As much as we might like to deny it, nonprofits exist in a market economy, which means that nonprofits, like everything else, must compete for customers and resources. Therefore it is critical that you understand where your nonprofit fits in the market.
While a business has one customer, a nonprofit has at least two distinct customer groups:
- Those who benefit from a nonprofit’s work (clients), and
- Those who fund that work (donors, government contractors, etc).
So it is absolutely critical that nonprofit leaders understand what unique value their work brings to these customers. This can be done through a Marketplace Map, which is one of the first exercises (along with a Theory of Change) that I help nonprofit leaders create during a strategic planning process.
A nonprofit organization is best positioned to create social change in a sustainable way when their core competencies (what the organization does better than anyone else) intersects with a community need (or set of social problems) apart from their competitors or collaborators, like this:
But don’t get me wrong. I am not saying that a nonprofit shouldn’t collaborate.
On the contrary, nonprofit leaders must forge strategic alliances that help move the social change they envision forward. However, when they create those alliances, they must be crystal clear about what their organization brings to the table, versus what a potential ally brings to the table. Thus, a marketplace mapping exercise is absolutely critical to charting a way forward.
In order to create their marketplace map, a nonprofit’s board and staff must answer these three key questions:
- Core Competencies: What superior assets (expertise, relationships, etc.) do we possess as an organization that are not easily replicable?
- Community Needs: What community needs/social problems are we attempting to address?
- Competitors/Collaborators: What other entities are working on some/all of those same problems?
The social change sector has become increasingly competitive in recent years. Now more than ever, nonprofits need to understand this external marketplace of competitors/collaborators against their own core competencies in order to understand the unique value that their nonprofit can contribute.
From this marketplace mapping exercise, some key strategic questions will emerge for the nonprofit, such as:
- Where do our core competencies and activities end, and where do others’ begin?
- Is our nonprofit better positioned than other entities to conduct all of the activities (from our Theory of Change) that we currently do? Should some activities be left to those who do it better?
- Are there core competencies that we must develop in order to better address the community needs we’ve identified?
- Are there collaborators/competitors that we should be more strategic about aligning with?
Creating a Marketplace Map, much like creating a Theory of Change, is an incredibly useful exercise that gets your board and staff thinking in bigger, more strategic ways about your work. And those more strategic conversations can help lead to a more effective and sustainable path forward.
If you want to learn more about how I work with clients to develop their strategic plan, download the Strategic Plan benefit sheet.
I’m a little late on my 10 great reads list this month because the GEO conference kept me busy, but there was lots going on in April. From the most pressing issues facing foundation leaders, to what history can tell us about new philanthropy and combatting xenophobia, to how nonprofits create economic value, to Millennials and social change, to state lawmakers attacking nonprofits, it was not a slow month.
Below are my 10 favorite reads from the month of April.
- If you read only one thing on this list, let it be Ruth McCambridge’s fascinating interview with media theorist Douglas Rushkoff. He argues that a nonprofit (or benefit corporation) business model is far better at creating value than a corporate model that operates under a “scorched earth policy.” He argues that corporations transfer value only to their shareholders, instead of the economy as a whole. As he puts it:
“Unlike the for-profit sector, the nonprofit company can’t sell itself, and it doesn’t have shares that go up in value…the way you make money is not by making your share price more valuable and then selling those to other people…the investment that you put in the company stays in the company. You can’t extract that when you leave. So, it’s much more like a family business, and if you look at the data, family businesses do better than shareholder-owned businesses in pretty much every single metric, and they last a whole lot longer. You’re building a company not because you want to take value out of it and then use that money to bequeath an inheritance to your grandchildren, but rather you’re building a company that you hope will still be around when your grandchildren need a job, to circulate wealth when you die. That’s why I’m trying to convince Internet startups to be benefit corporations, multipurpose corporations, or best of all, nonprofits.”
- And if you only have time to read two things on this list, let the second thing be Phil Buchanan’s essay on the five most pressing issues facing foundation leaders, “Big Issues, Many Questions.” A thought-provoking read.
- Pew Research provides a cool interactive graphic of the ebbs and flows of political polarization over the last 20+ years.
- While we are talking about change over time, I have always thought there are great parallels to be drawn between the philanthropists born of today’s digital age and the Gilded Age philanthropists. Nellie Bowles writing in The Guardian seems to agree in her piece about the “Digital Gilded Age.”
- And speaking of the history of philanthropy, Alfred Perkins, writing on the HistPhil blog, sees parallels between our current xenophobic political environment and the anti-Japanese sentiment in World War Two. But back then Rockefeller Foundation philanthropist Edwin Embree fought it. And perhaps there is a lesson there for philanthropy today: “By moving boldly beyond the customary boundaries of organized philanthropy, Embree was able to challenge deeply-held prejudices, demand justice for a vulnerable minority, and extend the impact of the monies he disbursed. This pioneer of his profession would not have voiced the idea, but implicit in his words and actions is the notion that foundation executives might on occasion serve as the nation’s conscience. In these less stringent times, his example might provide useful lessons for his contemporary successors—to the benefit of the philanthropic enterprise, and the nation as a whole.”
- So what will the future of social change be? All eyes are on Millennials, from how they turn out to vote, to how they donate, to what they think of capitalism, to how they find housing.
- A recent conference focusing on “maintainers” rather than the overly popular “innovators” aimed to uncover how critical the role of those maintaining the world in which we live are. As one of the conference organizers, Lee Vinsel (assistant professor of science and technology at the Stevens Institute of Technology) put it, “The vast majority of technologies that surround us and underpin our lives are not innovations. And the vast majority of labor in our culture is not focused on introducing or adopting new things, but on keeping things going.”
