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When Nonprofit Collaboration Actually Makes Sense

Let’s talk about nonprofit collaboration for a second. Funders and thought leaders often extol the virtues of collaboration among nonprofit organizations as a way to maximize increasingly limited resources. But pushing nonprofits to blindly collaborate, just for the sake of saving some money (“Can’t you all just work together?”), is really doing no one any favors.

Peter Panepento’s recent article in the Stanford Social Innovation Review, is among the latest of these calls for more collaboration. In fact he explains a sort of magic he sees in collaborations that are forged between quite disparate groups. He argues:

“At a time when nonprofits are getting squeezed by government budget cuts and facing increased need among those they serve, many groups are realizing that they cannot achieve their missions without building new alliances…Interestingly, many of the most successful collaborations have been between groups working on very different missions, or between nonprofits and groups outside the nonprofit field.”

Indeed, innovative collaborations can be very exciting. But we must make sure that when collaboration happens, it follows a thoughtful, strategic approach, otherwise it can come at quite a cost. We can’t just encourage nonprofit leaders to “collaborate more” and call it a day. There are very specific times when, and very specific ways to approach, collaborations that make sense.

First, it’s important to make a distinction between two very different types of collaboration:

  1. Little “c” collaboration where a nonprofit coordinates with other organizations to deliver programs and services and/or share best practices, vs.
  2. Big “C” Collaboration where nonprofit leadership analyzes their external marketplace and forges organization-wide, strategic alliances with other entities that can help move the nonprofit’s social change goals forward.

In their article “The Networked Nonprofit,” Jane Wei-Skillern & Sonia Marciano articulated this difference:

“Many traditional nonprofits form short-term partnerships with superficially similar organizations to execute a single program, exchange a few resources, or attract funding. In contrast, networked nonprofits forge long-term partnerships with trusted peers to tackle their missions on multiple fronts.”

Collaboration with a Big C is a strategic way for nonprofits to operate, but it necessitates that nonprofit leaders have a clear understanding of their individual nonprofit’s core competencies, target audiences, and desired social change outcomes (through a Marketplace Map and Theory of Change), so that they can be very clear about which entities they should Collaborate with in order to move those outcomes forward. And instead of viewing their nonprofit as a single organization, nonprofit leaders can begin to think of their nonprofit’s work as part of a larger network of social change.

So to Collaborate effectively, nonprofit leadership must embark on a 3-part process:

  1. Get clear about the nonprofit’s core competencies (what you do better than anyone else), target populations (who you seek to benefit or influence), and desired social change outcomes (the change you’d like to see in the world). This can be done by creating a Theory of Change.
  2. Map your external marketplace to determine the potential Collaborators out there and where and when it might make sense to forge strategic alliances.
  3. Finally, because these need to be organization-wide alliances, you must engage your board, not just your staff, in creating high-level relationships with those with whom you’d like to Collaborate.

In other words, in order to move your mission forward through Collaboration, you must better understand both your nonprofit and your external environment. By figuring out exactly what your nonprofit brings to the table that is different from and additive to what potential Collaborators bring to the table, you can more successfully develop partnerships with more high-level decision-makers in the nonprofit, government, and/or private industries that affect the social change you seek. And isn’t that what it is ultimately all about?

I’m all for Collaboration — when it makes strategic sense. But the only way Collaboration works is when a nonprofit gets very clear about what change they want and which entities out there can help achieve it.

Photo Credit: Joseph Stalin, Franklin D. Roosevelt, and Winston Churchill on the portico of the Russian Embassy during the Tehran Conference to discuss the European Theatre in 1943, Wikimedia.

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What I Learned From My Time Off

I am back from vacation, and as I suspected it would, the space has given me a new lease on life. I have returned with more energy, more hope, more perspective, and less worry.

As I said before I left, I really encourage you also to take some time off this summer. Reject the pervasive notion that we must be always on and create some space for yourself to recharge.

Perhaps as an added incentive, I offer you some of the perspective that my time away gave me.

On my vacation I traveled to Europe, and I have to say, Europeans seem so much more relaxed than Americans. Now I spent only two weeks there, so this is far from a scientific observation, but the pace just seemed less harried. People walk more slowly than they do in America, taking more time with their strides, observing their surroundings, pausing to chat with friends. Meals take much longer and require that you specifically ask your waiter for the bill because they don’t want to rush you. The lack of a relentless pace allowed me to take a deep breath and live more in the moment. I’m trying to take that slower pace back to work with me.

Europeans also move their bodies and get outside much more than Americans, it seems. There are so many more bikes and pedestrians on the roads. In fact, in Berlin every street has a dedicated bike/pedestrian lane, and often one for each. And the biker or walker always has the right of way over the car. It is obvious that while cars are important, the healthier, more environmentally friendly forms of transportation are more valued. I found that the increased amount of walking and biking made me feel healthier, but also gave me a new perspective on my surroundings. Removing the separation of the car window, I became much more cognizant of and part of my world.

