I am out of town this week, so in my place I am offering you two interviews this month in my ongoing interview series.
First, as promised, is my video interview with Hope Neighbor, CEO of Hope Consulting and author of the Money for Good reports exposing a $15 billion opportunity to direct more private money to high performing nonprofits.
This is the first video interview I’ve done, and I am very grateful to Hope for being the guinea pig. You’ll notice that unfortunately there is no video of Hope, only her voice and a picture of her with her fiance. That’s because we couldn’t get her computer’s camera to cooperate (you’ve gotta love technology!). But the interview is still well worth a watch because Hope has really interesting insights about how donors approach giving and how we might be able to change some of that.
So take a look:
I’m really excited to announce that, as promised, I’m starting to move the Social Velocity Interview Series to video interviews, via Google Hangouts (for those interviewees who are willing). I launch next week with an interview, on the Social Velocity Google+ page, with Hope Neighbor, CEO of Hope Consulting and author of the Money for Good reports exposing an $15 billion opportunity to direct more private money to high performing nonprofits.
In 2010 and 2011 Hope, and her team of partners (like GuideStar and Charity Navigator) and funders (like The Gates Foundation and The Hewlett Foundation), conducted comprehensive studies of donor behavior, motivations, and preferences for charitable giving in order to understand how to effectively influence giving behaviors.
Money for Good I found that 90% of donors say how well a nonprofit performs is important, but only 30% of donors actively try to fund the highest performing nonprofits. So there is a disconnect.
In Money for Good II, Hope and her team set out to figure out what it would take to change donor behavior and direct more money to high performing nonprofits. What they found is that more information about performance and more “Consumer Reports” style reporting could encourage more donors to switch their giving to higher performing nonprofits.
This is all fascinating and helps inform the on-going question, “How do we funnel more money to social change?” Needless to say I have lots of questions for Hope.
Here is my list of questions for Hope, but I imagine since it’s a conversation the questions will evolve:
- With Money for Good you are hopeful that we can change donor behavior and shift more money to high performing nonprofits. But what will it take beyond providing more (and better information) to donors? How do we create incentives for donors to change?
- Money for Good estimates that $15 billion could shift to high performing nonprofits, but that is only 5% of the total private money flowing to nonprofits. And only 12% of all money flowing to the nonprofit sector comes from the private sector, so we are really only talking about shifting 0.6% of all the money in the sector to high performing nonprofits. Is that piece of the pie worth the kind of donor behavior change effort required? What about expanding the overall pie (only 2% of the annual Gross Domestic Product has historically gone to the nonprofit sector)? Is there any hope of growing the 2%?
- Where does impact investing fit in all of this? Typically only 5% of a foundation’s money is directed to social change efforts. What about the opportunity to encourage foundations to tap into their corpus and do more program-related and other mission-related investing?
- How do we ensure that more information means better information? What if low performing nonprofits simply start mimicking high performing reporting? How do we ensure that accurate performance evaluation is conducted and reported across the sector? And how do we fund that?
- What about the problem of donors misconstruing information? For example, if nonprofits provide more financial information, and donors still have a bias against overhead spending, could that just shift more money to nonprofits with lower overhead, not necessarily higher performance?
Watch for the interview on the Social Velocity Google+ page next week.
And stay tuned for more video interviews soon!
Day 2 of SoCap was by far my favorite. It started with an interesting keynote from Julie Sunderland of the Gates Foundation. She offered a perhaps more realistic, bordering on the pessimistic, view of the social capital market space. She said that Gates struggles to find entities that can absorb the size investments they want to make. They get excited about the idea of bringing together foundation, government and private dollars in stacked deals, but that the work is complicated and hard and they have yet to craft one of these deals simply because it is extremely difficult to determine the terms. All of this underlines what I’ve said in a previous post: in the nonprofit, philanthropic and government worlds there is still much work to be done to unlock capital.
The first session of the day for me was “Lessons of Behavioral Finance: Understanding and Overcoming Barriers to Impact Investing” with Hope Neighbor and her ground-breaking research, Money for Good, released earlier this year calculating a $120 billion pool of potential impact investing money that is sitting on the sidelines. Hope said that despite our desires to the contrary, people still very much think of their charitable giving as separate from their impact investing, “the reality is that people compartmentalize their money.” And only 3% of the population uses data to compare the organizations they give to.
