Social Media and Nonprofit Advocacy

In the first part of this series, we spent some time discussing the intricacies of social media by definition, as well as its importance as the largest and fastest growing trend in nonprofit communication. Understanding exactly how powerful this outlet can be is the first step in creating an effective social media campaign.

The second step is knowing how to gain a connected, knowledgeable and consistent group of advocates for your organization. Whether attempting to influence powerful decision makers, inform citizens of important causes or spread awareness throughout a community or nationwide, nonprofit organizations can utilize social media as an effective and inexpensive tool to move these tasks forward. And because of its low cost, social media can be added to a communications strategy without having to eliminate anything due to budget constraints.

Here we will take a look at the ways in which social media can be used specifically for advocacy.

Educational/Informational Content

Supporters can quickly and easily gather the most up-to-date information on an organization’s mission and campaigns through social media updates. Many supporters research and find a nonprofit to support through social media, and even more use social media to find additional information about an organization that has peaked their interest.

To further engage current supporters, both Twitter and Facebook can be used to distribute updates on programming, new or shifted initiatives, and upcoming campaigns or events.

Keeping both current and potential supporters updated on the organization, with the ultimate goal of further spreading the word, is one of the most important tasks in nonprofit communications and advocacy. And social media provides the quickest, easiest, cheapest and most effective outlet to do so.

Actionable Support

Although spreading the word is atop the priority list for most nonprofit organizations, creating a way for supporters to act on that information is just as important. Social media sites are perfect for the fast distribution of actionable items, including petition signing, joining a rally, peer fundraising and much more.

For instance, if there is a pressing issue within the organization’s wheelhouse, reaching out to followers via social media and specifically asking for a share or re-tweet of information can create a whirlwind of activity surrounding that cause. Ultimately, more “voices” are heard in a shorter amount of time, and a greater potential for effecting change is created.

Gratitude and Celebration

No, the days of hand written thank you’s sent through the mail are not long gone – in fact, in today’s tech-heavy society, those mindful notes are more powerful than ever.

However, after a big event or a successful fundraising campaign, social media is a fantastic channel for a blanket thank you or public recognition for volunteers, staff, community leaders and other supporters. You can even extend the celebration by putting together a short video from the event, and post it just hours after. This keeps the event in the minds of supporters and can maintains the momentum for as long as possible.

Volunteer Recruitment, Recognition and Retention

Nonprofits are well aware that the majority of work would not be doable without faithful helping hands. Social media channels are a quick, easy and inexpensive way to reach hundreds to thousands of potential volunteers that are passionate about the organization’s mission and willing to give their time and talent. Although directly asking for volunteers is an effective strategy, there are many other ways to recruit new volunteers through social media.

We discussed previously the importance of remembering that social media is about connection and dialogue. In other words, creating an environment where like-minded, mission-driven people can work together for the greater good.

In attracting volunteers, this is paramount to keep in mind. Instead of simply making a request for new volunteers, sharing stories from your current volunteers can be a less direct approach that works very well. If current volunteers are personally connected to the organization’s social media pages, they can help recruit volunteers by sharing this information with friends and networks.

These areas in which social media can be beneficial to a nonprofit’s advocacy efforts are just the tip of the organizational iceberg, but can be a fruitful beginning to a truly effective social media campaign.


Donors – A Case for Funding Capacity Building

When you ask a donor what their goal is with their philanthropy, they will most certainly respond that they “want to make a difference”.  They may have a specific ideas about how they want to make a difference, and maybe even what organization they wish to support, but in the end they want to make a difference

Furthermore, they probably want to make a difference for as many people as possible.  As a foundation representative, you obviously see the value in perpetual giving because those philanthropic dollars can be recycled year after year with the income making a difference even after the original donor is gone.

Well you can help donors make their philanthropy even MORE valuable by introducing them to the importance of capacity building.   Whether you provide capacity building in house, or utilize a third party (which I highly recommend, and is explained in my blog article “Foundations & Capacity Building”), your donors should understand that effective capacity building means significantly more impact for the same (or less) dollars.  And ensuring capacity building support in provided to nonprofits in combination with grant funds is something National Donor Advised Funds (by investment groups such as Fidelity or Schwab) could never provide.  Meaning, not only do you provide local expertise & personalized donor relations, but a larger impact (which can be seen as a legacy) as well.

For a donor new to capacity building, I explain it to them like this.  “Every nonprofit organization has a continuous number of people needing their support.   There are always more families who are hungry, more children who want a better education, more elderly people who need medicine, etc.  So the biggest issue for every nonprofit is how to serve more people so they don’t have to turn anyone away.  Capacity means how much can be done for how many, so capacity building is key.”

The Edyth Busch Foundation did a study in 2010 of the capacity building efforts they had funded in addition to their standard grants over the previous 5 years.  The study concluded that ALL of the programs had increased productivity substantially, and collectively the productivity grew by an average of almost 400%!  That means that a $10,000 grant actually made an impact previously valued at $40,000!  Now THAT is making a difference.

Nonprofit CEO Sabbaticals Reduce Turnover and Spur Growth

I have always encouraged my staff to take vacations of at least one week twice a year, in order to avoid burnout and increase efficiency (the studies on the importance of vacation are numerous to). To further reinforce the issue, I have even edited vacation time policies so employees are NOT paid out unused time. I felt well educated on the issue, with a clear understanding of the benefit to the individual, as well as the benefit to the organization. However, it wasn’t until I was forced to take a sabbatical from the nonprofit sector, that I realized the full and tremendous impact a leader can make after taking an extended period of time off.

My Forced Sabbatical

My twin sister had been fighting a terminal cancer diagnosis for more than 5 years, when I realized I needed to be with her as often as I could. I had two small children and she lived over 1,000 miles away, so working full time and being there for my family and my sister were not possible. So I left my job as President/CEO of a growing foundation. Although those next few years with my sister were previous ones that I would never give up, I missed the nonprofit sector terribly.

I found myself during my entire time off reading, researching and studying everything I could find on the nonprofit sector; especially the areas where I had thought I had the most experience (foundations and increasing nonprofit capacity). I dug deeper into issues I saw as major societal problems (i.e. low efficiencies in nonprofits, lack of funding for capacity building, no support for donors, etc.), and opened up communication with various experts and colleges to flush out solutions. I significantly expanded my knowledge and learned to reject the norm of focusing only on your individual nonprofit, and to instead collaborate with others to seek better ways of doing things.

Once I was ready to go back to work full-time, I quickly realized my time away was both a gift and a curse. I was very frustrated when it became more difficult to break back into nonprofit; not because I still felt qualified, but because I felt 10 times more qualified than previously! I knew the time off had benefitted me, and could greatly benefit a nonprofit – but groups hiring only saw my time away as a negative.

So how could I learn from this? If I could do it all over, how would I do it? If it could benefit someone else or some other organization, what would that look like?

Can A Sabbatical Benefit Your Organization?

If your burned out or your organization is just maintaining the status quo, a sabbatical may be just what both you and the organization need. Often in these circumstances you or your board may say it is time to get a new President, but rushing to change the leadership can be very dangerous and costly to the organization. The cost of turnover at the top can be very high—not only in lost productivity, but in lost relationships, fundraising, momentum and, most importantly, lost impact. I have found that it takes on average about 18 months to really understand and lead a new organization, recognize opportunities and build the relationships necessary to begin really making an impact (i.e. introducing innovative ideas, developing collaborations, funding capacity building, etc).

Instead of making such a drastic change, a change that could be detrimental if the wrong leader is hired, consider a three to six-month sabbatical instead! Not only would this save the high cost and lost productivity associated with leadership turnover, but it could drastically increase the organization’s impact when you return with fresh ideas and a recharged battery. Moreover, you could use the opportunity to test out upcoming leaders in the organization and evaluate your succession plan.

Details, Details, Details

So it sounds good in theory, but how do you logistically make it happen? Below are several issues and ideas that should be considered when your deciding on how to take a sabbatical:

1. Make sure you make it clear to your board how long you plan to take on your sabbatical. Most people benefit most taking 3-6 months for a Sabbatical.

2. Talk to your board about whether you plan to be away the entire time, or will be checking in weekly or bi-weekly. Either way, try to use the opportunity for staff development & succession planning (i.e. allow the person you would most likely hire as either an interim or permanent replacement to lead the organization).

3. If you have a small organization that can’t cover for you, consider simply going part-time. You can also consider hiring someone to handle basic job duties when you are away. This person can be full-time or part-time, depending on your needs and ability to pay.

4. If you are in dire need of a break, and need that break to be full-time, hire an interim CEO to run things while you are away. Interim CEOs never stay permanently in one position (so you don’t need to worry about them winning over your board and taking your job), and they specialize in running an organization for 6 months to 2 years while they concurrently evaluate the organization from top to bottom. When the new or returning CEO starts work, the interim presents a report on ideas/suggestions to improve the organization. (There are many professionals who specialize in being an interim CEO, and know how to help you take advantage of this time you are away).

5. Pay is something that should be determined between you and your board of directors, and will vary depending on the financial capability of the nonprofit, the financial needs of the CEO, the CEO’s tenure and whether or not a part-time or full-time replacement will need to be hired.

One way to negotiate for at least part-time pay is to agree to continue to oversee the organization virtually or only one day a week (this is especially convincing if a replacement will not need to be hired). In addition, if you are like me and will be studying and learning from experts and/or colleagues, make sure your board is aware of these plans. It will go a long way in defending why you should still be paid part-time while on sabbatical. Finally, you can offer to sign a contract assuring your board you will stay with the organization for at least 2 years after the sabbatical (thereby ensuring the organization will benefit from your time away).

6. If the sabbatical is more to refresh your ideas and less about being burned out, OR if it is a financial burden to take an unpaid sabbatical, consider more creative ideas for a sabbatical. For example, take a part-time position at an organization similar to yours in a different area, or “swap” jobs with the CEO of another organization with a comparable mission or vision. Both you and this other organization will benefit greatly from the in-depth learning opportunities and collaborative ideas that come from really digging into another organization. Consider how much more you learn in your first year at a new organization, then each year after when things become routine and people become complacent. Taking a short-term job at another organization will provide a super charged learning experience with new challenges and opportunities that you may not have considered in your own nonprofit.

Remember, there are many benefits to running a nonprofit as opposed to a for-profit organization – and a big one is that without the element of competition, there are great opportunities for collaboration and peer-learning. Sabbaticals are only one example of the innovative ways we can work and excel. As a sector, we need to learn to recognize and take advantage of these unique benefits and opportunities more often.

The New Nonprofit Leader

The new millennium has been a difficult one. A crippled global economy, threatening climate change, crumbling education and healthcare systems, and a widening income gap comprise a few of the social problems we face.

But the leaders of our nonprofit sector are already so worn down by continuously being forced to do more and more with less and less. They have been given a seemingly endless list of tasks: develop and execute effective programs, manage a diverse and underpaid staff, chart a bold strategic direction, create a sustainable financial model, wrangle a group of board members with often competing interests, embrace rapidly changing technology, and recruit and appease a disparate funder base.

So it is time for a new kind of nonprofit leader, one who has the confidence, ability, foresight, energy, and strength of will to lead the nonprofit sector, and our communities, forward. Indeed it is up to the leaders of our great nonprofit sector, to face, rather than shrink from, these many challenges.

It is time we move from a nonprofit leader who is worn out, worn down, out of money and faced with insurmountable odds, to a reinvented nonprofit leader who confidently gathers and leads the army of people and resources necessary to create real social change.

So in the hopes of inspiring nonprofit leaders to claim their rightful place as true heralds of social change, I have written this book. It is based on my many years of coaching nonprofit leaders to success. This book lays out the elements that those nonprofit leaders have learned in order to embrace their role as reinvented nonprofit leaders.

Steps to Starting a Nonprofit Social Media Campaign

While it is becoming more commonly accepted that social media outreach can be a vital tool for nonprofit organizations, a solid understanding of its power and purpose are, at times, hard to come by. At all levels of an organization, it is critical that social media channels and the campaigns produced to utilize them are benefitting the organization, without exhausting staff time with fruitless work. (Tip: As a rule of thumb, set aside about two hours every week for each social media channel in your mix. If your time is limited, start with a single channel. It’s far better to utilize one channel well than many channels poorly.)

To ensure the effective management of this new wave of communication, one must first understand what social media is and why it is critical for nonprofits to do it right.

In this series, we will explore why social media outlets should be a priority in nonprofit organizations, and to what extent they can be used to support our missions. To ensure everyone has a solid foundation of understanding, let’s begin with the basics.

What Is Social Media?
When one thinks of the term, social media, it can be an overwhelming thought. There are numerous channels that are touted as such, but let’s keep it simple. Defined, the term describes online content, which can include text, photos, messages or video, that is social in nature; it is material that prompts some level of conversation and can be easily shared with others.

Facebook, Twitter, YouTube, LinkedIn, Pinterest and Instagram all meet the standard for a social media channel. While understanding which mediums are used as part of the online social scene is relatively easy, the distinction that makes each of these sites “social” in nature can be less so. Are we simply sharing information, such as dates for upcoming events, pictures of our work in the community, and articles written by our staff; or are we truly prompting interaction with our followers?

No matter the channel(s) used – making connections, and inspiring action from those connections, is the top priority.

Steps to Starting A Social Media Campaign

Social media campaigns are made up of two equally important parts: listening for what people want and sustaining an open dialogue. To get the most bang for your buck (or your time), it is crucial to understand that both factors are equally important.

Yes, information can be shared and shared and shared, but if those who follow the organization could care less about the specific information being shared, valuable resources will have been wasted – time, money and skill – in the worst kind of way.

In order to create a positive space for ongoing communication, understanding what followers want from the sites we use should be the first step. So, how do we do this if we are just starting to wander down the social media path?

