Note: As I mentioned last week, I am at the Grantmakers for Effective Organizations conference this week curating a group of bloggers. First up is Phil Buchanan, President of the Center for Effective Philanthropy (CEP). His guest post is below. In full disclosure, some of the foundations he mentions below are clients or funders of CEP. Don’t forget you can also follow the conference from afar on Twitter #GEO2016 and #2016GEO
Culture was front and center on the first day of the 2016 GEO National Conference – the featured topic at the opening plenary. A conference for some 800 staff of grantmakers interested in maximizing their external impact started by looking inward, at what happens within the walls of staffed foundations.
As Kathleen Enright, GEO’s president & CEO, put it, “culture and effectiveness are inextricably linked” suggesting that companies have recognized this. She cited as an example her positive experience as a customer with the online shoe retailer Zappos, which has been held up as an exemplar in terms of its corporate culture and customer service. [Note: Zappos was acquired by Amazon in 2009 but has sought to maintain a distinct culture.]
Enright moderated the panel discussion, which included Jim Canales of the Barr Foundation, Carrie Pickett-Erway of the Kalamazoo Community Foundation, and Sylvia Yee of the Evelyn and Walter Haas Jr. Fund.
“Culture is all around us, it permeates everything we do, and yet we often don’t realize it,” said Canales.
It also emanates outward. Yee discussed program officers as the nexus where culture and values are “translated” from the inside to the outside. And her point is certainly supported by the data. The organization I lead, the Center for Effective Philanthropy (CEP), has surveyed staff at nearly 50 foundations over the past decade. We know from our analyses that what happens within a foundation’s walls doesn’t stay inside those walls – that staff perceptions and grantee perceptions of foundations are correlated on some key dimensions.
This data and the arguments of the panelists about the importance of culture also resonate with recent writing on the topic. Tom David and Enright’s essay, The Source Codes of Foundation Culture, argues that foundation culture is crucial but often under-appreciated. In a similar vein, Amy Celep, Sara Brenner, and Rachel Mosher-Williams of Community Wealth Partners suggest in a recent issue of Foundation Review that, “Foundations have a tremendous untapped opportunity to more intentionally build culture.”
But culture and results don’t always correlate perfectly, as Fay Twersky of the William and Flora Hewlett Foundation (and a member of the CEP Board) suggested during the Q&A in a friendly challenge to Enright on her Zappos example. Citing other companies without naming names, she observed – to knowing laughter from the crowd – that “sometimes unhealthy cultures seem to be associated with very fat profits.”
Enright allowed that this was certainly true, as it surely is. And, of course, Twersky wasn’t arguing that culture doesn’t matter. Indeed, in her excellent piece, Foundation Chief Executives as Artful Jugglers, she suggests that building a healthy culture is one of the essential responsibilities of effective foundation CEOs.
But the point is that culture alone is not the answer.
Related, and not mentioned during the session, is that, in the business world, there seems to be a bit of a backlash of late against the emphasis on corporate culture. This is manifested in rants against “forced fun” and other “culture-building” that, at their worst, can look like self-absorbed navel-gazing that is divorced from the imperatives of the work.
This skepticism is perhaps most prominently expressed on the April Harvard Business Review cover, which blares “You Can’t Fix Culture: Focus on Your Business and the Rest Will Follow.”
“When organizations get into big trouble, fixing the culture is usually the prescription,” write Harvard Business School Professor Jay Lorsch and his research assistant. “But the corporate leaders we have interviewed – current and former CEOs who have successfully led major transformations – say that culture isn’t something you ‘fix.’ Rather, in their experience, cultural change is what you get after you’ve put new processes or structures in place to tackle tough business challenges.”
Let’s set aside (if we can) the fact that, unbelievably, this conclusion appears to be drawn from a very (very) limited sample of four interviews with men (yes, all men) who run major corporations. Still, I think there is a healthy caution here: that the focus on culture should not be an end in itself. It’s about the work.
And, in fairness, Enright and the panelists certainly were making that argument, too. They discussed the relationship between culture, being transparent, continual learning and improvement, and getting and receiving feedback. Repeatedly, the discussion about culture became something much, much broader – a discussion about effectiveness.
“The closer we get to the community, to the people whose lives we are trying to improve, the more humble we will be,” said Pickett-Erway. “The more feedback that you can get the better.”