I also spent a lot of time exploring museums and monuments in order better to understand European history. Because we were in London and Berlin, our historical exploration tended to focus on World War II and the Cold War. And for some strange reason I found the people and places from that period of history strangely comforting. Our current times often feel overwhelmingly uncertain and grim. But those anxieties pale in comparison to the second half of the 20th Century, which was particularly hard on the people of Europe — from the rise of Nazism, to the violence and destruction of World War II, to the displacement and fear of the Cold War. Yet the European people somehow found a way to get through it. In fact, the DDR Museum, which chronicles social history in East Germany under communist rule, demonstrated how East Berliners, essentially cut off from the rest of the world by the Berlin Wall, found creative ways to build lives for themselves despite the limits of their surroundings. It was, to me, a testament to the human spirit’s ability to endure, adapt and survive. And it was a particularly heartening message for me in our 2017 world.

The geographic and historical space my time away provided helped me realize that my little world is fairly insignificant. There is a much larger world and a much longer history out there. And so I emerge more relaxed, more present and with a greater appreciation for focusing on what I can control and letting the rest just be.

Photo Credit: October 1961. Children keep their friendship across the barbed wire border between East and West Berlin. From the booklet “A City Torn Apart: Building of the Berlin Wall.” The Central Intelligence Agency.

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Planning for Nonprofit Success: An Interview With David Grant

In this month’s Social Velocity interview, I’m talking with David Grant.

David is the former President and CEO of the Geraldine R. Dodge Foundation and past chair of the Council of New Jersey Grantmakers. He now consults nationally with nonprofits, foundations, and schools and is the author of The Social Profit Handbook: The Essential Guide to Setting Goals, Assessing Outcomes, and Achieving Success for Mission-Driven Organizations.

He is also a member of the Leap Ambassadors, a 100+ community of nonprofit thought leaders, progressive funders, policy makers, and instigators who believe “performance matters.”

You can read other interviews in the Social Velocity interview series here.

Nell: Your book, The Social Profit Handbook, is about assessment, but your central chapter is titled “Mission Time.” Is this akin to the time spent on research and development in for-profit companies?

David: Yes, it is. I would compare it to any time set aside for strategic thinking and reflection on what we are learning from experience. I invoke Steven Covey’s famous Urgent/Important matrix and equate mission time with “Quadrant II,” where we deal with important matters when they are not urgent.

Effective nonprofit leaders often think strategically. The case I make for mission time in my book is that this should be an ongoing collective exercise. I believe there should be more time set aside for staffs and boards, singly and together, to be much more specific about what success will look like for their organization, so they can plan backwards from that shared vision.

I think it’s the most important practice nonprofit organizations can adopt if they are serious about getting better at what they do – which is creating social profit. At its best, I think mission time also includes the voices and perspectives of the people being served by a nonprofit organization. Can you imagine a company conducting R&D without checking in with clients and customers?

Nell: “Planning backwards” is another phrase you use frequently in the book. Is that what you are saying should happen during mission time? And if this practice is as important as R&D is in the for-profit sector, why don’t we see more of it in the social sector?

David: Those are great questions. Let me start with “planning backwards.” I see this phrase as critical to the practice of formative assessment – the kind of assessment whose purpose is to improve performance, not audit it or judge it. I think too many of us view assessment as summative; we think it comes at the end and that somebody gives us a grade. The central argument of my book is that when an organization takes assessment into its own hands, embraces its formative purpose, makes time for it and gets good at planning backwards, they not only improve their workplace culture, they go much further towards fulfilling their mission. In short, they create more social profit.

But here’s where the challenges of assessing and measuring success come in. If you describe what matters most to you – things like increasing a young person’s sense of hope and confidence; improving relationships and building trust between former adversaries; inducing an aesthetic response through great art; inspiring a long-term commitment to equity or a healthy environmental – people say, “You can’t measure that.”

What they are really saying is, “there is no standard unit of measure that applies to that.” Ok, fair enough – that’s why we need to get good at qualitative assessment. We need to be able to respond with confidence, “If you can describe it, you can measure it.” That’s why I spend so much time in my book talking about qualitative assessment rubrics as effective tools for this process. The rubric invites us to describe as specifically as possible along a spectrum what we mean by success, in relation to our criteria for success. It is as if we were creating the test we want to give ourselves a year from now, and we can plan backwards from how we want to score on that test. You can see how that can’t happen without mission time.

Your other question about why we don’t see more mission time, more planning backwards, and more rubrics in the nonprofit sector is one I think about a lot. I don’t think there is a single answer. Part of it is mindset – we tend to focus on programs and direct mission-based actions in the world instead of on building strong organizations and internal practices. Part of it is resources – we are stretched so thin that it is hard to get out of a mode of urgency. Part of it is our habits – we are used to certain kinds of meetings that often don’t make enough room for group education, reflection, and decision-making. Part of it is funding patterns – donors prefer program support to general operating or infrastructure support.

