David and Lucile Packard Foundation
In this month’s Social Velocity interview, I’m talking with Linda Baker. Linda is the Director of Organizational Effectiveness at the David and Lucile Packard Foundation.
In this role, she leads the Organizational Effectiveness (OE) team as they invest in grantees to build their core strengths and maximize their impact. Through these investments, the OE team aims to build healthier, better connected organizations and networks ready to bring about greater change in the areas the foundation cares most about. The OE team works in collaboration with the four program grantmaking areas of the foundation, and also engages with the broader field on capacity building and good philanthropic practice.
Linda has also served the foundation as program officer in the Local Grantmaking and Children, Families and Communities programs, and as an analyst and associate editor in the Center for the Future of Children.
If you want to read interviews with other social changemakers in the Social Velocity interview series go here.
Nell: You recently took over leadership of the Packard Foundation’s Organizational Effectiveness program. What are your plans for the future of this program? Where do you see opportunities for change or growth in the work Packard does to build stronger nonprofits?
Linda: It is an incredible honor to lead the Organizational Effectiveness (OE) team. I’m proud to be a part of a foundation that actively embraces a commitment to effectiveness by helping our nonprofits partners strengthen their fundamentals so they can better achieve their missions.
The best capacity-building grantmaking happens in open and authentic conversation with nonprofits. At the Packard Foundation, this means that changes in OE funding are driven through continuous listening to our nonprofit colleagues about where they are strong and where they would like to grow – as leaders, organizations, and networks. While many of the funding requests remain similar to the past (like support for strategic planning and fund development planning), a few topics have recently become more prevalent. For example, as nonprofits and leaders focus on movement building and their ability to be flexible and strategic in an ever-changing environment, we are hearing more requests for funding on leadership development and diversity, equity and inclusion. We have also seen an increase in interest in projects that focus on nonprofits better understanding their financial situation and increasing their financial resilience.
I’m also excited about our participation in the Fund for Shared Insight, a funder collaborative that supports nonprofits in seeking systematic and benchmarkable feedback from the people they seek to help. This collaborative believes that foundations will be more effective and make an even bigger difference in the world if we are more open—if we share what we are learning and are open to what others want to share with us, including our nonprofit partners and the people we seek to help. It is early days, but the possibilities are promising.
Nell: The Packard Foundation is way ahead of the pack in terms of actively investing in stronger nonprofit organizations. What do you think holds other foundations back from providing capacity building support (like planning, leadership development, evaluation, etc.)? And what can be done to get more foundations funding in these areas?
Linda: This work is incredibly important. People are the engine of change, and they need appropriate training, tools and support to get their work done. The good news is that momentum seems to be building. Last year we talked with twenty foundations who reached out to us on this work—and we are always happy to provide insight to our peers in this way. I’m also encouraged by the standing-room-only crowds at Grantmakers for Effective Organizations (GEO) conferences, which often focus directly on the importance of capacity building.
An increasing number of our peers have embraced this approach to grantmaking. Both the Hewlett Foundation and the Meyer Foundation have OE programs similar to ours. The Ford Foundation’s BUILD program works to support institutional strengthening in a big way. Many others support the capacity of leaders – we particularly admire the work of the Haas Jr. Fund in this area.
JPMorgan Chase and the Aspen Institute recently issued a report discussing roles and opportunities for business in nonprofit capacity building. And the 2016 GEO publication on capacity building is full of examples of foundations providing capacity building support to nonprofit partners.
For any foundations on the fence, we will soon be releasing our 2016 Grantee Perception Report data that shows that our grantees who receive OE support rate the foundation as more responsive and a better partner. Data from our evaluation last year shows that one to two years after their OE support ended, nearly 80% of grantees reported significant increases in capacity and 90% reported continued investments in capacity building a year after grant completion. We are confident that these investments build lasting change.
Another bright spot is the feedback work of the Fund for Shared Insight that I mentioned earlier, which is investing in stronger nonprofit organizations through experimenting with investments in feedback loops. Shared Insight provides grants to nonprofit organizations to encourage and incorporate feedback from the people we seek to help; understand the connection between feedback and better results; foster more openness between and among foundations and grantees; and share what we learn.
Nell: You have been actively involved in the Real Costs effort to get funders and nonprofits to understand and articulate the full costs (program, operating, working capital, fixed assets, reserves, debt) of the work nonprofits do. How do you see that movement progressing? Are minds changing? Are we, or when will we, reach a critical mass of nonprofits and funders embracing full costs?