- Nonprofits have been under fire lately by state lawmakers who are trying to make it even harder for nonprofits to do their work. Tim Delaney from the National Council of Nonprofits provides an overview on what’s happening and what we can do about it. And Erin Bradrick delves into a proposed California bill that didn’t make it out of committee but sets a dangerous precedent on legislating nonprofit overhead rate disclosure in fundraising.
- Particularly during an election cycle, the struggle of the modern news media becomes more evident. The Knight Foundation released a troubling report that the news media has grown less able to defend their First Amendment rights in court. And French economist Julia Cage argues in her new book that the news media should embrace a nonprofit business model in order to reflect better its social role of bolstering our democracy.
- Hanh Le from Exponent Philanthropy and Rusty Stahl from Talent Philanthropy make a very convincing case about why funders should invest in nonprofit talent. Let’s hope this helps turn the tide.
Photo Credit: Stepan Lianozyan via Wikimedia Commons
Note: As I mentioned last week, I am at the Grantmakers for Effective Organizations conference this week curating a group of bloggers. Next up is Trista Harris, President of the Minnesota Council on Foundations. Her guest post is below. And don’t forget you can also follow the conference from afar on Twitter #2016GEO.
Day two of the 2016 GEO National Conference was all about bringing equity to the forefront in Grantmaking. Two of the morning short talks really stood out for me:
- Isaiah Oliver, Vice President of Community Impact at the Community Foundation of Greater Flint, on the water crisis, and
- Alicia Garza, co-founder of #BlackLivesMatter and special projects director for the National Domestic Workers Alliance, about turning moments into movements.
Here’s some of what they covered.
Isaiah Oliver told a heartbreaking story about how the Flint water crisis is impacting his family directly. He said “I trusted those that said the water in Flint was safe, so I gave it to my babies. My little girls should not have to analyze public water. What if this was your child?” The EPA has said that 15 parts per billion is a safe level of lead in the water; two weeks ago there were houses in Flint that had 11,040 parts per billion. Isaiah said that “if a house is on fire, you need to get the people out and then worry about blame later.” We have not yet gotten all of the people out of the fire.
Alicia Garza said “Hashtags don’t start or sustain movements, people do.” Philanthropy is not prepared to support fast moving movements. Our structures and processes have created a situation where celebrities have given more to #BlackLivesMatter than philanthropy has. She made two critical suggestions to address this issue:
- Philanthropy should get money to change agents while change is happening. Fund movements to fail fast and learn quickly from those failures to innovate their strategies.
- Structural racism exists in philanthropy, and grantmakers should develop strategies to get out of the way of social movements.
Then there was a panel on Equity as an Effectiveness Imperative.
Michael McAfee, of Promise Neighborhoods Institute at PolicyLink, when given the chance for closing remarks at the Equity as an Effective Imperative plenary luncheon, said “I love all of you.” That may strike those not in attendance at the 2016 GEO conference as an odd thing for a speaker to declare to a room of 900 funders, grantmakers and organizational leaders, but in context it perfectly summed up the message of the collective speakers. For equity to truly be a part of the work in philanthropy there must be equal parts discomfort and love throughout all conversations and collaborations.
In addition to McAfee, the panel included: Minnesota State House Representative Peggy Flanagan, CEO of Meyer Memorial Trust Doug Stamm, and moderator Reverend Starsky Wilson of the Deaconess Foundation. Each of the four speakers brought a vulnerability to how they shared their personal and professional experiences with racial inequities in the philanthropic sector. And this created an open and connected space in the ballroom.
Wilson made it clear from his opening remarks that the plenary would focus on racial inequities and the uncomfortable work grantmakers face if meaningful change is to be made. Flanagan talked about her work as Executive Director at the Children’s Defense Fund-Minnesota and the impact there in creating people of color-centered and American Indian-centered spaces to talk about early childhood education. Stamm talked frankly about the heavy burden carried by the people of color at Meyer Memorial Trust as they’ve worked to make racial inequalities more than just a side conversation in their work but actually take action to make internal and external changes. And McAfee shared how sometimes talk about “equity” can be a way to avoid dealing with subtle or institutional racism.
There were powerful questions from attendees about the importance of what language is used and how it is used and how to decide when to educate a colleague about race and when to delegate that education to books or professional development. McAfee, Flanagan and Wilson shared stories of often feeling subtly or overtly ignored, othered or discounted while Stamm admitted his slow learning curve as a white person who hasn’t been forced to be aware of institutional racism.
Numerous attendees expressed on social media that this conversation resonated in ways few other conference sessions ever have. You can see the emotional and engaged responses to a moving and important conversation at #2016GEO.
From an historic blizzard that blanketed the country, to tackling poverty, to the leadership of Black Lives Matter, to technology in the new year, to using social media to stop ISIS, to advice for Charity Navigator, January was an interesting month in the world of social change.
- Winter storm Jonas dumped several feet of snow across the country, but also offered a couple of interesting lessons in social change. First, the sheer amount of snow piled up on east coast urban streets provided a glimpse into better urban design. And after the blizzard hit Washington, DC it seems only female senators were brave enough to come to work. Among them, Senator Lisa Murkowski wondered: “Perhaps it speaks to the hardiness of women…that put on your boots and put your hat on and get out and slog through the mess that’s out there.”
- Writing in the Nonprofit Quarterly, Tom Klaus took issue with those who criticize the Ferguson and Black Lives Matters movements as being “leaderless.” Instead, he argued that they demonstrate a more effective “shared leadership” model: “Shared leadership…means that multiple members of a team or group step up to the responsibility and task of leadership, often as an adaptive response to changing circumstances. Multiple members may emerge to lead at the same time, or it may be serial as multiple leaders emerge over the life of a team or group.” And The Chronicle of Philanthropy profiled three of the leaders of the Black Lives Matter movement.
