March offered lots of insight about how philanthropy should respond in the age of Trump. From investing in social movements, to getting involved in advocacy, to strengthening local communities, to giving more than the required 5%, there was much advice. Add to that a growing interest in how to combat “fake news,” steps to creating a digital marketing strategy, and the idea of employing migration as a tactic to combat poverty, March had much to read.
Below is my pick of the 10 best reads in world of social change in March, but feel free to add to the list in the comments. If you want a longer list, follow me on Twitter @nedgington.
And you can see past months’ 10 Great Reads lists here.
- Heinz Endowments President Grant Oliphant takes issue with the current administration’s distaste for the media and the arts (as evidenced by Trump’s elimination of the National Endowment for the Arts in his proposed budget). Oliphant argues that journalists and artists play a crucial role in a thriving society: “The right of artists and journalists to tweak the nose of power, to challenge what we believe, to criticize those in high places, to hold accountable people who otherwise might anoint themselves kings, cannot be abridged because we find it at times uncomfortable. It is that very discomfort that tells us they are doing their part in maintaining a healthy society.”
- Vocalizing dissent as Oliphant does is only one path available to philanthropy in these challenging times. Many people had other ideas for how philanthropy should respond, including funding social movements, getting involved in advocacy, countering the increase in hate crimes, strengthening local communities, and giving more than the typical 5% of assets. As Grantmakers for Effective Organizations President Kathleen Enright puts it: “We have a choice to make. We can succumb to the swirling and diverting streams of information that wash over us with every passing week. Or we can use this moment as a call to action, first to crystalize our values and determine what matters most to our institutions. And then to act in support of those values in new, bold and creative ways.”
- Philanthropic visionary Clara Miller, president of the Heron Foundation, describes what the foundation will do now that they’ve reached their goal of putting 100% of their assets toward mission. As she writes, “It’s becoming increasingly important to think and act holistically with money and influence within and beyond our sector, seeking impact on both Wall Street and Main Street.”
- The revelations that Russia used fake news to influence the U.S. presidential election added urgency to attempts to find solutions to the growing misinformation ecosystem. Pew Research offered a comprehensive report about the future of fake news. And writing in Nieman Reports Joshua Benton compares American distrust of journalism with American distrust of banks. And Marina Gorbis compares our current reality to the creation of the printing press in the mid-1400s, which ushered in political, religious and scientific revolutions.
- Speaking of what we can learn from history about today’s challenges, Harvard professor Tomiko Brown-Nagin provides 7 lessons from history for today’s social protests.
- Never one to shy away from controversy, Phil Buchanan takes to task those who argue that social problems can be solved by nonprofit and for-profit solutions equally well. As he puts it, “The fact is that in many, dare I say most, of the issue areas in which nonprofits are working to make a difference, there isn’t a way to do it that jibes very well with making a profit. And indeed, that is why the nonprofits were formed in the first place — because markets weren’t taking care of the issue!” Amen!
- Writing in his Nonprofit Chronicles blog, Marc Gunther argues that few anti-poverty interventions include the effective approach of encouraging the poor to migrate to areas with better opportunities.
- Large and aging nonprofit organization Greenpeace underwent a complete shift toward 21st century fundraising and advocacy efforts using technology. This fascinating case study describes how they did it.
- David Mundy from GuideStar kicked off the first of a great multi-part series on how nonprofits can create their digital marketing strategy.
- And Nonprofit Tech for Good offered 24 Must-Read Fundraising and Social Media Reports for Nonprofits.
Photo Credit: Beraldo Leal
Note: As you know, I am taking a few weeks away from the blog to relax and reconnect with the world outside of social change. I’ll be back later this week, but I have left you in the incredibly capable hands of a rockstar set of guest bloggers. The last, but certainly not least, is Antony Bugg-Levine. Antony is CEO of Nonprofit Finance Fund, a national nonprofit and financial intermediary that works with philanthropic, private sector and government partners to develop and implement innovative approaches to financing social change. Here is his guest post…
When we asked nonprofit leaders to identify top challenges as part of Nonprofit Finance Fund’s 2015 State of the Nonprofit Sector Survey, 32% said “achieving long-term sustainability,” by far the most popular response.