Linda: As you and your readers know, this question is fundamentally about the relationship between funders and nonprofits. Nonprofits that have trusting relationships with their funders and an understanding of what it takes to run their organization can talk with funders about what it truly costs to deliver outcomes over the long term. In response, funders with a nuanced understanding of a nonprofit’s financial requirements will be able to structure grants more effectively to achieve those outcomes.
The move for funders to understand the financial resources nonprofits require for impact is gaining steam. I’ve been encouraged by the level of interest and conversation in California alone, and I know conversations are happening nationally too. The Real Cost Project in California is gearing up for the next phase, and we are pleased to be supporting that work and to be thinking about these ideas at the Packard Foundation. I am hopeful that California funders will continue to embrace the conversation and consider how funders can strip away unnecessary processes and promote transparent dialogue about how to best support the work of nonprofits.
One part of the challenge is that we are going up against misguided notions that good nonprofits should not invest in their infrastructure or their people. These ideas are embedded in our culture, and it takes time to change perspectives. If we can get a critical mass of foundations to join the conversation and consider what they can do to improve, and ensure that nonprofits have the tools to understand the financial requirements needed to get to outcomes, that will be progress.
Nell: You and your team at Packard OE have created a great Organizational Effectiveness Knowledge Center website with a deep set of resources for building stronger nonprofit organizations. Foundations are sometimes hesitant to offer resources (beyond money) to nonprofits, but you have made a conscious choice to move in this direction. Why and what could other foundations learn from your experiences here?
Linda: Thank you! We created the Knowledge Center to share our perspective and resources about improving organizational and network effectiveness with the goal of helping nonprofits, our consulting partners, and other funders make their work even stronger. The Knowledge Center is a place for us to share our perspective on a number of topics from network development to leadership and coaching to evaluation, and discuss the latest in the field from conferences and publications.
In addition to providing grantmaking support, we believe that sharing this information will increase our impact on the nonprofit sector and advance the capacity building field. Change does not happen in silos, and we don’t want our nonprofit partners to spend time reinventing the wheel. So, we decided to create a space to exchange what we’re learning and the resources available to help support organizations in this work.
We hope that the Knowledge Center will be a place to exchange learning and reflections, and we encourage users to engage with us by commenting on your experience with these topics or submitting resources that you would like us to consider sharing. And, while you’re there, leave us a comment to let us know what you think of the Knowledge Center and how we can improve.
Photo Credit: David and Lucile Packard Foundation
Note: As I mentioned earlier, I am taking a few weeks away from the blog to relax and reconnect with the world outside of social change. But I am leaving you in the incredibly capable hands of a rockstar set of guest bloggers. Next up is Kathy Reich. Kathy is Organizational Effectiveness and Philanthropy Director at the David and Lucile Packard Foundation where she helps grantees improve their strategy, leadership, and impact. Here is her guest post…
Philanthropy pundits often exhort nonprofits to “act more like businesses.” Usually I disagree; in fact, I think there’s a great deal that businesses could stand to learn from nonprofits.
In at least one area, though, I admit that all too frequently nonprofits lag their for-profit peers. Nonprofits simply do not invest enough time or money in talent assessment, development, and management.
Major national surveys provide a helpful snapshot of the nonprofit sector’s talent troubles. In the Bridgespan Group’s Nonprofit Management Tools and Trends 2014 survey, which polled almost 500 nonprofit organizations about their current management practices, nearly 60 percent of respondents agreed or strongly agreed that “hiring, training, and retaining staff is one of our greatest challenges.” Yet the survey found that only 40 percent reported using talent assessment and development tools, and just 38 percent said their organizations engage in leadership succession planning.
Similarly, in the Nonprofit Finance Fund’s 2015 State of the Nonprofit Sector survey, which included responses from more than 5,400 nonprofits nationwide, respondents were asked to name the top three challenges facing their organizations. “Ability to offer competitive staff pay and/or retain staff” was ranked in the top three by fully 25% of the respondents, behind only “achieving long-term financial sustainability” as one of the top three challenges facing nonprofits. Yet the same survey found that just 37 percent of respondents had invested money or time in staff professional development in the past year. Only 28 percent had given cost-of-living raises, and 18 percent had given raises beyond COLA.
At the Packard Foundation, program officers tell me that they see signs of this underinvestment almost every day. Some problems that our nonprofit grantee partners routinely report:
- Executive turnover is frequent, and often traumatic.