1)Know the mission, inside and out. There is a reason nonprofit organizations exist – to be of benefit to the community, and impact a particular cause. Whether it is education, social justice, fair housing or animal welfare, the greater good that nonprofits strive to serve should always be the primary priority of leadership and staff. (Believe it or not – when caught up in the daily grind staff and board members often make decisions based on income or reputation, with some decisions even working against the mission.) When the staff and board maintain a habit of always considering how each decision and communication will impact the mission, everyone will connect more quickly with the work that’s being done. In other words – if we are passionate about our mission, our supporters will be as well.
2)Use analytic tools to ensure your social media efforts are beneficial. Most social media platforms have analytic tools free ‘ for your use. Facebook, for instance, provides clear analytics as it relates to the reach of posts, both paid and organic, as well as the engagement with those posts. Remember that engagement is as important, or even more so, than the number of followers. If you gained 500 followers but no one liked or shared the information, it is a sure fire sign that what you are giving to your followers isn’t hitting the mark. Keeping tabs on this information is pertinent to long-term success in the social media realm, and can even help steer the entire organization in the right direction as it relates to what connects most deeply with followers.

3)Google the organization. It is safe to say that individuals Google themselves on a regular basis, either for fun or to gain insight into what is being said about them on the World Wide Web. While it seems natural to research your personal online reputation, very few think to do the same with their nonprofit organization. There is no reason why this shouldn’t be done on an organizational level; in fact, it is irresponsible not to. If you are avoiding this step because of the fear you won’t find anything (or worse, you will find something negative), there is a good chance you will be pleasantly surprised with the results! Even if the organization itself is not yet social media savvy, many of your supporters are; and if you are lucky, some may have been promoting your nonprofit since before you even considered social media for communication! Put a hashtag in front of the nonprofit’s name and be prepared to be astounded at the amount of information that is returned, even for a small or start-up organization. The results can be incredibly insightful in understanding what reaches our audience and what they are more than willing to share with their networks.
Taking the time to go through the steps here is important for an organization seeking to better understand and enhance its online presence – but why should this be a priority in the first place?

Why Is Social Media Important for Nonprofits?
In answer to this basic question, there are simply millions of people frequenting social media sites multiple times each day, and the numbers continue to grow. These users include both the community we serve and our greatest supporters. We can all attest to the fact that our current world is consumed by technology and utilizing it to make life easier, and nonprofit organizations cannot ignore this continual shift. However, keep in mind that embarking on this trend is not a one size fits all strategy. Not every nonprofit organization must utilize social media to connect with supporters – each organization is unique and will need to make their own decision based on its operations, mission, and support base. However, if we take the time to see past the “one solution for all” mindset, as well as other subsequent hype surrounding the growing trend, we can embrace these tools as an effective and inexpensive strategy to market to the masses. If our supporters, donors, and community leaders are using social media – and most of them certainly are – isn’t it worth knowing how and why?
Now that we know what defines social media at its core, and why it is so important for organizational growth, it is just as important to understand how to effectively create a space for healthy communication with followers. In the following post, Social Media and Nonprofit Advocacy, we will dive into specific ways social media can be a powerful tool for advocacy.

The Nonprofit Sector Must Change, or Be Left Behind!

I often start my speeches or consulting sessions by stating that the nonprofit sector is broken. I'm not talking about being a little off track or needing some tweaks here and there. I am talking about smashed up and shattered to splinters BROKEN.

Consider the present social sector. Not only do we benefit from aggressive tax breaks and estate benefits that help us raise billions of dollars above and beyond any money we can make selling services and/or products like the private sector; but we also have access to human capital (in terms of free volunteers) at a level that should make our sector able to accomplish change on a scale the private and government sectors couldn't even dream of! Yet in reality, we are significantly less effective than any other sector.

And people know this!  Many people see the potential for the social entrepreneurship movement to take over and actually leave the nonprofit sector behind. I believe our sector is extremely important in solving the complex problems of our time; but you can't blame those who have witnessed great social change from the social entrepreneur movement, while the original social sector continues to struggle with mounting issues and low efficiency.

Most of the time I just feel bad for the nonprofit leaders who wear too many hats, work 80 hour weeks, and still are underpaid and often not respected by their own board members. Nonprofit boards are notoriously closed-minded to any change, simply because of the perceived risk that no one wants to be left responsible for. So the status quo continues to be rewarded, while those leaders who try to bring innovation and change are often replaced or disregarded.

Well the status quo simply will not work in the nonprofit sector any more. And incremental changes will no longer be enough.  I am no longer willing to allow our sector, which is made up of some of the most non strive and passionate people I know, to limp along waiting for the other shoe to drop.

This new and challenging environment – with greatly reduced funding and significantly increased need – requires that every nonprofit MUST work together because nothing short of a quantum, sector-wide change will save us. If we want to survive, and more importantly, if we want to become the sector of significant social change we were always meant to be, we must create a culture of innovation, efficiency and collaboration.

Today is a completely new day. Period.

This new day starts with every nonprofit asking themselves what they exist to change, and if they are actually creating that change (a challenge recommended by Mario Morino in his book, Leap of Reason: Managing to Outcomes in an Era of Scarcity). With limited funding and more complex problems to be solved, it is not enough anymore to just be doing good works. If a nonprofit don't know what they exist to change, or determine they are not making the social change needed, then reviewing why you are taking limited financial and human capital is necessary. Closing or merging a nonprofit organization does not make it a failure, but utilizing limited resources without affecting change most certainly does.

If, on the other hand, a nonprofit determines that they exist for an important purpose and are creating important social change… then it is time for the REAL work to begin.

(Continued: A New Nonprofit Sector)


Understanding the Nonprofit Millenial

I have had many conversations over the last 5 years with various nonprofit leaders complaining about issues with managing the millennial generation (born 1980 – 2000). As often as I hear this complaint, however, I more often hear managers speak of the passion of this generation. As a sector, nonprofits are benefitting most from this generation for two big reasons: first, they have been involved in philanthropy, understand it and have a sincere desire to make a difference; and second, they believe their career should be more than a paycheck but an extension of their passion and an enjoyable pursuit, making a significantly greater number from this generation look for a career in nonprofit. Just as important, however, is the fact that this generation is talented, well educated, technologically savvy, AND INNOVATIVE. Something I believe to be crucial to the future impact of philanthropy.

However, the generational gap (particularly as it pertains to work) has created conflicting sensibilities of mature bosses who rose slowly through the ranks and their young employees who expect to move up the career ladder much more quickly. Not only do they want to move up quickly AND earn more money, but they want to do so while working less and maintaining a work-life balance that includes substantial time with family and friends. In other words, they don't seem to want to pay their dues as their managers had to do before them. This is because of their need to balance their personal life with work. Work simply isn’t as important to millennials as it was to previous generations at the same point in their careers. This can be frustrating for managers, making them feel that the generational gap in work attitude is too large to conquer. And many managers give up, saying they just won't hire Millennials anymore. But this idea is as unrealistic as it is stubborn.

The aging Boomer population has made the work environment desperate for new help. The average age for a nurse today is 47, creating an immediate need. Half of all certified school teachers plan to retire within five years, and sixty percent of all Federal workers are Baby Boomers about ready for retirement. The U.S. Census Bureau data suggests that in less than a decade, Millennials will comprise about half of the working-age population in the U.S. There’s no way around it – we need our Millennial workers. But I believe it is their innovativeness, not simply their demand, that will make them an outstanding generation.

Understanding the development of this generation, however, will help to plan how the work environment will need to evolve to get the most from this new and growing workforce. A great article called Managing Millennials by Claire Raines (the full article of which can be found at http://www.generationsatwork.com/articles/millenials.htm) speaks specifically on the development of Millennials. Raines explained that life experiences created the filters through which they see the world—especially the world of work. She believed that the following eight key trends of the 90s and 00s had a profound effect on their generational personality (and what I believe to be a "workforce personality" that will greatly benefit the future and innovation of the nonprofit sector, IF we know how bring out the best in them). The trends include:

Focus on children and family. In the decades right before and after the turn of the Millennium, Americans moved the spotlight back onto kids and their families. That spotlight has swung like a pendulum over the last sixty years. During the post-WWII era, children were all the rage. It was a popular time to be having kids and to be a kid. Then, when the Gen-Xers were growing up, the spotlight had shifted. Latchkey kids, children of divorce, and kids with two working parents found themselves growing up with the understanding work took time and priority, especially if you wanted to move up the ladder and become a leader or manager. The early 90s saw the spotlight swinging back. Las Vegas and Club Med went family. Parents and grandparents took the kids along on trips across the country and to destinations all over the globe. Eating out—once an adult thing—became a family matter. Ninety percent of fathers attended the birth of their children. The Federal Forum on Family Statistics reported that national attention to children was at an all-time high (The earlier peak was in the 1960s when the Boomers were kids.).

Scheduled, structured lives. The Millennials were the busiest generation of children we’ve ever seen in the U.S, growing up facing time pressures traditionally reserved for adults. Parents and teachers micromanaged their schedules, planning things out for them, leaving very little unstructured free time. They were signed up for soccer camp, karate club, and ballet lessons—and their parents were called into service, shuttling them from one activity to the next. Some started carrying Daytimers when they were in elementary school. 

Multiculturalism. Kids grew up in the 90s and 00s with more daily interaction with other ethnicities and cultures than ever before. The most recent data from UCLA’s Higher Education Research Institute shows that interracial interaction among college freshmen has reached a record high. 

Terrorism. During their most formative years, Millennials witnessed the bombing and devastation of the Murrah federal building in Oklahoma City. They watched in horror as two Columbine High School students killed and wounded their classmates, and as school shootings became a three-year trend. And their catalyzing generational event—the one that binds them as a generation, the catastrophic moment they all witnessed during their first, most formative years—is, of course, the terrorist attacks on September 11, 2001. 

Heroism. Emerging out of those acts of violence, Millennials watched the re-emergence of the American hero. Policemen, firemen, firefighters, and mayors were pictured on the front page of the newspaper, featured on TV specials, and portrayed in art and memorabilia. In the 10 months following 9/11, the word hero was heard more than it had been in the entire 10 years before. 

Patriotism. During the post-Vietnam and Watergate era, patriotism was at an all-time low. Displaying the American flag, always and forever the right thing to do for members of the WWII Generation, had become less and less common—particularly among disillusioned Boomers and skeptical Xers. September 11 changed all that. It seemed that national pride had been tested, and the overwhelming verdict was that patriotism was alive and well. The UCLA freshmen survey reported signs of renewed political interest. The percentage of students who reported discussing politics represented the “largest one-year increase since the 1992 presidential election year.”

Parent advocacy. The Millennials were raised, by and large, by active, involved parents who often interceded on their behalf. Protective Boomer and Xer parents tried to ensure their children would grow up safely and be treated well. Parents challenged poor grades, negotiated with the soccer coach, visited college campuses with their charges, and even went along to Army recruiting centers. Then, too, Millennials actually like their parents. In the Generation 2001 survey, conducted by Lou Harris on behalf of Northwest Mutual Life Insurance, Mom and Dad were most often named when young people were asked whom they admired.

Globalism. With penpals in Singapore and Senegal, Millennials grew up seeing things as global, connected, and open for business 24/7.

All of this translates into a generation of employees with a different work ethic than any other, certainly different from their Gen X colleagues. Here are the main components of their work ethic:

Confident. Raised by parents believing in the importance of self-esteem, they characteristically consider themselves ready to overcome challenges and leap tall buildings. Managers who believe in “paying your dues” and coworkers who don’t think opinions are worth listening to unless they come from someone with a prerequisite number of years on the resume find this can-do attitude unsettling. But their ideas are innovative, and worth consideration.

Hopeful and Expectant of a lot from employers. They’re described as optimistic yet practical. They believe in the future and their role in it. They’ve read about businesses with basketball courts, stockrooms stocked with beer for employers, and companies that pay your way through school. They expect a workplace that is challenging, collaborative, creative, fun, and financially rewarding. They also expect managers to respect their ideas, give them a great deal of time and attention, and work hard to make their job enjoyable.

Goal- and achievement-oriented. Just a day after she won a totally unexpected Olympic gold medal, skater Sara Hughes was talking about her next goal—scoring a perfect 1600 on her SATs. Many Millennials arrive at their first day of work with personal goals on paper.

Inclusive, Open to Diversity and Team Oriented. Millennials are used to being organized in teams—and to making certain no one is left behind. They expect to earn a living in a workplace that is fair to all, where diversity is the norm—and they’ll use their collective power if they feel someone is treated unfairly. 

Civic-minded & Highly Philanthropic. They were taught to think in terms of the greater good. They have a high rate of volunteerism. They expect companies to contribute to their communities—and to operate in ways that create a sustainable environment.

SO, the development and work ethic of this generation may be very different, but can be very beneficial to managers and organizations that know how to leverage their strengths. For the nonprofit sector, we benefit even more by their willingness – and insistence – on operating for the greater good.

My next blog will follow-up on this topic, and discuss specifically how to leverage the strengths of this generation through innovative management and flexible policies and procedures.

Discovering if a Nonprofit is Dishonest

As I noted in my two-part series on how to review a nonprofit's financial records, a good review is only helpful if the organization is an honest one. Fortunately, there are ways to find out if an organization has had problems or disciplinary actions in the past.  Below are the best four tools I have found to research nonprofits I am unfamiliar with.

1. Use the Times/CIR national database of regulatory actions (http://charitysearch.apps.cironline.org).
2. Look up the nonprofit on a variety of charity watchdog websites, such as the Better Business Bureau Wise Giving Alliance (http://give.org), Charity Watch and Charity Navigator. These organizations rate nonprofits and provide warnings if they find reason for donors to be wary. 
3. Google the nonprofit and then it's CEO to ensure no negative stories or press are revealed.
4. My favorite site when reviewing a new nonprofit is Great Nonprofits (http://GreatNonprofits.org), because you can read reviews from the public about their personal experiences with various nonprofits. Not all nonprofits have an adequate amount of information, especially small or new organizations.  If you are reviewing a nonprofit that is claiming to have been around for a long time, however, and they are not listed on Great Nonprofits, I would consider that a red flag in itself.
Lastly, and possibly most importantly, make an appointment and go talk to the leader of the nonprofit you are looking into.  Often, just seeing the programs and/or talking to the staff can help you immensely.
Do you know of any other techniques or tools to ensure you are donating to a quality nonprofit?  If so, please let me know in the comments!

