Tuesday, April 16, 2013

Philanthropic climate change

After seeing a number of posts related to Ken Stern's book "With Charity For All"[i] I bought and read it. Aside from the sometimes torturous case studies of large philanthropic donors, it isn't a bad read from the standpoint of understanding why large sums of money don't easily equate to optimum results at the client level. I found some of the passages on the rise and fall cycles of the nonprofit industry in the United States and elsewhere interesting from a historical perspective. As a window into a segment of the philanthropic and nonprofit world most of us will never see, it has value. Relax though, this isn't a book review.

The primary reason I wanted to see his viewpoint is that the book has been variously described as leading the coming wave of philanthropic responsibility and a forecast of the end of individualized charity. Opponents in particular hold up this book as an example of why grant-making organizations are too hung up on business-style metrics and absolute control by the grant-makers of the nonprofits they support.

There is no doubt that foundation and corporate grant-makers are beginning to formulate standards of performance-based outcome measurement. No longer is it enough to include touchy-feely testimonials and call them outcome measurements when applying to this type of donor. For instance, the book documents an aborted initiative by the Gates Foundation and the effect of that experience on the foundation's current rigid insistence on reporting and yes, control of the dollars from the standpoint of impact.

It doesn't disturb me that any donor, whether they are  operating from a corporate philosophy of optimum results for investment or as an occasional ten-dollar a month supporter, wants to know that the funds actually have the desired result.

What does disturb me is that while Mr. Stern decries the waste, ineptitude and even outright fraud inherent in the charitable sector he simultaneously complains that the big donors require too much control and exert too much influence over the use of their funds. His profile of the impact of the Joan Kroc bequest on the Salvation Army's core mission is an example of this.

I get inquiries nearly every week from small nonprofits to write proposals to these large corporate-style foundations.  After all, that's where the real money is, and a grant from one of these players can be life-changing for a small organization. I can certainly write the application, but ultimately a positive result rests on the shoulders of the nonprofit. This is the professional level, and far too many smaller nonprofits are unaware of the rules. While the axiom that "people give to people" is still a factor in the nonprofit world, in the context of large-scale supporters, one might almost say that "organizations give to organizations".

 In my view, too many nonprofits are conceived as social benefactors, and end up being professional fundraisers. The mission gets lost in the constant struggle to obtain enough funding to simply survive. As Mr. Stern comments on pg 205 of his book, "Social investors focus solely on impact…They focus on the end customer, rather than targeting contributions to smaller charities so they can make a difference to the organization". To achieve that focus, the organizational strength of the grantee is a significant part of the equation.

The key phrase is "social impact investors". In the context of the book, these are the contributors and donors looking for change on a grand scale. They aren't as interested in the local neighborhood after-school program as they are on the larger societal need for the program. These are the big dogs of the philanthropic world. You might even say as the Gates Foundation and their peers go, so goes the sector.

There is no doubt that there are a great many nonprofits that should not have entered the field at all. They are philosophically and monetarily unable to achieve their mission and adversely contribute to the public perception that bigger is best. They waste finite dollars and human capital and may turn off donors to the point that their whole mission focus gets a black eye.

Still, without new blood and fresh ideas and enthusiasm entering the nonprofit arena, I believe we will get the same bureaucratic bungling, stale ideas and ineffective results that are inherent in maturing companies and corporations in any sector. Developing objective analysis tools for measuring effectiveness and mission-centric results is a worthy goal, but certainly not the only tool. To me at least, it underscored the need for less centralized and industrialized philanthropy at the grassroots level while profiling exactly how to use the trends to good advantage.

The take-away for me is that no matter how small your organization may be, you need to understand the driving forces behind the current giving philosophy of nonprofit supporters. Documented results at the client or street level definitely matter. Organizational professionalism and the ability to document ground-level change and statistically measurable improvement are no longer the sole realm of the giant nonprofits.

There will always be people that give because it simply makes them happy to do so, but the important supporters, the ones that can offer significant monetary security for your organization are demanding results. Even at the local level, the grassroots nonprofit that can provide provable data and transparency regarding fund use is going to have an edge over the ones that can't. If you are the nonprofit that gets defensive when asked to provide financial data, ignores strategic planning, thinks budgets are for policy wonks or doesn't like to document your efforts and results in detail, you are going to find yourself left behind.

[i] "Ken Stern, With Charity for All: Why Charities are Failing and a Better Way to Give (Doubleday, 2013)

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