Ironically, I believe mission time and planning backwards make their own cases. But we have to take the time first in order for the case to be made.

Nell: In your previous role as CEO of the Geraldine R. Dodge Foundation, you launched a capacity building initiative for your grantees. What results did you see from doing so and what do you think holds other foundations back from doing something similar?

David: It’s interesting you should ask that this week, because even though I’ve been gone from the Dodge Foundation for seven years, I just saw something I would attribute, at least in part, to those capacity building efforts. I was working with a national gathering of arts service organizations, and we were examining several of their strategic plans to see how they addressed the concept of sustainability. The first two defined it narrowly as financial stability. But then a New Jersey-based organization, a long-time Dodge grantee, defined it holistically, citing elements of governance, human resources, assessment systems, and ongoing capacity building as critical to sustainability, in addition to maintaining financial vitality. I don’t think it was a coincidence that this organization, alone among this national group, had just completed a successful, million dollar capital campaign.

I remember when I was still reading proposals that the groups that participated in our capacity building workshops were much clearer about what they were trying to do, more straightforward about the challenges they faced, and more cognizant of their own needs as a vehicle that carried the pursuit of their mission over time.

What holds foundations back from capacity building? Well, I imagine some might feel it is too indirect as a social investment; others might worry this kind of support carries with it a promise of ongoing funding. All I can say is that I think Dodge got more bang for our bucks in this part of our funding portfolio than in any other.

Nell: One of the projects you are working on is Artists Thrive, which is about developing assessment tools for the arts. What are the goals of this project and how could it be a model for other social issue areas?

David: The Artists Thrive project is the brainchild of the Emily Hall Tremaine Foundation in New Haven, CT and its grantees. It started with creating an assessment tool for those who work with artists – essentially the grantees in Tremaine’s program called “Marketplace Empowerment of Artists.” But it quickly expanded to consider a much larger system and asked: “What would it look like to have thriving artists in thriving communities?” and “Who would need to do what to achieve that vision?”

A group of six arts leaders have been running with these questions for over a year, with me in a support role. We have launched a series of rubrics, with the spectrum of success defined from bottom to top as “Artists Give Up,” “Artists Struggle,” “Artists Survive,” and “Artists Thrive.” The initial rubric, as I said, looked at the mental models and the actions of those who work with artists. The second looked at the range of attitudes and actions of artists themselves. The third will be for funders, describing how different philanthropic practices affect artists and their communities. Those are the front-line players, so to speak, but we plan to look at how others can contribute to the realization of the thriving artists/thriving communities vision as well – mayors, corporate leaders, planning commissions, educators, etc.

As far as models go, I think we already have some fantastic models of rubrics that deal with issues on a national scale, like the Whole Measures for Community Food Systems, which I describe in my book, or more recently, the Whole Measures for Urban Conservation (2017), which is described on The Nature Conservancy’s website..

Nell: Our country is currently divided along many lines, however in your work as a consultant you often lead groups made up of people that bridge these divides in order to create change in their communities. What are some examples of change you have seen recently in your work? And more broadly, what gives you hope in these challenging times?

David: I wish I were doing more of the kind of work you mention. In fact, I had this fantasy during the 2016 primary election cycle that one of the candidates would brandish my book on stage during a debate and say, “What this country needs is a good rubric!”

But I did see an exercise in cooperation recently that I found really heartening. It was in Delaware, where members of the Delaware Alliance for Nonprofit Advancement (DANA) and the Delaware Grantmakers Association (DGA) created a working group to write a rubric titled, “Grantmaker and Nonprofit Relationship for Creating Community Impact.” The title identifies their shared purpose — why their relationship matters.

The DANA/DGA draft rubric evokes a spectrum of performance (the columns of the rubric) in four short words: “Transactional,” “Engaged,” “Partnership,” and “Transformative.” As far as criteria to be measured along that spectrum (the rows of the rubric), the task force went to the critical dimensions of the relationship: the Alignment of beliefs in the purpose of the relationship; the Mutuality of feeling about its importance; the levels of Trust and Transparency in their interactions; and the quality of their Communication. Given that structure, it is no surprise that the draft rubric is both honest about disappointments and aspirational in its description of the possible.

This is an example of what gives me hope whenever I see it – systems thinking. As David Peter Stroh writes, “In conventional thinking, in order to optimize the whole, we must optimize the parts. In systems thinking, in order to optimize the whole, we must improve the relationships among the parts.” It strikes me that at the highest level of the DNA/DGA rubric, it will not be just a relationship that has been transformed; it will be the State of Delaware. All from carving out the mission time and learning how to use it!