Reviewing a Charity’s Financials with their 990 – Part 2

In part one, we reviewed how to use a nonprofit's Form 990 to determine it's mission, and to understand program versus operational expenses. We reviewed both the black and white answer, as well as the muddy gray one. In part two we will do the same as we look at four other parts of the Form 990 that can be helpful in determining if a nonprofit is one you wish to support. I have also provided a list of websites that can help you determine if a nonprofit is known to be dishonest, because the information found in an organization's 990 is only as good as the nonprofit that supplied it.


Does the nonprofit use professional fundraisers?  

The Black & White: To find out if a charity uses professional fundraisers, and if so, how much they charge, look at Part I, line 16a, column b. An even more detailed breakdown can be found in Schedule G, line 2b.

The Gray: Most charities do not use outside fundraisers. However, America’s worst charities rely heavily on high-cost solicitors that can charge as much as 90% of every dollar raised. Experts say that charities should not spend more than 35 cents to raise a dollar. 

2. How much does the CEO make?  

The Black & White: Officer and compensation information can be found in Part VII. According to a CEO compensation study conducted by Charity Navigator, CEO salaries vary according to nonprofits' location, mission and size (same as any for-profit company). Check out the compensation study found at (http://www.charitynavigator.org/__asset__/studies/2012_CEO_Compensation_Study_Final.pdf) to find a median CEO salary to compare against the nonprofit you are reviewing. 

The Gray: While reviewing a nonprofit CEOs salary is an important part of your due diligence, it is important to know that this issue is heavily debated, and an emotional one for many nonprofit professionals. Outsiders to the nonprofit sector often state that nonprofit CEOs should expect a lower salary because it is a nonprofit, and accept that lower salary because they are working to help people. Nonprofit sector experts explain that not only can we not run effective organizations without exceptional leaders, but we cannot lure the next generation of great leaders if we don't match the salaries of other sectors. Leaders who wish to enter the nonprofit sector should not have to decide between supporting their family to the best of their ability OR working in a nonprofit; and if they do have to make this choice, the sector will suffer. Do we really want our hospitals, social service agencies, children's programs, family services, environmental protection agencies and others to run less effectively? Keep this in mind as you evaluate the salaries of nonprofit CEOs and staff.

3. Non-cash assistance, or in-kind donations. 

The Black & White: In-kind donations can include clothing, medical supplies or other goods, and even professional labor. For information about a nonprofit’s grants and in-kind assistance, look at Schedule F (outside the U.S.) and Schedule I (inside the U.S.). The schedules can be found toward the end of the 990, listed in alphabetical order.

The Gray: While these in-kind donations are an important part of supporting nonprofits, they have come under increasing scrutiny from regulators. Some nonprofits overvalue their non-cash assistance, making the organization appear to be spending more on its programs than it actually is. Some dishonest nonprofits even claim valuable in-kind gifts that were never donated. For example, Breast Cancer Society of Mesa, Arizona claimed to have in-kind medical supplies valued at more than $36 million donated in its most recent tax filings. The nonprofit said the medical supplies came from two organizations, but both suppliers said they had no record of providing goods to Breast Cancer Society or shipping them on its behalf. Of course reporters discovered the issue, as they often do, which led to the organization being named one of the worst nonprofits in America.

4. Fundraising costs counted as programs. 

The Black & White: Joint costs, reported in Part IX, line 26, refer to activities that combine educational campaigns or programs with fundraising. You can determine the percentage of joint costs in a nonprofit's program expenses by dividing line 26, column b by line 25, column b (total program expenses).

The Gray: Joint costs can sometimes be used to disguise a charity’s true fundraising costs and inflate its program expenses. While many charities have advocacy or education as their mission, or part of their mission, a high percentage of combined fundraising and education should be very closely reviewed. This can be done by simply attending a session and using common sense to determine if the Form 990 is justified and reasonable based on the organization's mission and the program session you attended.

Reviewing a Charity’s Financials with their 990 – Part 1

Spending more time researching the nonprofits donors wish to support has become a growing trend. While I support this trend for any donor who has the time, I worry when anyone tries to analyze or compare something that they don't completely understand. Most donors state that the most important thing they wish to review is a nonprofit's financials. Therefore, I have provided below all the information needed to review a nonprofit's finances by utilizing it's public financial records.  

HOWEVER, I am not only going to provide information that paints a black and white picture – because we all know there is no such thing. I will be explaining how to understand a more realistic picture – a gray one. Once you have ALL the information you feel you need (and I suggest looking at more than just financials), including the muddy part, you can make your own informed decision.


The best way to get financial information about nonprofits is through their Form 990, a report that they file each year with the IRS. You can find an organization’s most recent 990 for free at Guidestar.org. The 990s are filled with information… and you can learn a lot from this one document if you know exactly where to look.

1.  The Mission 

The Black and White: A nonprofits mission can be found in Part III, line 1. This is important because it summarizes exactly what the organization does. As long as the organization is honest, this is a pretty black and white finding.

2. Program Expenses and Overhead

The Black & White: You can find out how much the nonprofit spent on its programs in Part IX, line 25, column b. In order to determine what percentage of an organization's expenses were for programs, you simply divide Column b by Column a. To have a baseline for comparison, in its standards of accountability (http://www.bbb.org/us/standards-for-charity-accountability/), the Better Business Bureau says an organization should spend at least 65 percent of total expenses on programs. Program expenses are defined as all costs directly supporting programs, plus some salary, overhead and fundraising costs (only to the extent those activities promote the charity's programs) can also be included.
The Gray: Determining how much is spent on "overhead" versus "expenses" is where things become very gray. First, don't ever assume you are comparing apples to apples in this category. Depending on how each individual is trained and how much they "cherry pick" the numbers, what is included in expenses versus overhead can be very different. For example, one nonprofit may characterize the presidents salary as 100% overhead, while another may include a significant part or even 100% of the presidents salary to programs because that person is out advocating on behalf of programs, raising money, etc. (I personally believe an average of 1/2 of a president's salary is acceptable, but read more about this issue in my previous post on Overhead Expenses.). To take it one step further, some organization's may put together the percentages, and then "tweak" them if the overhead seems to high. Usually it is fairly innocent, like changing the president's fairly subjective percentage from 40% to 50%, but it is still something to keep in mind.  

In Conclusion…

The majority of nonprofits are not trying to scam anyone, but knowing the emphasis donors put on overhead %, they are simply trying to portray the important work of their organization in the best possible light. However, as a donor, you need to understand how these things work in order to realistically compare your choices.

Foundation Responsibility Goes Beyond GrantMaking

As a past community foundation CEO, I am a passionate advocate of the power of foundations.  However, I find myself disappointed in the narrow-minded focus of many of these organizations who hold so much potential power in terms of making and inspiring positive social change.  Currently most foundations (especially in Florida) are trying to solve the major social problems of our day – such as poverty, homelessness, global warming, and lack of healthcare – by making grants to nonprofits.  However, grant-making is not why foundations hold so much potential power, because that is not where major change is made.  Large scale social change is made in the capital market, and foundations are in a unique position to create change because they alone control large pools of investment capital that CAN BE dedicated to broad social purposes. They have the power, through their collective financial assets, to craft market-based solutions to social problems.  Market-driven solutions cannot cure all social ills, but they can create positive social change in many areas that nonprofits previously could not influence.

What we are talking about here is not the bland “social investment strategy” most foundations define with a paragraph in their investment policy stating “no investments will be made in companies involved in the production of tobacco, weapons or alcoholic beverages”.  Instead, we are talking about a proactive approach to using a foundation’s large investment pool to help shape social change.  A practice most often called mission investing, or impact investing.

Mission investing refers to investments in revenue-generating nonprofit and for-profit organizations whose work is consistent with an investor’s charitable purpose and goals.The emphasis is on investments, as opposed to grants.  To be successful, foundations must reach out beyond the nonprofit universe to work with a new set of partners in the commercial sector.  Board members and foundation staff must recognize that for-profit enterprises also contribute to social solutions. They must thoroughly understand not only the nonprofit options for intervention, but also the impact of commercial enterprise on the social issue to be addressed.

Foundations must also realign their organizational structures to bring program expertise to the investment side and investment expertise to the program side. This may require recruiting new staff or hiring consultants who bring this unusual combination of perspectives. Foundations must also coordinate impact evaluation and financial reporting processes to enable tracking of progress toward both program and investment objectives.

At the same time, the spread of strategic mission investing will also require changes external to foundations. A robust and efficient marketplace of investment options for mission investing does not yet exist. The sector needs new investment intermediaries that offer foundations easy participation with low transaction costs in a wide range of investment vehicles targeted toward specific programmatic objectives. People with financial and business expertise must be recruited into the sector. Nonprofits must develop the financial discipline and appetite for investments as well as grants. And better ways of measuring social performance and benchmarking financial returns must be found.

Neither the internal nor the external changes will happen all at once. Instead, they will evolve. The more foundations create demand for strategic mission investments, the more others will develop a robust roster of investment offerings. This will make mission investing easier, leading more foundations (as well as social-concious individual investors) into the practice. And as mission investing becomes more mainstream, foundations will attract staff and develop the internal processes necessary to support them, as well to benchmark each other.

1 Mark R. Kramer and Sarah Cooch. “Strategic Mission Investing.” Stanford Social Innovation Review, Fall 2010. 2 Based on Foundation Center data for 50 largest U.S. foundations, March 2007.


Hiring the Right Millennial and Getting the Work Done


Despite the differences in defined work ethics between generations, talent leaders CAN (and must) successfully hire and retain high-performing employees of this generation. Cultivating a keen understanding of millennials is the first step. Adapting company policies to their workers’ attitudes is another way to create an advantage over less flexible companies. But before you can focus on motivating these employees, you must determine how to hire the right ones.

To address the potential challenges posed by relatively fixed expectations and dispositional characteristics shared by many millennials, companies have two options:

1. First, they can carefully select employees with certain qualities. By exercising care when conducting interviews and determining which assessments to deploy (assessments can be chosen and implemented by many online websites such as http://www.mgassessments.com or http://www.profilesinternational.com), talent managers can better gauge the degree to which their millennial applicants can adapt to the workplace. For example, millennials who score higher in intellectual flexibility and comfort with ambiguity should be more adaptive than those who score lower.

One of the major ways millennials on the fast track distinguish themselves from their cohorts is how keenly they appraise uncertainty and reason inductively. Thus, talent leaders who select millennials with these characteristics will fill their ranks with employees who’ll succeed in the short run and be ideally equipped to lead when they do ascend the hierarchy. Further, selecting young workers who are self-aware and sensitive to how their co-workers perceive them means these new employees will be savvy enough to adhere to company norms as well as fit in with employees from older generations.

2. Second, companies can benefit from clearly articulating the traditional career paths through the organization. A well-designed path up an organizational chart — including what to do, how to do it, and how long it usually takes — will appeal to millennials’ preference for structure and relatively low-interest in ambiguity. Millennials tend to thrive when they know precisely what’s expected of them and how they should go about accomplishing goals. But this must be regularly communicated with clear challenges and benefits to entice a millennial worker.


Once you have hired Millennial employees, however, the work has just begun. They’ve always felt sought after, needed, indispensable. They are arriving in the workplace with higher expectations than any generation before them—and they’re so well-connected that, if an employer doesn’t match those expectations, they can tell thousands of their cohorts with one click of the mouse…

Therefore, proper management techniques developed specifically for this generation is very important to keep and motivate Millennial employees. In Managing Millennials by Claire Raines, she defines 6 Principles of Millennial Management based on the generation's own most frequent requests:

1. You be the leader. This generation has grown up with structure and supervision, with parents who were role models. The “You be the parent” TV commercials are right on. Millennials are looking for leaders with honesty and integrity. It’s not that they don’t want to be leaders themselves, they’d just like some great role models first.

2. Challenge me. Millennials want learning opportunities. They want to be assigned to projects they can learn from. A recent Randstad employee survey found that “trying new things” was the most popular item. They’re looking for growth, development, a career path. 

3. Let me work with friends. Millennials say they want to work with people they click with. They like being friends with coworkers. Employers who provide for the social aspects of work will find those efforts well rewarded by this newest cohort. Some companies are even interviewing and hiring groups of friends.

4. Let’s have fun. A little humor, a bit of silliness, even a little irreverence will make your work environment more attractive.

5. Respect me. “Treat our ideas respectfully,” they ask, “even though we haven’t been around a long time.”

6. Be flexible. The busiest generation ever isn’t going to give up its activities just because of jobs. A rigid schedule is a sure-fire way to lose your Millennial employees. Consider flexible schedules, time off incentives or even a Results-Only Work Environment (ROWE).

5 Cool Ideas for Managing Millennials

Just as the Xers and Boomers finalize their own negotiations for an uncertain workplace peace, optimistic millennials find themselves at the mercy of Xer skepticism. Gen-Xers complain the millennials are another indulged generation like the Boomers—that they’re self-absorbed with no work ethic. millennials charge that Gen-Xers are cynical and aloof—that they throw a wet blanket on fresh ideas and idealism. Why can't we all just get along?

Maybe using our own creative side is what we need to connect and motivate the millennial generation. Here are a few ideas to get your creative juices flowing!

5 Cool Ideas for Managing Millennials

1. Design office space so that millennials are set up physically to share ideas. They do not work well when left alone in an office (even though they WANT that personal office… It really does not provide the most productive environment).