- One of my favorite bloggers, David Henderson, has made a new year’s resolution to write more often. Let’s hope he keeps it up because he offered us two great ones this month. First, he wrote a scathing critique of the nonprofit and philanthropy sectors for not standing up against presidential candidate Donald Trump’s hate-filled ideology. And then he took it further in a later post arguing that the philanthropic sector must get more political: “It seems a strange consensus that philanthropy and politics do not mix. Yet it is our politics, and more specifically our collective values, that creates the maladies we aim to address. Martin Luther King was a civil rights pioneer not for creating a nonprofit that provided social services to help African Americans live a little better, but by challenging the laws and social values that subjugated a significant portion of our community. Social interventions like homeless shelters, food pantries, and tutoring programs are fundamentally responses to injustice. While these programs are wrapped in apolitical blankets, they are plainly and intuitively critiques of the system we live in.”
- And speaking of critiques, columnist Tom Watson wrote a sharp commentary on American philanthropy arguing that it is going the way of American politics — moving from democracy towards plutocracy: “The disparity between democratic philanthropy and its plutocratic cousin is nowhere more apparent than in the importance placed on the Facebook co-founder’s commitment to giving away much of his vast personal fortune compared with the potential of the largest digital social network in the nation. Mr. Zuckerberg’s billions may create major causes and eventually steer public policy, but many nonprofits will struggle to find in their budgets the money required to purchase desperately needed social-media eyeballs from his advertising department. If there’s a better example of the power gulf in American philanthropy, I’m not sure what it is.”
- And other critiques of philanthropy in January went even further, with some arguing that modern American philanthropy attempting to address growing wealth inequality (illustrated by a new Oxfam infographic “An Economy for the 1%“) is a paradox because philanthropy itself emerged from the wealth excesses of capitalism. A new book by Erica Kohl-Arenas argued that philanthropic interventions to solve poverty have been flawed because they don’t address the structural issues causing the poverty in the first place. And her argument was extended when she wrote about her view of a January 7th public event at the Ford Foundation where Darren Walker (who recently announced a new foundation focus on overcoming poverty) and Rob Reich discussed these issues.
- Caroline Fiennes argued that nonprofits should not try to “prove their impact,” since proof of impact is impossible, but rather use evaluation to gain knowledge that can help “maximize our chances of making a significant impact.” Patrick Lester, writing in the Stanford Social Innovation Review, offered a similar caution about outcomes, but this time to the Obama administration: “A dose of…realism, combined with a greater reliance on evidence and a willingness to learn from the past, could transform the administration’s focus on outcomes into an important step forward. By openly acknowledging the challenges and dangers, recognizing the difference between mere outcomes and true impact, and demonstrating how this time we will do better, the administration could show that what it’s really calling for is not just an outcomes mindset, but an Outcomes Mindset 2.0.”
- Speaking of proving results, Charity Navigator’s new leader, former Microsoft exec Michael Thatcher, and the board that hired him came under attack in January for not moving quickly enough away from rating nonprofits on financials and towards rating them based on results. But Doug White, writing an opinion piece in The Chronicle of Philanthropy and who created the beginning data behind Charity Navigator many years ago, took it even further took it even further: “Charity Navigator is far worse than nothing. The best that could happen is for the group to sink into oblivion, with no charities, no news outlets, and no donors giving it any thought. Or the group could take serious steps to grow up, humbly taking the time and effort to truly try to understand the charitable world.”
- Wanting to get further into the social change game, Facebook COO Sheryl Sandberg announced a new effort to use Facebook “Likes” to stop ISIS recruitment efforts on social media. It will be interesting to see how effective this slacktivism effort becomes at creating real change.
- Kivi Leroux Miller released her annual Nonprofit Communication Trends Report, including lots of data about how and where nonprofits are marketing. And while she found that YouTube is currently the #3 social network for nonprofits, that may change since YouTube just announced new “donation cards” that allow donors to give while watching a video.
- And finally, in January we lost David Bowie. But Callie Oettinger urged us not to be sad, but rather, inspired: “I [am] comforted in thinking of Bowie…on Mars, mixing it up with other artists…a place where the greats go to keep an eye on the rest of us and send down jolts of inspiration from above.” Yes.
Photo Credit: Northside777
This is my favorite time of year. Despite the darkness of the last few months, December is often about reflecting on the year that is drawing to a close and hopes for the new one coming.
And as is my tradition on this blog, I like to look ahead at the trends that may affect the nonprofit sector in the coming year. I have never claimed to be a clairvoyant, but I am an admitted optimist, so my predictions are less about telling the future and more about wishful thinking. This year, more than ever, I want to see opportunity amid the uncertainty and the challenges we face.
So here are 5 things I’m really hopeful about for the nonprofit sector as we head into 2016.
- New Opportunities for the Nonprofit Sector to Lead
A growing recognition of the value of the nonprofit sector paired with a rising confidence among nonprofit leaders will create opportunities for nonprofits to step up and create opportunity out of the seemingly mounting pile of challenges (like terrorism, natural disasters, political gridlock). The nonprofit sector’s natural place — its core competency — is in righting imbalances and it often coalesces in times of trouble. We are already seeing really exciting collaborations and innovations aimed at increasing civic engagement and winning equal rights, to name a few. Call me an optimist, but I think the challenges we face are merely a precursor to the emergence of a stronger social sector ready to find new solutions.
- Increased Use of Protests
And as evidence of social movements emerging from challenges, we are seeing an uptick in social protests. This year we’ve seen some impressive organized demands for social change. From Black Lives Matter, to student protests on college campuses, to Chicago protests demanding the mayor’s resignation, people are rising up to demand change. While their methods somewhat mirror the protests of the 1960s and 1970s, their access to and use of technology is quite new. It will be interesting to see how these movements evolve and how much change they will be able to accomplish.