Photo Credit: Social Profit Handbook

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Understanding The Full Costs of Nonprofits: An Interview with Michael Etzel

In this month’s Social Velocity interview, I’m talking with Michael Etzel. Michael is a partner in The Bridgespan Group, a global nonprofit organization that consults to nonprofits and philanthropists, provides leadership development support, and develops and shares insights — all with the goal of scaling social impact.

Since joining Bridgespan in 2006, Michael has focused on effectiveness across the full spectrum of social innovation financing, advising corporate, institutional, and family philanthropists and investors. Much of Michael’s work explores what it takes to use tools of innovative finance and impact investing to solve pressing social problems. His work and research in philanthropy also focuses on the question of what it takes to deliver results as a new approach to ending the nonprofit starvation cycle.

You can read other interviews in the Social Velocity interview series here.

Nell: In your research and writing you have focused a lot on what you call “Pay-What-It-Takes-Philanthropy,” the radical idea that different nonprofit solutions have different business models and thus require different costs and investments. This concept is so accepted in the for-profit world that it is a truism, but why is it a radical idea for nonprofit and philanthropic leaders?

Michael: It’s worth pausing for a moment to reflect on why business models and capabilities matter. Every nonprofit operates with an underlying business model and set of capabilities critical for program delivery. Failure to understand an organization’s business model frequently leads to underinvestment in core capabilities, and, as one program officer put it, “a hollowing out of civil society institutions.” We can’t have resilient, durable civil society organizations that deliver successful programs unless they operate from a position of financial strength.

As you highlight, segmentation and analysis of comparable performance data is common practice in the for-profit world. Leaders like Clara Miller, president of The Heron Foundation and former CEO of the Nonprofit Finance Fund, have long called for this kind of thinking in the social sector. But this type of comparison requires transparent and consistent data, something hard to come by. As one nonprofit executive reminded me, “If you think you can analyze a nonprofit through IRS 990 filings, you are in outer space.”

Yet, I wouldn’t say this a radical idea. Organizations like DataArts and CoMetrics show how this is possible. For example, DataArts gathers a variety of comparable revenue, cost, and performance data for arts and cultural organizations, and provides tools for reviewing that data. This provides grantees and grant makers with actionable data to inform management or funding decisions with an eye to effectiveness and efficiency. CoMetrics addresses a more diverse set of enterprises, providing software platforms and tools that enable those enterprises to collect, display, and compare financial, operational, and impact data against their peers. This bottom-up approach gathers data across organizations running the same type of business in the same field to form groups relevant for comparative assessment and learning.

Bridgespan’s preliminary analysis to date has shown that different types of nonprofit organizations have different cost structures based on their business model. Segmenting nonprofits by business model can help us compare similar organizations. When it comes to indirect costs, for example, nonprofit research labs have a median indirect cost rate of 63%, nearly two and a half times the 25% median rate of direct service organizations.

We plan to push ahead this year to refine and deepen our understanding of segmentation and how it applies to nonprofit cost structures and capital needs. Having this information will benefit funders and grantees alike when it comes to funding discussions.

Nell: You work with both nonprofit and philanthropic leaders, so you likely see both sides of this dysfunction. What do you think it will take to move the field to a place where those with potential solutions to social problems have enough and the right kinds of money to see their solutions come to fruition?

Michael: Nonprofits exist in a complicated marketplace, seeking capital from a broad range of funders. As in any marketplace, some influential market makers set the rules. The practice of setting limits on indirect costs in project grants to nonprofits/NGOs has its antecedents in the US government’s approach to funding R&D at universities during the post-World War II era. The federal government has changed practice dramatically since 1958, embracing the “fair share” approach—that federal agencies pay their fair share of true costs, including indirect costs.

Among private foundations, indirect cost rate policies have been common for decades. A RAND report from the 1980s captured the variety of policies at that time: “many foundations customarily pay full indirect cost as budgeted in a proposal. Other foundations may pay only a portion of… or specify a cap on the support of indirect costs.” More recently, our research has shown that many large foundations set a cap of 15% or lower on indirect costs. Yet, among the 20 large nonprofits we sampled, indirect costs comprised between 21% and 89% of total costs, with the median at 40%.

I offer this history because I see the indirect cost conversation changing. For decades, much of this conversation has been driven by nonprofit and NGO leaders’ concerns about caps on indirect cost reimbursement. But funders have begun to engage more deeply in this conversation over the last several years. In 2013, Forefront (formerly Donors Forum) convened a cross section of staff from smaller Midwest foundations to discuss barriers and potential solutions to funding indirect costs. In 2015, the three California Regional Associations of Grantmakers launched the Real Cost Project (now the Full Cost Project) with the dual goals of increasing the number of funders providing real-cost funding and building the skills and capacity of grantmakers.

Having philanthropic leaders at the table is important to overcoming the reality of power dynamics. In the same breath, it’s also important to see this issue for what it is—a complex systems issue. Acknowledging this complexity helps approach this issue from a place of empathy for funders that want to do the right thing, and nonprofits that want to own and manage the costs of delivering impact.