2. Consider assigning projects to groups of employees who are evaluated as a group for reaching a goal.

3. Set up a reverse mentoring program. Companies from Procter and Gamble to Siemens have set up tutoring for middle-aged executives. Young newcomers help the executives navigate the Net. Jack Welch of General Electric fame says that “e-business knowledge is usually inversely proportional to age and rank.” GE matched 1,000 managers and 1,000 young employees. Even though the younger cohort had just joined the firm, they tended to understand new technologies better than GE’s finest.

4. Provide time off for incentives. I have used this as a way for millennials to earn the time off and flexibility they want. They could earn up to 1/2 day per week based on weekly goals… If they reached their goals one week, they get to choose a morning or afternoon to take off the following week. It helped them feel short-term rewards and kept both myself and them on track with their goals. It also ensured they were never bored, as they were always trying to reach that weeks goals (longer-term goals were rewarded with bonuses).

5. Ask them to draw up their own job description. Then you can meet with them and combine it with your job description, explain why certain things in your job description are important (millennials need context, and the more context you give them the more they will work to reach & excel your goals). Ask them to include any professional/personal goals they are willing to share as well, so while managing & mentoring you can help them reach those goals.

More Specifics about Millennial employees (according to Managing Millennials by Claire Raines):


distaste for menial work

lack of skills for dealing with difficult people


lack of experience




goal orientation

positive attitude

technical savvy


What They Want From a Job

• to work with positive people

• to be challenged

• to be treated respectfully

• to learn new knowledge and skills

• to work in friendly environments

• to have flexible schedules

• to be paid well

Where Employers Go Wrong with Millennials

• not meeting their high expectations

• discounting their ideas for lack of experience

• allowing negativity

• feeling threatened by their technical knowhow

Millennial Learning Preferences

• teamwork

• technology

• structure

• entertainment & excitement

experiential activities

Millennial Communication Preferences

• positive

• respectful

• respectable

• motivational

• electronic

• goal-focused

Questions To Ask Before Opening a Donor-Advised Fund (DAF)

Whether you plan to open a donor-advised fund through a community foundation, national financial service institution, a public foundation or a specific charity, there are several questions you should ask before finalizing your new fund.  The questions below will not only protect your philanthropic investment, but be sure there are no miscommunications that may create problems in the donor-provider relationship later on.
Minimum contribution requirements and account balances – This is important because many donors want to make a good sized contribution once a year at tax time, and then grant from those dollars all year; but some foundations charge a heavy fee once your balance goes under a certain amount. 

Investment options – As a donor, you may or may not feel strongly about how your money is invested.  However, if you wish to grant income from your fund contributions, you will want to be sure the investments are aggressive enough to have a goal of at least a 5% return (most foundations have a return goal of around 8%, but use 5% as a conservative return amount on sustaining grants).  On the other hand, you will want to know that the investment is conservative enough that your fund will not be significantly reduced because of overly aggressive investments.

Some fund providers will offer a variety of options, so you can decide how conservative or aggressive you want your fund to be.  In this case, make sure you consider the long-term health of your fund, as well as what you want your fund to do as a whole.  Someone wanting to fund a current theatre renovation, and someone wanting to pay for community capacity building for as long as possible, will obviously have different goals in mind for their fund and how it is invested.

Donor services and access to professional expertise – this is an area where community foundations are often much stronger than the national donor advised funds run by Fidelity, Schwab and other big investment firms.  However, the service you desire will depend on your charitable goals.  For example, community foundations become very involved in their local nonprofit sector, thereby giving their donors access to extremely beneficial information on how use their funds to make an impact in their local community.  But if you are already firm on the grants you want to make, or want to make all your donations to one organization, you may prefer more limited grant expertise, lower fees and the technical capabilities of the nation DAFs. 

No matter what your goals are, make sure you ask what services and professional expertise are offered.  And if you feel you could use different or additional support… keep looking.  Chances are, there is a provider out there offering what you need.

Fees and payment schedules – Because of the wide variety of services and expertise made available to donors, fees can vary substantially.  Make sure you understand what the fees are, what they are for and when they will be assessed against your fund.  Remember you will most likely have multiple fees (i.e. investor fees, provider fees, grant fees, etc.), so be sure you understand everything.  The best option is to ask for all standard fees, processing or administrative fees and penalty fees to be provided to you in writing.  Also be sure to ask when the fees were last adjusted, and if there are any plans to increase them in the near future.  

Grant recommendations –  In other words, ask the extent to which the DAF provider adheres to donor requests, because once you write that check and you receive your tax benefit… that provider becomes the owner of those funds and they, not you, make the final decision on grants.  Now don't let this scare you too much, because this is necessary in order for you to get your tax benefit immediately after depositing the money into your fund.  Also, keep in mind that any organization that took advantage of this policy in ANY situation that was not extremely critical and easily defendable would not be around very long (i.e., word travels fast on these sorts of things).  Plus, you have some protection as long as you have confirmed that you retain the ability to transfer the fund to another DAF Provider, which leads to the next, and probably the most important, point.

Ability to transfer the account to another institution – On this last point, I can't emphasize the extreme importance enough of selecting a DAF that allows donors to transfer their accounts elsewhere, should the donor become dissatisfied with any aspect of the sponsoring organization's services. This is your umbrella protection, so make sure you confirm it as a policy of this organization.  It is also prudent that donors do a simple google search on the organization, and maybe ask around if it is a local community foundation, to get a feel for their reputation.

Although DAFs facilitate a relatively unencumbered giving process, philanthropic best practices still apply. Both donors and their advisors should take care to conduct careful due diligence on potential grantees, follow-up with grantees to assess impact and strive to develop working partnerships with grant recipients to ensure that both donor and grantee needs are being met.


Benchmarking and Best Practices… Evaluation is Not Enough

I would be fairly confident saying that most nonprofit executives, board members and employees are working hard every day for their organization.  They follow procedures, evaluate their programs and even provide outcomes.  They are no doubt working their best, but are they working "best practices"?  Most are not.

Many nonprofit organizations conduct some form of program evaluation, either as a funding requirement or as good practice, but benchmarking is often reserved for those "lucky" nonprofit organizations with extra resources or staff.  Evaluation is necessary because it is for accountability (proving results were accomplished), but benchmarking takes too much additional time and resources not readily available.

Evaluation may prove results, but it does nothing to show if these results are actually efficient.  Nor does it help to improve these outcomes over time.  Benchmarking, on the other hand, takes these outcome measurements and looks at improving existing processes by searching out best practices that, if implemented, would improve overall performance and impact.  Shouldn't that be every organization's goal?

Furthermore, benchmarking looks at improving areas beyond just programs, evaluating other critical organizational processes such as financials, fundraising, board management, etc.  Searching out improved processes and procedures means a more effective and efficient delivered mission.  Something every nonprofit today should be striving for… something the sector needs in order to reach the efficiency of the corporate and government sectors.

So where do you start?

Benchmarking is defined as an ongoing process of measuring your organization against leaders, then changing your practices and processes to pull the organization's performance up a notch.  These can be small changes that over time make a big impact in your organization's effectiveness.  Or they can be big projects that your organization takes on in order to implement a best practice by an organization you believe is doing well in that area of expertise.  You can also identify an area in which you are struggling, and find help with a professional consultant or volunteer with that expertise.

The benefits of the benchmarking process are numerous. It can help set higher standards so you are constantly improving, sharpen your mission focus, identify strengths and weaknesses, reach new stakeholders, raise more money, consider innovative ways of solving old problems, and demonstrate to donors that you are trying to make the biggest impact possible with the highest efficiency.

Much of the time, the term "best practice" makes people nervous that you are working to reach someone else's impossible dream rather than a manageable, practical goal.  Jason Saul, in his book, "Benchmarking for Nonprofits: How to Measure, Manage, and Improve Performance", defines best practice as the most successful and efficient means of achieving a particular outcome for an organization.

Saul lists six principles to determine what is a best practice:

*  Is there a proven track record of success? (Obviously, without a track record, the success could be a fluke unrelated to the "best practice.")

*  Are the results sustainable? (A practice that requires unsustainable inputs will eventually fail.)

*  Can the idea be replicated? (A practice that is unique to a particular leader or set of circumstances has little chance of being adapted to fit another leader or situation.)

*  Is it cost-effective? (As with sustainability, a practice that is too expensive for its results is not "best.")

*  Does it help us achieve our mission? (Mission relationship is at the heart of any practice we adapt.)

*  Does it fit the particular context? (Many practices are suitable only for certain situations and not for others.)

Included with "Benchmarking for Nonprofits", is a useful chart showing a set of common indicators for various nonprofit attributes listed horizontally–that is, across commonly-shared outcomes as opposed to “vertical” program activities–to help organizations figure out how to measure and compare performance even when their programs are very different.  This is an excellent resource to review as you determine what areas of your organization you would like to start benchmarking.  This very helpful chart can be found in full as part of Fieldstone Alliance's Free Resources at http://www.fieldstonealliance.org/client/book_excerpts/069431_perf_meas.cfm.  (I highly recommend printing this chart and keeping a copy on hand.  As far as free resources go, this is one of the best I have seen.)

With this chart, an arts organization could actually begin to compare itself in one of many indicators with a homeless shelter. For example, both might want to share their approaches to community engagement. Despite huge differences in their missions, these organizations could learn from each other by studying the processes that resulted in particular outcomes.

If there are no local organizations you feel are "leaders" and would like to benchmark against, you can obtain benchmarking information for many nonprofit organizations online or through a local or state nonprofit association.  If your state does not have a nonprofit association, you can go to the National Council of Nonprofits at http://www.councilofnonprofits.org to see if there are any smaller associations in your state, or where the closest might be.  Many colleges and universities have this type of information as well, and can be found with a simple google search for "nonprofit research in (name your state)".

For further information on benchmarking, here are some websites devoted to the subject:

The Not For Profit Benchmarking Association (www.nfpbenchmarking.com) – offers a free membership as well as more in-depth paid studies.

The Center for What Works, founded by Jason Saul (www.whatworks.org) – offers a wide range of information and links.

eNonProfit Benchmarks Study (www.e-benchmarksstudy.com/2012infographic) – offers studies on social media and other online resources.

The American Productivity and Quality Center, APQC (www.apqc.org) – offers access to studies, but you do have to pay a fee.

I Am Thankful For The Work of Philanthropy in my Life

Nonprofits are not just organizations – they are the face (and soul) of our communities. They help millions of individuals every day meet basic needs, such as food, shelter, health care and education. But that us not all nonprofits do for our communities.

Nonprofits also give shape to our boldest dreams, highest ideals, and noblest causes. They turn our beliefs into action – as promoters of democracy, champions of the common good, incubators of innovation, laboratories of leadership, protectors of taxpayers, responders in times of trouble, stimulators of the economy, and weavers of community fabric.

From your local PTA to Harvard. From a neighborhood free health clinic to the American Red Cross and the American Cancer Society. From your local community theatre to the Kennedy Center. From a local animal shelter to the National Humane Society. Nonprofits are all around us and touch millions of lives each day. You would be hard pressed to find anyone who has not been touched in some way by a nonprofit organization, whether they knew it or not.

Take, for example, this nonprofit life journey…

Being born in a nonprofit hospital;

Attending middle school and high school at a nonprofit;

Attending many arts & theatre events by various nonprofits;

Studying at a nonprofit college;

Earning your undergraduate degree from a nonprofit university;

Earning your professional degree from a nonprofit law school;

Working several years at nonprofits in New York and Chicago;

Honing your community-organizing skills by teaching at a nonprofit and running another nonprofit;

Teaching constitutional law when employed by a nonprofit university;

Playing basketball at countless different nonprofits;

Adopting a pet from a nonprofit;

Serving as a board member of several other nonprofits;

Getting married in a nonprofit;

Marrying the leader of a community nonprofit who became an executive at a nonprofit hospital; and

Sending your children to a nonprofit school.

This isn’t just a hypothetical of how someone can be touched by nonprofits throughout their life. This is the journey that Barack Obama took that shaped his life before he became President of the United States. Take a moment and trace your life’s nonprofit journey. Think about the people you’ve interacted with on that journey – and be thankful for the philanthropy in your life.

Focus on Outcomes, Not Overhead

Often nonprofit executives are so focused on keeping our budget tight that we forget to ask ourselves, are we cutting corners? What could we do if we had more money? What opportunities to better serve our beneficiaries are we missing by being so fiscally conservative?

Most long-time nonprofit leaders have a “do more with less” mindset, and have had it for so long they don't even recognize the consequences of doing so anymore. According to the article “The Nonprofit Starvation Cycle” in The Stanford Social Innovation Review, even new nonprofit leaders have adopted this thinking, most often due to the unrealistic demands of some of their funders.

Article authors Ann Goggins Gregory and Don Howard report that the result of "doing more with less" has been a hollowing out of nonprofit infrastructure that has crippled the ability of many organizations to fulfill their beneficiaries’ needs.

Their solution? Fixing funders’ unrealistic expectations about how much it costs to run a sustainable and EFFECTIVE nonprofit organization. Unfortunately, Gregory & Howard suggest that many grantees find it very difficult to be brutally honest about how much it costs, particularly in terms of overhead expenses, to run their organization.

I not only believe that with a little preparation grantees could easily show donors the importance of not cutting overhead too low; I believe this conversation is a great opportunity not to be missed!

Grantees must first shift their own focus, and then the focus of their grant-makers, from costs to outcomes.  Gregory & Howard believe this shift is fundamental to getting away from the current culture of “low pay, make do, and do without” that has created dysfunction and low outcomes in many organizations.  I have found that the best way to successfully do this is by providing a detailed comparison of your program, it's estimated costs and outcomes with little to no overhead and with a "lean but healthy" overhead.

When your donor sees they can either keep the overhead too low (spending X to  serve Y), or pay a little more in overhead to serve substantially more beneficiaries (spending X + 10% to serve Y x 10), they will not only pay for additional overhead, but will become a more loyal partner of your organization because together you both share the same goals.

Once goals are clear, donors and grantees should together honestly answer the question, “What will it take to deliver these outcomes consistently, or to deliver these outcomes at an even higher level of quality or quantity?”  This is where many new opportunities lie.