What does it take to reach the promised land of sustainability? It may seem counter-intuitive, but one of the best measures of organizational sustainability is not stability but adaptive capacity, the ability to act as circumstances require and opportunities allow. A truly sustainable enterprise must have the capacity to nimbly respond to external conditions. A strong balance sheet must allow for flexibility.
In the nonprofit sector, where pursuit of a mission is paramount, the ability to thoughtfully tack toward progress as funding conditions and community needs change is a hallmark of a success. That does not change the reality that our sector is notorious for restricted funding and hampered by a lack of available enterprise-level investment capital.
So, how do organizations build adaptive capacity?
Here are a few ways that nonprofits can build their adaptive “muscle” and be better prepared to change as the environment demands and opportunities allow.
Know your costs.
Nonprofits must understand the true costs of providing programs in order to make informed decisions about whether grants or contracts are able to cover those full costs, and how much subsidy might be required from other sources to fill the gap.
Many times, we see nonprofits use a grant amount as a starting point, and try to design a program that fits with the award amount. Heights and Hills, which provides services for older adults in Brooklyn and their families, asked us to help them take a different approach. Using customized tools, leadership now understands not only the current costs of running particular programs, but also how those costs change based on a variety of factors.
Like Heights and Hills, nonprofits need to be able to answer questions such as:
- “Which programs may be too costly if they are not fully supported by direct revenue?”
- “How do our costs change if we expand a program and need to hire additional staff?”
- “What if the amount of grant funding changes?”
- “Where might collaboration with another organization serve us well?”
Just say “no.”
The social sector attracts passionate activists who have a knack for seeing solutions where others see problems, and who are often driven by a deep inclination to say “yes” to those in need. But in order to build and preserve adaptive capacity and to truly remain mission focus, leaders must protect the nonprofit enterprise and its ability to continue its work. The common practice of accepting pennies on the dollar to deliver programs perpetuates unhealthy funding patterns and expectations. Armed with data about true costs makes it easier to say “no” to opportunities that ultimately detract from an organization’s ability to move the needle on mission.
New York’s Committee for Hispanic Children and Families did just that, and declined to pursue a large government contract because it sapped too many “indirect” resources. While at first glance, it seemed that the small allotment for “overhead” was enough, the amount didn’t nearly cover actual costs associated with the time that executive, finance and administrative staff were spending to keep the program afloat.
Saying “no” to a fiscally unhealthy grant preserves the organization’s ability to serve its clients well into the future. If we want to change embedded, unhealthy funding practices — and perhaps even elements of nonprofit culture that fuel these — we must be more willing to say “no.”
Ultimately, the benefit of adaptive capacity is the freedom to pursue what works. Some programs are more easily measured than others, but nonprofits and our funders need to invest in understanding impact. This is especially critical as we move toward an outcomes-based funding environment.
Scenarios USA, a nonprofit that uses storytelling for youth sex education, found a rare partner in the Ford Foundation when it decided to dramatically change its approach. Scenarios was open to asking, “Are our programs working?” and accepted that its core assumptions were inaccurate. With the Ford Foundation’s support, the organization revamped its program to focus on fostering critical thinking, which has tremendous influence on youth behavior.
Evaluating programs, experimenting with new ways of meeting mission and measuring outcomes over time are necessary to positive social change.
Seek support for major changes.
Money for programs is far more plentiful than money for enterprise-level change. Our survey found that nearly half of nonprofits report that they can have an open dialogue with funders about expanding programs, but just 6% feel comfortable conversing with funders about flexible capital for organizational growth or change.
