10 Great Social Innovation Reads: February

February was another great month in the world of social innovation reading. As I mentioned last month, I’ve started a new monthly series on the Social Velocity blog highlighting my favorite 10 reads in the world of social innovation over the past month. You can read the January list here.

There are many more than 10 great reads out there, but these were the ones that really challenged me and got me thinking. I hope they do for you as well. As always, please add to the list in the comments. I’d love to hear what got you thinking this past month.

1. Seedbeds for Social Innovation: The Echoing Green blog discusses a new Carnegie Mellon University report that details what it takes for a city to be a seedbed for social innovation.




2. Nonprofits need to stop begging for scraps From the Chronicle of Philanthropy’s Money and Mission blog, authored by the Nonprofit Finance Fund, comes a great response to the Stanford Social Innovation Review article a couple of years ago about the nonprofit starvation cycle. This post discusses what nonprofits can do to break out of the cycle.




3. A 10 Year Lesson in How Not To Spend $200 Million The Northwest Area Foundation in Minnesota has declared it’s ten year philanthropic experiment a failure. An interesting study in the less talked about side of innovation (failure) and transparency.




4. Social Impact Bond Learning Group The Nonprofit Finance Fund has launched a learning and discussion group to explore the feasibility of social impact bonds (government bond funding for social impact organizations tied to outcomes) in the US. The UK has already experimented with similar kinds of bonds. If the US introduced these kinds of bonds it could be a revolutionary new tool for funding social innovation.




5. Wired and Shrewd, Young Egyptians Guide Revolt A fascinating look from the New York Times into the structure and tactics of the small group of young innovators who brought Egypt’s ruling dictator to his knees. A real study in social innovation.




6. To Collaborate or Compete? From New Philanthropy Capital comes a report studying when it makes sense for nonprofits to collaborate and when to compete. Such a framework could be a really helpful way to tackle to this burning question.




7. Q&A With Middle East Entrepreneur Habib Haddad And another view of what happened in Egypt, a fascinating interview with a young entrepreneur who discusses the role of social media in the uprising.




8. Stop Giving Donors What You Think They Want: Dan Pallotta challenges nonprofits to treat donors like adults and be upfront and honest with them.




9. Rethinking the State of the Sector: The Deep Social Impact blog encourages the nonprofit and philanthropic sectors to focus on assets instead of challenges.




10. Governmental “Crowding Out” in Philanthropy: Sean Stannard-Stockton argues that because of the arcane way nonprofit accounting is done, money from government sources might actually cripple the financial sustainability of a nonprofit.

Tags: donors, nonprofit begging, nonprofit collaborate or compete, nonprofit financial sustainability, philanthropic transparency, Philanthropy, social entrepreneurs, social innovation

A Place for Government in Social Innovation?: An Interview with Laura Tomasko

In this month’s Social Velocity interview we are talking with Laura Tomasko. While she shares her millennial generation’s passion for social innovation, she sees a real opportunity, that many dismiss, for government to play a role. Laura serves as manager of Public-Philanthropic Partnerships at the Council on Foundations. She is a proud StartingBloc Social Innovation Fellow who holds a Master of Public Administration from the Maxwell School of Citizenship and Public Affairs at Syracuse University, where she served as the Vernon Snow Fellow in Nonprofit Management. You can follow her on Twitter at @lauratomasko.

You can read all of the interviews in our Social Velocity interview series here.

Nell: Many of your contemporaries are as passionate about social innovation as you are, but they tend to dismiss government. Why don’t you? Why do you think there is hope for government to be reinvented?

Laura: I don’t dismiss government because I believe that cross-sector partnerships benefit social innovation. People, organizations, and sectors all have strengths and limitations. Partnering affords an opportunity to merge skills and areas of expertise for the purpose of achieving a common goal. Like any institution, there are ways that government could improve. But I don’t believe that government needs to be reinvented to be a helpful partner in social innovation. In classrooms and professional settings, my generation recognizes the value of partnerships and discusses how to blend social innovation and government. Increasingly, master’s degree programs in public service emphasize social entrepreneurship. Fellowship programs like StartingBloc train emerging leaders to drive social innovation across sectors. Last fall, I facilitated a conversation among StartingBloc fellows on the role the public sector plays in social innovation, and I saw that these next generation leaders recognize the valuable role that government can play in social innovation.

Nell: Where do you think government fits into the social innovation movement? What should government’s role be?

Laura: Government provides an incredible platform for convening people and connecting ideas. Right now, we are seeing federal innovation initiatives that elevate results-oriented programs and incentivize public-private partnerships. The White House Office of Social Innovation and Civic Participation used its platform to draw attention to federal initiatives such as the Social Innovation Fund and the Investing in Innovation Fund. The Corporation for National and Community Service and the Department of Education, the federal agencies that respectively house those initiatives, attracted interest from public and philanthropic entities that want to work together to support innovative community-based models for change. These examples demonstrate the ability of government to draw attention to social innovation and encourage the development of partnerships to sustain the movement.

Nell: What are you working on right now at the Council on Foundations’ Public-Philanthropic Initiative? What gets you really excited there?

Laura: I serve as the Council’s manager of the Public-Philanthropic Partnerships Initiative, a program that marries my passion for social innovation and government. The goal of the initiative is to increase substantially the quality and quantity of government-philanthropic collaborations. We serve as a conduit between foundations and the federal government by cataloging opportunities, developing partnership tools, and generating analysis and commentary about current partnerships. As foundations work with the public sector, we are here to offer support and coordination assistance. During the Council’s Family Philanthropy Conference last month, I met with our members and had conversations about collaborating with government to scale up promising programs. Philanthropy plays an important leadership role in society, and I get excited by the opportunity to bring together people and ideas and facilitate connections.