- Nonprofits have a hard time finding appropriate candidates for senior management roles, including CEO, program executives, development directors, and communications directors.
- The leadership many nonprofits have is not reflective of the leadership that they need, or the communities they serve. In most of the fields in which the Packard Foundation works, nonprofit leadership remains predominantly white, male, and middle-aged, even as our country becomes younger, more diverse, and hopefully, more committed to racial and gender equity.
- Emerging leaders under age 45 report high levels of career dissatisfaction, driven in part by lack of professional development and advancement opportunities. In a 2011 Young Nonprofit Professionals Network survey, only 36 percent of respondents said that their organization invested in “bench strength” to develop emerging leadership. Of that group, less than 47 percent said their organization implemented these investments effectively.
Nonprofits and foundations both have critical roles to play in ensuring that the nonprofit sector has a robust, diverse talent pipeline now and in the future. First, foundations need to step up their financial support for leadership. The private sector spends $12 billion annually, an average of $120 per employee, on developing leaders, investing in their management and technical skills so that they can move up the ranks or excel in their current jobs. In contrast, philanthropy’s investment in nonprofit leadership development totals an average of $29 per employee annually.
Foundations can do much more. Some concrete ways that they can help:
- Fund nonprofit overhead so that nonprofits have enough money to pay their people competitively and can have the operations in place necessary to support their staff and manage their talent. Depending on their size and talent needs, some nonprofits may need to hire a Chief Operating Officer, a Human Resources Director, or a Chief Talent Officer.
- Support nonprofits to develop “right-sized” performance assessment and management systems, as well as meaningful succession plans for key leaders.
- Include funds for staff professional and leadership development in project support grants.
- Incentivize nonprofits to develop cultural competency in hiring and management so that they can attract and retain diverse employees.
But foundations cannot tackle this issue alone. No matter what their size, nonprofit boards and executive leadership need to focus on talent issues and ensure they have appropriate plans in place to manage and develop staff for their organizations. They need to implement thoughtful, intentional strategies and process to ensure that they are identifying their own talent needs, assessing the strengths and growth areas of their staff, and providing ongoing development and feedback to all employees, particularly those with high growth potential. And they need to make the case for talent to their funders, along with concrete examples of how investing in leadership capacity will improve outcomes.
In the nonprofit sector, as in business, leadership matters. Let’s be sure we’re all investing our time, and our money, where it counts.
As I mentioned earlier, it is so important to take time away to rejuvenate and reconnect with your passions, family and friends. So I am taking my own advice and taking some time off later this summer to connect with the world outside of social change.
And so for the second summer in a row I’ve asked a group of social change thought leaders to write guest blog posts in my absence (you can read last summer’s guest blog posts here).
I am so excited about this year’s group of amazing social change thinkers. They are experts in social change finance, philanthropy, political reform, outcomes data, organizational effectiveness and much, much more. They are smart, thoughtful, engaged and visionary leaders. And they are all helping to move social change forward in big ways.
Below is the lineup of guest bloggers with background information on each of them. Their posts will begin in late July. Enjoy!
Antony is the CEO of Nonprofit Finance Fund (NFF), a national nonprofit and financial intermediary where he oversees more than $340 million of investment capital and works with philanthropic, private sector and government partners to develop and implement innovative approaches to financing social change. NFF also creates the annual State of the Sector Survey. Antony writes and speaks on the evolution of the social sector and the emergence of the global impact investing industry. Prior to leading NFF he was Managing Director at the Rockefeller Foundation. He is the founding board chair of the Global Impact Investing Network and convened the 2007 meeting that coined the phrase “impact investing.” You can read my past interview with Antony here.
UPDATE: Here is Antony’s guest post.
Kelly is a program officer at the Hewlett Foundation working on their Madison Initiative, which focuses on reducing today’s politically polarized environment. Before joining Hewlett, Kelly worked as a strategy consultant with the Monitor Institute, a nonprofit consulting firm, where she supported a range of foundations’ strategic planning efforts. In addition to her experience as a strategy consultant, Kelly has worked with various nonprofit and multilateral organizations including Ashoka in Peru, the World Bank’s microfinance group CGAP in Paris, Technoserve in East Africa, and both The Asia Foundation and Rubicon National Social Innovation in the Bay Area. Kelly guest lectures on impact investing at Stanford’s Graduate School of Business and often writes for the always thoughtful Hewlett Foundation blog.
UPDATE: Here is Kelly’s guest post.
