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A Nonprofit “Culture of Philanthropy” Is Not Enough

By Nell Edgington



Beyond FundraisingThe Evelyn and Walter Haas, Jr. Fund, a foundation on the forefront of investing in nonprofit capacity and one of the few foundations funding nonprofit leadership development, released a new report this week Beyond Fundraising: What Does It Mean to Build a Culture of Philanthropy?.

While I applaud the Haas Fund for taking a pioneering interest in, as they put it, “understanding how to break out of the nonprofit sector’s chronic fundraising challenges,” unfortunately I don’t think that this report will move the needle on the sector’s money woes.

Their landmark 2013 report published with CompassPoint, UnderDeveloped: A National Study of Challenges Facing Nonprofit Fundraising (of which the Beyond Fundraising report is a follow up) uncovered a real crisis in fundraising staffing in the nonprofit sector. And last year Haas announced a multi-year effort to “to identify gaps that may need to be filled when it comes to helping nonprofits break out of chronic fundraising challenges.”

A sector-wide conversation about money is so incredibly needed that I really appreciate the Haas Fund’s efforts to start it, especially when philanthropists are loathe to talk about the sector’s money challenges, let alone invest in solving them.

But in the hope that debate spurs greater change, and because of Haas’ expressed desire to open a conversation so that they can “learn out loud,” I offer my concerns about the Beyond Fundraising report.

As Linda Wood, Senior Director of Leadership Initiatives at the Haas Fund (and past interviewee on this blog), describes in the beginning of the Beyond Fundraising report, there must be a fundamental change in how nonprofits approach fundraising. As she writes: “Without a deeper shift in how organizations hold the work of fund development, simply adopting new tools and techniques may not be enough.”

The Beyond Fundraising report, authored by philanthropy consultant Cynthia Gibson (also a past interviewee on this blog), starts from where the 2013 UnderDeveloped report left off: that the lack of a culture of philanthropy is the most important issue holding nonprofits back from fundraising success:

By framing the issue as a talent pool problem alone, we neglect to focus more critically upon entrenched organizational factors that contribute to the inability to establish development as a shared function and nurture an organizational culture to sustain it. The right development director hire alone will never break the cycle, but the right person inside an organization that has a culture of philanthropy, can.

The Beyond Fundraising report is an attempt to understand what a culture of philanthropy is and how to encourage its growth. The report defines a “culture of philanthropy” as a situation in a nonprofit where:

Most people in the organization (across positions) act as ambassadors and engage in relationship-building. Everyone
promotes philanthropy and can articulate a case for giving. Fund development is viewed and valued as a missionaligned program of the organization. Organizational systems are established to support donors. The executive director is committed and personally involved in fundraising.

The report delineates four necessary components to a culture of philanthropy:

  1. Shared responsibility for development
  2. Integration and alignment with mission
  3. A focus on fundraising as engagement
  4. Strong donor relationships

It then provides a list of indicators for nonprofit leaders to use to assess whether or not they possess a culture of philanthropy, a list of “guiding questions” nonprofit leadership can ask in order to build a culture of philanthropy, and a list of roles that development staff and funders can play in bringing a culture of philanthropy to fruition.

While I don’t disagree with any of the indicators, questions, or roles the report describes, I don’t think that any of them, or even their sum total, will solve the lack of financial sustainability at a particular nonprofit, let alone in the nonprofit sector overall.

And this is because I think that only looking at fundraising — the pursuit of philanthropic dollars, which only make up 13% of all the money flowing to the nonprofit sector — is a fundamentally flawed approach to understanding money in the sector. My bias has always been to move the sector from a broken fundraising approach to a more strategic and holistic financing approach.

And while I agree that individual nonprofit leaders are part of the problem, they are just one part. Often their troubled approach to money is simply a reaction to a dysfunctional system. Certainly we need to move away from some ineffective money practices that nonprofit leaders embrace (being reactive rather than strategic about money, not calculating the return on investment of fundraising activities, not aligning money and mission, allowing a board to dismiss their money-raising responsibilities…).

