Note: In October I interviewed Kathleen Enright, CEO of Grantmakers for Effective Organizations (GEO), on the blog. In the course of that interview, she mentioned GEO’s upcoming study of staffed grantmaking institutions. That study was released a few weeks ago, and I asked Kathleen to provide some perspective here on what the results mean. Her guest post is below.
A few weeks ago GEO released our latest field study, Is Grantmaking Getting Smarter? We conduct this national study of staffed foundations in the United States every three years to better understand how and whether grantmaker attitudes and practices are changing in ways that help nonprofits make faster progress on their missions. In our 2014 survey, we endeavored to understand how funders support and engage in collaboration.
We were anxious to make meaning of the results related to collaboration in part because it was a key theme across the nonprofit listening sessions we conducted last year. Leaders touted the value of funders connecting them with each other and building peer networks. They recommended funders create more opportunities for nonprofit leaders to share ideas and allow collaboration to be an organic outcome of these peer exchanges. In addition, they made a strong case for funding collaborative work. As one listening session participant noted about collaborating, “It is expensive to undertake and not really fully funded.” Hopefully these results will provide an opportunity for funders to look carefully at their own practices to make sure that they are doing what they can to help productive collaboration flourish.
Collaboration in the context of philanthropy has many dimensions (you can find a description of the many forms and uses for collaboration here). In this survey we attempted to learn more about the extent to which grantmakers:
- Fund nonprofit collaboration
- Collaborate with one another
- Create an enabling environment that supports collaboration
The findings in Is Grantmaking Getting Smarter? were mixed on this issue.
Fund nonprofit collaboration. Anyone who has participated in collaborative initiatives knows the truism that they take longer and cost more than you think at the beginning. It follows that successful collaborative initiatives hinge on nonprofits having sufficient bandwidth to meaningfully engage in them. This is why it’s encouraging that multiyear support has rebounded to pre-recession levels and general operating support is on the rise. General operating support increased in terms of share of total grantmaking dollars from 20% to 25%.
Our past two surveys also sought to understand if grantmakers directly support the costs necessary for nonprofits to collaborate. The 2014 findings suggest that grantmakers are now less likely than in 2011 to fund the costs of collaboration or managing strategic relationships among grantees. In 2011, 38% of respondents reported never or rarely funding the costs of collaboration or managing strategic relationship among grantees. In 2014, it got even worse—53% said they never or rarely provide this kind of support.
As the drum beat for collaboration has grown louder, it’s surprising (and a bit worrisome) that direct philanthropic support for collaboration appears to be in decline. Our research partners at Harder+Company hypothesized that improving economic conditions may play a role. Foundations may have seen collaboration as a way to make limited resources go farther in order to withstand the tough economic conditions. Given the rebounding economy, maybe funders see this kind of support as less important.
It is also interesting that general operating and multiyear support are going up at the same time that support for collaboration is going down. Might funders be increasingly providing organizations with flexible, long-term grants as a strategy to support the collaborative work they need to do? If so, that’s a positive instinct. Regardless, if funders expect their grantees to collaborate, they have to be willing to underwrite the costs of doing so. Otherwise it’s an unfunded mandate that is unlikely to succeed.
For the first time this year, we asked a question about what kinds of support funders were providing to enable collaboration. The most common approach is to organize collaborative meetings or events for grantees. Nonprofits who participated in our listening sessions appreciated when grantmakers do this work well.
Collaborate with one another. Most grantmakers (69%, which was the same in 2011) reported developing strategic relationships with other grantmakers. Those who are cultivating such relationships are overwhelmingly motived by achieving greater impact, followed by an interest in tapping the expertise of other grantmakers. The least common reason for collaborating with fellow grantmakers was to minimize burden on grantees.
That such a strong percentage of grantmakers recognize both the importance of and motivations for collaborating with one another is a promising result. However, this further highlights the divide between what grantmakers are willing to support for themselves and what they are willing to fund for their grantees. As more grantmakers engage in collaborative partnerships hopefully the case for supporting similar work for their grantees will grow stronger.
Create an enabling environment for collaboration. In addition to directly supporting nonprofit collaboration and engaging in collaboration themselves, we were also curious about whether grantmakers are doing what they can to create an environment conducive to successful collaboration.
