 7:29 pm

Last month I posted a question on the Google Finance profile page of the United Way of America. I got an email today from Meg Plantz, director, Impact Design and Learning for United Way. You can catch up on the Google Finance for nonprofits discussion here.

United Way of America’s approach to program outcome measurement, reflected in its manual, Measuring Program Outcomes: A Practical Approach (United Way of America, 1996), encourages health and human service agencies to develop ways to measure outcomes quantitatively.  This often is a challenge because many human-service outcomes seem at first glance to be un-quantifiable, and many agencies are used to describing their successes with narrative vignettes rather than with numbers.  When they have used numbers, the numbers often have reflected outputs (e.g., number of classes offered, number of clients served) rather than outcomes (e.g., improvement in parenting skills).  However, for purposes of creating and tracking program improvement over time and demonstrating results to increasingly data-oriented funders, donors, and publics, numerical indications of program performance are important.

Our approach consciously responds to the challenges that quantitative measurement presents.  For example, in our approach, intended outcomes do not have to meet the “measurable” test.  In fact, when agencies are identifying what their outcomes are, we encourage them not to worry about how they will measure them, but instead to focus on what results are meaningful to the program and its clients.

Once the agency is comfortable that it has described the appropriate outcomes for its activities, then we advise them to identify measurable indicators of those outcomes.  Questions such as “What will tell you if clients achieve the intended outcome (e.g., improvement in parenting skills)?  What will you be able to see, count, or measure?” help agencies identify critical aspects of their outcomes (e.g., using age-appropriate discipline methods) and think about ways to quantify them (e.g., record observations of parents in role plays and tally entries that parents make in a journal).  Agencies are encouraged to pick indicators that will provide useful data – data that will help them with program improvement, in communications, and in other management tasks.

Qualitative information complements and can help with quantitative measurement.  For example, agencies can use their narrative success stories to identify intended outcomes and then use quantitative measurement as a way to learn whether the stories are unique or are representative of other clients.  Agencies can use their narrative stories to illustrate their outcome data rather than offering the stories as evidence of outcomes.  Qualitative information such as focus groups discussions of quantitative data can help agencies understand the meaning of the data and make appropriate program improvements.

Meg Plantz
Director, Impact Design and Learning for United Way

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

Efficient Markets in Philanthropy

January 24, 2008 – 9:25 am

In response to my post yesterday in which I discussed the value of information to philanthropy and why donors should desire efficient philanthropic markets, Phil Cubeta writes:

The logic here can become relentless and destructive. What this tends towards a lists, like league tables in a sport, with the best at the top. It leads then to managing a nonprofit by the numbers, to get the rating, and it leads to shutting down those that don’t rank high. We then have the tyranny of the metrics, however much arbitrariness is built into them…

The world you want - are you sitting in corner office reading a spreadsheet?

So are the philanthropic capital markets I envision boring and lifeless with endless spreadsheets and numbers to crunch? Not in the least.

Economics is often called the “dismal science”. I know that many people think that finance is boring. But the vision of financial markets as nothing but numbers and spreadsheets does not capture the reality. Do investors buy stock in Apple because they spent hours and hours processing spreadsheet calculations? No. While at the end of the day, buyers of Apple stock believe that the return on capital being generated by the company will make for a profitable investment, the information they use to determine that are not just numbers. The way in which Apple has captured the imagination of the consumer, (an intangible piece of data that cannot be added to a spreadsheet) is by far the most valuable asset that Apple has and it is a major reason why investors have flocked to the stock.

Have you ever watched CNBC, the news channel of the financial markets? It is far from some kind of spreadsheet crunching lecture. Every day, investors or all types come on the show and make passionate arguments for why certain companies are good investments. While numbers and calculations underlie much of their thinking, it is the story, the human story of the companies they discuss that take center stage.

Warren Buffet is widely considered the best for-profit investor of his generation. Does he sit in a corner office reading a spreadsheet the way that Phil suggests? The quote below is from noted investor Whitney Tilson (Tilson is a huge fan of Buffet and a fellow columnist of mine at the Financial Times):

If the future were predictable with any degree of precision, then valuation would be easy. But the future is inherently unpredictable, so valuation is hard — and it’s ambiguous. Good thinking about valuation is less about plugging numbers into a spreadsheet than weighing many competing factors and determining probabilities. It’s neither art nor science — it’s roughly equal amounts of both.

The lack of precision around valuation makes a lot of people uncomfortable. To deal with this discomfort, some people wrap themselves in the security blanket of complex discounted cash flow analyses. My view of these things is best summarized by this brief exchange at the 1996 Berkshire Hathaway annual meeting:

Charlie Munger (Berkshire Hathaway’s vice chairman) said, “Warren talks about these discounted cash flows. I’ve never seen him do one.”

“It’s true,” replied Buffett. “If (the value of a company) doesn’t just scream out at you, it’s too close.”

Taking liberties with Tilson’s quote, I would argue that donors should not “wrap themselves in the security blanket of metrics” because “the lack of precision around measuring the impact that nonprofits achieve makes them uncomfortable.”

World-class investors do not sit in their office crunching spreadsheets all day. Neither should world-class donors. But the underlying logic of both should be that of achieving the highest return on investment.

Recently Phil commented to Perla Ni regarding her site Great Nonprofits (which offers reviews of nonprofits written by volunteers, donors and the people served by the nonprofit):

Thank you so much, Perla, for setting the record straight. In fact, your site is the exact opposite of a metrics driven exercise. You are bringing together the voices of those who have been touched by a nonprofit. I finally “got” what you are doing.

An efficient philanthropic capital market does not only view numbers as valuable inputs to the decision making process. Sites like Great Nonprofits offer extremely valuable information to donors. This sort of qualitative information is critical to both donors and for-profit investors. Great Nonprofits is not the opposite of a metrics driven exercise. They are both part of the same process of determining where donors and investors should direct their capital.

Disclaimer: Nothing in this blog should be construed as investment, tax or legal advice. This blog is for informational use only.

By Sean Stannard-Stockton | Also posted in Effective Giving, Evaluation, Grantmaking, Impact Measurement, New Philanthropy, Philanthropic Capital Markets, Philanthropy | Comments (7)