Funders have the opportunity to ask grantees their true costs of programs and to be prepared to pay their fair share of the operational and financial support it takes to deliver those programs. Meanwhile nonprofits can focus on knowing their costs and advocating for them. Funders cannot pay their fair share if grantees don’t tell them what it is!

Nell: Beyond researching and consulting on these topics, you also serve on the board of two nonprofit organizations. What has been your on-the-ground experience as a board member trying to put these concepts to practice?

Michael: Creating space for a conversation among peer board members has been important in establishing a shared understanding of the issues—and why sometimes the executive director very rightly chooses to say “no” to a grant that doesn’t cover true costs.

The reality of this “complex marketplace” also hits home—there is no one-size-fits-all solution. That puts a big burden on the executive director and finance team to effectively report and manage costs.

Photo Credit: The Bridgespan Group

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3 Things I Wish Funders Would Ask Nonprofits

I think we can all agree that most philanthropists truly want to be helpful to the nonprofit recipients of their dollars. However, because of the inherent power imbalance, it is often challenging, if not impossible, for a funder and a grantee to have a candid conversation about what it will really take to achieve the social change that they both seek.

I think part of the answer may lie in funders initiating more productive conversations with their grantees about what truly holds a nonprofit back from becoming more sustainable and effective at creating social change.

So here are some questions that funders, who hope to help their most beloved grantees achieve their mission, can employ:

  1. What holds you back?
    Rather than hearing this most critical question asked of them, nonprofit leaders often hear a very different question from their funders: “Why don’t you grow your programs?” In fact in the most recent Nonprofit Finance Fund State of the Sector Survey, 49% of nonprofit leaders said they could have an open dialogue with their funders about expanding programs, but only 17% said they could have a conversation with funders about organizational change or adaptation.  Instead of pressuring nonprofit leaders to grow, funders should ask about the capacity constraints that are holding those nonprofits back. And once a nonprofit leader reveals what those constraints are, funders and nonprofit leaders together should brainstorm how to overcome those hurdles, with capacity capital.

  2. What would it really cost to achieve your long-term goals?
    Nonprofit leaders are rarely asked what their long-term goals are, let alone what it would take to achieve them. For so long the incentives in the nonprofit sector have encouraged nonprofit leaders to hide their full organizational and infrastructure costs and operate on a short-term view. So they rarely give themselves the luxury of planning for the long-term, let alone calculating what the long-term might cost. Instead, funders should encourage the leaders of the nonprofits they fund to take the longview (perhaps starting with a Theory of Change), and to include ALL the costs (program, infrastructure, reserves, staffing and systems) necessary to get there.

  3. What other funders or influencers can we introduce you to?
    Beyond actual money, there is much more that philanthropists could be doing to support their grantees. Whether they realize it or not, funders often are connected to other key people who could help move a nonprofit’s mission forward. That might include other funders in the same issue area, or policymakers with an influence on the nonprofit’s mission, or others with a role in whether or not a nonprofit’s desired outcomes will come to fruition. Instead of being overly protective of their desirable network, funders should actively make connections for those nonprofits that they want to succeed.

I know I’m an optimist. These are hard questions for funders to ask and equally hard questions for nonprofit leaders to candidly answer. But the only way we are going to move beyond the power dynamic and an under-resourced nonprofit sector is if funders and nonprofit leaders have more open and honest conversations about what it will really take to move social change forward. So get talking.

Photo Credit: DuMont Television/Rosen Studios

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Putting Wealth to Work for Social Value Creation: An Interview with Jen Ratay

In this month’s Social Velocity interview, I’m talking with Jen Ratay. Jen is executive director of the Silicon Valley Social Venture Fund – SV2, a community of families and individuals who come together to learn about effective giving and impact investing while pooling their resources and skills to support promising social ventures. Prior to taking the helm of SV2, Jen served as program officer at the William and Flora Hewlett Foundation where she led its Organizational Effectiveness grantmaking program that helps grantees build high-performing organizations.

Nell: SV2 is a strategic partner of the Social Venture Partners network of affiliates across the country that fueled the development of the venture philanthropy model of making large investments of money and expertise to grow proven nonprofits. The venture philanthropy model is almost 20 years old now, where do you think it stands? What have you learned and where do you think venture philanthropy goes from here?

Jen: Twenty years ago in the heart of Silicon Valley, SV2’s founder Laura Arrillaga-Andreessen launched a team sport approach to grantmaking that pooled donor resources for investment in promising nonprofits. Laura and her peers went beyond pooling monetary donations and invested their time and professional skills to help high-potential nonprofits build strong organizations and scale their impact.

From its earliest days, SV2 focused on finding and funding innovative nonprofits poised for dramatic scale, creating a philanthropic version of venture capital. SV2’s giving approach, along with the broader Social Venture Partners network it helped inspire and now partners with, helped catalyze the global movement known as venture philanthropy.