- Greater Emphasis on Networks
And these protests, like any social change effort, will be more successful if they embrace the use of networks. I think there will be a growing recognition that nonprofits must build networks in their social change efforts. They must understand the points of leverage for attacking a problem on a much larger scale than a single organization can and then figure out who the influencers are in their space and how to connect their work with those others. Because the network approach requires that nonprofit leaders move away from the resource-constrained, scarcity approach that keeps them from forging alliances with other entities that might be competing for the same limited pool of funding, I think (hope) we’ll see more nonprofit leaders move to an abundance mentality that leaves fears behind in favor of a bigger, bolder, more networked path.
- More State-by-State Strategies
The stunning victory this year legalizing same-sex marriage demonstrated the tremendous success that a state-by-state (as opposed to a national) approach to social and political change can have. Indeed, because of political gridlock at the federal level, other social change efforts (like Represent.us and the legalization of marijuana) have found success at the state level where changing minds and changing policy is sometimes easier and more efficient. But this isn’t a new idea. In fact according to research compiled by Bloomberg Business, social and political change in America follows a pattern: “A few pioneer states get out front before the others, and then a key event—often a court decision or a grassroots campaign reaching maturity—triggers a rush of state activity that ultimately leads to a change in federal law.” Though the idea isn’t a new one, I think it may gain traction as more social movements find a state-by-state approach increasingly attractive.
- Smarter Funding
But to pursue more successful models, like the use of networks and state-by-state strategies, nonprofits must have the necessary funding runway to get there. So I’m hopeful that funders will increasingly recognize that nonprofits need more flexible and effective funding (like unrestricted dollars and capacity capital). There are already encouraging signs. The Ford Foundation has moved to provide more unrestricted support (and encouraged other funders to build the capacity of nonprofits) and the federal government released new guidelines this year providing more indirect funding to nonprofits. So let’s hope we see more foundation, individual and government funders providing nonprofits more of the kind of money they really need to create solutions.
Photo Credit: Library of Congress
In today’s Social Velocity interview I’m very excited to be talking with the co-founders and editors of the new History of Philanthropy blog: Benjamin Soskis, Stanley Katz, and Maribel Morey.
The HistPhil blog launched this past June and focuses on how history can shed light on current philanthropic issues and practice.
Because how can we hope to create social change without understanding the results of efforts that came before us?
Ben, Stanley, and Maribel are all academics with specialities related to history and philanthropy. Stanley is on faculty at Princeton’s Woodrow Wilson School and has also taught at Harvard, Wisconsin and Chicago. Benjamin is a Fellow at the Center for Nonprofit Management, Philanthropy and Policy at George Mason University and a consultant for the history of philanthropy program of the Open Philanthropy Project. And Maribel is a professor of history at Clemson University and is currently writing a book, From Tuskegee to Myrdal, which describes how and why white Americans in big philanthropy transformed from proponents of segregated education to advocates of racial equality.
You can read other interviews with social change leaders here.
Nell: Stanley, you write, in your inaugural post for the HistPhil blog, about the tendency of philanthropy to get swept up in “new” approaches that actually aren’t all that new. Is there really anything new in philanthropy right now? Are there any structural or cultural developments or approaches in philanthropy that are significantly different than in the past?
Stanley: It is hard to separate rhetoric from reality in the current environment of philanthropic hype. From my perspective, the current boasting that all is new in philanthropy (see the recent New York Times “Giving” section), is pretty uninformed (naïve?).
One of the most common claims, repeated frequently in the New York Times piece, is that philanthropists are no longer simply trying to alleviate the “symptoms” of distress, but in fact are aiming to remove the underlying causes of social and physical problems. This attempts to distinguish what the large foundations are doing from what the traditional foundations did in the 20th century (and of course no one is making this claim more loudly than Judith Rodin of the “new” Rockefeller Foundation.)
But the emphasis on the elimination of problems by identifying their root causes was the innovative claim of the founders of the first American foundations, best articulated by Andrew Carnegie and John D. Rockefeller, Sr. So from this point of view there is not much new in the current aims of big philanthropy.
But what is actually new, and there is a lot that is new, is the determined focus on short-term, measurable, results — this is the mantra of the genuinely new “strategic” philanthropy. The older foundations of course aimed to be effective, but they defined effectiveness much more loosely and measured it less precisely than current large foundations. This is an enormousdly important attribute of the current mega-foundations, and all the other foundations that have jumped on the “strategic philanthropy” bandwagon.
The current foundation rhetoric also makes use of a wide range of business metaphors, none more important than the notion that philanthropy is best thought of as “investment” in change, and frequently characterized, using the language of hedge funds, as “bets” on successfully producing change. Much of the current language of philanthropy is drawn from venture capital activity, and the new philanthropy can also be thought of as “venture” philanthropy. This is a new attitude.
The original philanthropists knew they were adapting the then modern techniques of business organization and management to their grantmaking, but they thought of philanthropy as different from business. That distinction seems to have eluded much of the current generation of philanthropists.
But I need to say that I am a little uncomfortable with these large generalizations, since not all current philanthropists speak or act as I have just suggested — nor did the earliest generation of philanthropists. But there is something new in the philanthropic air. The question is whether that air is as salubrious as its current advocates claim.
Nell: Stanley, philanthropy got its modern day start in the missionary work of Europeans and Americans in third world countries. What, if any, parallels do you see in philanthropic work in developing parts of the world today?