Explore possibilities with each other, and consider ideas and impact without the constraint of cost.  The donor may conclude that more money is needed to be most effective, or the grantee may realize there is a new option that is more effective.  Either way, it will be a partnership where both parties have participated and feel comfortable that the donor's gift is being used efficiently and effectively.  This collaboration will not only solve your program's overhead issue, but will show the donor they are a true partner and will further cement their ongoing loyalty to the organization!

"Outcomes, not overhead."  This statement gets beyond the question of money and refocuses the listener on the question of results. Because ultimately, none of us, neither grantee nor donor, is in it for the lowest overhead!  We are in it for the outcomes!

Throwing Starfish: A Philanthropic Debate

I was really moved by a recent article in the Stanford Social Innovation Review written by Rich Tafel, titled "Social Entrepreneurs Must Stop Throwing Starfish".

Tafel begins by summarizing the beloved starfish story often told by motivational speakers: A man walking along a shore covered with washed-up, dying starfish notices a boy throwing them back into the ocean, one by one. The man says to the boy that there are miles and miles of beach and hundreds of starfish, and that he’ll never make a difference. As the boy throws a starfish back into the ocean, he says, “I just made a difference to that one."

Tafel writes that this story epitomizes the mindset of our social entrepreneur movement—the lone hero making a difference in the life of one person by not falling into the paralysis of cynicism. The power of one.

But goes on to write that the story also represents the great failure of the social entrepreneur movement. Too often we fail to recognize the complex nature of the problems we face. We engage in linear, simplistic solutions, when lasting change requires collaborative efforts.

Action is important, but we also need to ask the bigger, strategic questions to create real solutions. In the starfish story, that would mean asking questions like: “What caused all of these starfish to dry up on the beach? What systems are at work here? Where can we have the greatest impact?"

Not only did I love Tafel's analogy between the classic starfish story and the mindset (and possible failures) of the social entrepreneur movement, but I think it provides the clearest explanation I have seen for one of the most fundamental issues in all types of philanthropic giving today.  As a donor or funding organization, do you want to engage in classic charity where you help with immediate needs (saving the dying starfish), or do you want to create real social change that improves or solves the problem creating the need?

One problem I had with Tafel's article was the title, "Social Entrepreneurs Must Stop Throwing Starfish".  This implies that basic charity is bad, and I don't agree with that.  I think both charity AND social change are necessary, I just think the donor or funding organization should understand the difference and recognize that the outcomes will depend upon which goal is chosen.

As an example Tafel wrote about an event in 2008 where thousands of starfish actually did wash up on the shores of Kent, England. Agencies and environmentalists considered weather and the possibility of disease as the cause, but after asking more questions, they found the cause was likely man-made. Dredgers, a tool fisherman use to scrape the sea floor for mussels, were almost certainly to blame, and the Marine Conservation Society (MCS) concluded that the incident was an example of overfishing. The MCS began to lobby the government “to dramatically extend its protection of the seas.”

Tafel used this example to make his point that when we confuse charity with actual social change, we often perpetuate the problem.  He believes that had the citizens of Kent organized a starfish-throwing campaign, they would have been perpetuating the problem.  Because without new fishing practices and policy, those same starfish surely would wash ashore again.

Real world problems and solutions most often require some kind of change to the rules, and that takes time. I personally don't believe one starfish needs to die simply because the solution has not been found and developed.  Starfish throwing may not be a solution, but it isn’t a bad thing either.  Why can't the charitable organizations throw back the starfish, while social change organizations work on the solution?  Why can't we do both?

If the example was instead about the millions of poor elderly persons in the US, who often can't afford medicines, shelter and even food; would we stop trying to feed, house and medicate these people because we should be instead working on a solution?  No one would argue that we have a problem in this country and need to find real solutions to better take care of our growing elderly population; but I don't think it perpetuates the problem to take care of these people's immediate needs.

Tafel worries that social entrepreneurs too often throw a few lucky ones back into the ocean and pat themselves on the back saying, “Well, it made it difference to that one.” That we might even frame our heroics at our annual fundraising banquet, giving the impression that we’re solving the problem.

I agree that every social entrepreneur, donor & funding organization must understand and educate others on the important differentiation between charity and social change.  We must have the courage to work within our complex systems to change the rules, but we must also help those suffering from problems yet unsolved.

Another way to frame the issue is, as a donor would you like to fund the SYMPTOMS of social problems (the dying starfish) or fund ideas on how to affect the CAUSE (overfishing).  What we must remember is that there is no wrong answer, and whatever your passion leads you to do IS the right thing.

For strategic philanthropists trying to increase efficiency and effectiveness, the complicated part is determining who does what.  Many organizations have already determined which goal they seek, and by making it clear that their mission is either charitable or social-change oriented, they making it easier for the rest of us to find what needs are left.  For instance, United Way focuses on social charity (the symptoms of problems in the system) and does a great job covering many of the basic needs within each local community.  Smaller donors who give annual gifts of $1,000 or less usually also focus on charity, because it is easier for them to see their gift make a difference.

I believe that community foundations most often have a great overview of the needs of their local community.  If they have a strong United Way and/or generous community that helps those in need of charity, they can focus more on encouraging the funding of social change.  If they don't, they may need to balance their giving more between the two.  

In terms of charity versus social change, there is no wrong approach.  The only way to go wrong is not understanding that there IS a difference… in the goal, the approach and the outcome.

How To Find The Right Donor-Advised Fund (And Why)

Donor-advised funds have long been a popular vehicle for charitable giving, and many in the field expect the popularity of DAFs to continue to grow as the Baby Boom generation reaches retirement.  But as the concept has grown in popularity, so have the number of options and providers. It is therefore important that both donors and their advisors understand the types of funds available and choose the ones that will best facilitate their wealth management and charitable goals. So how do you find the best donor-advised fund for your purpose and how do you find the right provider?

The first step is understanding your options.  There are four major types of DAF providers, each of which is explored below.

The Donor-Advised Fund Marketplace 

1.  National DAF Organizations - Today there are approximately 30 national organizations that sponsor DAFs. Some are the charitable arm of for-profit financial services institutions such as the Fidelity Charitable Gift Fund, the Schwab Charitable, and the Vanguard Charitable Endowment Program. Others are independent sponsoring organizations (i.e., they are not affiliated with a particular financial institution or charity) such as the National Philanthropic Trust and the American Endowment Foundation. Unlike most DAF options, national organizations are issue and geography agnostic, which is fine if a donor is set on where his/her funds will go, but can be a huge deterrent to those donors who could benefit from targeted philanthropic advice.

National funds most often appeal to donors because of their technological capabilities. Their websites allow donors to simply login and access grant activities and other national databases with relevant information about prospective grantee organizations (i.e. Guidestar and Charity Navigator).

National funds also provide fee calculators on their websites so that donors know exactly how much services will cost. The relative low cost of national funds is another reason donors choose them. Because of their large capacities, national funds charge up to 40% less than other DAF options, according to Wright-Violich, representative of Schwab Charitable.

National funds are also attractive to donors because they have the expertise to deal with complex gifts and they have the most sophisticated investment options. Donors with large accounts ($10 million+) have access to alternative investments, allowing them to customize their investment choices so that their DAFs have similar investment flexibility to private foundations.

2.  Community Foundations – There are also more than 700 community foundations that sponsor donor-advised funds, as well as hundreds of faith-based institutions. In fact, it was such institutions that originally pioneered the DAF as an alternative to the relative inefficiency of checkbook giving or the more complicated process of establishing a private foundation.  Over the years these organizations have become very technically savvy, with many offering similar online access and investment options as the national DAFs.

What really sets community foundations apart, however, is the local expertise and community commitment.  These foundations become very involved in their local nonprofit sector, thereby giving their donors access to extremely beneficial information on how use their funds to make an impact in their local community.  Many community foundations even have a grant process where local nonprofits can submit grant requests that are compliled into a "catalogue" of opportunities for donors.  For donors interested in impacting their local community, this is by far the best option, even if the cost is a bit higher than national DAFs.  This does not, however, mean all donations must go to the local community.  Donors still have the flexibility to donate anywhere in the world.

3.  Public Foundations – Public foundations typically give nationally and sometimes internationally, often focusing on a particular issue or geographic region. Their staff members usually have regional and/or issue specific expertise that they use to assist DAF holders in finding causes that interest them. For example, the Peace Development Fund houses DAFs for donors interested in creating systemic social change throughout the Americas.

4.  Other Charities – Other public charities, like hospitals and universities, set up donor-advised funds within their organizations to advance their own charitable missions.

Finding The Right Donor-Advised Fund Provider

When selecting a DAF provider, with a little due diligence donors can ensure that the organization they select is one that reflects their interests and values. After all, there are almost as many different types of DAFs as there are donors.

The main reason donor-advised funds were designed was to remove the barriers to giving, by outsourcing the administration, record keeping, and due diligence on the charities.  If you know what parts of the charitable process you want to control, what parts you want to outsource, and what you want the outcome to be, you will have the information you need to make the right choice.

Benefits of Donor-Advised Funds

Donor-advised funds (DAFs)–simply defined as funds held within, and managed by, a public charity–are fast becoming THE most popular vehicle for charitable giving in the U.S. Despite the sluggish economy, the number of DAFs in the United States actually grew by 152,365 (3%) in 2009, according to the National Philanthropic Trust's 2010 Donor-Advised Fund Report. The report shows that DAFs not only outnumber private foundations by more than two to one, but they also exceed the combined number of charitable remainder unitrusts, charitable remainder annuity trusts, charitable gift annuities and pooled income funds.

So why have DAFs become so popular?  There are many reasons why these types are so popular, with a few of the biggest reasons outlined below.

First, establishing a DAF is a relatively cost-effective way for donors to reap maximum tax benefits while supporting the causes they care about. It eliminates the complications of starting your own private foundation, provides better tax benefits and includes all of the administrative responsibilities related to grants made, reporting and record keeping and tax paperwork.  Many also include expertise in helping you make grants, follow-up services and even get your donation returned if it was not used as you required.

Often, DAFs can be set up with as little as $1,000 or $5,000. In addition, DAF holders can take a federal income tax deduction up to 50% of adjusted gross income for cash contributions and up to 30% of adjusted gross income for appreciated securities. Further, by transferring assets such as real estate or limited partnership interests to a DAF, donors can avoid capital gains taxes and receive an immediate, fair-market-value tax deduction.

In addition, DAFs are not subject to a legal minimum payout requirement, unlike private foundations which must give away 5% of their annual assets, so the donor has more flexibility in how and when he/she decides to make grants.  DAFs allow account holders to choose what information is disclosed to grantees, and therefore, donors have the option of remaining completely anonymous (a very important issue to many donors, who were unable to do this in the past).

Innovation is Alive and Well in the Nonprofit Sector

It has been well-documented that America’s unparalleled charitable spending has not led to better outcomes. This has led to calls for donors to be more actively involved with their grants, but those of us who understand the complexities involved in the nonprofit sector know that asking donors to each become educated and implement innovative strategies in each individual grant is unrealistic and frankly a bit unfair (Donors have been financially successful and now want to do their part by funding innovative programs, so the least we can do is find realistic ways to ensure their gifts are utilized well.)  This realism has bred a growing pessimism among those who believed donor action would be the only way forward.

However, there is indeed another way forward, and the good news is that we won’t have to depend on individual interventions to fix the system — or worry about them making things worse if they try. There are already management support organizations (MSO) around the country that can help nonprofits deliver better quality outcomes at a lower cost, which focus on capacity building, and where innovation is alive and well.

Understanding just how they’re accomplishing this could provide us with a blueprint for transforming the rest of the nation’s nonprofit sector.  If you are a donor, represent a nonprofit organization or a foundation, or just are interested in helping improve your local nonprofit sector.  Research your area and find out if there are any MSOs that serve your local nonprofits.  You may be able to volunteer as a professional consultant, or help them raise funds to pay for capacity building.  You may be able to inform others in your local nonprofit sector about the importance of capacity building, and how it can lead to making a difference in the lives of more people.

Foundations and Capacity Building

Any nonprofit executive will tell you their biggest concern is not programs, or board management, or even money; their biggest concern every day is that they will have to send someone away who is really in need of their service.  Today this fear is a reality for many nonprofit executives who have to send people away every day.  The answer to this problem, to the surprise of many people, is NOT more money.  It is better efficiency.  The nonprofit sector is broken… in spite of record donations and millions of hours of volunteer time (a resource the nonprofit sector is uniquely able to utilize), the sector is inefficient and unable to properly serve its local communities.  Which is why the strength and efficiency of nonprofits has become such a common and important topic of study.

While the value of strengthening nonprofits to improve their performance is obvious, how to do this effectively, and who should be responsible for the local implementation, are not.  In the last 10 years experts and interested nonprofit executives have begun to realize that foundations hold the most appropriate position in communities to best effect change in nonprofit performance.  Many foundations have since taken a serious role, resulting in an increase in visibility and frequency of capacity-building activities in philanthropy.  While there are still a majority of foundations not involved in capacity building, the ones involved have provided outcomes proving increased efficiency, outcomes and longevity when combining capacity building strategies in addition to capital infusion.

Capacity building in philanthropy isn't new, but increased activities mean new opportunities to learn and replicate best practices in local communities.  Research done by many foundations over the last 10 years has proven what most nonprofit executives already know – that nonprofit organizations struggle to keep vital infrastructures intact, and in tight times are inclined to piratize whatever modest commitment they may have made to them, rather than cut back further on direct services. Moreover, our current grantmaking practices (which often includes a reluctance to pay for core administrative costs) may contribute to what Mark Kramer, in a Chronicle of Philanthropy editorial, calls the "culture of inadequacy." Nonprofit leaders have come to believe that they will never have the resources to "do things right," so they simply accept that they will always be under-resourced and struggling for survival.  Is this really how we want our most essential service organizations to operate?