There are exceptions. The California Community Foundation has partnered with Nonprofit Finance Fund and several others to offer strategy, management, and financial services aimed at strengthening the region’s nonprofits and building the durability of the sector. New York Community Trust has launched an initiative to help small arts organizations navigate various transformations and milestones such as leadership succession, business model changes, and facility renovations or moves. And New York’s Change Capital Fund is a collaboration of 17 foundations and financial institutions that is funding five New York community development organizations to help them refocus their strategies and develop new business models to address persistent poverty more effectively.
It is time to challenge the notion that funders aren’t willing to talk about money for adaptation and adaptive capacity, and to make the case for the right kinds of support.
It is hard to know what will be required of our sector in the years to come, but a steady trend of increased demand seems to indicate that the answer will be, “more.” Limited resources make doing more of the same nearly impossible. We must change the way we approach the challenges of our day, and organizations with adaptive capacity will lead the way.
Tris is Director of Development for New Philanthropy Capital (NPC), a U.K. think tank and consultancy that works with both nonprofits and funders. Tris focuses on both the demand and supply sides of innovation around social impact. His particular interest is putting impact at the heart of the social sector, including shared measurement, open data and systems thinking. He helped initiate, and now coordinates, the Inspiring Impact program which aims to embed impact measurement across the UK charity sector by 2022. He is also a trustee of the Social Impact Analysts Association, a member of the EU GECES subgroup on impact measurement in social enterprise, and the Leap of Reason Ambassadors Community.
You can read interviews with other social change leaders here.
Nell: A big focus of your work at NPC is making impact measurement ubiquitous in the UK’s nonprofit sector. How far is there to go and how does the UK compare to the US in impact measurement being a norm?
Tris: There’s undoubtedly been significant progress over the last decade on impact measurement in the UK, and NPC has been at the heart of that. There are several ways in which that progress is visible, as well as in the sector level surveys NPC has done to track change. For example, most charities say that they have invested more in impact measurement in the last five years, and as a result we see that it is increasingly the norm for charities to have a defined theory of change, a role within the organisation to lead on impact measurement, and to talk about their impact measurement efforts in their public reporting. Most institutional funders also say that they look for evidence of charities’ impact measurement efforts in their funding decisions. Demand for measurement advice is growing, and the impact measurement industry is growing in response – there are more consultants offering services in this area.
The growth of social (or impact) investing has also driven greater interest in impact measurement. The industry as a whole acknowledges the centrality of impact measurement and the need for social returns to be as well evidenced as financial returns. There have been a number of key developments to move the field forward here, from Big Society Capital’s outcomes matrix to the G8 Social Impact Investment Taskforce and European GECES reports and guidance on impact measurement – all of which NPC has helped to deliver.
What’s not as clear is how much progress there’s been on the use of impact measurement, rather than its mere existence. When NPC repeats our field level state of the sector research in 2016, we’ll be asking a number of questions to tease out whether impact measurement activity is leading to use of impact evidence in decision-making – whether it’s becoming embedded in practice.
My concern is that we don’t see the signs that impact measurement is driving learning, improvement, decision-making or wholesale shifts in allocating resources towards higher impact interventions, programmes and organisations. It feels like impact measurement is something that everyone acknowledges we need to do, but few have worked out how to use. With the result that it’s bolted on to the reality of organisations delivering services and raising funding, but not embedded at the core.
A few examples of what I mean: if impact measurement were driving learning, I’d expect to see lots of organisations sharing their insights on success and failure, and learning from each other. I’d expect to see common measurement frameworks which allow organisations to understand their relative performance. These are still very rare. I’d also expect to see investment by funders and investors in the infrastructure that we know is needed for learning – journals, online forums and repositories and practitioner networks. There are some emerging examples of these, like the What Works Centres, but they’re still mostly just getting off the drawing board.
Most importantly I’d expect to see charities adjusting strategies and programmes in response to their learning. Maybe I’m not looking in the right places, but the examples I do see are the exception, not the norm.