Yee, too, emphasized the link between “culture and organizational effectiveness.” She noted, for example, the importance to effectiveness of “hiring a diverse staff. We need people who can stand in somebody else’s shoes, who have experienced difference themselves.”
And Canales talked about moving from “transparency 1.0” to transparency that is about two-way exchanges.
We need, as the panelists did, to keep the focus on culture as a necessary element of effectiveness rather than promoting too much of an inward gaze among institutions that, in all honesty, are already often seen as isolated and insular. What I don’t want, and what I guess fear a little, is that some foundations will misread the encouragement to focus on culture as an invitation to spend endless hours on office space re-designs, staff personality tests, or trust-building exercises. These things all have their place (or at least the first two do) but in limited doses.
The culture conversation should be integrated with, not separate from, the conversation about goals, strategies, implementation, and performance indicators. My experience (for what it’s worth) suggests that what bonds a staff together best is a sense of shared purpose and alignment toward – and progress against – shared goals.
Put another way, culture is a crucial part of the effectiveness puzzle, but it isn’t a magic bullet.
In 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
In this month’s Social Velocity blog interview, I’m talking with Phil Buchanan. Phil is president of The Center for Effective Philanthropy (CEP) and was the first chief executive of the organization. Under his leadership, the organization has grown into the leading provider of comparative performance data to large foundations and other grantmaking institutions. Phil also serves on the board of Great Nonprofits and is a columnist for The Chronicle of Philanthropy.
You can read past interviews in our Social Innovation Interview Series here.
Nell: At the Center for Effective Philanthropy you work to make philanthropists more effective at creating social change, but a large part of philanthropy is driven by emotion and passion as opposed to results and data. How do you reconcile a push towards more reasoned philanthropy with the emotional aspect that will always be present?
Phil: I understand that some people feel this tension, but to me, it’s hard to understand because I think emotion and passion and results and data can – and should – cohabitate very happily. The passionate, emotional desire to make change is what inspires the commitment to get results. If you believe deeply in helping people in need, but do it in a way that doesn’t help, what kind of emotional satisfaction do you get from that?
Fay Twersky of the Hewlett Foundation articulated this very well in an essay in Alliance Magazine. She says impact should be pursued with “a warm heart and a hard head.” I like this way of thinking about it.
Nell: One of the the things you promote at CEP is a move from evaluating nonprofits based on overhead spending to evaluating them based on achievement of results. But sadly most funders haven’t yet embraced this distinction. What will it take for funders and the general public to recognize that overhead percentages are meaningless and destructive to the nonprofit sector?
Phil: I think the adoption of better nonprofit performance assessment practices is part of the answer. The more data nonprofits can point to that can show what they achieved with their total budgets, the less relevant how that budget was divided will feel to donors.
Look, I think people tend to gravitate toward that which is available, quantifiable, and comparative. Overhead percentages are all of those things, so they become the default performance measure even those they don’t tell you anything about performance. Caroline Fiennes of the U.K. has a great new book called It Ain’t What You Give, It’s the Way You Give It, and one of the best parts is that she really slays the argument for looking at administrative costs, while also providing guidance on how to approach performance measurement.
The rub is that the only way we’ll get better overall nonprofit performance assessment practices is if funders support that work. In our research, we have seen that, contrary to the stereotypes, nonprofits care about assessment and are working on it. But they want and need much more support – financial and non-financial – from their funders. I hope that funders embrace this and support better assessment practices in service of better outcomes.
I think Mario Morino has been a powerful voice on this topic and I recommend his book, Leap of Reason, to everyone I can. I hope people are listening to Mario because measuring effectiveness isn’t some academic issue. People who work at nonprofits deeply want to be effective. Foundations want to be effective. The people we help desperately need us to be effective. So we should – and we must – figure it out and get beyond empty measures. And many have. There are some fantastic exemplars when it comes to nonprofit performance assessment. But there are not enough.
Nell: In addition to leading CEP, you also serve on the board of GreatNonprofits, which allows individuals (clients, donors, volunteers) to review nonprofits. How does the idea of individual consumer reviews of nonprofits fit into the larger movement to evaluate nonprofits based on outcomes when the average person doesn’t yet understand or embrace the idea of nonprofit performance measurement?
