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Can Philanthropy Pave the Way, Not Get in the Way?

By Nell Edgington



snowplowThere is a growing drumbeat lately (for starters here, here and here) that nonprofits must be more bold. I couldn’t agree more and have argued that nonprofit fear and small thinking sometimes hold them back. But it is becoming increasingly obvious to me that if we want to get better at solving social problems, we have to ask philanthropist to be more bold too.

And I’m heartened to see this conversation starting to emerge. The Letter to the Donors of America, the Donor Forum’s Real Talk About Real Costs effort, Dan Cardinali’s request that philanthropists fund the “unsexy” work of nonprofit capacity building, Rebecca Thomas encouraging funders to support nonprofit resilience, and Ben Powell’s idea that philanthropy provide more start-up capital all add to the philanthropy reform discussion. I love it!

But I want to see the idea that philanthropy can be so much more move beyond talk.

There is a huge disconnect between what nonprofits really, truly need to solve social problems and how funding currently flows. We are locked in a chicken or the egg scenario where often a nonprofit working to solve a social problem encounters some major capacity constraints. For example, a nonprofit doesn’t know how to:

  • Create a sustainable financial model
  • Effectively grow their solution
  • Structure their board and staff for success
  • Strategically filter opportunities
  • Engage key outside elements in the change effort

And quite often they don’t know how to move past these capacity constraints.

At the same time, philanthropists may recognize that a grantee is encountering some significant hurdles, but doesn’t know how (or is unwilling) to invest in overcoming those hurdles. So the constraints remain unmoved.

But what if nonprofits and philanthropists could start working together to move those hurdles?

What if instead of getting in the way, philanthropists started paving the way?

Philanthropy could provide the critical infusion of the right kind of organization-building money at the right time thereby allowing a great solution to grow.

To me, that’s bold philanthropy.

But how do we get there? Philanthropists need to change in some fundamental ways:

Move to Impact
Just as we are increasingly asking nonprofits to move to impact, philanthropists need to do the same. Instead of tracking outputs (# of grantees, $s given), foundations need to start tracking whether their investments result in change to 1) their grantees and 2) the problems those grantees address. Just as we are starting to ask nonprofits “To What End?” we need to ask funders the very same question.

Help Diagnose the Constraints
Once philanthropists start getting clear about what they want to change and whether their investments are actually resulting in change, they need to become cognizant of the hurdles standing in the way of that change. And I will tell you that there are some almost universal hurdles in the nonprofit sector (lack of management expertise, poor leadership development, board disengagement, financial instability). So if a philanthropist really wants to see change to a social problem, he needs to get clear about what those he is investing in need to make that change a reality.

Invest in Removing Those Constraints
But it simply is not enough for funders to recognize that those they fund have very specific and tangible organizational needs. Those funders then must put their money where their mouth is. More philanthropists need to invest in building stronger, more effective, more sustainable solutions. They need to provide more capacity capital, money to build an effective, sustainable nonprofit that can grow impact.

We have only scratched the surface on what philanthropy can do to solve social problems. But I am optimistic that we can fundamentally change philanthropy so that it increasingly provides the capacity capital the sector so desperately needs.

Photo Credit: Jeffrey Beall

 

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About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.


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2 Comments to Can Philanthropy Pave the Way, Not Get in the Way?

Jack McCarthy
September 18, 2013

Nell–

I couldn’t agree more. We recently completed a business plan with McKinsey & Co. which is, as you know, not a casual endeavor. With the level of diligence and the deep dive into how to build our capacity to increase our impact, I thought we would provide many of the answers philanthropists seek through this process.

We’re finding ourselves still in the same old processes with small grants that fund part of someone’s salary causing us to pretzel twist to fit our goals with the foundation’s desired deliverables and others seeking us to develop new programs and approaches (without full funding) to meet their goals and desires.

We’ve recruited a new development committee chair to actively pursue high net worth individuals for the year-end with hope that this strategy might break us out of the doldrums, but there is definitely a prevailing belief in the philanthropic world that programs are supplicants and foundations are the strategic thinkers and that the number of flaming hoops a grantee jumps through on the way to a grant is an indicator of quality.

Keep up your great work.

Jack

Nell Edgington
September 18, 2013

Jack,

I’m sorry to hear that you are encountering this very issue. I’m curious, did you take the plan that McKinsey put together to some foundations to ask for capacity capital? Did they turn you down? I’d be interested to hear how those conversations went and what held those philanthropists back from investing in such a well-thought out plan.

I hope that you don’t give up trying to raise the capital you need. It may be a question of finding the right philanthropists who can be educated about the transformative power of capacity capital. Good luck!

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