For foundations, this “culture of inadaqacy” (due to reluctance in funding capacity building) creates an additional problem: organizational capacity is directly related to whether a new program will survive and prosper once its original funding has ended. Thus foundations which do not fund capacity building activities actually deepen their own "exit problem." If they want to see a program endure, much less replicate and build to scale, investment in nonprofit capacity building is essential.  And isn’t program longevity and scale the very thing our foundations are trying to achieve?  This can never be executed without adding capacity building to the standard of service.


Capacity-building activities in philanthropy are wide-ranging. Just to give a few examples: a foundation pays for the services of a consultant to help one of its grantees with board development and strategic planning. A nonprofit obtains a grant from a foundation to support purchase of computer software and hardware for improving its financial and client information systems. Another nonprofit is invited by a foundation to participate in a capacity building grant-making initiative, through which it receives both direct financial support and technical assistance consultation in a number of management areas – with all this help coordinated through an intermediary organization.

Sometimes capacity building focuses on assisting other philanthropies, which in turn fund and serve the nonprofit community. For instance, a community foundation receives support from a private foundation both to build its asset base and improve its management infrastructure. The community foundation then sets up and staffs a local nonprofit MSO to offer capacity building services to nonprofits in its geographical area.


Recent increases in the visibility and frequency of capacity-building activities in philanthropy arise from several trends. First is the considerable attention to venture philanthropy, with its counterpart in the nonprofit world – social entrepreneurism. Although not inherently linked (I don’t personally believe running nonprofits as you would a business would improve their outcomes), capacity-building in practice is supported by many donors because they view it as the “business” approach to nonprofit.

Second is the increasing commitment by foundations to evaluating funded projects and their measurable outcomes. The lack of nonprofit organizational capacity shows up in evident ways when rigorous evaluation is done.

And third, there are profound changes in the nonprofit world that both promote and demand increased strength of these institutions. They include more demands for service in the face of government cutbacks, fewer resources, privatization of services (which puts fragile nonprofits more at risk – their revenues may increase, but so does their financial risk under tightly-defined service contracts offered by public agencies), increasingly professional management, and the growth of university-based nonprofit management training programs.

Ultimately, foundation interest in capacity building comes from the desire for leverage – for increasing the impact of philanthropic resources invested in nonprofits. A recent article in Harvard Business Review by Michael Porter and Mark Kramer sets this larger context persuasively,identifying four special assets of foundations: financial resources, expertise, independence, and a long time horizon. How can these assets be leveraged?  Porter and Kramer suggest four strategies that are used by most foundations today:

1 – selecting the best grantees (each of which is made stronger by capacity building)

2 – signaling other funders about how to conduct their work more effectively (promoting capacity building)

3 – improving the performance of grant recipients (capacity building)

4 – advancing the overall state of knowledge and practice (advocacy)


In order to effectively achieve their mission to increase the impact of philanthropic resources invested in nonprofits, they must leverage more than dollars.  In an article in Harvard Business Review, authors Michael Porter and Mark Kramer assert: "Foundations can create still more value if they move from the role of capital provider to the role of engaged partner, thereby improving the grantee's effectiveness as an organization. The value created in this way extends beyond the impact of one grant. It raises the social impact of the grantee in all that it does and, to the extent that grantees are willing to learn from one another, it can increase the effectiveness of other organizations as well."  It essentially takes the nonprofits currently being “fed” and teaches them to fish, thereby significantly improving local nonprofits strength and longevity (perpetuity being a major piece of the mission of foundations).

Once foundations accept that capacity building is essential to the success of the sector, and that they are best positioned to implement capacity building consistently and effectively, they still must determine how to implement such a large-scale change.  There are essentially three ways this can be done (and each has been used and is still in practice somewhere):

  1. The foundation can oversee capacity building itself, by hiring professionals and implementing it directly with their own staff.  The biggest challenge with this evolves in large part around the inherent imbalances of power between foundations and nonprofits. These power balance concerns manifest in many technical ways: for instance, community foundations that also operate capacity building programs must be careful to build appropriate "firewalls" between their grant-making and capacity-building functions. Otherwise there may be not only ethical problems, but also a practical reluctance of nonprofits to use the foundation's capacity-building service, which typically requires them to be candid about their operating problems and organizational shortcomings. This reluctance by nonprofits can lead to "the assurance of a mediocre approach."    In addition, foundations that handle capacity building in-house have higher operating expenses that are passed on to the donor.  Community foundations must keep their fees as low as possible in order to compete with the for-profit National Advised Funds (NDAF) such as Schwab, Fidelity and others.
  2. The foundation can build relationships with local professionals whom they then hire to train and consult nonprofits.  This, however, takes significant oversight which will mean higher overhead and higher donor fees, and does not create a sufficient “firewall” to allow nonprofits the comfort to provide information about their weaknesses and get the most out of their capacity building activities.
  3. The foundation can partner with one or more management support organizations (MSOs) who handle the capacity building audits, trainings and consultations requested by the foundation, while still maintaining a separate status.  MSOs can be for-profit or non-profit, and are the most common vehicle for capacity building activities.  The MSO would apply for grant money to implement capacity building, so the foundation could keep overhead costs down and maintain a healthy distance allowing nonprofits to fully open up to the MSO ensuring the best possible outcomes.

All three of the options above are currently being used by foundations around the country.  Most, however, have found that option 3 (partnering with an MSO) seems to have the least number of challenges and allows foundations to concentrate on their other activities.


Foundations have taken on capacity-building activities for various reasons. For instance, at the David & Lucile Packard Foundation, which has had a major capacity building program since 1983, these activities reflect the donor's commitment to applying business principles to nonprofits. The Boston Foundation's efforts starting in 1987 grew out of the observation that many of the homeless and battered women's shelters they were funding in Massachusetts were "crashing and burning" in their first five years of operation.

Intertwining themes of values and necessity tend to re-occur as the most common inspirations for capacity-building efforts; but the fact is that theory-driven, model-based capacity building with good evaluation behind it simply has the best chance for success.

Some additional reasons for capacity building, specific to foundations, include:

1.  Foundations, in their typical role of supporting nonprofits and communities through grant making and other mechanisms, have a vested interest in strengthening nonprofits. Paul C. Light in Sustaining Innovation demonstrates empirically what's already well known intuitively – that strong, healthy nonprofits are more able to be innovative. "Give me food, and I eat for today. Teach me to fish and I will eat forever" is a maxim that applies to nonprofit innovation as well as to the overall operation of the nonprofit organization. Since much foundation grantmaking is oriented to funding innovative programs, capacity building can increase the number of "innovative ideas and applications".

2.  Readiness of nonprofits for new funding is an important issue that can be easily addressed through capacity building assessments.  It is difficult for nonprofits to resist applying for funding, even though they may be ill-equipped to engage in the changes the funded project will require. For instance, a nonprofit may be overwhelmed with change from turbulent life in the community, or even from other funded change initiatives they are already involved with. In the latter situation, "hyperinnovation" can result, to use a term from Madeline Landau at the University of California, Berkeley. Finite energies of nonprofits and community leaders can be dissipated if spread too thinly over too many initiatives.

3.  According to Porter and Kramer, "Affecting the overall performance and strength of grant recipients is important because foundation giving represents only about 3% of the nonprofit sector's total income. By helping grantees to improve their own capabilities, foundations can affect the social productivity of more resources than just their slice of the whole." In an ideal world, all philanthropic activity is intended to contribute in some way to nonprofit capacity building, of course, but some strategies have more "leverage value" in this arena than others.


Capacity building is something that many experts believe will significantly improve the presently poor outcomes of the nonprofit sector, but everything has its challenges.

Funding:  There is also both historical and current resistance to the use of philanthropic funds for capacity building. Christine Letts, Allen Grossman & William Ryan, in their book High Performance Nonprofit Organizations, assert that in too many cases funders see "investment in the infrastructure of nonprofit organizations as overhead – the connotation is that these are deadweight costs that take money away from program beneficiaries."

In the capacity-building paper, Finishing the Job, the Edna McConnell Clark Foundation amplifies this statement: "The role of organization builder is not a familiar or comfortable one for many foundations…. Wary of becoming life-support systems for undercapitalized institutions, foundations have tended to concentrate on refining methods and generating ideas more than on funding and building the productivity, versatility and staying-power of the institutions that implement ideas and distribute services." In particular, it is noted, funders (including both foundations and government) have been reluctant to pay for core administrative costs – such as for staff training, information technology and strategic planning.  This has led to the inefficiency and low effectiveness of the nonprofit sector, often due to the fact that nonprofits are beyond lean and are trying to function with little to no overhead.  (A business run this way would be closed in a matter of months, so why would we want to operate our nonprofit sector in a way that doesn’t work?)  What donors must understand is that capacity building is about a nonprofit reaping an increased result, NOT about management for its own sake.

Role conflicts in capacity buildingrefers to the unique "three-way relationship" that exists between foundations as funders of capacity building, nonprofits and their communities, and providers or intermediary organizations. There are bound to be some tensions, especially as capacity building programs grow in scope. These can best be handled if roles are defined clearly from the outset (plus providing simple structures by which role conflicts can be discussed and resolved).  Important questions that should be asked at the onset of capacity building include:

  1. Should a capacity audit be required before nonprofits can apply for a grant?
  2. How much information from a capacity audit should be provided to the foundation?  To the donor?
  3. Will the foundation provide capacity building grants, or only fund capacity building as a part of a program grant?
  4. Should capacity building initiatives offered to grantees be mandatory or voluntary?  What about capacity building initiatives that directly impact the foundation’s grant?
  5. Should donors be required to pay for the capacity building related to their donations?
  6. Should a partner MSO be funded by an annual grant or by project/hour?
  7. Should nonprofits receiving foundation support be required to be a member of the partner MSO (if they are a membership organization).

These, and several other issues (direct or indirect), are among the complex matters funders, nonprofits and providers will need to consider and decide upon together.




STRENGTHENING NONPROFITS: CAPACITY BUILDING AND PHILANTHROPY, by Thomas E. Backer, PhD of the Human Interaction Research Institute, 2010

The Most Powerful Partnerships – Foundations and Nonprofit Intermediary Organizations (IO)

Partnerships have never been "popular", and certainly not common, in the nonprofit sector.  The basic premise for this is that each organization must compete for limited philanthropic dollars.  Not only is this view counter-productive, but actually a hindrance in today's new landscape of more involved and educated donors who seek out effective partnerships and collaborations that improve nonprofit performance.

Raising money from large numbers of small donors will always be one of the best ways to raise money for nonprofits,  especially if your organization is good at keeping those smaller donors engaged (protecting your organization from the "all your eggs in one basket" scenario); but large foundations and educated philanthropists are now a standard part of the fund raising landscape, and they expect collaboration in any healthy, community organization they plan to fund.  And they expect more than just the local Boys and Girls Club to collaborate with tutoring centers or drug prevention organizations; they want to see collaborations that improve organizational capacity and overall program impact.  The irony here is that foundations themselves often forget about collaboration, and the many ways it can improve their own philanthropic mission.

I believe the single most powerful partnership in the nonprofit sector is one between Family, Private or Community Foundations and one ore more nonprofit Intermediary Organizations (IO) with the sole mission of professionally supporting the increased capacity of fellow nonprofits.

Nonprofit IOs are fairly new.  However, there are several lucky states which have this type of organization, and some have been around as long as 20 years or more.  These organizations, which are most often defined as state nonprofit associations, focus on providing networking and collaboration opportunities, professional consultants at a reasonable price (or sometimes free of charge) and advocating to target policy makers, donors and the general public so they understand the positive impact the nonprofit sector has made in their communities.  Overall most nonprofit IOs are still growing their nonprofit memberships and fine tuning their offerings (although I have found several that are excellent examples that every state should emulate), but the impact they could make if they became a fixture in our nonprofit sector is limitless (especially when you consider how difficult it is for nonprofits to raise money to increase their own capacity, when donors are constantly scrutinizing overhead and expecting nonprofits to do more with less).   If a new business was unable to spend any money on professional development or organizational capacity, it would go out of business almost immediately.  So why is it so difficult for people to understand the importance of nonprofit capacity building?

While helping nonprofits one at a time is helpful, these nonprofit support organizations could increase the overall impact of our sector much more quickly (thereby starting to fix the long-time problem of low effectiveness and efficiency) if foundations could understand the critical need for increased capacity, and partner with these organizations to either provide professional support or help nonprofits improve in important areas of expertise like accounting, legal, board engagement, fund raising, staff management, leadership training, outcomes reporting, program management, donor relations, public relations, technology, etc.

The most ideal partnership, however, could go far beyond simply educating nonprofit organizations and advocating to potential donors.  Foundation's could utilize the expertise of these unique IOs to 1) provide a capacity audit on all nonprofits the foundation plans to fund, so that the foundation (and the nonprofit) know what areas they can improve on to increase the effectiveness of their programs (so the foundation is confident it will reach as many people as possible) and the efficiency (so the foundation can save money to use for other important programs);  2) provide new board member training and board education, so the foundation is confident any organization it funds has adequate oversight, a supportive and educated board and is very unlikely to provide legal, ethical or public relations problems;  3) provide program oversight to ensure grant compliance (something most foundation's do not have time to complete) and optimum efficiency and effectiveness (all of which can be provided to donors, significantly increasing donor engagement and donor satisfaction);  4) help community foundations determine areas of service duplication and areas of need, so that some local organizations can be encouraged to focus on best practices (as opposed to expansion when it is not necessarily needed) and some can participate in RFPs to provide new services where needed.  These examples only touch on the important work that can be done through foundation and nonprofit IO partnerships.

In return the foundations would provide financial support to these important nonprofit support centers, either in the form of donations, grants or service fees on a per-project basis.  Grants awarded to nonprofits could include funding for personalized support from the partner IO, as well as ongoing membership and/or conference participation. They could also support IO membership by requiring nonprofits seeking funding to become members, thereby encouraging all nonprofits to seek out ways to increase capacity.   But whatever the cost, the savings in increased efficiencies will provide foundations an extremely high ROI (even save them money that can be used for other programs), and the growing effectiveness will make impact limitless.