- By seeking and using input. Asking for and using feedback from key stakeholders lays the foundation for collaboration. At last, the majority of staffed foundations in the US are asking for grantee feedback. Additionally, grantmakers have become more likely over time to engage external voices in decision-making and strategy setting. They were most likely to seek external perspectives on foundation strategy (63% do so sometimes, often or always) and the majority of respondents now seek advice from a grantee advisory committee about policies, practices and program areas (52% up from 42% in 2011). This is good news.
- In how they engage with grantees. Survey participants were asked how important certain funding practices were to their success. Fully 92% of respondents indicated that it is important that staff build relationships with grantees so that grantees can be open about their challenges. A slightly lower but still substantial percentage (89%) indicated that it’s important to provide opportunities for staff members to spend time outside the office with representatives of recipient communities or grantees. Given that strong and trusting relationships are an important ingredient to successful collaboration, this sense of priority is encouraging. However only 63% thought it was important to their success to have staff with experience working at nonprofits like those they fund. Nothing really beats having walked in someone else’s shoes, so it is my hope that more and more foundations will recognize the importance of hiring program officers with nonprofit leadership experience in the years ahead.
I’m curious what you make of these survey findings, so please let us know what you think:
- Do you have ideas for why philanthropic support for collaboration might be declining? Do you think there’s any relationship to the increases in multiyear and general operating support?
- For grantmakers: To what extent are you creating an environment that enables collaboration inside your organization? How are your practices smoothing the way for your grantees to collaborate more effectively?
- For nonprofits: Are you talking with funders about what it takes to collaborate and what your real needs are?
Photo Credit: GEO
In this month’s Social Velocity blog interview, we’re talking with Carol Thompson Cole. Carol is President & CEO of Venture Philanthropy Partners (VPP), a philanthropic investment organization (co-founded by Mario Morino) that helps great leaders build strong, high-performing nonprofit institutions. She has over thirty years of management experience in the public, private, and nonprofit sectors. She served as Special Advisor to President Clinton on the District of Columbia and was the Vice President for Government and Environmental Affairs at RJR Nabisco.
You can read past interviews in our Social Innovation Interview Series here.
Nell: This year marks Venture Philanthropy Partners’ 10 year anniversary. And in fact, venture philanthropy itself is only a little bit older. How has the concept of venture philanthropy changed since it first came on the scene?
Carol: People began talking about “venture philanthropy” about 11-12 years ago. Back then, it meant many different things, depending on who was speaking. Today, it still means many different things, but those organizations that work within this philanthropic mindset, like Venture Philanthropy Partners, have learned some important lessons along the way and share some common characteristics like a focus on performance, long-term financial commitments, investing in capacity and building infrastructure, and bringing resources in addition to capital to the table, to name a few.
At VPP, we actually moved away from using the term “venture philanthropy” a number of years ago as we realized that our approach was not a strictly “venture” approach. We are much more about blending some of the ways private equity firms approach their financial investments with many of the lessons learned and techniques developed by philanthropists through the years. We usually call ourselves a “philanthropic investment organization,” and we work to maximize all available resources, including capital, time, the skills and experience of our team, and the power of our network, to improve the lives of low-income children and youth in the National Capital Region.
Venture philanthropy arose out of the tech boom in the late 1990s, when many young entrepreneurs making their fortunes online decided to shift their resources into philanthropy. They saw a real opportunity to apply their business and management knowledge to nonprofits to create real, sustainable change for our society. These entrepreneurs decided to take the principles of venture capital that helped them become successful and shift that over into philanthropy.
Of course, the main strategies of venture philanthropy have been used, in some form or another, by grantmakers long before the late 90s. Venture philanthropists focus on high-engagement approaches to their grants, work to build capacity of organizations to scale their programs, and seek measured and proven outcomes as a result of their investment. Above all else, venture philanthropists use high-engagement techniques to bring more than just money to their partnership with nonprofits. Different grantmakers have refined their own ways of implementing these strategies, but they remain at the core of venture philanthropy, even a decade later.
Nell: When venture philanthropy started in the late 1990s it was thought to be a true innovation that could transform the nonprofit and philanthropic sectors. Has it lived up to those original ideas?
Carol: Venture philanthropy is a true innovation, but the nonprofit and philanthropic sectors are large and complicated systems. Venture philanthropy is an effective tool that has helped us deliver strong results for the children and youth in the National Capital Region. VPP is focused on identifying outstanding nonprofit leaders with strong programs and bold ambitions to grow. We give them growth capital to build their infrastructure and scale their organizations through serving more children and youth, by increasing their outcomes and impact, or through influence – making systemic change that ultimately allows for many more lives to be changed. Our first fund has grown to serve an additional 16,000 youth.