Phil is President of the Center for Effective Philanthropy (CEP), a nonprofit that is the leading provider of data and insight on foundation effectiveness. CEP helps bring the voice of grantees and other stakeholders into the foundation boardroom and encourages foundations to set clear goals, and coherent strategies, be disciplined in implementation, and use relevant performance indicators. Phil writes and speaks extensively about nonprofits and philanthropy and rarely pulls punches when he does. He is a columnist for The Chronicle of Philanthropy and a frequent blogger for the excellent CEP Blog. He was named to the 2007, 2008 and 2014 “Power and Influence Top 50” list in The Nonprofit Times. You can read my past interview with Phil here.
UPDATE: Here is Phil’s guest post.
Kathy is Organizational Effectiveness and Philanthropy Director at the David and Lucile Packard Foundation where she helps grantees around the world improve their strategy, leadership, and impact. Her team makes grants on a broad range of organizational development issues, from business planning to social media strategy to network effectiveness. She also manages the Packard Foundation’s grantmaking to support the philanthropic sector. Prior to joining the Foundation, she worked in a non-profit, on Capitol Hill, and in state and local government in California. Kathy serves on the board of Grantmakers for Effective Organizations and on the advisory committee for the Center for Effective Philanthropy. You can read my past interview with her here.
UPDATE: Here is Kathy’s guest post.
I asked David to be a guest blogger again this summer because he is so insightful and often points out things that few others in the sector are willing to acknowledge. He is Director of Analytics for Family Independence Initiative, a national nonprofit which leverages the power of information to illuminate and accelerate the initiative low-income families take to improve their lives. David is also the former founder of Idealistics, a social sector consulting firm that helped organizations increase outcomes, demonstrate results, and organize information. He writes his own blog, Full Contact Philanthropy, which is amazing. You can read his past guest blog post here and my interview with him here.
UPDATE: Here is David’s guest post.
In today’s Social Velocity interview, I’m talking with Kathy Reich, Director of Organizational Effectiveness Grantmaking at the David and Lucile Packard Foundation. Kathy leads a cross-cutting program to help grantees around the world improve their strategy, leadership, and impact. Her team makes grants on a broad range of organizational development issues, from business planning to social media strategy to network effectiveness.
She also manages the Packard Foundation’s grantmaking to support the philanthropic sector. She has been with the Foundation since 2001, and previously held positions in the Organizational Effectiveness and Children, Families, and Communities programs. Prior to joining the Foundation, she worked in a non-profit, on Capitol Hill, and in state and local government in California.
You can read other interviews in the Social Velocity Interview Series here.
Nell: There is often a chicken or the egg scenario in the nonprofit sector where nonprofit leaders are hesitant to tell funders their real struggles and needs for fear of appearing unworthy of investment, and philanthropists are hesitant to stick their noses in the business of the nonprofits they fund, so organizational capacity needs are not openly discussed or addressed. How does the Packard Foundation uncover the organizational needs of your grantees and what would you advise other funders to do in order to have more open and transformative discussions with their grantees?
Kathy: Well, I try not to tell other people—funders or nonprofit leaders—what to do! But I can tell you what works for us at the Packard Foundation. First, we encourage each of our program officers to learn about the organizational strengths and challenges of their grantees, and to weave capacity building into grantmaking strategies. That’s a big part of the work of the Organizational Effectiveness team here at the Packard Foundation.
But we also have a separate Organizational Effectiveness (OE) program, staffed by its own program officers and with its own budget, to help grantee partners strengthen their fundamentals so they can focus on achieving their missions. Once a non-profit gets a grant from any Packard Foundation program, they’re also eligible to apply for an OE grant. We support a wide range of projects to promote individual and team leadership, organizational planning and development, and the development of healthy networks.
The application process is pretty simple and straightforward. It starts with a letter of inquiry where our grantee partners have to answer just a handful of questions: What are the objectives of your project and what do you expect to accomplish? How will this project support your organization in meeting its goals, and over the long term, enhancing its effectiveness? What special challenges or changes have caused your organization or network to focus on management and organizational issues at this time? How do you propose to use Foundation funds? Who from your organization’s staff and board has made the commitment to lead the project?
Here’s the most important part of our approach: We work very hard to be responsive to the needs of our partners. We never say, “We think you need a strategic plan, and that’s the only thing we’re going to fund.” We listen to the grantee’s assessment of their strengths and challenges, and serve in a coaching role to help them develop the OE project that best meets their needs.