Nell: How confident are you that public and private money can come together to create significant social change? There wasn’t a large government presence at past Social Capital Markets (SOCAP) conferences, for example, but that might be changing. What will it take to get private and public money to collaborate more?

Laura: I believe that public and private money can come together to create social change. To encourage more collaboration, both the public and private sides need to understand and trust one another. The barrier of unfamiliarity creates misunderstandings and missed opportunities for partnerships. Greater understanding of the risks and opportunities can build trust and lead to significant social change. The SOCAP conferences are excellent platforms for breaking down barriers, increasing understanding, and fostering relationships among for-profit investors, social entrepreneurs, government officials, and philanthropic leaders. In your interview with Kevin Doyle Jones, one of the SOCAP founders, he described SOCAP10 as a time for translation as people learn to work together. A few months ago, I was excited to hear Secretary of State Hillary Clinton announce her intention to bring SOCAP to the State Department in fall 2011. With the talented SOCAP team leading the way, I am optimistic that participants can move past translation and into action, developing public-private collaborations in the social capital markets.

Nell: What sorts of changes would you like to see in government, at the local, state and federal levels in order for it to be more effective and instrumental in the social innovation movement?

Laura: The social innovation movement focuses on the root causes of social conditions. It looks to new and creative means for improvement, rather than continuing to treat the manifestations of problems. Innovators, optimistic about the potential for change, focus on the assets of clients and aim to use resources in new ways. With an end goal in mind, they emphasize measurement, evaluation, and collaboration when appropriate. Government can help these efforts by aligning incentives in a way that encourages innovators to address the root causes of social conditions and by supporting programs that emphasize results. Through federal innovation funds, we are seeing government invest in ventures at a level commensurate with past and potential impact. In addition to emphasizing the importance of measurement, I think that government should seek opportunities to work with philanthropy as a knowledge partner. For example, community foundations can offer local governments innovative solutions for addressing critical needs in the community.

Nell: There has already been a bit of controversy around the Social Innovation Fund, the federal government’s first official foray into the social innovation realm. What do you think about this first attempt by the federal government to play a role? Is it working or is too soon to tell?

Laura: I like the Social Innovation Fund (SIF) because it raises the visibility of philanthropy’s leadership in social innovation. The SIF offers a model for how government can leverage funds and expertise to identify promising and innovative mid-sized nonprofits. Once selected as intermediaries of SIF funds, grantmaking organizations identify and grow high-performing nonprofits. This is an important aspect of the SIF design because government defers to philanthropy’s knowledge when finding effective ways to meet community needs. In addition to encouraging public-philanthropic partnerships, I like that the SIF focuses on evidence, a desire to scale success, and the need for growth capital. George Overholser has provided incredible thought-leadership about the field of nonprofit financing. Sean Stannard-Stockton, president and CEO of Tactical Philanthropy Advisors, wrote a great post that applies Overholser’s distinction between builders and buyers to the SIF. Steve Goldberg also has offered detailed commentary about why the SIF is so important.

Even among those who like the SIF concept, some have criticized its implementation. As with any initiative in its early stages, it is helpful to have conversations about what is working and what could be improved. From my perspective, I see two good measures of success for the SIF. The first measure is whether the community-based organizations that receive public-private funds and resources can achieve their desired impact. Community-based organizations have just begun receiving funds, so we still have to wait and see. The second measure is whether state and local governments elect to implement similar models moving forward. Even before the SIF, state and local governments showed interest in social innovation and entrepreneurship. I am hopeful that these initiatives will continue to exist and new ones will develop. The more of these models that exist, the more opportunities will be available for philanthropy and government to collaborate in supporting social innovation.

Tags: George Overholser, Hillary Clinton, Investing in Innovation Fund, Kevin Doyle Jones, Laura Tomasko, Public-Philanthropic Partnership Initiative, scale success, Sean Stannard-Stockton, SoCap@State, Social Capital Market Conference, Social Entrepreneurship, social innovation, Social Innovation Fund, Social Velocity interview series, StartingBloc, Steve Goldberg, White House Office of Social Innovation and Civic Participation

Connecting Government & Philanthropy: An Interview with Rene Cabral-Daniels

In this month’s Social Velocity interview we are talking with Rene Cabral-Daniels, head of the Council on Foundations’ Public-Philanthropic Partnership Initiative that works to connect government and philanthropic resources in order to create bigger, better solutions to social problems. Rene has been a leader in both government and philanthropy, including roles as director of the Office of Health Policy and Planning for the Virginia Department of Health, and as vice president for grant programs at the Williamsburg Community Health Foundation.

You can read all of the interviews in our Social Velocity interview series here.

Nell: What are the goals of the Public-Philanthropic Partnership Initiative, what impact do you hope to have on social change efforts in this country?

Rene: The goals of the Public-Philanthropic Partnership Initiative (PPPI) are exciting ones as they reflect a growing desire by a number of entities within philanthropy to better collaborate their similar investments in social change with government to achieve enhanced impact and effectiveness. Philanthropy can, and should, be a key player alongside the public and private sectors to help the nation accelerate the pace of its response to emerging challenges. For philanthropies seeking information, context and guidance on partnering with government to advance the common good, the PPPI will facilitate the flow of information, ideas and opportunities between philanthropy and government and elevate promising practices and models so that partnership achievements transcend administrations. Essentially, the PPPI serves as a conduit between foundations and the federal government to substantially increase the quality and quantity of government-philanthropic collaborations. The PPPI has three major goals:

1. Catalog current opportunities and develop tools and resources to enable foundations, large and small, to successfully partner with government;
2. Generate timely analysis and commentary to increase awareness and understanding among the foundation community and government about all aspects of public-philanthropic partnerships and PPPI; and
3. Position the Council as an intermediary for public-philanthropic partnerships.

