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Bill and Melinda Gates Foundation

Catalyzing Nonprofit and Philanthropic Effectiveness: Fay Twersky

Fay TwerskyIn today’s Social Velocity interview, I’m talking with Fay Twersky. Fay, an expert on philanthropy and the nonprofit sector, serves as the Director of the Effective Philanthropy Group at the William and Flora Hewlett Foundation. In that capacity, she oversees five functions including cross-foundation support, evaluation and organizational learning as well as grantmaking in support of organizational effectiveness and a strong philanthropic sector. Prior to Hewlett, Twersky was at the Bill & Melinda Gates Foundation, designing and developing their Impact Planning & Improvement division.

You can read other interviews in the Social Velocity Interview Series here.

Nell: As head of the Effective Philanthropy group at Hewlett you obviously think a lot about how nonprofits and philanthropy can work better together. There is a very real power imbalance between those doing the work (nonprofits) and those funding that work (philanthropists). How can we overcome that power imbalance so that there are fewer hurdles standing in the way of the work?

Fay: If we are being totally honest, I am not sure that we ever fully overcome the power imbalance. But, the first step is, simply to be more honest. Candor and openness can go a long way. One the funder side, if funders are more open and candid about what we can and cannot do with respect to funding, if we clearly communicate about our priorities, strategies, goals, and funding criteria, that will help a lot. If we listen to nonprofits with open ears and keep an open mind, that will help build more productive relationships. If our funding is fair and flexible, and we recognize through our support that nonprofits need overhead to run a high performing organization, our grantees might experience us as more respectful and fair.

On the nonprofit side, I think it is also essential to be more honest. Actually, what I really mean here is to be more realistic – more realistic about expected results, about timeframes and what it takes to run an effective organization. In addition to saving lives, reducing carbon emissions, or improving reading skills, nonprofits also have to pay the rent and buy computers. Be honest with yourselves and your funders about what is required to run a top notch nonprofit. We need to know. We also need to know if we are making the wrong assumptions or ill-conceived decisions.

Nonprofits are often complicit in the funding game of over-promising and under-delivering. It may be that funders have more power to change that expectation, and we should, but nonprofits can also do their part by regularly educating us on the art of the possible.
The truth is, we need each other in order to create the change we seek in the world.

Nell: One of the goals of the Effective Philanthropy group is to improve the overall effectiveness of the philanthropic sector. That is a big undertaking. How do you go about that?

Fay: Not alone!

The philanthropic sector is growing at a tremendous rate. In 1990, there were 32,000 foundations in the United States. Today, there are 115,000. And, that number is likely to continue to grow. And those foundations are dedicated to a huge diversity of needs. The Hewlett Foundation views our philanthropy grantmaking as a highly leveraged way to improve all of philanthropy—so that the many areas of need are funded and supported in smart and sustainable ways.

We have a modest budget for grantmaking to improve the sector, and we pursue two strategies to achieve that goal. Our first strategy focuses on producing and disseminating knowledge about how to do philanthropy well. Our grantees in this portfolio include groups like the Stanford Social Innovation Review, Grantmakers for Effective Organizations and the Foundation Center. We are hosting a convening of our knowledge grantees this month to seek their input into our strategy going forward and any changes we should consider. Our second strategy is brand new and currently in development. One of our primary goals with this new strategy is to pursue grantmaking collectively with other funders. The strategy will likely focus on ways to promote more openness among foundations. More on that later in 2014 as it develops.

Nell: Another aspect of your work is to make grants to nonprofits for organizational effectiveness, or in other words, capacity building. But few foundations recognize the need to invest in stronger, more effective nonprofit organizations. What is Hewlett doing to convince more philanthropists to invest in organizational effectiveness?

Fay: We think it is essential to support nonprofits to be high performing organizations, and not projects for hire. We do this by providing flexible general operating support when we can and also through organizational effectiveness grants – grants that are explicitly targeting improvements to the strategic and operational aspects of an organizations. These are typically smaller grants, but, according to our grantee perception report survey results, they are greatly appreciated by our grantees. A lot of the credit for our program really goes to the Packard Foundation, on whose program ours is modeled.

We regularly consult with colleagues in philanthropy about how we approach our work and sing the praises of our OE grants, but we know that there is still a long way to go among foundations overall. I don’t know the numbers, but I am hopeful that we are seeing a positive trend as there does seem to me to be more interest in supporting organizational capacity. This year, we are conducting our first ever comprehensive evaluation of our organizational effectiveness grantmaking program, and we are committed to widely sharing the results and any resulting refinements to our approach.

Nell: There is a growing push to encourage nonprofits to evaluate their work. But there is a chicken or the egg situation where nonprofits can’t find the funding to create performance management systems, and so they can’t demonstrate the value of their work in order to secure more funding. How do we solve that?

Fay: There is so much I could say about this topic having worked on all sides of this equation–in a nonprofit, as an evaluation consultant and as a funder. But, I will limit myself to a couple of points.

First is funding. Foundations need to provide funding for measurement. Nonprofits must build it in as a line item in every budget. Measurement is not a nice to have. It is a need to have. Just like rent.