But I worry that by scapegoating the problem to the shortcomings of individual nonprofits we are ignoring the larger financial dysfunctions of the sector. Rather than pull back the curtain on the systemic hurdles causing the nonprofit sector’s money woes, I fear that this report lays much of the blame for financial dysfunction at the feet of individual nonprofit leaders.

Because in my mind, the real problem is not the approach of individual nonprofit leaders, although that is important. I think the financial problems of the nonprofit sector run much deeper. If we truly want to address those problems we must have bigger conversations, and ask harder questions, like:

  • Why is there a lack of financial acumen (how to effectively attract and employ money) throughout the sector (present among both nonprofits and their funders), and how do we solve that?
  • Why is long-term organizational and financial planning not encouraged and supported throughout the sector?
  • Why is there not enough investment in the financial function of nonprofit organizations (the staffing, systems, technology, planning, and marketing necessary to build sustainable financial models)?
  • Why aren’t there many, many more funders like The Haas Fund discussing and investing in solutions to the sector’s money problems?
  • Why are we still focusing on philanthropic dollars alone when we need to understand and integrate money as a whole into social change efforts?

And that’s just a start.

My fear is that if we place the full weight of nonprofit financial dysfunction on the shoulders of an individual nonprofit’s culture, or if we look only at fundraising, we shirk our duty to dig deeper and remedy larger, structural dysfunctions in the sector.

I applaud the Haas Fund for their determination and courage to create a space, through their capacity investments and on-going research, for the incredibly important conversation about money in the nonprofit sector. But I would love to see this effort grow to become a bigger conversation about how we solve the endemic financial challenges nonprofits face.

Photo Credit: The Evelyn & Walter Haas, Jr. Fund

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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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7 Comments to A Nonprofit “Culture of Philanthropy” Is Not Enough

Kate Barr
March 5, 2016

Nell,
Thank you for your substantive and thoughtful response to the excellent report. I agree with you that the issues and possible steps forward are much broader than development or individual organizations. I am especially happy to read this point, “Why is long-term organizational and financial planning not encouraged and supported throughout the sector?” I continue to be disappointed in strategic plans that gloss over the business model required to actually carry out the plans and make the difference in the community they describe. I’m going to chew on this some more, read the report again, and add my thoughts as well.
Kate

Nell Edgington
March 7, 2016

Thanks for your thoughts, Kate. I absolutely agree with you about strategic plans that lack a financial model component. I look forward to your additional thoughts on what I believe is a hugely important topic in the sector. Thanks!

Cynthia Gibson
March 14, 2016

Thanks, Nell, for taking the time to raise some very important points about the recent Haas Fund, Jr.’s new publication, Beyond Fundraising: What Does It Mean to Build a Culture of Philanthropy? As mentioned, this report came out of a group the Fund convened to highlight promising practices for smaller/mid-sized social change organizations wanting to break out of chronic fundraising challenges spotlighted in the Fund/CompassPoint’s UnderDeveloped study, which received considerable attention in the field.

One of the most consistently identified promising practices that emerged from the UnderDeveloped research was a culture of philanthropy. That raised a lot of questions about what, exactly, this “culture of philanthropy thing” was. People were talking about it but there wasn’t much consensus on what it looked like in practice, nor were there indicators against which to assess it—gaps that nearly all those interviewed for “Beyond Fundraising” (many of whom have done their own excellent work on this issue) said were important to fill.

To that end, the Haas Fund, Jr. asked me to help put some meat on the bones by examining existing research and information about cultures of philanthropy, as well as tapping people with deep fundraising experience to get their perspectives and wisdom about this approach. The charge was simply to take a stab at codifying a construct that was still relatively inchoate in the hope it could serve as the foundation for broader discussion about 21st century development strategies. It wasn’t to advocate for the approach one way or another, nor was it intended to ignore serious and important questions about the need for a robust systemic social sector financing infrastructure that could alleviate some of the fundraising pressures individual nonprofits face on a daily basis.

As a former development professional and funder who’s spent decades advocating for more investment in social sector capacity building and management, I agree completely with your concern that there continues to be a distressingly small amount of attention given to designing the kind of “financial ecosystem” for nonprofits that may include, but isn’t limited to, private fundraising. And I agree that focusing on individual organizations’ practices—whatever those may be—will not address the absence of reliable, sustainable and system-wide financing structures to which all nonprofits have access.