When it comes to comparing the UK and US, it’s really hard. We don’t have comparable field-level studies, and we need to work together more closely on these if we want robust insights. For example, if you compare the findings in NPC’s 2012 paper with a recent US study it looks like nonprofits are more likely to say the main purpose of impact measurement is learning and improvement. But actually we don’t know if this is the result of the questions we asked and how we asked them.
In both the US and the UK, it’s clear that the rhetoric on impact measurement has advanced over the last decade. What’s not yet clear is how the reality underlying that has shifted.
Nell: While there are many similarities between the US and UK nonprofit sectors there are some fundamental differences, in particular views about how much government (vs. private charity) should do for public welfare. How does the UK’s view of government’s role help or hurt the capacity building efforts of nonprofits?
Tris: The UK government has taken on a leading role in the social investment space, and it’s here that efforts to build capacity are most visible. Investment readiness programmes have been introduced over the past few years to build general capacity to access social investment. More recently, impact readiness programmes have arrived to do the same for impact measurement capacity. NPC has been working within these programmes to help a number of charities, and cohorts of charities, and it’s clear that they can play a major role in helping the sector to improve. But capacity-building in general has felt the effects of austerity just as much as any other area of government funding. Perhaps more so, as limited funds are increasingly focused on service delivery, not on efforts to improve services.
When NPC repeats its survey of the field, I am certain that we’ll find that limited funding to develop impact measurement capacity is still the major barrier cited by charities. It doesn’t look like anything’s going to change that any time soon.
Nell: NPC works at the nexus between nonprofits and funders, helping the two groups to understand and adopt impact measurement. In the US few funders will fund impact measurement systems, even though they want the data. How does NPC work to convince funders of the need for investments in measurement (among other capacity building investments)? What progress have you seen and what’s necessary for similar progress to happen in the US?
Tris: While a proportion of funders have for a long time supported evaluation, the majority still don’t. We’ve worked through programmes like Inspiring Impact (a sector-level collaborative programme to help embed impact measurement) with a group of funders to develop principles, and help them to embed support for impact measurement in their practice. These efforts can help those who already see the benefit of capacity-building to advance their work, but it’s tough to engage those who aren’t already thinking in this way. I think that the leap we need to make is to selling impact measurement through its benefits, by showing how organisations improve, and their impact increases, as a result. And because impact measurement isn’t yet typically embedded in organisations, those benefits aren’t as evident as they should be.
What does seem to work well is trying to get funders and charities to work together in a specific outcome area to make progress, rather than making a general case for impact measurement. Cohort capacity-building programmes, learning forums and shared measurement initiatives are all part of this. The key thing here is that then the funder is committed to the outcomes everyone’s working towards, and impact measurement becomes a tool for everyone to achieve those outcomes together.
Nell: You are part of the Leap Ambassador Community that recently released the Performance Imperative. Have you seen similar interest groups forming around these issues in the UK? And what role do you think interest groups like these play in a norm shift for the sector?
I have been privileged to be part of this amazing community of leaders, and one of a minority initially from outside the US. I’m convinced we need a similar movement here in the UK, and globally and have been discussing whether and how to approach this with the group from the start. And as co-Chair of Social Value International – a network of those working in the social impact field, I’m part of an effort to do this at the practitioner level too.
The Leap Ambassadors Community brings a human face to what is often seen as a technical subject. After 11 years of working in the social impact field, I am convinced that we cannot sell impact measurement just by increasing the supply of good technical solutions. We need a movement to build the demand for those solutions. We need the right frameworks to measure impact and manage performance. But we need the leaders to demand them, and to harness them to hold themselves accountable, learn and improve, and share what they find.
Photo Credit: NPC
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.
What a great month March was. Just as the weather started to turn to Spring (I hope it did where you are too), there was a whole host of great reading to digest. From analysis of the new breed of philanthropists, to controversy about contest grantmaking, to mission investing progress, to tips and guides on nonprofit finance, leadership and financial advocacy, there was lots to read.