The PPPI’s potential for impact on social change efforts in this country is like no other. When one considers the overall goal of philanthropy to promote its investments and partnerships to enhance real change – new solutions to old, enduring problems then the PPPI’s emphasis on partnerships assures a longstanding, meaningful impact that coalesces the sector’s greatest resource- its intellectual capital. While the financial capital of some funders may be greater than others, every funder has significant intellectual capital in what works as well as what does not work in addressing a particular challenge. Thus, every funder has the capacity to effectuate meaningful change in the areas that they fund. The Council assures that the Public Philanthropic Partnerships are not and cannot be simply the domain of a few large foundations that partnered with one administration at one point in time. Thus, the PPP supports the desire of many foundations (of all sizes and missions) which choose to collaborate with public sector agencies in ways that enhance the delivery of common program missions.

Nell: Connecting foundations and government is a pretty new idea, why has the Council created this initiative and what is it about this particular time that seems right for something like this?

Rene: When I first came to the Council, I thought the PPPI was a new idea. However, after researching the history of philanthropy, it became clear to me that public-philanthropic partnerships have not only been around for a very long time but that there have been a number of successes that continue today such as the existence of public libraries, elimination of diseases such as yellow fever and the creation of the Head Start program. Another fascinating fact I learned while researching the history of philanthropy is that the foundation for public philanthropic relationships within the federal government was set under the Reagan administration. Reagan’s early activities as President was to urge the country to, “get the private sector in the driver’s seat so we can start using market incentives and philanthropy to find lasting solutions to community problems.” He highlighted the role of philanthropy by, among other actions, declaring the first National Philanthropy Day in 1986. Clearly, President Reagan recognized the leadership role of the philanthropic community within the private sector. He created the base for successful public-philanthropic partnerships that continue to this day. Recognition of philanthropy’s role did not end with his administration. Successive administrations have likewise partnered with philanthropy to solve intractable social problems. One great example is President Bush’s President’s Emergency Plan for AIDS Relief, also known as PEPFAR, which serves to help save the lives of those suffering from HIV/AIDS around the world. The current administration’s creation of the Office of Social Innovation and Civil Participation merely elevates the important role of philanthropy recognized by earlier administrations, by dedicating an office that exists to leverage as well as scale up public-philanthropic partnerships. Like the government, the Council’s history with public-philanthropic partnerships is about as old as the Council itself. Its recent creation of the PPPI capitalizes on government’s elevated interest in these partnerships, which is sure to transcend administrations.

While both the federal government and the Council have had a long history with public philanthropic partnerships, there is another important reason why the Council has created this initiative at this time. The PPPI furthers the Council’s goal to promote philanthropy in an important way. The PPPI leverages the Council’s promotion in a range of activities that fall into its four priority categories – connecting, convening, communicating, and building capacity. The Council’s strengths in these four areas are simply unparalleled within the philanthropic sector. As a connector, the Council brings together foundations and government agencies seeking partnerships that can enhance their common goals. The Council’s convening abilities allow it to bring different audiences together to learn from one another about topics essential to ensure strong and productive partnerships. As a communicator, the Council provides timely information to members, government agencies, and colleague organizations on existing or future partnerships, effective practices, emerging opportunities and available PPP resources. Finally, the Council enhances the capacity of philanthropy to participate in public-philanthropic partnerships both by utilizing the Council’s expertise and by aggregating the expertise of its members and colleague organizations. Thus, the PPPI provides a wonderful platform for the Council accomplish its overall goal to promote philanthropy.

Nell: How do you define successful public/philanthropic partnerships? What does that look like?

Rene: My answer may sound circular but I think a successful public/philanthropic partnership is one whereby a shared vision of success that was clearly considered, articulated and memorialized by both the government and philanthropic partners becomes a reality. In essence, both parties have to define success for themselves at the onset of the partnership. There simply is no magic formula for successful public/philanthropic partnerships as the definition of success is as variable as the number and types of partnership possibilities. To respond further to your question, I would like to highlight an excellent document from Grantcraft which funders might want to consider when contemplating potential public/philanthropic partnership engagement. It is called Working with Government and offers a host of important considerations funders should address when contemplating partnerships with government. Funders that decide to engage in public-philanthropic partnerships should then consider the Council on Foundations’ Public-Philanthropic Partnership Initiative website. This website offers a wealth of information about public philanthropic partnerships and highlights the Council’s engagement in a range of activities that fall into its four priority categories – connecting, convening, communicating, and building capacity.

Nell: Do you see philanthropists increasingly wanting to collaborate among themselves and with other funders, both government and private sector funders? If so, why?

Rene: While I have no quantitative data that can demonstrate a trend or an acceleration of interest in partnerships, it is clear from a number of sources such as conference session suggestions, affinity group and member inquiries as well as webinar participation that the desire to collaborate is very strong within the philanthropic sector. I suspect one very important reason is that the downturn in the economy has encouraged funders to reconsider the many benefits of collaboration in their efforts to scale up projects while possessing fewer resources. Funders are likely realizing that their collaborative efforts are not only enhancing their economic resources, but their human and intellectual resources as well. The questions the Council receives from its members regarding collaboration make it clear that they have realized that just as there are different types of partnerships, there are many types of collaborations and that certain types of funders are better than others when considering specific types of collaboration. For example, a collaborative effort that requires the entities to act quickly to solve a challenge where time is of the essence may not be the best fit for government. However, the government might be an ideal entity with which to collaborate if the activity involves addressing a long-term community health problem, such as child obesity.