The irony is that during the past few years, we’ve seen buckets of ink spilled on the topic of “nonprofit financing,” but most of that discussion has focused on narrower strategies such as social impact bonds, PRIs and other kinds of impact investing, rather than on how (or whether) these mechanisms can eventually merge into the kind of larger financing infrastructure we’d all like to see. Not to mention that many of these are still in the experimental stages and targeted primarily to large, already well-resourced organizations.

The result is that the majority of nonprofits –especially the small or mid-sized groups that Haas and other foundations are supporting –are left still having to fundraise through more traditional means. As “Beyond Fundraising” points out, that’s becoming even more difficult because of rapidly shifting cultural trends that are forcing nonprofits to reexamine the ways in which they get the resources they need to do their work. That means they need as many promising approaches as they get, and developing a culture of philanthropy seems to be one that’s worth testing.

Is it the magic bullet? Hardly. Is it promising? The qualitative data surfaced in this and the UnderDeveloped study suggests that development experts and professionals who are implementing this approach think it may be. As we pointed out in the report, however, we won’t know until more organizations test it.

In the meantime, organizations have budgets to meet and programs to deliver. Recognizing this, the Haas, Jr. Fund’s initiative is trying to help them be as successful as possible given the reality in which they are currently operating—not where we all might like it to be. That’s a far cry from “scapegoating the problem to the shortcomings of individual organizations.”

Still, I agree that there’s much more to be done and that includes finding ways to start building the kind of financing infrastructure you advocate, as well as helping individual organizations strengthen their own financial systems, including more sophisticated business planning, as Kate Barr has advocated for years (and on this blog).

That will take much more discussion, which we’re happy to see is occurring, thanks to you and others who are asking important questions. It’s my sincere hope that the Fund’s “Resetting Fundraising” project can, at the very least, serve as a thoughtful springboard for that conversation—one that digs deeper into the feasibility and potential of not only new fundraising approaches but broader social sector financing structures that support the individual organizations undertaking those approaches.

[…] A Nonprofit “Culture of Philanthropy” is Not Enough. Nell Edgington of Social Velocity is one of the smartest, most thought-provoking writers in the […]

Gayle L. Gifford, ACFRE
April 5, 2016

Nell, we agree on something!!
If building a ‘culture of philanthropy’ means investing heavily in a significant number of revenue generating staff — which research has shown to make a difference — then I’m all for it.

As Cynthia and I previously exchanged comments, given that there is no quantitative data at all to link a ‘culture of philanthropy’ with actual growth in revenues from fundraising, this is pretty much all just speculation. I’m not even willing to call this a “promising practice” as even the qualitative evidence is pretty, pretty sparse.

Like you, I’d rather see ngos (including foundation funders) spending time building and testing funding models and testing the actual dollar returns and ROI on significant investment in revenue development capacity (and by that I don’t mean one token inexperienced development director) than sinking time into chasing the culture of philanthropy.

Nell Edgington
April 6, 2016

Gayle, I knew someday you and I would find common ground! (I actually think we have already found common ground, and I really appreciate your always thoughtful responses. I would love to see more of this kind of debate in the sector).

I completely agree with you about needing to build money-raising capacity (both experienced, well-paid, strategic staff AND the technology, systems, training, etc. necessary to equip that staff for success). And I also agree that we need more sector-wide investments in R&D about what works and what doesn’t.

Gayle L. Gifford, ACFRE
April 6, 2016

Nell,
Nice to be in alignment.

While we are taking on the plight of the majority of small and medium sized nonprofits, how about we train our sights on the diversion of significant amounts of philanthropy to the wealthiest among us. I don’t see any major philanthropists crying out “There are simply too many business schools at universities, why are we creating all these wasteful structures” or “we have too many cancer centers at hospitals” while low-income housing, mental health, early childhood, etc. etc. is starving for dollars.

Small and medium sized nonprofits can’t compete with advancement departments employing hundreds of fundraising professionals, no matter how much “culture of philanthropy” they create.

In many ways it reminds me of the culture of poverty argument for why poor folks are poor.

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