Stanley: Here the important fact is that the Rockefellers (John D. Sr. and Jr.) originally intended the Rockefeller Foundation to be a missionary foundation, operating mostly (possibly entirely) in China. For a variety of reasons, in particular the influence of their advisor Frederick T. Gates (a minister who had turned in a secular direction), they abandoned the missionary focus in favor of a secular focus. Their work in China, and especially the founding and support of the Peking Union Medical School, continued to have a missionary flavor, but their work in Africa and other tropical areas was more early medical philanthropy than missionary philanthropy. They turned to the eradication of tropical diseases both because they were attractive to current medical research capacity, and because it was politically safe to engage in medical experimentation abroad — a lesson that Big Pharma learned from them later in the century.
But the emphasis of the large foundations, beginning in the 1960s, with grant-making in the underdeveloped world, was quite different, and unrelated to any neo-missionary instinct. Many of the large American foundations at mid-century thought they could assist the process of decolonization and local self-determination by supporting a wide range of development activities in what was then called the Third World. They later came to be attacked by neo-Marxists for allegedly supporting US and Western imperialism in the developing world, but that is a big subject all in itself.
Ironically, there is now a burgeoning effort by American evangelical business people to invest in private development projects, especially in East Africa, and this is a throw-back of sorts to much earlier notions of philanthropic support of development. But it needs to be contrasted with the massive Gates Foundation public health efforts in Africa and elsewhere — an effort purely “strategic” in its inspiration.
Nell: Ben, historically, philanthropic giving has not grown above 2% of US GDP, why do you think that is and do you think there is any hope of changing that?
Ben: The answer to the 2% conundrum is the holy grail of the nonprofit sector, and I don’t pretend to have any certain answer about it myself. It’s worth noting, though, that 2% of GDP is still pretty good relative to other developed countries (in fact, by many measures, it’s one of the best rates). But it’s still confounding why it hasn’t budged for more than four decades. There’s obviously a tangle of causal factors at play, and I’ll just offer a few possibilities that have occurred to me in the course of my research, without making any claims that this is an exhaustive list.
Given the persistence of that rate, it makes sense to look for some equally persistent characteristic of the American nonprofit sector that has also remained unchanged over that long timespan. A recent article in the Chronicle of Philanthropy can give us a clue to a possible candidate. As part of their Philanthropy 400 ranking of the nation’s largest nonprofits, they note how little the list has changed from when it was first tallied in 1991 (especially when compared with the churning of the list of the largest for-profit companies). In part by dint of habit, and in part because of the power of the institution’s “brands,” Americans have tended to stick with a handful of large charities—through scandals, evolving social needs and changing fads.
As I pointed out to the Chronicle reporter (though my observations got a bit lost in translation; Josephine Shaw Lowell, a founder of the American charity organization movement, wouldn’t have suggested that bigger is better, only that a degree of centralization in charity administration was necessary), we can trace this development back to the turn of the last century, when charity reformers instituted a process of centralized, bureaucratized and professionalized giving. That is, from the late 19th century-scientific charity movement onward, individuals were warned that their disparate giving was too often haphazard, scattered, wasteful, and overlapping, and so were encouraged to hand over the administration of charitable resources to a centralized institution. The community chests and the United Way came out of this impulse; Catholic Charities succumbed to it as well.
It’s very possible that the development toward more centralization and professional administration has bolstered American giving by providing citizens with more confidence and by making decisions about where to give easier. But I think we also have to wonder whether it imposed a sort of cap as well, since it might have removed some of the immediacy, intimacy and individuality from the charitable exchange that could push individuals to give beyond an initial comfort point (which very well might be around 2%).
The Chronicle suggests that we might see more disruption in the list in the coming years, or at least that some of the big names, like the United Way, might be ceding ground. If that is the case, and if some of the space they occupied is filled with smaller upstarts, it’s possible we might see some movement beyond 2%.
Another possible factor worth considering for the persistence of the 2% rate is the declining role of religion in determining charitable allocations. I don’t only mean that the percentage of total giving going to religious institutions has been steadily declining over the last few decades. But also that giving itself has, for many Americans, become an increasingly secular activity.
Again, we can trace this back to the early 20th century, when charity reformers sought to “secularize” giving by stripping it of any sectarian taint and endowing it with a degree of rationality; the indiscriminate giver in their rhetoric was often an easily-duped priest. But it is also possible that the religious impulse to give is more easily able to push past the equilibrium of 2% and to ask individuals to make even deeper financial commitments.
Yet another factor preventing giving from crossing that 2% barrier might be media coverage of nonprofits. As I quipped in an article on the subject in the Chronicle last March, borrowing from Woody Allen, the coverage is generally pretty weak—and the portions are too small. That is, the media grants the sector relatively little attention, and when it does, it seems to suffer from what New York Times reporter David Clay Johnson has called a “Madonna-whore” complex: alternating between feel-good human interest stories and stories focused on nonprofit abuse. But stories that chronicle the difficult and important work many nonprofits are doing on a daily basis—they just don’t have the journalistic juice to make it into print. As the former nonprofit beat reporter for The New York Times, Stephanie Strom, told me, “A nonprofit just doing good isn’t news because everyone knows nonprofits are supposed to do good.” This might be changing, with a number of important online journalistic ventures out there, but I think there is a deep deficit in public knowledge about what nonprofits are doing—and this deficit could sap the public’s willingness to give more.
You also have to combine this media deficiency with the general conceptual muddle that has emerged with the blurring of private and public lines of funding social welfare provision in the last half century. Not only do American givers and tax-payers have to contend with a federated system (to say nothing of international structures of governance), in which various jurisdictions take up differing responsibilities for addressing social ills and needs. But we also inhabit what political scientist Jacob Hacker has termed a “divided welfare state,” in which public and private lines of responsibility for social welfare are increasingly blurred. Obviously, there’s opportunity in this blurring. But as scholars such as Lester Salamon have pointed out, it also can represent a sort of existential threat to the nonprofit sector’s distinctive identity and mission, which in turn might be restricting American’s willingness to dig in and give more.