Leveraged (For-Profit) Mission Investin

When used in an integrated fashion, mission investments enable foundations to achieve impact in ways that grants could not. The most far-reaching impact of all, however, comes when foundations use for-profit market forces to create social change – in what is called leveraged mission investing.

This form of strategic mission investing has been slow to catch on because it requires foundations to think differently about who can impact social change (and thinking differently is not something nonprofit boards are comfortable with). The traditional view is that nonprofits address social problems and businesses make money. Increasingly, however, businesses are coming to see the social dimension of their endeavors as a key competitive factor.7 Publix SuperMarkets, for example, have often noted their charitable works as a significant factor in their ongoing success.

At the same time, foundations are beginning to pay more attention to the interplay between economic forces and social problems. Poverty, housing, healthcare, and many other core social issues that the nonprofit sector addresses are fundamentally failures of market capitalism to deliver desirable social outcomes. These failures often occur because conventional investors weigh the risk and time horizon of an investment against the expected financial returns, without taking into account any accompanying social benefits or detriments.  Consider the alternative result if bankers had considered the potential social problems associated with giving so many large home loans back in 2003?

Foundations, on the other hand, are in the business of spending money to achieve social benefits. Their calculation of risk and reward can and should be different from that of conventional investors. The most powerful use of strategic mission investing is when foundations use their capital to create incentives, reduce risk, and invent new financial instruments in order to leverage for-profit markets to achieve social objectives.

Foundations can leverage their investments to achieve desired social benefits in a variety of creative ways. They can, for example, help stimulate the creation of a new market, like microfinance. When microfinance was just beginning, conventional investors were not interested in funding it because they believed that the risk of lending money to poor people in poor countries was greater than the potential earnings when the loans were paid back. Foundations stepped in and provided the initial capital for microfinance institutions. Now microfinance is attracting billions of dollars from conventional investors – a clear example of how foundation money can help achieve social goals via market-based solutions.

Foundation money can also help create new companies that have strong social goals but modest financial prospects. One example is Waste Concern, a hybrid forprofit/ nonprofit organization based in Dhaka, Bangladesh. The company’s plan was to hire slum dwellers to collect the piles of garbage rotting in the city’s streets, separate out the recyclables, compost the rest, and sell the compost as organic fertilizer. No commercial financing was available for such a speculative concept, but after persistent efforts the founders persuaded the Lions Club to donate land for composting and the United Nations Development Programme to subsidize the costs of building a facility capable of handling 3 tons of garbage per day. Today, Waste Concern is a profitable company employing thousands of people who recycle the garbage created by nearly 1 million residents.8Only a few foundations have used financial leverage in this way. The $300 million F.B. Heron Foundation, based in New York, is one example. Despite its modest size, Heron has achieved an impact far disproportionate to its resources by leveraging 24 percent of its endowment to advance its mission of helping build wealth for low-income families and communities. Seventy percent of its mission investments earn market-rate returns, yet all are aligned with or directly further the foundation’s program goals.

One market-rate investment that Heron has made is in the Yucaipa Corporate Initiatives Fund, a private equity fund that invests in companies that are located in, serve, or employ people from low-income communities. The fund’s goal is to create attractive investment returns while advancing the flow of private equity into underserved communities. In 2004, for example, Yucaipa and another firm acquired Piccadilly Cafeterias, saving it from bankruptcy and preserving close to 6,000 jobs, many of them in low-income communities in the southern United States. Preserving these jobs kept many Piccadilly workers from falling into poverty.

Heron has also pioneered the Community Investment Index, a positively screened investment fund that selects publicly held companies that do an outstanding job of supporting low-income communities through workforce development, wealth creation, and corporate philanthropy. Working with Innovest Strategic Value Advisors and State Street Global Advisors, Heron has committed its own capital to test the index and, after its positive initial performance (a 15 percent return in 2006), hopes to attract other institutional investors to this new fund.

Heron also developed a deliberate practice of cross-fertilization between its investment and program staff, so that investment staff gained an understanding of the foundation’s program strategies and impact, while program staff received training in financial analysis and underwriting. Not all of the original program staff felt comfortable with this new way of working, and some left the foundation. Today, program and finance staff work together on mission investments, with program officers often suggesting potential investments, and investment staff lending expertise to the assessment and structuring of the transactions.

FSG’s study found numerous other examples of foundations that have, on occasion, used their capital to offset risk, experiment with new financial instruments, and leverage forprofit enterprises to achieve social change. Very few, however, have built leveraged mission investments into their institutional structure as deeply as Heron has.


1 Mark R. Kramer and Sarah Cooch. “Strategic Mission Investing.” Stanford Social Innovation Review, Fall 2010. 7 Michael E. Porter and Mark R. Kramer. “Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility.” Harvard Business Review, December 2006; Mark R. Kramer and John Kania. “Creating Game- Changing CSR.” Stanford Social Innovation Review, Spring 2006. 8 See http://www.wasteconcern.org for more information. 9 Based on Foundation Center data for 50 largest U.S. foundations, March 2007.


Integrated Mission Investing

There are two facets to strategic mission investing. First is integrated mission investing, and second is leveraged mission investing.  The distinguishing characteristic of integrated mission investing is that foundations treat mission investments as a substantial and inseparable part of their program strategy from the very beginning of the program initiatives. They make frequent mission investments and dedicate significant funds to their mission investment portfolios. They have designated one or more foundation staff members to manage these investments, although they may still depend on outside consultants to negotiate and structure individual deals. And the staff person charged with managing mission investing works closely with the foundation’s investment staff and with each program area to identify opportunities where investments might be paired with or substituted for grants.

One foundation that has adopted integrated mission investing is Meyer Memorial Trust, a $650 million private foundation based in Portland, Ore. The foundation’s mission is to “invest in people, ideas, and efforts that deliver significant social benefit” to the region. Meyer Trust had made a number of mission investments in the past, but it had not done so in a consistent or planned fashion. Beginning in late 2005, the foundation began to increase the volume and sophistication of its PRI program, and in 2006, the foundation determined that its mission investing should be fully integrated into its overall program strategy. The foundation also decided to increase the amount of money it commits to mission investments. More than 20 percent of its 2007 grantmaking budget is allocated to PRIs – a larger amount than the foundation invested in its first 20 years of existence. In addition, the foundation is in the early stages of investing in market-rate mission investments, committing $10 million to several deals in the past six months.2

Meyer Trust decided that it would concentrate its mission investments on two initiatives: affordable housing and restoration of the Willamette River Basin. To help create more affordable housing, Meyer Trust lent $375,000 to the Portland Housing Center to fund a down payment assistance program. In so doing, the foundation accepted higher levels of risk and lower financial returns than commercial lenders, enabling low-income home buyers to obtain millions of dollars in mortgages for which they would otherwise not have qualified. The foundation is also helping nonprofit housing corporations explore the feasibility of housing sites – such as drawing up construction plans, drafting funding proposals, getting zoning approvals – by making predevelopment loans available through a nonprofit loan fund that Meyer Trust capitalized with a $1 million loan at a 1.5 percent interest rate. Meyer Trust is exploring the concept of capitalizing a statewide housing preservation and acquisition loan fund. The foundation expects to complement these PRIs with technical assistance grants to nonprofits active in affordable housing and community development corporations, especially in rural areas. Meyer Trust will also evaluate opportunities to provide financially sustainable tenant support services through a combination of PRIs and grants.

In its initiative to restore the Willamette River Basin, grantmaking plays a critical role, but PRIs are also integral to Meyer Trust’s strategy. The foundation will use grants to assemble a coalition of funders, policy advisers, and stakeholders to help catalyze a coordinated restoration of the river, which has become too polluted for swimming or fishing. The foundation will use PRIs to lend money to environmental organizations at below-market interest rates for the acquisition of land and water rights. The loans will be repaid from government funding, private contributions, and the subsequent sale of conservation easements. These loans enable the nonprofits to move quickly in acquiring property to protect the basin before they have assembled all of the necessary acquisition funds.

To ensure that its PRIs and grants are aligned, Meyer Trust’s CEO Doug Stamm assigned Ann Lininger, a lawyer and a former program officer, to manage the foundation’s PRI portfolio. She works closely with program staff and also gives periodic reports to CFO Wayne Pierson, who assesses the financial soundness of the investment and determines whether it qualifies as a PRI.

Meyer Trust has fully integrated mission investing into its program strategy and internal operations, increasing its impact beyond what grants alone would have accomplished. By relying primarily on low-interest loans to nonprofit organizations, however, Meyer Trust has not harnessed the leverage that comes from applying for-profit market forces to solving social problems. Its recent market-rate investments in private equity funds are the foundation’s first major forays into what we call leveraged mission investing.



1 Mark R. Kramer and Sarah Cooch. “Strategic Mission Investing.” Stanford Social Innovation Review, Fall 2010. 2 Meyer hired FSG to develop its new strategy. FSG has also consulted for other foundations mentioned in this article, including F.B. Heron and Grand Rapids, on a variety of projects. 

The Experimental Stage of Mission Investing

Many foundations have already begun to do more than simply make grants, and consider social values in their investment decisions through the screening of securities portfolios for undesirable stocks, using shareholder activism to change corporate behaviors, investing in socially responsible businesses, and making loans to promising nonprofits.  While these foundations are successfully challenging the orthodoxy that grant-making is the only tool foundations should use to effect social change, there is still much more that can be done.  Using mission investing effectively, however, requires foundations to change the way they do business.  And that means educating and persuading a great number of community leaders… a complicated task in any context.

Nevertheless, our research clearly shows that more foundations are doing more mission investing than ever before. Despite this activity, the impact of mission investing often falls far short of what it could be. That’s because the majority of foundations that make mission investments are still at the early, experimental stage. (See chart at right for the stages of mission investing.) These foundations may have made mission investments over a period of time, but typically only in small amounts or on an infrequent basis. Though they may seek out individual investments, rather than simply waiting to be asked, they often have not yet revamped their program strategies to incorporate mission investing as a core philanthropic tool. In addition, they often focus only on below-market- rate investments and do not use their endowment assets for mission investing.

Because these foundations are still experimenting with mission investing, they have not yet restructured their operations to support this approach. As is the case in most foundations, their program staff and finance staff remain in two distinct operations that rarely communicate with one another. Mission investments are usually managed by program staff without the full benefit of the finance staff’s expertise and assistance.

Although the foundations in the experimental stage of mission investing are doing more than most foundations, research has found that they are not yet treating mission investing in the same strategic manner as their grantmaking. As a result, their mission investing may increase social impact, but they are not fully exploiting its potential.

One foundation that is in the experimental phase of mission investing is the Grand Rapids Community Foundation, in Grand Rapids, Mich. The foundation’s mission is to “build and manage the community’s permanent endowment and lead the community to strengthen the lives of its people.” The foundation has $225 million in assets, of which only $1.4 million is in outstanding mission investments, all in low-interest loans to nonprofits. The foundation began making mission investments in the early 1980s with a series of small (typically under $25,000), zero-interest “recoverable grant” loans to grantees using program funds. The loans were made in response to requests by grantees rather than as part of a proactive program strategy.

The foundation began making larger mission investments in 1994, guaranteeing a $200,000 loan to Dwelling Place, a local nonprofit community development corporation that builds affordable housing. The foundation knew that Dwelling Place had strong financials and capable management, so it considered guaranteeing the loan to be low risk. The foundation’s board, however, was unfamiliar with mission investments and spent considerable time debating whether to provide the guarantee. In the end, the loan was repaid on time and the guarantee was not called upon.

As the Grand Rapids Community Foundation gained experience with mission investing, it was willing to experiment in bolder ways. In 2004, the foundation made a $1 million loan at 2 percent interest to Lighthouse Communities, a nonprofit community development corporation, to help create a loan fund for home improvements and lead paint removal. This time, the foundation initiated the idea, knowing that some of its donors were interested in neighborhood development. Because of the foundation’s leadership, eight banks provided an additional $2 million to the Lighthouse fund at a low interest rate.

Although these mission investments have met all financial and social expectations, and the Grand Rapids Community Foundation has become more proactive in using this tool, the foundation has not yet developed a strategy for future mission investments, nor has it changed its operations or staffing structure to support an ongoing mission investment program. This foundation’s experience is typical of the large majority of the foundations in FSG’s study: Despite having had a number of successful experiences with mission investing over many years, most foundations have remained in the experimental mode for decades without moving beyond low interest loans to grantees or graduating to a more strategic and integrated approach.

Next step:  Some foundations have advanced beyond experimental mission investing to the next level – strategic mission investing. There are two facets to strategic mission investing. In the first – integrated mission investing – foundations change the way they manage mission investments by fully integrating them into their overall program strategy and internal operations. In the second – leveraged mission investing – foundations change the types of investments they make, adding for-profit businesses to the mix and deliberately leveraging market forces. Although foundations can pursue these two facets of strategic mission investing independently, they achieve their greatest impact when they bring the two together in a unified strategy.



1 Mark R. Kramer and Sarah Cooch. “Strategic Mission Investing.” Stanford Social Innovation Review, Fall 2010.

Risk vs. Reward Of Mission Investing

Boston-based FSG Social Impact Advisors, recently completed the most comprehensive study to date on mission investments (as opposed to the broader universe of social investments), which they define as investments that proactively further a foundation’s mission.2 Funded by the David and Lucile Packard Foundation, the study analyzed the mission investments of 92 U.S. foundations.

The vast majority of private foundations that make mission investments concentrate on program-related investments (PRIs), whose primary purpose is to further the foundation’s charitable objectives, rather than to earn financial returns. (The IRS allows foundations to count PRIs as part of their required 5 percent annual payout.)  Most PRIs are below-market-rate loans made to foundations’ grantees with interest rates between zero and 3 percent.