Nell: Government has a tendency to get dismissed in social change efforts, particularly in recent years with the social innovation movement because government can be viewed as bureaucratic and slow to change.  Do you think government can be more nimble and adaptive to this new energy around social change efforts?

Rene: This question is best answered by providing some legal history. When President Roosevelt expanded the number of federal agencies in the early 1930s Congress became concerned that an important political doctrine of the Constitution requiring separation of powers between the three branches of government was becoming obfuscated. Our system of government has a system of checks and balances to assure one branch of government does not have too much power. One important concern with the federal agencies is that they had legislative, judicial and executive responsibilities without public input. Because of this concern, Congress passed the Administrative Procedure Act in 1946. It has been called “a bill of rights for the hundreds of thousands of Americans whose affairs are controlled or regulated” by federal government agencies. The APA requires agencies to keep the public currently informed of their structure, procedures and rules and provides for public participation in the rule making process. More recent examples of other laws that assure public participation in government decisions include the Federal Advisory Committee Act, which makes public all administrative procedures and hearings and the Government in the Sunshine Act, which makes agency meetings public.

While the need to assure the citizenry has adequate input into agency decisions is an important tenet of the American government, it also challenges the ability of government to act quickly. The private sector is not saddled with this important, yet burdensome responsibility. While the government may never be as nimble as the private sector in executing social change activities, its many resources can still be adaptive to new social change efforts. I think the more strategic funders will harness as well as leverage those resources in addressing social change challenges. Examples of some of these resources are as follows:

1. The government has a tremendous amount of relevant, longitudinal socio-economic data that are often underutilized because government lacks the ability to make these data user-friendly. Collaborative efforts between government and others to improve the utility of this rich resource can inform social change movement efforts going forward.
2. Another important resource that government possesses is the breadth of its workforce. Excluding postal workers, the federal government will employ 2.11 million people in 2011. To build on Justice Holmes’ analogy of a “marketplace of ideas”, the federal workforce offers a “supermarket” of ideas. This expansive knowledge base translates into a plethora of professional expertise that can be tapped to address the complexity of social challenges. The ability to harness the interest and energy of large numbers of people toward a particular goal is another related benefit.
3. Finally, the government’s history in addressing or attempting to address social change challenges might help to identify the circumstances under which some social change efforts have been successful, as well as the conditions which have frustrated past efforts.

So, I guess in a nutshell I would suggest those engaged in social change efforts acknowledge that while government strives to act quickly, it does not have the luxury of forsaking timely public notice and participation of its efforts. Also, because many social challenges are protracted, their resolution may require significant time. In social change efforts, government should not be relegated to a role whereby it is expected to act quickly but rather one whereby its many resources are appropriately tailored to inform the quick action of its partners.

Nell: Where do you think collaboration between government and philanthropy will be 10 years from now? What do you hope the future looks like?

Rene: In my opinion, the collaboration between government and philanthropy will be much more intricate than what we are seeing today and therefore the resultant successes that emanate from that collaboration will be more sophisticated. I think that the lines that separate the two will become a bit blurred as they build upon the successes of current public-philanthropic partnerships and learn to have realistic expectations of one another. In particular, I anticipate seeing a greater number of matching grants and cooperative agreements, sponsorships and co-sponsorships and the staff sharing.

Tags: Council on Foundations, Foundations, government philanthropic collaboration, Philanthropy, Public-Philanthropic Partnership Initiative, Rene Cabral-Daniels, social change, social innovation

A New Model For Ending Inner City Poverty: An Interview with Ted Howard

In this month’s Social Velocity interview we are talking with Ted Howard. Ted is the driving force behind an exciting experiment in social innovation going on in Cleveland. Evergreen Cooperatives are employee-owned, green, start-up, for-profit companies that are designed to completely revamp inner city Cleveland’s economy by drawing on assets already there. Ted is one of the principal architects of Evergreen Cooperatives through his role as Senior Fellow for Social Justice at the Cleveland Foundation. He is also the executive director of The Democracy Collaborative at the University of Maryland. I found out about Evergreen Cooperatives at this year’s Social Capital Markets Conference and was so blown away, I asked to interview Ted.

Nell: Like any social entrepreneur, Evergreen Cooperatives has huge plans for growth. The goal is to create 5,000 jobs in inner city Cleveland, and you currently have created about 50. How do you plan to scale Evergreen Cooperatives to that level?

Ted: The Evergreen strategy is based on leveraging the economic strength of Cleveland area anchor institutions – hospitals, nursing homes, universities, museums, cultural centers, and the like. We tend to think of these types of institutions in terms of their social missions – providing health care, educating students. But they are also important businesses – albeit usually nonprofits. In Cleveland, three of the city’s biggest anchors – the Cleveland Clinic, University Hospitals, and Case Western Reserve University – annually procure more than $3 billion in goods and services. This is in addition to their very substantial personnel and construction budgets. Yet virtually none of that $3 billion of annual spend makes its way into the low-income neighborhoods that surround the campuses of the institutions.

Our strategy is to work closely and in partnership with these anchors to identify supply chain purchasing opportunities that could be sourced locally. For example: laundry services, food, renewable energy, recycling, and so forth. Evergreen then develops locally-based businesses matched to these procurement needs. The goal is to drive as much of this $3 billion into the community as possible, and in the process, catalyze a network of locally based businesses that hire their workforce directly from the neighborhoods.

In truth, we don’t know how to move from a few companies with 50 or 100 employees to a robust network of dozens of companies that can employ thousands. But clearly the opportunity exists due to the presence of these anchors. The institutions aren’t going anywhere (unlike corporations, universities and hospitals almost never move) and their need for goods and services continues to grow.