Second is mindset. Measurement is not for punishment, but for learning. Funders need to approach it this way too. This is related to your first question, about removing hurdles in the funder/grantee relationship. If funders want to have more honest relationships with our grantees, we have to encourage the sharing of news about disappointing results and be prepared to provide continued support for course correction. Not every time of course.

I have had several different experiences that relate to mindset. One was as a funder with a reluctant nonprofit. This was a situation where I had questions and concerns about a particular program we were funding and suggested to the CEO that they conduct a formative evaluation of the program and that we would fund the full costs of the evaluation. He was reluctant and protective of his program. He in a sense fell in love with the program instead of its purpose. After several conversations, he was still unwilling to engage in an evaluation and given that circumstance, which I experienced as a lack of openness to learn, we stopped funding that program. It is essential for all of us to have the courage to learn and change.

I have had many more wonderful experiences with supporting nonprofits to measure results. The best of these do not just deliver good news. They are evaluations that produce information for nonprofits to learn from, to be challenged by and to catalyze improvement. And, when nonprofits share those lessons with us, we get smarter. Because most of the knowledge out there is within reach of the nonprofit organizations. And, as they say, knowledge is power. Perhaps the secret to this funder grantee relationship is recognizing that true power imbalance should rightly tip in the nonprofit’s favor.

Photo Credit: William and Flora Hewlett Foundation

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The Politics of American Philanthropy

Every once in awhile an article comes along that is so honest and observant that it opens the door for a fundamental shift in thinking. Curtis White’s “The Philanthropic Complex” in the Spring 2012 Jacobin is such an article. White writes about how the politics behind American philanthropy compromise its ability to create real social change. His focus is the philanthropy that funds environmental organizations, but ultimately he makes a larger point about the limitations inherent in American philanthropy overall. I’m not sure I agree with everything White writes, but his unapologetic description of the politics of philanthropy is so raw that it is refreshing.

White begins by laying out the fundamental power imbalance between nonprofits seeking funding and the foundations that offer that funding. That imbalance is so dysfunctional that nonprofits cannot get enough and the right type of money that they really need to effectively solve social problems:

One of the most maddening experiences for those who seek the support of private philanthropy is the…difficulty of knowing why the foundation makes the decisions it makes…The closest thing to an answer you’re likely to hear is something like this: “The staff met with some Board members last night to discuss your proposal, and we’re very interested in it.  But we don’t think that you have the capacity [a useful bit of jargon that means essentially that the organization should give up on what it thought it was going to do] to achieve these goals.  So what we’d suggest is that you define a smaller project that will allow you to test your abilities [read: allow you to do something that you have little interest in but that will suck up valuable staff time like a Hoover].  Meanwhile, we’d like to meet with your Board in six months and see where you are.” And on you go one year at a time. But cheer up, you’ve made your budget for the year!

Part of this dysfunction, White believes, stems from the lack of wide-spread mission-related investing among foundations. Foundations in America are required to distribute 5% of their funds each year to nonprofit organizations. And the remaining 95% is invested to make as much profit as possible. In recent years the idea of “mission-related investing,” where a foundation actually invests that 95% in companies that align with the mission of the foundation, has been gaining favor. But the vast majority of foundations still don’t align their 5% with the 95%, or their “mission” with their “investments.” This strategic disconnect results in situations like the one the Gates Foundation faced last year:

The Los Angeles Times concluded a long investigation into the investment practices of foundations by revealing that the Gates Foundation funded a polio vaccination clinic in Ebocha, Nigeria, in the shadow of a giant petroleum processing plant in which the Gates Foundation was invested…This is prima facie evidence of a deep moral conflict not just at Gates but in all of private philanthropy.  The simple fact is that most boards actually don’t know if their investments and their missions align.

White ultimately argues that because the wealth of philanthropy is built on privilege it is impossible for that wealth to bring about social change because that change might undermine the underlying power structure that created the wealth in the first place, “The great paradox of environmental philanthropy is this: How do institutions founded on property, wealth, and privilege…seek to address the root source of environmental destruction if that source is essentially the unbridled use of property, wealth, and privilege?”

White’s is a shocking, provocative, and controversial piece. And he probably takes his argument too far. American philanthropy has contributed to much positive social change over the centuries.

But what if White’s article helped to start an honest conversation about the need for more money to make real change, unbridled by politics and self-preservation? What if it helped encourage things like:

  • Foundations unleashing billions more dollars to social change efforts by broadly employing mission-related investing.
  • More philanthropists making larger, longer and more organization-building grants that actually make their grantees more effective and self-sufficient, instead of encouraging year-by-year dependence.
  • Foundations getting out of the way of the organizations working on the ground to solve social problems by fully funding requests for the amount, type and use of money.
  • More foundations becoming spend down foundations, where they have a plan for spending down their assets and eventually closing when they have achieved their social change goals.
  • Nonprofits getting braver, bolder and more honest with their foundation funders about exactly what they need from them.

That’s my hope.

Photo Credit: Robert Minor, St. Louis Post-Dispatch (1908)

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