Finally, it’s worth pointing out another powerful strain in the American charitable tradition—the devaluation of monetary gifts themselves in favor of the “helping hand.” At the turn of the last century, even while scientific charity reformers were attempting to rationalize giving, they were also trying to preserve traditions of neighborly assistance. The fact that such assistance could not be easily quantified and rationally appraised was regarded as a mark of its worth. And in many senses, it was considered a higher form of giving than monetary contributions. That idea is still with us today; and it’s possible that by focusing too much on the 2% rate, we miss other forms of voluntarism that have had more variability and elasticity over the years.
Nell: Maribel, during the Gilded Age great wealth concentrated among a few brought large philanthropy (Carnegie, Rockefeller, etc.) but also contributed to a subsequent progressive period (as the pendulum swung back against that excessive wealth). Do you see parallels between the Gilded Age and today, and do you think we are heading for a more progressive period? And what role do you think philanthropy will or won’t play in that?
Maribel: Indeed, many late nineteenth- and early-twentieth century Americans looked at Andrew Carnegie’s and John D. Rockefeller’s wealth (and even their philanthropy) with some suspicion.
Reflecting these Americans’ anxieties, for example, the United States Congressional Commission on Industrial Relations called John D. Rockefeller Sr. and his son in 1915 to defend the independence of the Rockefeller Foundation. As many scholars have noted, the Rockefellers had established a division of economic research in 1914 within the one-year-old foundation; and a few months later, the Ludlow massacre occurred at the Rockefeller’s Colorado Fuel Iron Company where women and children died when the state militia assaulted the strikers’ tent camp.
In response, the organization decided to organize a study on industrial relations under this new division and selected a close working friend of John D. Rockefeller Jr. (William Lyon Mackenzie King) to direct it. From the perspective of the American public, it was hardly easy to trust that gilded age tycoons who had undermined the rights of workers in the process of accumulating their wealth would have the interests of the people in mind when they funded social scientific projects to study the American populace. From this perspective, the Rockefeller Foundation was the playpen of industrialists who had defined interests in society and their policy-oriented social scientific research would be—far from disinterested—an extension of those interests.
And far from ignorant of Americans’ suspicions about gilded age levels of wealth, Andrew Carnegie himself discussed it head-on in The Gospel of Wealth (1889). Aware that Americans might find socialism an attractive alternative to capitalism, for example, he pitched philanthropy as the better form of wealth redistribution.
Today as then, Americans are confronting and discussing the great influence of leading philanthropists in public policymaking and of wealth inequality more broadly. However, I am not convinced that we are necessarily heading for a more progressive period.
I say this because I don’t see contemporary Americans reflecting the same level of angst about elite philanthropy nor with the broader topic of wealth concentration. Congress isn’t questioning leading philanthropists as it did with the Rockefellers in the early twentieth century nor do leading philanthropists seem threatened by Americans’ potential voting patterns, as Carnegie had been.
One key explanation might be that these earlier Americans entertained a vastly different meaning of American democracy than their successors today. For them, American democracy promised economic opportunity (or rather, freedom from class divisions) and an equal voice over public concerns. Today, it seems that the general American public and their representatives in Congress aren’t as convinced of this definition of American democracy. With a narrower understanding of American democracy, it might simply be more difficult for contemporaries to see how wealth inequality and elite philanthropy in public policymaking are democratic threats.
Philanthropies committed to resurrecting a more progressive period might just need to focus on ways to revive this earlier (dare I say, more robust) definition of American democracy and help empower Americans to fight for it.
Photo Credit: HistPhil
October brought some great discussions in the blogosphere, including a forum on whether regulations around donor advised funds should change, concerns that we are working too hard, the need to better retain donors, and a debate about whether social media is (or can be) an effective fundraising tool. Round that out with examples of successful crowdfunding and volunteer skill crowdsourcing, and it was a good month.
Below are my picks of the 10 best reads in the world of social change in October. But, as always, let me know what I missed. And if you want a longer list, follow me on Twitter, LinkedIn, Facebook or Google+.
And if you want to see past 10 Great Reads lists go here.
- Donor advised funds (DAFs) have come under fire in recent years. There was an interesting discussion in October at the Boston College Law School Forum on Philanthropy and the Public Good about whether regulations on donor advised funds should be changed. In advance of that forum, history professor Lila Corwin Berman provided an historic perspective (on the HistPhil blog) including the fact that “donor advised funds fundamentally changed the balance of public and private power in the United States starting in the 1970s.”
- John Hopkins University professor Lester M. Salamon released a new book in October, The Resilient Sector Revisited: The New Challenge to Nonprofit America in which he lays out a framework for understanding America’s nonprofit sector. An excerpt from the book in the Nonprofit Quarterly examines “The 4 Impulses of Nonprofits“, as he describes it: “The nonprofit sector has long been the hidden subcontinent on the social landscape of American life, regularly revered but rarely seriously scrutinized or understood.” His book is an attempt to do just that.
- The Association of Fundraising Professionals and the Urban Institute released their annual Fundraising Effectiveness Survey Report with some startling data, like: nonprofits retained only 43% of their donors in 2014, and for every $100 a nonprofit brought in they lost $95 to lapsed and reduced gifts. So the challenge for nonprofits, says AFP president Andrew Watt, is to get better at retaining donors: “Donors do not simply choose a few charities to support and stick with them every year. Donors are remarkably inconsistent in their giving, whether it’s because they lost interest in a cause, were giving because a friend or family member asked them, or did not like how the charity was treating them. The charitable sector’s challenge is to figure out how to better inspire and retain donors from year to year.”