Nell: Leadership development is something that is fairly prevalent in the for-profit sector – it’s understood that good leaders need coaching and support along the way – but leadership development is rarely supported in the nonprofit sector. Why do you think there is that disparity and what do we do to change it?
Kathy: I think you’re right — the lack of investment in leadership development and talent management in the nonprofit sector is a significant issue. We don’t have any shortage of talented, passionate people entering this sector. But I believe that we lose too many of them before they rise to senior-level leadership positions.
Some of that brain drain happens for financial reasons: people are staggering under the weight of educational debt, or they’re lured away by more lucrative career prospects in the private sector. But much of the loss of talent is preventable. People leave because they feel burnt out and undervalued. They can’t forge career pathways and can’t access meaningful professional development. They sometimes have lousy managers. Their jobs don’t offer opportunities for promotion, or sufficient work/life/family balance.
That is all stuff that the nonprofit sector can fix. As a sector, we can even tackle some of the thornier issues around compensation and educational debt. And funders can lead the way. But philanthropy is not doing that. Rusty Stahl at the Talent Philanthropy Project, a Packard Foundation grantee partner, points out that between 1992 and 2011 foundations spent, on average, about 1% of grant dollars on nonprofit talent development. I’m not sure why there’s been a lack of investment in leadership development in the nonprofit sector over time — especially when virtually everyone seems to agree that effective leadership is one of the keys to lasting social change.
I do see some glimmers of hope. In the OE program last year, 21 of the 86 grants we awarded focused on leadership development, including projects that invested in interventions like executive coaching, board development, succession planning, and executive transition at key grantee organizations. And a number of efforts are underway throughout the Foundation to support existing and/or emerging leaders in the issue areas where we work. Clearly, though, much more is needed.
Nell: There has been a concerted effort in the past year to overcome the “Overhead Myth,” the idea that nonprofits should spend as little as possible on “overhead” (administrative and fundraising) expenses. But there is still much work to do before that idea becomes mainstream in the philanthropic sector. How do we change funder (and nonprofit leader) thinking about overhead?
Kathy: I’m a fan of so many leaders and organizations who have spoken out on this issue, including Packard Foundation grantee partners like Guidestar, California Association of Nonprofits, and Grantmakers for Effective Organizations. They’ve done a great job of making a research-based case that arbitrary, low overhead rates don’t capture the true cost of delivering non-profit programs and services. I think that there are a couple of common-sense things that funders and nonprofit leaders can do to keep this debate at the forefront of people’s minds.
First, prepare real budgets. If the funder tells you, “You can only have $25,000 for this project,” that’s fine. That’s their budget. But submit a budget for the full cost of the project, including your personnel, facilities, and other costs of doing business. Let them see what their funding covers, and what it does not. Be honest if you do not know where the rest of the money will come from. At least it will spark a good conversation with your funder about the gap, and about your real costs. Most funders do not penalize honesty. If the funder does penalize honesty, their money probably is not worth your trouble.
Second, define what goes into your overhead rate, and stick with it. Many funders have a “rule” about acceptable overhead; 15 percent, 10 percent, even 5 percent. But most do not have a standard definition for what’s included in that rate. You should have one. Define it, calculate it, and then defend it.
Nell: Philanthropy is a very personal and values-driven thing, but at the same time we need to funnel more philanthropic money towards the most effective solutions. Do you think it’s possible to get more philanthropists to give based on results rather than interests and values, or can we somehow better combine the two drives?
Kathy: I think combining values and a focus on results is not just desirable — it’s essential. None of us goes into social change work with a completely cool, dispassionate lens. We go in with passion. We want to make a difference. We bring our whole selves to this work. That’s what makes it wonderful, and that’s why we stay in it.
At the same time, resources are limited — money, people, time — and we have to be sure they’re being well-spent. Ideally, we want to make sure those resources are being better-spent than they could be on other endeavors.
At the Packard Foundation, we try to craft a balance. Our mission—to improve the lives of children, families, and communities, and to restore and protect our planet—derives directly from the values and beliefs of our founders. The way we go about that work is deeply rooted in five core values, which also come from our founding family — integrity, respect for all people, belief in individual leadership, commitment to effectiveness, and the capacity to think big. But we also are committed to scientific rigor, evaluation, and most importantly, learning. We care not only about what grant funds accomplish, but also about how we do that grantmaking, engage with grantees and improve over time. You can read about some of what we’ve accomplished over the years on our new digital timeline.
Photo Credit: Packard Foundation