Below are my picks of the 10 most interesting reads in the world of social change in March, but as always, please add to the list in the comments.
You can also see the 10 Great Reads lists from previous months here.
- Call me biased, but I think the biggest social change news in March was the launch of the Performance Imperative, a detailed definition of a high-performance nonprofit, by the Leap Ambassadors (of which I am one). Many reviewed the new tool, including Phil Buchanan from the Center for Effective Philanthropy who wrote that nonprofit performance is a “moral imperative.” And if you want to learn more, there is a webinar drilling down on the PI later this month.
- Who says online debate never results in change? There was a big discussion on the Chronicle of Philanthropy‘s site this month over the Council on Foundation’s plans to hold a “Shark Tank”-like contest for nonprofits. Many felt this contest would be a step backward, forcing nonprofits to perform for money, so the Council scrapped the contest and created instead a panel discussing the positives and negatives of contest-style grantmaking.
- F.B. Heron Foundation CEO, Clara Miller (formerly of the Nonprofit Finance Fund) is a true nonprofit finance visionary, and this month the Foundation passed the halfway mark on their goal of putting ALL of their capital toward mission. And writing in The Guardian, Tim Smedley would seem to agree with their goal when he makes the case for mission investing.
- Chris Gates (from the Sunlight Foundation) and Matt Leighninger (from the Deliberative Democracy Consortium) wrote a fascinating letter to the editors of the Chronicle of Philanthropy taking issue with Diana Aviv’s comments on recent Independent Sector research about technology and nonprofit institutions. Gates and Leighninger argue that there is great opportunity in technology if nonprofits embrace it effectively, as they put it, “It is true that the rise of the Internet is forcing institutions like governments, foundations, nonprofits, and professional associations to rethink how they operate. They have to adapt to the needs and goals of 21st-century citizens or perish. But ultimately, people want the same things they always have: to belong to a community, to have a voice, and to make an impact…if institutions can provide those things in this interconnected time, they will thrive.”
- American educators and education funders have focused in recent years on science and math to create a more effective and competitive American education. But Fareed Zakaria, writing in the Washington Post, thinks that’s a big mistake, “As we work with computers (which is really the future of all work), the most valuable skills will be the ones that are uniquely human, that computers cannot quite figure out — yet. And for those jobs, and that life, you could not do better than to follow your passion, engage with a breadth of material in both science and the humanities, and perhaps above all, study the human condition.” Amen!
- The fourth installment of Tom Watson’s on-going series about the changing face of American philanthropy focuses on the class of new, entrepreneurial philanthropists, those young, tech wealthy donors who are pushing for data-based social change. And Pascal-Emmanuel Gobry takes it even further arguing that “effective altruism,” what he calls this data-centered approach to philanthropy, is only one potential method of investing in social change, not the only or best approach. As he puts it, “making the world a better place is an inherently speculative behavior — if we knew how to do it we’d have already done it. Therefore the most prudent collective thing to do is to try a very wide swath of different approaches rather than a single one.” And as one of these new philanthropists, Facebook founder Mark Zuckerberg’s investment in Newark public schools continues to come under fire.
- The National Committee for Responsive Philanthropy put out a fantastic report on the need for more philanthropic investment in nonprofit leadership development. This should be required reading for every philanthropic and nonprofit leader in the country.
- The National Council of Nonprofits developed a guide for nonprofit leaders to advocate for their funding rights, particularly around indirect rates, with government funders.
- And there were lots of great tips and tools this month for becoming an effective financial leader. The Nonprofit Finance Fund released a list of tips to help “keep business and finance an integral part of decision-making.” And Kate Barr offered 6 Takeaways from the Nonprofits Assistance Fund’s annual Nonprofit Finance and Sustainability Conference.
- Finally, Jocelyn Wyatt from IDEA.org argues that general funding for nonprofits is the “future of innovation”. Yes please!