My favorite session of the day, by far, was “Deep Dive Into the Evergreen Cooperative Initiative.” This session was exactly what I was hoping to see more of at SoCap this year. A group of leaders in Cleveland realized that the heart of their city was quickly deteriorating and no one was doing anything about it. They formed a coalition of the anchor institutions in Cleveland (Case Western Reserve University, Cleveland Clinic, etc), foundations, city leaders and others to create the Evergreen Cooperatives that brings career-track jobs and green, employee-owned businesses to the inner city, transforming a city that has lost 50% of its population in the last 50 years. Beyond the fascinating coalition, business model and results this project is achieving, lies its impressive financing. A combination of bonds, foundation grants, loans, HUD money and others launched this project and financed the 3 businesses they currently operate (a green laundry, an organic greenhouse, and a solar power company). According to Evergreen leaders, “Cleveland wants to be where the world is going, not where the world is.”
To scale this project to create 5,000 jobs (the area needs 46,000 jobs), which will be the impetus to truly transform the inner city economy, they are creating a CDFI and looking to use PRIs and MRIs. What excites me so much about this project is not the spirit of collaboration and tremendous results, but how they are bringing public, private and philanthropic money together in a truly innovative convergence. THIS is the kind of social capital market I’m talking about. Impact investing is great, but it is only ONE piece of the puzzle. I would love to see more examples like Evergreen at SoCap.
The last breakout session I attended for the day was “Nonprofit Analysis: Beyond Metrics,” which gave a great overview of the growing nonprofit evaluators market through the lens of rating one nonprofit, DC Central Kitchen. It was interesting to see how Charity Navigator, the most well-known nonprofit evaluator, has evolved from a system driven purely by IRS 990 form overhead ratios to a three-pronged review including transparency and impact evaluations.
The end of the session gave me serious pause, however, when a member of the audience asked whether any of the evaluators might use the GIIRS system coming out of the impact investing world to rate nonprofit impact. Ken Berger admitted he wasn’t familiar with GIIRS and Tim Ogden of GiveWell said he was skeptical of social return on investment (SROI) calculations in general. Again, my point that the philanthropic and impact investing worlds aren’t communicating and collaborating becomes apparent. Wouldn’t that be amazing if impact in both the philanthropic and impact investing worlds could be measured in a comparable way? That would be truly innovative!
So, although Day 2 of SoCap provided much more conversation and examples of how the philanthropic and government capital markets are evolving, there is still much work to be done to bring both capital fully into the social capital market. Perhaps at SoCap 2011?
Photo Credit: Markets for Good
In the August installment of our Social Velocity interview series, we are talking with Lucy Bernholz, founder and President of Blueprint Research & Design, Inc. a strategy consulting firm for philanthropic institutions and individuals. She is also the author of many seminal books (including the prescient Creating Philanthropic Capital Markets), reports (like Disrupting Philanthropy) and her famous Philanthropy 2173 blog. Lucy is considered a visionary in the philanthropic world and is doing tremendous work to move philanthropy forward.
Nell: You have become increasingly interested in data sharing and crowd-sourcing for change. What are the risks in these new forms of social problem solving?
Lucy: Data are not objective – quantitative data is subjectively collected, categorized, sourced, and analyzed and its “reputation” as neutral is unearned. Using data well requires skills that most of us don’t have – statistical analysis, methods, etc.
That said, when I talk about data I mean “anything that can be digitized.” Stories. Video. Anecdotes. Numbers. We may not all have all the skills to make sense of every type of data, that is partly why crowds are important. For decades, only experts and the wealthy had access to data – so their subjective analyses dominated the discussion. Now, many of us – crowds – can have access, make sense of, add nuance, ask questions. That changes the “subjectivity” and changes the dynamic. Data are disruptive when access to them is broad, cheap, and easy.
We still need to be skeptical, ask questions, and think deeply about the biases behind both data collection and presentation. But, as computer programmers say, “many eyes make for shallow bugs.” Crowds and data are two sides of the same coin when it comes to disrupting the social sector.