- And speaking of fundraising, Nonprofit Tech for Good donated $800 to 32 nonprofit organizations via the nonprofit websites and shared some important lessons for other nonprofits trying to fundraising effectively online. But Derrick Feldmann cautions that social media fundraising is not the panacea many board members might think. The new “Social Good Team” at Facebook might disagree because they have big plans for social media and the nonprofit sector.
- Kickstarter, the crowdfunding website, re-incorporated as a public benefit corporation in order to put their social good mission above profit, and then partnered with the United Nations to raise money for Syrian refugees.
- While we’re on the power of the crowd, in his ongoing Fixes blog, David Bornstein profiles Movement.org, a crowdsourcing site that connects human right activists and skilled volunteers. As David Keyes, one of the leaders, describes the platform: “Amazon says that you don’t need to be a bookstore to sell a book and Uber says that you don’t need to be a taxi service to drive a taxi. I realized that you don’t need to be an N.G.O. to fight a dictator, or a political leader to help a human-rights activist. Millions of people around the globe have the skills to help, and they’re currently not being utilized. If we could build a bridge between these communities, more people could be helped than we ever thought possible.”
- And in more solutions news, South Los Angeles, once an urban food wasteland, is becoming a hub of food activism with a focus on startup, affordable eateries that are committed to building a strong, healthy community.
- Companies are already getting ready for the holiday season mix of commercialism and philanthropy and Amy Schiller worries that Bloomingdale’s “Icons w/ Impact” marketing campaign highlighting celebrities, fashion and philanthropy is a worrisome shift in philanthropy. But I’m hoping that the HistPhil blog will chime in with a reasoned, historical perspective.
- Poor strategy will get you in the end. The breast cancer nonprofit, the Susan G. Komen Foundation came under fire a few years ago for some poor strategic decisions (like aligning with Kentucky Fried Chicken and pulling funding from Planned Parenthood), and it looks like those decisions have dramatically affected their fundraising.
- Phil Buchanan from the Center for Effective Philanthropy has a problem with our workaholic culture. He and his organization have learned from the Millennial generation’s more balanced (than Gen X’s or the Boomer’s) approach to work and life, and he suggests we do the same: “The millennials don’t care that this is what we might have done at that stage of our careers. In fact, they look at us and are quite clear they don’t want to be us — they don’t want to make the same mistakes!” Amen!
Photo Credit: Museum of History and Industry, Seattle
In today’s Social Velocity interview I’m talking with Tim Delaney, President and CEO of the National Council of Nonprofits, the nation’s largest network of nonprofits.
The National Council of Nonprofits helps nonprofits identify emerging trends, engage in critical policy issues, exchange proven practices across state lines, and advance their missions through advocacy. Previously, Tim served as a partner at a large law firm (helping prosecute the impeachment of a Governor and leading the firm’s government relations practice), Solicitor General and then Chief Deputy Attorney General (leading his state to win several cases in the U.S. Supreme Court), and founder of the Center for Leadership, Ethics & Public Service (championing ethical leadership and civic engagement).
You can read interviews with other social change leaders here.
Nell: Historically, “advocacy” has been a dirty word in the nonprofit sector. Organizations have been afraid of getting into trouble with the IRS for pursuing too much lobbying behavior. But that seems to be changing. What are your thoughts on how involved in advocacy 501(c)(3) organizations can and should be?
Tim: Yes, it’s perplexing that using words like “advocacy” and “lobbying” could get a nonprofit employee’s mouth washed out with soap. But seriously, advocacy is not just a right for nonprofits that is protected by the First Amendment; it’s a profound responsibility and effective tool to advance nonprofit missions.
Nonprofits provide a way for Americans to come together to solve problems, large and small. And they often do so through advocacy: simply standing up and speaking out for something they believe. Americans came together through nonprofits to advocate successfully in securing the right of women to vote (via suffragist groups), establishing Social Security (spearheaded by Townsend Clubs), desegregating schools (leadership by NAACP), securing civil rights (Dr. King delivered his “I Have a Dream” speech and undertook much of his work as President of the nonprofit Southern Christian Leadership Conference), and so much more.
But advocacy is not just for social movements. Advocacy includes standing up for your nonprofit’s right to be paid reasonably for services it provides under a government contract. Advocacy includes telling the story of your nonprofit’s impact to a reporter. We see advocacy as the answer to one key question: who can I talk to today to advance my nonprofit’s mission?
A barrier many nonprofits run into comes from what I call the “3 As” –uninformed academics, accountants, and attorneys who advise nonprofit boards by passing along false lore that there “might be legal problems” if a nonprofit does “too much” lobbying. Nonprofit staff come back from advocacy training fired up, but boards extinguish that passion based on false lore. After hearing stories like this from across the country, we’ve decided to turn advocacy training around. The traditional approach of “it’s legal” sought to counter the false lore, yet too often it led people to focus on arcane issues more remote than the fine print on your airline ticket or apps that you never read. Therefore, we now focus on “why” advocacy is essential to mission advancement and “why” nonprofits need to be engaged at the state level to protect against government attacks on tax exemptions, nonprofit independence, and charitable giving incentives.
As part of our effort to get nonprofits past those old barriers, we’ve joined together with Alliance for Justice, BoardSource, Campion Foundation, the Forum of Regional Associations of Grantmakers, and Knight Foundation to create Stand for Your Mission, a free website that provides nonprofit board members with information they need to be effective advocates in advancing nonprofit missions.
Nell: The National Council of Nonprofits has been on the forefront of the movement to get government to recognize the importance of funding nonprofits’ indirect costs. The recent OMB ruling mandating a minimum 10% indirect rate on most government grants and contracts with nonprofits seems like a watershed moment, but 10% is still pretty low and many nonprofits don’t understand the implications or how to benefit. What are your plans at the Council of Nonprofits to continue to move this issue forward?