Nell: There have been countless attempts over the years to solve inner city poverty. Why do you think this model could be the solution? What makes it different and more promising than past attempts?

Ted: Evergreen represents a new “paradigm” in community economic development. By that, I mean to suggest several important elements in the Evergreen design that are significantly different from traditional anti-poverty approaches.

First: this is not a welfare or subsidy strategy. We are building a network of for-profit businesses committed to hiring their workforce from among local low-income neighborhoods. Each business is closely linked to area anchor institutions that can provide ongoing contracts to support the company.

Second: because our workers live in low-income households (the median annual household income in our target area is below $18,500), we believe that jobs alone are not enough, even when those jobs offer a living wage and no-cost health benefits, as our jobs do. People need to be supported in building their family assets and wealth beyond their weekly paycheck. The way we are addressing this is by incorporating Evergreen companies as worker-owned cooperatives. Once someone has joined the coop, they become eligible for annual profit distributions into their capital accounts. The goal of our business model is to generate enough profit in each company so that a worker who has been with Evergreen for 8 years has amassed $65,000 in his or her account. This is their property, their asset, and when they leave the company, they take this money with them. While most of us can’t imagine retiring on $65,000, in our neighborhoods, this amount of money can be life-altering.

Third: the long-term goal of the Evergreen Cooperative Initiative is not simply to create business or provide jobs, not even to build the work of workers and their families. The ultimate commitment is to stabilize and then revitalize six neighborhoods that are home to 43,000 residents. In the past decades, these communities have been radically disinvested as jobs and business have left the area. We are trying to rebuild community, and a key to that is creating new capital (in the form of Evergreen businesses) that won’t get up and leave the community (as so many individual entrepreneurs and businesses often do). By broadening ownership of our businesses to the workers who live in the community and are employed in the company, it becomes much less likely that these companies will exit the area.

Rather than a trickle down strategy, Evergreen focuses on economic inclusion and building a local economy from the ground up. Rather than offering public subsidy to induce corporations to bring what are often low-wage jobs into the city, the Evergreen strategy is catalyzing new businesses that are owned by their employees. Rather than concentrate on workforce training for employment opportunities that are largely unavailable to low-skill and low-income workers, Evergreen first creates the jobs (in our network of companies), and then recruits and trains local residents to take them.

Nell: The financing to get the Evergreen Cooperative up and running was a pretty innovative mix of public, private and nonprofit capital. How were you able to get those three players to the table and investing?

Ted: Access to low-cost capital is one of the great challenges faced by low-income communities. Typically, they are starved for investment – banks don’t want to make loans and investors don’t tolerate the risk level. We think we are beginning to crack the code on this problem – we still have a lot to learn, but we are making progress. To date, we have raised about $6 million in grant funding which in turn has helped unlock an additional $35 million (approximately) in long-term, low-interest federal loans (such as HUD108), tax credits (including solar and New Markets Tax Credits), state grants and loans, and even growing participation from commercial banks.

What has helped bring all of this to the table has been the leadership of local philanthropy (in particular, the very strong commitment made by the Cleveland Foundation) and by partnership among the city’s large anchor institutions. By putting their reputations, relationships and resources on the line, they have been able to reassure public and private investors that investing in Evergreen is a sound investment. I should also say that the very strong support from the Mayor and the City’s Department of Economic Development have been crucial in building a funding bridge between Evergreen and Federal and State sources.

Some might ask: why are local universities and hospitals and other anchor institutions so intimately involved in the Evergreen strategy? Why are they at the table at all? The answer is simple, actually. They realize that in order for their businesses to succeed, the neighborhoods surrounding them have to be strengthened and rebuilt. It is never good for business to be surrounded by depressed and dangerous neighborhoods. Parents won’t want to bring their children to those schools; doctors and nurses won’t want to work for those hospitals. If people aren’t employed, they can’t pay for the services these institutions offer. So, even beyond the moral or humanitarian reasons, there are sound business reasons for these institutions to be at the table.

Nell: What are your long-term financing plans for the Evergreen Cooperative? Will you ever be able to fully exit and allow these businesses to stand on their own?

Ted: There is essentially no equity investments in the Evergreen cooperatives – almost all of the financing is debt financing that will be repaid over time. The goal is to have each company become profitable, repay its debt, and become a sustainable and successful business. That said, we also are intent on tying the businesses together into a coherent network with a shared mission and shared values. In 2011, we will establish the Evergreen Cooperative Corporation which will be a kind of holding company that will coordinate the entire network. ECC’s board will be comprised of a range of stakeholders – representatives of the individual coops, the anchor institution partners, local philanthropy and so on. In building this structure, we have been inspired by the example of the Mondragon Cooperative Corporation in the Basque region of Spain. There, over a 50 year period, a group of 120 cooperatives employing more than 100,000 people, with annual revenues of $20 billions has been built. While each company has great autonomy, they are all networked together, which provides business resilience and ensures that the cooperative vision and mission are shared by all,

Nell: Aside from the fascinating model and financing, yours is also an interesting study in managing diverse stakeholders. There are many stakeholders in this project (city of Cleveland, businesses, employee-owners, funders, etc). How do you keep them all aligned on both the long-term vision and the day-to-day tasks?

Ted: Certainly, Evergreen embraces a broad and diverse group of stakeholders. At one end of the spectrum, you have world-class, multi-billion dollar institutions that are the economic engine of our region. At the other, you have men and women who have grown up in some of the most disadvantaged neighborhoods to be found anywhere in America. Any many other types of institutional actors in between. Keeping all of this aligned and moving forward together is one of the essentials to our success to date.