Clearly, venture philanthropy has worked for us, but it is not the only answer for the nonprofit sector. It can be a useful tool to deliver results, but creating those results is more important than the way those results are created.
Nell: Venture philanthropy was in many ways the precursor to what has now become the social innovation movement. How do you think venture philanthropy fits into these new worlds of social investing, for-profit social entrepreneurship, and other areas where the public, private and nonprofit sectors are converging?
Carol: Again, venture philanthropy is a tool to be deployed in grantmaking. At VPP, we are focused on bringing a high-engagement model to our nonprofit partners and delivering results for the children and youth of the region. Social investing, social entrepreneurship, and other innovations coming out of the convergence of sectors are examples of similar tools to drive results. At the Harvard Social Enterprise Conference in March, where I spoke along side Paul Carttar of the Social Innovation Fund, there was a lot of discussion about what type of organizational structure is best to create social change and what type of funding an organization should seek out to achieve its mission. What became clear is that people need to focus on goals and strategy, not methods. Venture philanthropy complements programmatic sources of funding because it can help some organizations scale very effectively to help those who need it.
Nell: The federal government took a step into the world of social innovation last year with the Social Innovation Fund, which was based largely on the venture philanthropy model. What do you think of the SIF and how do you see government’s role (at both the local and federal levels) evolving from this?
Carol: VPP is a member of the inaugural portfolio of the Social Innovation Fund, and we are honored to be included among the other intermediary funders. We applied to SIF because the challenges in our community are too big and complex to be met by a single funder, a single nonprofit, or a single sector. What we need now is a “network” of nonprofits, funders, corporations, local governments, and the federal government working together to solve our most intractable problems.
SIF represents the first step towards that new form of collaboration. Speaking at the Harvard conference, Paul Carttar said that SIF was about much more than money, and it would be a success if the public-private partnership model was adopted by others across the country. In these lean times for funding, it is important that we work together to encourage social innovation where it is needed. SIF, as well as the other public-private innovations launched by the Obama administration, like Investing in Innovation and Race to the Top, are developments that should be encouraged. If we can continue to push local and federal government to take on this role as collaborator, we will be able to achieve much higher levels of impact in our communities.
Even the largest philanthropic investments are dwarfed by public funding and are often deeply effected by availability of public funding as well as how and when it is allocated. Not every partnership needs to be as formal as SIF, but I would urge all philanthropic and nonprofit organizations to look for ways to seek alignment with local, state, and federal government efforts.
Nell: What’s next for venture philanthropy? Where does it go from here? How do you continue to reinvigorate or adapt the model?
Carol: I strongly believe that SIF represents the next step for VPP, and for all of venture philanthropy. We feel our model of philanthropy works and our first investments were successful, but we also feel like there is potential to dramatically improve the lives of the most vulnerable children and youth in our regions through intense and intentional collaboration. Because of this, we applied to SIF.
Our SIF initiative, youthCONNECT, represents the next phase of our work. Instead of single investments, we are investing in a network of high-performing nonprofits that provide a number of different services to young people from low-income families to help them thrive in adulthood. All the nonprofits in the network share the goal of bringing education, job training, and social services to at least 20,000 low-income youth, ages 14-24, in our region over 5 years. As we demonstrate success, this approach can be replicated or adapted by others around the region and the country. We will still make high-impact, long-term investments in single organizations, but we are exploring the transformative power of a network approach.
It is too early to tell the effectiveness of youthCONNECT and SIF, but I think these developments are pushing us into the next generation of high-engagement philanthropy. At VPP, we are committed to evaluation, sharing, and transparency so we can learn from each other as we work in these unexplored areas.
Nell: One of the criticisms of venture philanthropy is that it is only accessible to the largest and most successful of nonprofits. Do you see smaller nonprofits being able to access the ideas of growth capital? And if so, how will this evolve?
Carol: VPP focuses on organizations with strong leaders that deliver results. We have historically focused on organizations with budgets of $3-$50 million, but in our youthCONNECT initiative we have invested in organizations that fall below that monetary requirement but still have a proven track record in the area. Investing in smaller organizations is a different approach than some venture philanthropists have used, but these smaller nonprofits should have opportunities to access growth capital. What is most important to VPP is that an organization, regardless of size, can deliver lasting and meaningful results for children and youth in our region. Change in the lives of those who need it most will always remain our priority.