Tim: As you noted, the 10% of modified total direct costs is just the minimum. For tens of thousands of nonprofits, just getting to 10% will make a huge difference. In its most recent State of the Sector Survey, Nonprofit Finance Fund found that 57% of nonprofits are being paid indirect cost rates of 9% or less. And Urban Institute found that of nonprofits reporting a problem, a quarter said that governments were paying them zero for indirect costs.
Now compare those paltry sums against research from Bridgespan showing that a more accurate range is about 25 to 35%. Certainly each case is different, but being reimbursed nothing or just 5% year after year when your real legitimate costs are always higher is debilitating, eroding effectiveness. Delivering sustained impact is impossible. So getting those nonprofits up to just the minimum will enhance sustainability to make a difference in their communities.
Importantly, 10% is just the floor. If a nonprofit is properly allocating costs and documenting its indirect costs, it can receive reimbursement for whatever those costs are, whether they are 20, 30, or even 40%. Getting paid for the true costs of delivering services can reduce burdens on nonprofits to fundraise for the difference, which frees funders from having to subsidize governments and allows nonprofits to dedicate more time to missions instead of diverted to filling funding gaps.
Seeing the OMB Uniform Guidance go into effect is just the beginning and underscores the importance of nonprofit advocacy. The mere issuance of OMB’s mandate doesn’t mean that the tens of thousands of local, state, and federal employees scattered across multiple departments, agencies, divisions, and offices will follow it or apply it properly. First, they need to become aware of it (which still has not happened), then receive training (same), and apply it consistently (same). Plus, states and localities often have contrary laws and policies on their books, requiring advocacy to change them to conform. OMB’s mandate involves a giant systems change, but the federal government still has not informed the system of what is required and the need to change policies and practices to abide by it.
David Thompson and Beth Bowsky on our team have been conducting dozens of in-person presentations and webinars across the country to ensure nonprofits are aware of their rights and how to advocate for proper implementation of the Uniform Guidance. Plus, we have been working with multiple state and local government associations to spread the word, and written numerous published pieces, including an overview, “Know Your Rights … and How to Protect Them,” that highlights potential compliance challenges.
In addition, we’re creating a series of short training modules for nonprofits to better understand their indirect costs. The key is for nonprofits with government grants and contracts to stand up for their rights to fair indirect cost reimbursement and to let their local state association of nonprofits and us know when governments are not living up to their obligations. Working through our network gives a nonprofit cover (so it isn’t fighting alone and having to worry about backlash) and strength in numbers to protect those rights.
Nell: This issue is also part of the larger movement to overcome the Overhead Myth in the nonprofit sector, the idea that “overhead” (or indirect costs) are bad and should be limited as much as possible. How close are we to truly overcoming this myth both among nonprofit donors and nonprofit leaders (who often keep themselves in these handcuffs)?
Tim: We still have a long way to go. OMB’s Uniform Guidance is a huge step forward because the federal government has now expressly acknowledged that indirect costs are legitimate and necessary. The sector needed a powerful external validating voice to overcome decades of treating mythology as orthodoxy. It’s inspiring to see that many private grantmakers have now adjusted their own policies or started to re-examine their past policies that unfairly limit payment for indirect/overhead costs.
However, the anti-overhead culture is deep seated and will take a long time to root it out. That’s true on both the funding side and the nonprofit side, given the powerful disincentives against claiming full costs. Nonprofits were forced to keep overhead artificially low by underinvesting in their infrastructure, staff training, and many other necessary expenses. Until we get so-called “watchdog” groups and reporters to stop using overhead ratios as false proxies for nonprofit efficiency (and get them to stop reporting overhead ratios as if they are a problem), and until all nonprofits are communicating with donors about their impact and what it truly costs to deliver that impact, everyone will still have work to do.
Nell: In both of these areas (advocacy and overhead) and in many others, nonprofits are treated like a second-class citizen. How do we get to a place where the critical role nonprofits play in our economy and in solutions to social challenges is recognized, and nonprofits are fully supported with the tools they need to be successful?
Tim: First and foremost, nonprofits must embrace our role as the place Americans come to solve problems and resolutely assert our role as advocates for the people and our communities. We often are on the front-line of vexing social challenges, giving us front-row seats to see the problems and the solutions. Who are we to hoard knowledge of solutions that could help our fellow neighbors? With the knowledge we hold and the clout we have (10% of the American workforce), we deserve a seat at policymaking tables. We need to proudly stand up, step forward, claim our space, and speak out for government to leverage its resources to solve problems at their source.
We need to tell the full story, not just of how many people were fed or acres preserved, but also the economic impact of the sector as a whole. For instance, CalNonprofits (the state association of nonprofits in California) published Causes Count about the economic clout of California’s nonprofits, and Donors Forum (the state association of nonprofits and grantmakers based in Illinois) released research on Social Return on Investment, showing the economic and social value of dollars invested in nonprofits.
As for being “fully” supported, that’s much more difficult. According to Nonprofit Finance Fund, last year – for the second year in a row – a majority of nonprofits didn’t have the resources to meet demand for their services. That’s going to be tough to turn around, especially as many nonprofits continue to be sliced by government budget cuts. Even as studies boast that individual giving is getting back to pre-Recession levels, that doesn’t make as much of a difference as most people think. Despite the focus on individual giving, it makes up only 9.3% of the sector’s overall revenue. Foundations are an even smaller percentage: 1.9%. Government grants and contracts make up a much larger portion – 32.3% – of the sector’s revenues. That’s why our focus in this area is so important.
Photo Credit: National Council of Nonprofits