We have established many mechanisms to nurture and sustain this alignment. Each quarter, for example, the Cleveland Foundation’s president, Ronn Richard, convenes a meeting of the leaders of the city’s major anchor institutions, foundations, city agencies, etc. – the most recent gathering had about 30 people around the table. They update each other on ongoing plans related to community development, job creation, transportation issues, and so on.

There is also a leadership team of people working on Evergreen at the staff level – the managers of the cooperatives, program staff at the Cleveland Foundation, consultants working on different elements of the project.

Continuing education and constant information flow are essential to keep the network and system of relationships whole and aligned. One element that has been quite important is an annual study trip to Mondragon (sponsored by the Cleveland Foundation). To date, about 35 civic leaders from Cleveland have participated in these trips, which have been important learning experiences about how cooperative development strategies can move to significant scale. I imagine that the City of Cleveland has a greater percentage of its leaders that have visited Mondragon than any comparable city in America.

Finally, it has to be said that the role played by the Cleveland Foundation as an honest broker and convener, in addition to its role as a funder, has been essential. The Foundation has been able to bring people to the table, and to keep them on board over a period now going on six years.

Nell: What is still holding the project back? Where are the hurdles in this project going forward and what are you doing to overcome them?

Ted: While we have had some success to date, we very definitely are facing big hurdles and significant challenges. Three stand out:

First: we have more business opportunities related to our anchor partners than we have solid management talent to bring new Evergreen companies into existence. We are now aggressively looking for seasoned managers who want to play key roles in this initiative – and who buy into the broader cooperative ownership and community stabilization vision. This is not typical for most business people, to say the least. But if any of your readers out there are interested in this, they should contact us!

Second: it will be critical to our long term success to build a strong culture of cooperative ownership within Evergreen companies. Being a worker-owner is a very different proposition from showing up at work for 8 hours a day and then clocking out. In Evergreen, each person is an owner – and with that comes enormous responsibility and accountability. Building that culture, and empowering our worker-owners to become leaders, both within their companies and within the communities, is essential.

Third: while we have had some success at accessing and placing capital, we are going to need to expand our capital pool considerably. In 2011 we will be launching our new Evergreen Cooperative Development Fund and will be seeking a broad range of investments – from foundation grant and program related investments to mission related investments, private equity (that is willing to take a below market rate of return), and government loans and grants. We are thinking of something on the order of raising $50 – $100 million in the coming period to capitalize the next generations of Evergreen companies. This is going to be a challenge in these difficult financial times, to say the least. But we believe we can do it.

Tags: anti-poverty approaches, Cleveland Foundation, Evergreen Cooperatives, inner city poverty, Innovative financing for social change, social business, Social Capital Markets conference, Social Enterprise, Social Entrepreneurship, Ted Howard, The Democracy Collaborative

My Wish List for SoCap 2011

Despite my frustration in an earlier post about this year’s Social Capital Markets Conference inability to fully integrate philanthropic and government capital into the discussion, I was reminded by a friend that we have actually come a long way in three short years. A keynoter at the first SoCap conference in 2008 noted that “we aren’t here to talk about nonprofits.” The fact is that just two years later not only were nonprofits and their philanthropic and government funders present in large numbers at the conference, but they had their own track. It was a huge step forward to have a devoted track focusing on the philanthropic capital market with Sean Stannard-Stockton at its head this year. The track brought some great work to light and started some important conversations.

In the spirit of continuing and expanding that conversation, here are the conversations/sessions I’d like to see at SoCap 2011:

• More case studies like the Evergreen Cooperatives in Cleveland and the Evergreen Lodge in Yosemite (not related) that demonstrate innovative collaborations of capital across the philanthropic, government and private sectors
• A working session that looks to compare/combine the nonprofit rating systems and GIIRS (Global Impact Investing Rating System)
• Case studies of nonprofits who have crafted a growth or capacity capital campaign to unlock philanthropic capital for scale and change
• A discussion about venture philanthropy. New Profit, Venture Philanthropy Partners and others pioneered the nonprofit capital space. Where are they now, what have they learned, and what are they doing to revamp the venture philanthropy model?
• An update on the Social Innovation Fund (SIF), what they’ve learned, what the government’s plans are to revamp and scale it.
• Beyond SIF, examples of what local, state and federal governments are doing to partner with philanthropists to expand capital for social entrepreneurs. Council of Foundation’s Public/Philanthropic Partnership is a place to start.
• Stacked deals involving philanthropic and private capital are very tricky to create, as Julie Sunderland and others have argued, but what can we do or develop to make this less difficult? What sorts of terms are people playing around with? What’s working and what isn’t and how can we evolve this?
• Donor-Advised Funds hold tremendous opportunity to unlock philanthropic capital, but are underused currently. What can we do to unlock that potential?
• Where do community foundations fit into all of this? Often the nexus of a city’s philanthropic activity, they have been slow to climb aboard the social capital market train.  How can we unlock this potential capital for social impact?
• Discussions about how we educate philanthropists about the need for capacity and growth capital in the nonprofit world. How do we make more philanthropists builders instead of buyers?
• How do we get more foundations to use Program Related Investments and Mission Related Investments?

SoCap10 did a great job of starting the conversation, now I’d like to see that conversation move to the tactical. Let’s create new structures, incentives, partnerships, tools to unlock philanthropic and government capital for social impact.

What do you want to see at SoCap11? Add to the list in the comments.