Nell: In Disrupting Philanthropy you examine the long tails of donors (foundation and individual contributors of money for social change) and doers (nonprofits, social entrepreneurs receiving that money) and how information technology is connecting the two. But as a future teller, how and when do you see more conservative/fearful nonprofits and philanthropists embracing these new technologies? What is the tipping point?
Lucy: There are few pressures on endowed foundations to change their behavior. It is hard to force this change from the outside.
The drivers of change in this day and age include new expectations about information at a societal level, the government 2.0 movement, the skills of two to three generations of employees and managers in using online tools and finding information when they want it. These are the soft, cultural, and ultimately most meaningful drivers of change. Regulations that require more disclosure, new expectations of transparency, efforts such as The Foundation Centers Glasspockets.org, the Center for Effective Philanthropy’s assessments are other possible influencers of the timeline.
That said, don’t discount the inevitable backlash against transparency, which is coming. Recent online “revelations” that have been fueled by political agendas and resulted in “flash decision making” highlight the need for all of us to be careful about the pace of information, believing everything we read, and the need for thoughtful, investigative, well-referenced and fact checked information. As Craig Newmark says, the news business is the “immune system of democracy.” As the news business is caught in this wildly transformative moment, we must all consider where we get our information, how we use it, who provided it to us, and what its credibility is. There is no straight line to widespread adoption of new tools – it is episodic and includes strange diversions.
Nell: Where does government fit into the connection between donors and doers? What can/should government do to encourage use of data sharing, crowd-sourcing, etc.?
Lucy: The government 2.0 movement is way ahead of nonprofits and foundations in the open sharing of data. That said, most of this is a “supply side” effort at this point – cities, states, and federal agencies shoveling data over the wall into the public domain with little knowledge of what information communities want or need and even less support for communities to use the information well. Firehousing data into the public domain is one thing, but it is not enough (It can also work to distract – “You want data? Here have it all”)
As for nonprofits and foundations, the data disclosure requirements of the new 990 are small steps in the right direction. Most of what will happen as far as nonprofits and foundations sharing their data is likely to be voluntary, led by innovators, and taken up by others over time as communities and constituents learn to ask for what they want. The expanding ecosystem of nonprofit ratings/raters – from GiveWell to Greater Nonprofits to Philanthropedia to National Councils of Nonprofit Analysts, etc. will also spur this.
The proposed legislation, HR 5533, which calls for a national council on nonprofits and a central system for tracking nonprofits as funded by federal agencies is the wildcard here – if it passes, the data game on nonprofits and philanthropy will change. How so, and whether for the better, I can’t say at this time because I just don’t know enough (yet) about what is being proposed, how it is supposed to work, and how it will really work (if enacted).
Nell: As you mention in Disrupting Philanthropy, 10 years ago socially responsible investment was a small niche, but now it makes up 10% of professionally managed investment funds. How much bigger will it grow? How much can mission and money be blended in our economy?
Lucy: Socially responsible screened assets have been growing for more than a decade. This is a multi-decade trend that is growing mostly outside of the realm of the charitable and philanthropic sector and within the realm, incentives, and returns of the mutual fund business. Philanthropic efforts to connect to these assets and to promote Mission Related, Program Related spending are only now getting real traction and advocacy from within philanthropy.
Nell: Your focus is largely on philanthropy, but what do you think nonprofits should be doing to tap into these trends and take advantage of the long tails of donors and doers?
Lucy: Nonprofits are experimenting with every tool to reach the long tail that they can – from “donate now” buttons to text giving. For the most part, the process has been focused on marketing and fundraising. The exciting changes are happening where we see people developing solutions that take the digital connectivity and data as the starting point for the work they are trying to do – think about Ushahidi or CrisisCommons – their entire programs/projects/initiatives/governance models/organizations are built on deep understanding of the power of disbursed long tails. That is powerful.
Nell: Because you are such a proponent of data and measurement, what do you make of the emotional part of giving? Do you think we can ever get to a place where it’s all about the data? And should we want to?
Lucy: I have always said that philanthropy is a business of passion – it is largely emotional. The use of data, as Hope Neighbor’s recent report shows, is a small part of the process of philanthropic decision making. And it will always happen within the personal interests of donors. And please remember, when I say data, I don’t mean just numbers.