Not unlike venture capitalists, venture philanthropists believe the success of a great idea is contingent on building a leadership team that can effectively execute against a compelling plan. Key elements of the venture philanthropy approach include offering larger and longer-term grants to support nonprofit growth and core operations, tying continued funding to outcomes and measurable results, and providing coaching and management assistance to nonprofit leaders.

As venture philanthropy has evolved over the years, we’ve learned a number of lessons.

First, venture philanthropy’s historical focus on investing in individual organizations, while important, has rarely been sufficient to drive major paradigm shifts or sustained systems-level change. Achieving transformative impact often requires strengthening the capacity of networks and social movements and engaging government and the business sectors in addition to scaling high-performing nonprofit organizations.

Second, we’ve learned how essential it is for nonprofit CEOs to not just be strong organizational managers but also highly-collaborative network leaders and movement builders, a different skillset altogether.

Additionally, venture philanthropy, which resonates with many Silicon Valley professionals, is not a perfect analog for investing in nonprofits. To be effective, donors must understand that nonprofits differ from for-profits in many meaningful ways including governance, funding flows, scaling challenges, organizational culture, and what it means to attain financial sustainability. It takes time to understand these complexities and execute well – whether as an individual donor or as part of a collaborative donor group like SV2.

Looking ahead, I’d be surprised if we don’t see continued rapid growth in venture philanthropy, as wealth transfers from one generation to the next and Millennials and other new philanthropists seek high-impact ways to put their wealth to work for social value creation. As part of this growth, the hands-on venture philanthropy model with its focus on experiential grantmaking and donor learning continues to be an attractive entry point for emerging philanthropists, whether in Silicon Valley, Seattle, Bangalore or Beijing.

Nell: The philosophy behind the venture philanthropy model is that we should scale proven solutions, but significant growth to nonprofit organizations is tricky because often those organizations lack basic capacity. When does scaling make sense and how can funders effectively support it?

Jen: Yes, scaling nonprofits – even those with proven program outcomes – can be tricky.

For early stage nonprofits, there’s often a capacity building Catch 22 – a nonprofit needs basic organizational capacity to be able to step back from the daily treadmill of client needs and service delivery to invest in strengthening the organization and laying a foundation for future growth.

Compounding this, nonprofits don’t currently work within a well-functioning social capital market that supports organizations through each stage of growth. While making a large impact does not necessarily require a large organizational budget, nonprofits do need a reasonable level of revenue to develop certain core capabilities. The majority of nonprofits also face what has been termed the “social capital chasm,” the huge gap between their current budget and the $10 million or more they would need to move toward full scale.

On top of these financing barriers, compensation for nonprofit employees typically lags behind – sometimes far behind — that offered by foundations and for-profits. There’s no equity for nonprofit founders or executives, which, in highly competitive labor markets like Silicon Valley, can make attracting and retaining top talent a challenge.

And don’t get me started on the nonprofit overhead problem – our sector’s wildly unhelpful myth that at least 85 percent of an organization’s income should go toward programs rather than core operations. This myth is not only illogical, but damaging, as it constrains organizational growth and impact that hinges on strategic investments in infrastructure, people, processes and capabilities.

Despite all this, candidates for nonprofit scaling do exist. Common across them, they have promising programs based on early evidence of impact and compelling business models. They have strong, connected boards of directors and leaders who are coachable, collaborative and brave. Perhaps because of these qualities, these organizations also have the ability to attract talent and new sources of funding over time in competitive human and social capital markets.

Funders can help by playing the higher risk role of “Big Bettor”. A funder willing to make a significant multi-year investment in a promising small or mid-sized nonprofit organization can help them prepare to cross that daunting social capital chasm. These funders clear the way for other funders, signaling an investment in the organization is worth the risk. Early Big Bettors who help a nonprofit prove its model make the waters safer for other grantmakers to jump in.

Nell: The SV2 model is a bit different than other Social Venture Partner models, how does geography play into this? Do you think Silicon Valley funders think about philanthropy and the nonprofit sector differently, and if so how?

Jen: I do think Silicon Valley funders tend to think somewhat differently about philanthropy and the nonprofit sector.

In my experience with Silicon Valley’s giving culture, it’s not uncommon for donors, particularly those coming from the technology sector, to prioritize clear, measurable social impact, innovative or disruptive products and services, tech-enabled platforms, and a lean startup management approach to social change efforts.

On the nonprofit side, we have a crisis in Silicon Valley.

Local community organizations are struggling amidst a perfect storm of increased demand for their services, exorbitant operating costs, and competition for staff talent in one of the tightest labor markets in the country.