Phil: In some ways I think it’s very easy for anyone to grasp. You’re trying to help someone; shouldn’t you ask whether they feel they have been helped? GreatNonprofits can provide that read on whether individuals served by a nonprofit feel they’ve been helped. I think GreatNonprofits, which Perla Ni founded and leads, is really important and I also think we need other kinds of efforts to collect and analyze beneficiary perception data. We need both the kind of open, web-based opportunity GreatNonprofits offers as well as rigorous, survey-based efforts such as the Center for Effective Philanthropy’s YouthTruth initiative, which helps schools, districts, and funders hear from middle school and high school students. We’re debating school reform in this country yet many of those with power and resources don’t understand the students’ experiences. We know that those experiences correlate to outcomes, so this kind of perceptual data could be a vitally important “leading indicator” of progress.
Nell: Philanthropy tends to be fairly risk averse and focused on program funding, as opposed to the organization-building capital investments (money to build organizations rather than buy services) the nonprofit sector so desperately needs. What do you think it will take to get more philanthropists to make riskier, longer-term, organization-building investments?
Phil: I think there needs to be a greater recognition that we count on organizations to get the work done. Sounds obvious, I know, but I think funders sometimes forget.
It is stunning, and sobering, that despite the valiant advocacy of Paul Brest, Paul Shoemaker, GEO, NCRP, and others, there has been no increase in the provision of general operating support over recent years. But we also need to be careful not to pretend operating support alone is the answer. Our research demonstrates that what really matters to grantees is operating support that is multi-year and a decent chunk of change – six figures or up in annual support, ideally. So the problem isn’t just one of grant type, it’s also one of grant size.
This comes back to assessment, too, in my view. If, as a funder, you know what you’re going after, and there is an organization that is focused on the same goal and can show that it’s delivering results, why would you not provide significant, long-term, unrestricted support? And, if you can’t find organizations delivering results toward your shared goal, why wouldn’t you fund in a way that would allow them to build that capacity?
Nell: You recently wrote a fairly scathing critique of Dan Pallotta’s new book, Charity Case because you thought his approach to advocating for the nonprofit sector was misguided. Yet the nonprofit sector is largely underfunded, undervalued, and dismissed in the broader regulatory and political environment. What do you think it will take to change that reality?
Phil: Pallotta’s book doesn’t advocate for the nonprofit sector that I know – or for one that I would ever hope to see. He wants the sector to become something entirely different, something a lot more like business, something that ultimately might not be discernible at all as a distinct sector. His take on the sector is both ahistorical (he demonstrates almost no understanding of the sector’s past contributions) and ideological (he has written that “the free market is a self-correcting system” that supports our “natural desire to help each other” and “only stops working when it is interfered with”). He is infatuated with free market analogies, believes financial incentives are the key to motivating people despite research demonstrating that they are not, insists that public trust in charities is lower than in other sectors when all credible research shows the opposite, and does not seem to understand that many nonprofits work to address the problems that exist as a result of market failures. His book is a disservice to the nonprofit sector.
So, then, what do we need to do to increase the appreciation of public and government officials for the nonprofit sector?
We need to start by standing up and asserting our value as a sector separate and distinct from business and government. We need to stop buying into the fiction that being effective means being “like a business,” whatever that even means. We need to stop praising the “blurring of the boundaries” and start articulating why we need organizations that pursue mission alone rather than profit for their shareholders. We need to explain why the sector is good for our society, good for business, good for government, good for citizens: we all need the nonprofit sector to be its best for us to be our best. And we need to re-learn our history – Olivier Zunz’s recent book on U.S. philanthropy would be a good place to start.
Yes, of course there is much work to do to improve the sector, but that doesn’t mean we need to tear it down. I wrote a series of blog posts for Duke University’s Center for Strategic Philanthropy and Civil Society a few years ago and argued that just as it is possible to walk and chew gum at the same time, it is possible to believe both that the nonprofit sector is and has been a defining strength of this country and that it must dramatically improve its effectiveness. It is possible to both celebrate the diversity of the sector and its various organizations and push for greater clarity of organizational goals, strategies, and performance indicators. It is possible both to applaud initiatives fostering “social innovation” and the government’s embrace of this push and also recognize what has worked in the past.
We need not tear down the sector to improve it. We need not disparage all that has come before in order to chart a better future.