Photo Credit: paratiger

Tags: builders instead of buyers, community foundations, Council of Foundation Public Philanthropy Partnership, Evergreen Cooperatives, Evergreen Lodge, GIIRS, Julie Sunderland, Mission Related Investments, MRIs, New Profit, philanthropic capital, PRIs, program-related investments, Sean Stannard-Stockton, SoCap, Social Capital Markets conference, Social Innovation Fund, Venture Philanthropy Partners

Socap Day 2: Unlocking the Nonprofit Capital Space

Day 2 of SoCap was by far my favorite. It started with an interesting keynote from Julie Sunderland of the Gates Foundation. She offered a perhaps more realistic, bordering on the pessimistic, view of the social capital market space. She said that Gates struggles to find entities that can absorb the size investments they want to make. They get excited about the idea of bringing together foundation, government and private dollars in stacked deals, but that the work is complicated and hard and they have yet to craft one of these deals simply because it is extremely difficult to determine the terms. All of this underlines what I’ve said in a previous post: in the nonprofit, philanthropic and government worlds there is still much work to be done to unlock capital.

The first session of the day for me was “Lessons of Behavioral Finance: Understanding and Overcoming Barriers to Impact Investing” with Hope Neighbor and her ground-breaking research, Money for Good, released earlier this year calculating a $120 billion pool of potential impact investing money that is sitting on the sidelines. Hope said that despite our desires to the contrary, people still very much think of their charitable giving as separate from their impact investing, “the reality is that people compartmentalize their money.” And only 3% of the population uses data to compare the organizations they give to.

My favorite session of the day, by far, was “Deep Dive Into the Evergreen Cooperative Initiative.” This session was exactly what I was hoping to see more of at SoCap this year. A group of leaders in Cleveland realized that the heart of their city was quickly deteriorating and no one was doing anything about it. They formed a coalition of the anchor institutions in Cleveland (Case Western Reserve University, Cleveland Clinic, etc), foundations, city leaders and others to create the Evergreen Cooperatives that brings career-track jobs and green, employee-owned businesses to the inner city, transforming a city that has lost 50% of its population in the last 50 years. Beyond the fascinating coalition, business model and results this project is achieving, lies its impressive financing. A combination of bonds, foundation grants, loans, HUD money and others launched this project and financed the 3 businesses they currently operate (a green laundry, an organic greenhouse, and a solar power company).  According to Evergreen leaders, “Cleveland wants to be where the world is going, not where the world is.”

To scale this project to create 5,000 jobs (the area needs 46,000 jobs), which will be the impetus to truly transform the inner city economy, they are creating a CDFI and looking to use PRIs and MRIs. What excites me so much about this project is not the spirit of collaboration and tremendous results, but how they are bringing public, private and philanthropic money together in a truly innovative convergence. THIS is the kind of social capital market I’m talking about. Impact investing is great, but it is only ONE piece of the puzzle. I would love to see more examples like Evergreen at SoCap.

The last breakout session I attended for the day was “Nonprofit Analysis: Beyond Metrics,” which gave a great overview of the growing nonprofit evaluators market through the lens of rating one nonprofit, DC Central Kitchen. It was interesting to see how Charity Navigator, the most well-known nonprofit evaluator, has evolved from a system driven purely by IRS 990 form overhead ratios to a three-pronged review including transparency and impact evaluations.

The end of the session gave me serious pause, however, when a member of the audience asked whether any of the evaluators might use the GIIRS system coming out of the impact investing world to rate nonprofit impact. Ken Berger admitted he wasn’t familiar with GIIRS and Tim Ogden of GiveWell said he was skeptical of social return on investment (SROI) calculations in general. Again, my point that the philanthropic and impact investing worlds aren’t communicating and collaborating becomes apparent. Wouldn’t that be amazing if impact in both the philanthropic and impact investing worlds could be measured in a comparable way? That would be truly innovative!

So, although Day 2 of SoCap provided much more conversation and examples of how the philanthropic and government capital markets are evolving, there is still much work to be done to bring both capital fully into the social capital market. Perhaps at SoCap 2011?

Photo Credit: Markets for Good

Tags: CDFI, Charity Navigator, DC Central Kitchen, Evergreen Cooperatives, Gates Foundation, GIIRS, GiveWell, Hope Consulting, Hope Neighbor, impact investing, Julie Sunderland, Ken Berger, Money for Good, MRIs, nonprofit capital, philanthropic capital, PRIs, Root Capital, SoCap, Social Capital Markets, Social Capital Markets conference, SROI, Tim Ogden, Willie Foote

Data and the Future of Philanthropy: An Interview with Lucy Bernholz

In the August installment of our Social Velocity interview series, we are talking with Lucy Bernholz, founder and President of Blueprint Research & Design, Inc. a strategy consulting firm for philanthropic institutions and individuals. She is also the author of many seminal books (including the prescient Creating Philanthropic Capital Markets), reports (like Disrupting Philanthropy) and her famous Philanthropy 2173 blog. Lucy is considered a visionary in the philanthropic world and is doing tremendous work to move philanthropy forward.

Our interview with Lucy is below, but you can also read our past interviews with Kevin Jones, Clara Miller, and Paul Tarini.

Nell: You have become increasingly interested in data sharing and crowd-sourcing for change. What are the risks in these new forms of social problem solving?

Lucy: Data are not objective – quantitative data is subjectively collected, categorized, sourced, and analyzed and its “reputation” as neutral is unearned. Using data well requires skills that most of us don’t have – statistical analysis, methods, etc.

That said, when I talk about data I mean “anything that can be digitized.” Stories. Video. Anecdotes. Numbers.  We may not all have all the skills to make sense of every type of data, that is partly why crowds are important. For decades, only experts and the wealthy had access to data – so their subjective analyses dominated the discussion. Now, many of us – crowds – can have access, make sense of, add nuance, ask questions. That changes the “subjectivity” and changes the dynamic. Data are disruptive when access to them is broad, cheap, and easy.