Silicon Valley is ground zero for income inequality. Skyrocketing wealth, including 76,000 millionaires and billionaires who live in Santa Clara and San Mateo counties alone, is found alongside rapid displacement of vulnerable families. Even with the nearly $5 billion boom in philanthropy from 2008-2013, 30 percent of Silicon Valley residents require some form of private or public assistance to get by. One in three local kids aren’t sure where their next meal will come from.

SV2 Partners, Alexa Cortes Culwell and Heather McLeod Grant, recently authored a report, The Giving Code: Silicon Valley Nonprofits and Philanthropy, that is elevating an important discussion around the region’s prosperity paradox. This data-rich report shines a light on a sobering donor knowledge gap around acute local needs and understanding of the local nonprofit ecosystem. Much of Silicon Valley donors’ philanthropy flows out of the region.

Alexa and Heather’s research also found a two-way empathy gap between donors and nonprofits. The reality is that Silicon Valley donors and nonprofit professionals tend to run in different circles, and they often have very different life experiences.

The Silicon Valley prosperity paradox, knowledge and empathy gaps are adding urgency and ambition to SV2’s work.

Our mission is to unleash the resources and talents of Silicon Valley to support promising social ventures to achieve measurable impact. An increasingly important role for us is to nurture empathy within and across Silicon Valley. As part of this, we’re sparking tough conversations via experiential poverty simulations and workshops with Silicon Valley donors on topics such as redefining power and privilege in the funder-fundee relationship and philanthropy’s role in advancing equity.

SV2 differs from SVP Network affiliates in that SV2 expanded beyond grantmaking to nonprofits to also invest in mission-driven for-profit companies and provide our donors experiential learning in impact investing. I’m seeing emerging Silicon Valley donors using both grants and investment tools to drive social change, following in the footsteps of Silicon Valley philanthropic leaders like Pam and Pierre Omidyar and Jeff Skoll, one of the earliest SV2 Partners.

I’ve also observed a trend of Silicon Valley donors thinking hard and in a more sophisticated way about where exactly their money sleeps at night. Are donors’ financial assets invested in alignment with their core values and social impact priorities? If the answer is no, local donors I work with are increasingly motivated to change this.

Nell: Prior to running SV2 you ran the Hewlett Foundation’s Organizational Effectiveness program investing in the capacity of nonprofit organizations, so building strong nonprofits is obviously near and dear to your heart. What holds nonprofits and their funders back from creating stronger organizations and how do we get beyond that?

Jen: In my view, trust is the critical lubricant between funders and grantees on the path to building strong, sustainable nonprofit organizations.

Yet it can be hard – even scary – for nonprofit leaders and funders to have courageous, authentic dialogue amidst the very real funder-fundee power dynamics.

This was equally true when I was a grantmaker at the Hewlett Foundation as it is now that I’m on the other side of the table as a nonprofit leader responsible for raising SV2’s entire operating budget each year to make payroll and fund SV2’s learning programs and grantmaking.

When striving for authentic relationships, it helps to consider this: Does it feel like we as funders and grantees are accountable to each other? Or is the grantee solely accountable to a funder? When something goes wrong with a grantee organization, does a funder run away or dig in and engage more deeply? Do funders think to ask a grantee “Is this an effective use of your time?” And respect it when the answer is no?

Whether in Silicon Valley or elsewhere, funders can help build strong organizations by making certain to keep their net grant high — that is, the net actual value of the grant to a nonprofit after subtracting out the costs to the nonprofit of applying for and reporting on the grant.

I’d also encourage funders of all stripes to consider doubling down versus abandoning organizations during leadership transitions. Leadership transitions are inevitable milestones that all organizations face, and are a high-stakes and often fragile time for nonprofits. These transitions can also be a time of revitalization and great opportunity for a nonprofit to evolve toward its strongest and highest-impact future.

Photo Credit: SV2

 

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Can Philanthropy Lead In These Challenging Times?

Last week I was in Boston for the Center for Effective Philanthropy conference. It was an amazing gathering of leaders talking about how philanthropy should respond in these difficult times. If you couldn’t make the conference and want a run down of the three days, CEP’s Ethan McCoy recapped Day 1, Day 2 and Day 3 on the CEP blog. And you can also see the #CEP2017 Twitter feed.

The conference gave me a lot to think about, so I wanted to share a few of my takeaways.

The conference was bookended by two incredible speakers. I was blown away by the first night’s keynote address by Bryan Stevenson. Bryan is the founder and executive director of the Equal Justice Initiative in Alabama, which works to end mass incarceration and challenge racial and economic injustice.

He gave a completely mesmerizing speech about the historic roots of racial inequity and injustice and how we can move forward from America’s past and present toward a more just and equitable society. He argued that there are four things we must do:

  1. “Get proximate” to communities we want to help
  2. Work to understand and change the long-standing American narrative of racial difference
  3. Stay hopeful, and
  4. Accept that the work will be uncomfortable

It is impossible to do justice to his amazing speech, so I offer his Ted Talk from 2012 to show you what a thought-provoking speaker he is. I also plan to read his best-selling book, Just Mercy: A Story of Justice and Redemption, about how to fix our broken criminal justice system.