Many foundations assume that such loans are high risk, but FSG’s analysis suggests otherwise. Of the 28 foundations in our sample that collectively made $230 million in loans that matured during the past 40 years, 75 percent experienced no defaults. Furthermore, the overall full repayment rate of principal and interest in this sample set was 96 percent.

Although most foundations concentrate on PRIs, many are starting to make market-rate investments that earn returns comparable to those of conventional investments in the same asset class made without considering social returns. These investments include loans that carry interest rates at or above the prime rate, municipal bonds, and equity investments in real estate development. Foundations are also diversifying the types of mission investments that they make, moving beyond loans and exploring areas such as private equity and venture capital. (Unlike PRIs, which are typically drawn from program funds, market-rate mission investments are often made directly from the foundation’s endowment, or from a segregated pool of endowment assets.)

Endowments and the income that flows from them are foundations’ lifeblood, so it is understandable that most foundations are proceeding cautiously when it comes to putting endowment funds into less conventional investments like mission investing. However, major U.S. foundations haven’t hesitated to shift a significant proportion of their assets into other unconventional investments, such as hedge funds, private equity, natural resources, and international stocks. Foundations have moved into these investments, as risky as they sometimes are, to diversify their portfolios and increase their returns. According to the Commonfund Institute’s study of 279 foundations, unconventional investments (hedge funds, venture capital, etc.) make up 23 percent of foundation holdings, and international investments make up another 20 percent.4Mission investments, in contrast, make up only about 2.4 percent of the assets of the foundations in FSG’s sample, and less than one-twentieth of 1 percent of all U.S. foundation holdings.

There are solid reasons why foundations are not pursuing mission investing with the same degree of vigor and imagination as they are pursuing unconventional investments like hedge funds and private equity (reasons that provide direction on how to inspire more mission investing by foundations). Most foundations do not have staff with the combination of program and financial experience that is necessary for finding and managing mission investments, and the compensation incentives for those who do manage a foundation’s investments are based solely on financial returns, not social returns. Foundations are also hindered by the limited number of mission investment opportunities, the paucity of outside investment advisers who understand mission investing, and the lack of reliable performance data for benchmarking the social and financial returns that mission investments provide. A misunderstanding of fiduciary duty – thinking that it limits a foundation from taking more risk or less return in pursuit of its mission – has also left many foundation boards skeptical of the entire idea. 5

The research, investment results and tools are available for mission investing by foundations.  It is now time for foundations to recognize their organization's full potential and begin using their investments for social change.  To only see grant making as a way to impact communities is shortsighted and irresponsible.  It equates to purchasing a 100-room hotel to house the homeless, but only allowing use of the 10 rooms on the bottom floor.  In other words, we can do MORE.



1 Mark R. Kramer and Sarah Cooch. “Strategic Mission Investing.” Stanford Social Innovation Review, Fall 2010. 2 The report,Compounding Impact: Mission Investing by U.S. Foundations, may be downloaded without charge athttp://www.fsg-impact.org. 3 Foundations approach the risk of mission investments in different ways. Some view mission investments as true investments, expecting low risk and market-rate returns; others use grant dollars to make risky investments with little due diligence and no attempt to collect on delinquencies. 4 Communfund Institute. “Commonfund Benchmarks Study 2007 Foundations Report,” 13 June 2007. 5 Mark R. Kramer. “Foundation Trustees Need a New Investment Approach.” The Chronicle of Philanthropy, 23 March 2006.


Effective Social Change – It’s More Than Just Grant-Making

As a past community foundation CEO, I am a passionate advocate of the power of foundations.  However, I find myself disappointed in the narrow-minded focus of many of these organizations who hold so much potential power in terms of making and inspiring positive social change.  Currently most foundations (especially in Florida) are trying to solve the major social problems of our day – such as poverty, homelessness, global warming, and lack of healthcare – by making grants to nonprofits.  However, grant-making is not why foundations hold so much potential power, because that is not where major change is made.  Large scale social change is made in the capital market, and foundations are in a unique position to create change because they alone control large pools of investment capital that CAN BE dedicated to broad social purposes. They have the power, through their collective financial assets, to craft market-based solutions to social problems.  Market-driven solutions cannot cure all social ills, but they can create positive social change in many areas that nonprofits previously could not influence.

What we are talking about here is not the bland "social investment strategy" most foundations define with a paragraph in their investment policy stating "no investments will be made in companies involved in the production of tobacco, weapons or alcoholic beverages".  Instead, we are talking about a proactive approach to using a foundation's large investment pool to help shape social change.  A practice most often called mission investing, or impact investing.

Mission investing refers to investments in revenue-generating nonprofit and for-profit organizations whose work is consistent with an investor’s charitable purpose and goals.The emphasis is on investments, as opposed to grants.  To be successful, foundations must reach out beyond the nonprofit universe to work with a new set of partners in the commercial sector.  Board members and foundation staff must recognize that for-profit enterprises also contribute to social solutions. They must thoroughly understand not only the nonprofit options for intervention, but also the impact of commercial enterprise on the social issue to be addressed.

Foundations must also realign their organizational structures to bring program expertise to the investment side and investment expertise to the program side. This may require recruiting new staff or hiring consultants who bring this unusual combination of perspectives. Foundations must also coordinate impact evaluation and financial reporting processes to enable tracking of progress toward both program and investment objectives.

At the same time, the spread of strategic mission investing will also require changes external to foundations. A robust and efficient marketplace of investment options for mission investing does not yet exist. The sector needs new investment intermediaries that offer foundations easy participation with low transaction costs in a wide range of investment vehicles targeted toward specific programmatic objectives. People with financial and business expertise must be recruited into the sector. Nonprofits must develop the financial discipline and appetite for investments as well as grants. And better ways of measuring social performance and benchmarking financial returns must be found.

Neither the internal nor the external changes will happen all at once. Instead, they will evolve. The more foundations create demand for strategic mission investments, the more others will develop a robust roster of investment offerings. This will make mission investing easier, leading more foundations (as well as social-concious individual investors) into the practice. And as mission investing becomes more mainstream, foundations will attract staff and develop the internal processes necessary to support them, as well to benchmark each other.


1 Mark R. Kramer and Sarah Cooch. “Strategic Mission Investing.” Stanford Social Innovation Review, Fall 2010. 2 Based on Foundation Center data for 50 largest U.S. foundations, March 2007.


Tactical vs. Strategic

Cheshire Cat appearing (detail)Think about your normal work day. How much time do you spend talking with people about building something? Building a website, starting a campaign, writing a grant, whatever. I’ve noticed that most of the questions I ask, and most of the questions asked of me, are all about logistics and tactical decisions: which fundraising event should I do? Should I do a blog? How do you build a budget? And so on. Considering how much time we spend on these sorts of questions (and this may be hard to hear), none of that stuff really matters.

Changing the world is much more important than having a the biggest fundraiser in town. You can have the best event in the world, but if you don’t have a clear vision for what you want to do it for, no one will care. Consider a for profit enterprise. You can have a super-optimized business model, but if no one wants to buy what you’re selling, you don’t have a business. In the nonprofit sector you are selling a mission, and if you don't have a clear vision of what you want to accomplish, no one is going to support it.

You can learn all about tactics as you go along, but you must have a clear STRATEGY from the start. After you have a clear strategy, then you can go back to some of the tactics. Then you can figure out what you’re doing and how to make it better, and you’ll see more of an impact. But starting with the tactics is almost always a mistake.

Another mistake often made in the nonprofit sector is the idea that you can simply find and reproduce successful programs that seem to achieve your similar mission. Often these replicated programs are started by people impressed with original program, and instead of reinventing the wheel they try to emulate the success of another nonprofit. The interesting thing is that they tend to copy the tactics but not the strategy. Too bad for them, because they’ll only see a fraction of the success.

In short, it’s like the Cheshire Cat from Alice in Wonderland said: “If you don’t know where you’re going, any road will get you there.”

More & More State Programs are Being Shifted to the Nonprofit Sector

While the nonprofit sector fights to keep our federal government from drastically cutting the charitable incentive tax credit, a credit thought to drive substantial funds to nonprofit

Governor of New Jersey Chris Christieprograms to the nonprofit sector. In an effort to cut budgets without hurting community support, state governments are turning to the nonprofit sector – the sector often forgotten EXCEPT in times of crisis. This crisis, however, is not the standard hurricane or earthquake. We are now being recruited to help in our country’s financial crisis.

Here is an excerpt from a press release with an example of a New Jersey after-school program shifted to the nonprofit sector: “Having eliminated through a line-item veto all state funding for the nonprofit named New Jersey After 3, Governor Chris Christie announced this month the creation of a private-public partnership to maintain some of the organization’s after-school programs in public schools. Appropriations for the programs run by the nonprofit had declined from $15 million in 2007. The new arrangement revolves around having NJ After 3 assist the state with its “No Child Left Behind” (NCLB) waiver application and work with various governments to support the expansion of high quality expanded learning time programs around the state.  In announcing the partnership, reportedly funded by a political supporter, Governor Christie announced, “This is the model for what we should be doing for these types of programs across the state during difficult fiscal times,” suggesting that more government programs are likely to be shifted to the nonprofit sector in the future.”

While nonprofits are most often happy to assist in helping with programs that serve our communities, it is difficult when financial support for our current programs is hurting. With the current economic climate, the government pushing a “pay-by-results” agenda for future funding, and the charitable tax incentive being reviewed as a way to increase taxes collected… how do we find the funding to pay for these new programs? One way is to reform our nonprofit sector to be more efficient, and make each dollar go further. Large foundations such as the Gates Foundation, as well as growing professional nonprofit associations, are beginning to recognize the need for reform and start funding the necessary research to get started. But in order to protect and expand our current standing, we also need to advocate for the nonprofit sector (or third sector) for better support (financially and otherwise) from our other two sectors: private and government.

The nonprofit sector is often seen as the weak, ugly stepsister of the powerful corporate and government sectors. We are seen as doing the best we can with little money and lower professional standards. We are often forgotten about until a crisis such as a hurricane or terrorist attach occurs, at which time we are expected to “back up” our private and government sectors to make sure the basic human needs are met. But we are not the small, weak, underperforming sector people often expect us to be. We have access to huge amounts of capital, both fiscal capital and (more importantly) people capital. We also have some of the brightest, and most passionate professionals of any sector. We are doing incredible things in our communities, but with the acknowledgement and cooperation of our other sectors, we can do so much more.

Who is Responsible For Advancing the Practice of Philanthropy?

Charity in the dictionaryNo matter where I go or who I talk to about philanthropy, I very rarely (if ever) hear concern for the improvement of philanthropic approaches. The bottom line – nonprofits just don't believe they should pay as much attention to the practice of philanthropy as they should to the execution of their programs. In recent years, the Gates Foundation has ramped up its own philanthropy program, but most large foundations do not seem to believe that funding the investigation and development of the philanthropic field is their responsibility either. I believe that every single nonprofit should be involved in the constant refinement of philanthropic approaches, because if we do not take responsibility for the improvement of our own sector, who will?

Nonprofits have been operating for decades in a vacuum. How can any nonprofit be expected to improve without networking, development & the investigation of new approaches and ideas? It has only been in the last 20 years that a professional association for nonprofits, the National Council of Nonprofits, was even started. And today only 32 states have a nonprofit association, and the states that do have associations have very small membership numbers compared to the total number of operating nonprofit organizations.

Not only does this lack of a strong network substantially stunt our growth and impact as a sector, but it leaves the oversight and standard setting of the nonprofit sector to the government sector. And without organized advocacy by nonprofits, for nonprofits, we have no one to blame but ourselves.

If you are interested in joining your national nonprofit association, and to see if your state has an association, go to http://www.nationalcouncilofnonprofits.org. If you are interested in participating with me in starting a state-wide association in Florida, contact me at kgradybrock@gmail.com.

Is Philanthropy Broken?

Maybe it’s because I’m getting older and I just plan to do what I want to do.  Maybe it’s more confidence. Maybe it’s just more wisdom.  No matter the reason, I feel it’s been long overdue to kick the time-worn “nonprofit template” to the curb.  As a long-time nonprofit executive, with more than 16+ years leading various nonprofit organizations, and an avid "learner" of all things related to nonprofits, I have spent a substantial part of my life researching and educating myself in an effort to “understand” the nonprofit sector better.  I have studied to “improve” myself as a nonprofit executive, "increase" the reach and impact of my nonprofit organization, and“tweak” the overall effectiveness of nonprofits in my community.  Finally, I stepped back and realized it wasn’t ME. It wasn’t MY organization.  It wasn’t MY community.  I realized that the nonprofit system in America is BROKEN!

The sad part is that most people haven't noticed the low efficiency, or slow social change.  Probably because they either 1) don't hold the nonprofit sector to the same standards as the private/corporate sector or government sector (nothing to be proud of as a nonprofit professional); or 2) don’t realize the enormous capital at our disposal.  (And not just financial capital, although it is substantial; but human capital as well.  What other sector has access to SO much human capital?)  We as a sector are NOT living up to our potential, and something has got to be done.

Many people and organizations have been working for many years on this issue, many people much smarter than me.  My plan is to continue to educate myself about the issues affecting nonprofit impact, and learn as much as I can from the people and organizations who are already working to make changes.  Many call this movement for change "Venture Philanthropy", "Social Entrepreneurship", "New Nonprofits"… but whatever you want to call it, it is a call to action.  A call for change.

In my blog I will be exploring these issues, the thoughts of many insightful people, and the new programs developed in an effort to start changing the nonprofit sector.  I welcome your input, either as another nonprofit professional, a donor, an educator or simply a caring person.  And I hope that through education, idea sharing and communication we can continue making changes (or in some cases  just start making changes) in our communities, while seeking larger change for our sector.  Change is never easy, but it is necessary.  So I look forward to this hard road of exploration and change ahead, with the goal of giving back more in the future with a more cohesive and efficient nonprofit sector.