We still need to be skeptical, ask questions, and think deeply about the biases behind both data collection and presentation. But, as computer programmers say, “many eyes make for shallow bugs.” Crowds and data are two sides of the same coin when it comes to disrupting the social sector.

Nell: In Disrupting Philanthropy you examine the long tails of donors (foundation and individual contributors of money for social change) and doers (nonprofits, social entrepreneurs receiving that money) and how information technology is connecting the two. But as a future teller, how and when do you see more conservative/fearful nonprofits and philanthropists embracing these new technologies?  What is the tipping point?

Lucy: There are few pressures on endowed foundations to change their behavior. It is hard to force this change from the outside.

The drivers of change in this day and age include new expectations about information at a societal level, the government 2.0 movement, the skills of two to three generations of employees and managers in using online tools and finding information when they want it. These are the soft, cultural, and ultimately most meaningful drivers of change. Regulations that require more disclosure, new expectations of transparency, efforts such as The Foundation Centers Glasspockets.org, the Center for Effective Philanthropy’s assessments are other possible influencers of the timeline.

That said, don’t discount the inevitable backlash against transparency, which is coming. Recent online “revelations” that have been fueled by political agendas and resulted in “flash decision making” highlight the need for all of us to be careful about the pace of information, believing everything we read, and the need for thoughtful, investigative, well-referenced and fact checked information. As Craig Newmark says, the news business is the “immune system of democracy.” As the news business is caught in this wildly transformative moment, we must all consider where we get our information, how we use it, who provided it to us, and what its credibility is. There is no straight line to widespread adoption of new tools – it is episodic and includes strange diversions.

Nell: Where does government fit into the connection between donors and doers? What can/should government do to encourage use of data sharing, crowd-sourcing, etc.?

Lucy: The government 2.0 movement is way ahead of nonprofits and foundations in the open sharing of data. That said, most of this is a “supply side” effort at this point – cities, states, and federal agencies shoveling data over the wall into the public domain with little knowledge of what information communities want or need and even less support for communities to use the information well. Firehousing data into the public domain is one thing, but it is not enough (It can also work to distract – “You want data? Here have it all”)

As for nonprofits and foundations, the data disclosure requirements of the new 990 are small steps in the right direction. Most of what will happen as far as nonprofits and foundations sharing their data is likely to be voluntary, led by innovators, and taken up by others over time as communities and constituents learn to ask for what they want. The expanding ecosystem of nonprofit ratings/raters – from GiveWell to Greater Nonprofits to Philanthropedia to National Councils of Nonprofit Analysts, etc. will also spur this.

The proposed legislation, HR 5533, which calls for a national council on nonprofits and a central system for tracking nonprofits as funded by federal agencies is the wildcard here – if it passes, the data game on nonprofits and philanthropy will change. How so, and whether for the better, I can’t say at this time because I just don’t know enough (yet) about what is being proposed, how it is supposed to work, and how it will really work (if enacted).

Nell: As you mention in Disrupting Philanthropy, 10 years ago socially responsible investment was a small niche, but now it makes up 10% of professionally managed investment funds. How much bigger will it grow? How much can mission and money be blended in our economy?

Lucy: Socially responsible screened assets have been growing for more than a decade. This is a multi-decade trend that is growing mostly outside of the realm of the charitable and philanthropic sector and within the realm, incentives, and returns of the mutual fund business. Philanthropic efforts to connect to these assets and to promote Mission Related, Program Related spending are only now getting real traction and advocacy from within philanthropy.

Nell: Your focus is largely on philanthropy, but what do you think nonprofits should be doing to tap into these trends and take advantage of the long tails of donors and doers?

Lucy: Nonprofits are experimenting with every tool to reach the long tail that they can – from “donate now” buttons to text giving. For the most part, the process has been focused on marketing and fundraising. The exciting changes are happening where we see people developing solutions that take the digital connectivity and data as the starting point for the work they are trying to do – think about Ushahidi or CrisisCommons – their entire programs/projects/initiatives/governance models/organizations are built on deep understanding of the power of disbursed long tails. That is powerful.

Nell:  Because you are such a proponent of data and measurement, what do you make of the emotional part of giving? Do you think we can ever get to a place where it’s all about the data? And should we want to?

Lucy: I have always said that philanthropy is a business of passion – it is largely emotional. The use of data, as Hope Neighbor’s recent report shows, is a small part of the process of philanthropic decision making. And it will always happen within the personal interests of donors. And please remember, when I say data, I don’t mean just numbers.

Tags: Blueprint Research and Design, Center for Effective Philanthropy, Craig Newmark, CrisisCommons, crowdsourcing for change, data sharing, GiveWell, Glass Pockets, Greater Nonprofits, Hope Neighbor, Lucy Bernholz, PHilanthropedia, philanthropic capital markets, Philanthropy, Philanthropy 2173, Ushahidi

Will the Social Innovation Fund Really Change the Nonprofit Market?

Last week a new head of the federal Social Innovation Fund, the $50 million public/private fund to scale innovative nonprofits that came out of the Serve America Act, was named. Paul Carttar brings a wealth of experience and knowledge having worked at New Profit, the first venture philanthropy fund, and Bridgespan and Monitor consulting groups, the largest and most sophisticated consulting firms to large nonprofits. He knows how to scale proven nonprofit models.

But we need to be cautious about how much the Social Innovation Fund can do to transform the nonprofit capital market. While it will provide mezzanine funding to the best nonprofits, there are still some glaring holes in the capital available to the rest of the nonprofit sector. You can read my post “Will the Social Innovation Fund Really Change the Nonprofit Market?” at the Change.org blog.

Tags: Bridgespan, Monitor, New Profit, Paul Carttar, Serve America Act, Social Innovation Fund