The final keynote speaker of the conference, Harvard historian Nancy Koehn, gave a riveting talk about looking at historic leaders, like Ernest Shackleton — an explorer who led expeditions to the Antarctic — to draw lessons about leadership in our current times.

She argued that “leaders are not born, they are made.” Every single one of us could step up and become a leader. And what defines a real leader is that “effective leaders help us overcome the limitation of our own selfishness, weakness, laziness, fears and get us to do harder, better, more important things than we can get ourselves to do on our own.”

In between those two amazing speakers were breakouts and plenaries that encouraged philanthropy to step up to the plate. There were urgings for foundation leaders to embrace advocacy, support nonprofit sustainability, explore state-by-state (instead of national) strategies for social change, listen to beneficiaries, understand their own networks, and fund evaluation, among other things. There certainly was an underlying theme that philanthropists should do more and be more in this new political era.

And these are incredibly challenging times, to be sure. Professor of Economics at Stanford, Raj Chetty, painted a very dire picture of income inequality in the U.S. Things have only gotten worse in the past several decades. In fact, as the slide below demonstrates, “the American Dream” is actually now more attainable in the U.K., Denmark and Canada than it is in the United States.

The final plenary session of the conference really pushed philanthropists to think hard about whether they are helping or hurting the causes they support. Jim Canales, President of the Barr Foundation, led a conversation among Sacha Pfeiffer (reporter from the Boston Globe), Vu Le (author of the Nonprofits With Balls blog), Grant Oliphant (president of the Heinz Endowments), and Linsey McGoey (senior lecturer at the University of Essex) critiquing philanthropy’s influence.

In particular, I really appreciated Linsey McGoey’s determination to push philanthropy farther, arguing that philanthropists working on issues of inequity need to address the much larger systems at work: “If foundations care about inequality, they should focus on the tax code and reduced government spending that worsens inequality.”

The CEP conference was an opportunity for philanthropy to take a hard look at itself and, I hope, find the determination to step up as the leaders we so desperately need now.

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Goodbye to a Mentor and a Friend

I have a heavy heart today. I found out yesterday that my first boss, long-time mentor, and most influential teacher of all things nonprofit management died over the weekend.

Mary Jubitz was the CEO of SMART (Start Making a Reader Today), a statewide early literacy nonprofit in Portland, Oregon. I met Mary when, as a new college graduate, I responded to a classified ad (yes, that is truly how we used to find jobs) for an office manager at a startup nonprofit. I had never worked at a nonprofit, but I was hungry to learn. And Mary proved to be an excellent teacher. So much of what I write, speak and consult about in the nonprofit world today was born out of what I learned at Mary’s side over the first two years of my career.

She was first and foremost an excellent fundraiser. Over the course of her 12 year tenure as CEO, she grew the budget by 400% and built a highly engaged donor base. She did that through an amazing mix of charisma, drive, organization, and exceptional relationship-building skills. I have never met someone who was so incredibly skilled at making a donor or potential donor feel that their involvement was absolutely critical. She rarely walked away from a meeting without the prospect wanting to be part of the exciting, game-changing partnership she described.

From her tenacious ability to find a connection to a prospective donor, to her skilled mastery of the meetings and conversations necessary to entice them to get involved, to her eloquent and (always!) grammatically correct letters and proposals, to her beautiful hand-written thank you notes, to her ongoing invitations to keep the donor invested, she was a thrill to watch.

But it was not just her exceptional fundraising ability — she also translated that relationship-building acumen into deft management of her board of directors. She made a habit of regularly meeting one-on-one with each board member to ensure that they were continually engaged. And it worked. Every single board member was not only personally giving, but also introducing their own networks to the organization. And beyond ensuring the board’s active money role, Mary made sure that they were all completely engaged in board meetings and decisions.

The board was so engaged certainly because SMART was a great cause, but also — and maybe even more importantly — because they simply didn’t want to let Mary down. No one wanted to let Mary down. As a true leader, she set the bar high making those around her want to give their best and then a bit more. She created and continually inspired a winning team of board, staff and donors who truly believed they were changing the future of the children of Oregon.

And they did. Over the course of SMART’s history the organization has reached almost 200,000 children who were found to be 60% more likely than other students to reach state reading benchmarks.

20 years after I left her employ, Mary continued to be a tremendous mentor to me. Throughout my career she was always available for advice, recommendations, words of support. She took real joy in watching the progression of my career, which is as it should be since she built its foundation. As a female leader, she took great interest in other women who were doing their best to rise through the ranks of the nonprofit world and devoted time and energy to helping groom the next generation of nonprofit leaders.

She was an amazing leader. She will be missed.

Photo Credit: Adrian Kingsley-Hughes

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