Photo Credit: BibBornem
Note: Fifth and last in my list of guest bloggers this summer is Laura Tomasko. Laura is a network developer at the Council on Foundations, where she follows trends related to private capital for social good. Here is her guest post:
Perhaps like some of you, I dedicate a good portion of my internet reading to blogs like Social Velocity, Re: Philanthropy, and Philanthropy 2173. When I am browsing a blog unrelated to nonprofits, philanthropy, and impact investing, I do a double take when I come across a topic from my professional sphere.
One of those non-work related blogs that I read is Popville, which chronicles activities in Washington, DC neighborhoods. This July and last, two local businesses sought financing through crowdfunding platforms, and reached out to Popville readers for support. Both cited the community focus of their enterprises as reasons to financially support their efforts. What ensued in the comment thread of both posts provides a snapshot into how those outside of the philanthropy and impact investing field understand and discuss crowdfunding, charitable giving, and investing with the intention to generate social and financial returns.
Last year, a local business named Pulp posted to Popville to request “donations” to improve the store and website, including repairs to fixtures, new paint, windows, and other related costs. Even though they said they wanted donations, Pulp actually sought no-interest loans, a distinction clear on their Clovest crowdfunding page but not on Popville. Confusion and opinions swarmed the comments section as people tried to figure out whether Pulp wanted a donation or a loan, and shared their musings on the whole situation.
This July, another local business, Three Little Pigs (TLP), used Popville to promote their Kickstarter campaign, accurately requesting donations for infrastructure improvements to enhance the business that will allow them to build a community space on their third floor. In exchange for donations, TLP offers gifts, like a pound of maple-cured bacon, to donors.
The comments to both posts provide insight into how local residents react to financial requests from community-focused small businesses. Such requests may increase given the passage of the JOBS Act and the Securities and Exchange Commission proposed rules that allow non-accredited investors to get an equity stake in a local business through crowdfunding platforms.
Here are common themes about local businesses raising money on crowdfunding platforms raised by commenters:
- Is This Charity?
While both businesses used words associated with philanthropy to appeal to the charitable sense of local residents, neither provides a charitable tax benefit to the readers. This created confusion and commenters wrote in to ask whether the business would provide a tax benefit or repay the money. One Pulp commenter asked, “Does anyone know what the tax implications are to this approach? I doubt they realize the tax-exemption you typically see with donations to non-profits. Or do they? Could this be an interest free loan as well as a tax-free donation?”Questions such as this one suggest that those using crowdfunding platforms to raise money need to clearly state what they ask of their potential supporters and what they will get in return. For example, they should distinguish between how the funding will benefit the community and whether it is a charitable donation, a donation without a tax benefit, or loan.
- Should You Donate to a For-Profit?
Many commenters bemoan the idea of a for-profit business asking for donations instead of raising the necessary capital through the sale of goods and services. There seems to be an expectation that the business should either flourish or fail based on the value of the good or service, and donations should not supplement either course. While some were happy with the idea of donating to a for-profit, most did not support the concept.
- What About Traditional Financing?
Several wondered why the businesses did not get loans through banks or pay for these expenses using a credit card. Others supported crowdfunding as a way to get around the hurdles of traditional financing. While one TLP commenter in support of traditional financing noted, “There are plenty small business loans and lines of credit they can apply for at the mentioned banks,” one in favor of crowdfunding stated, “If you can’t meet every requirement, the major banks will usually turn you down due to high risk.”
The confusion and concern that arose from these two crowdfunding experiences suggest that language matters and concepts like crowdfunding and impact investing are still new to people accustomed to distinguishing charity, which generates social benefit, from business and investing, which seek to generate financial revenue.
In addition to local businesses on crowdfunding platforms, mainstream media use language associated with charity to describe impact investing activities. An interesting example is coverage of the bridge loan that Laura and John Arnold made to the National Head Start Association during the 2013 government shutdown. Covering the story, the New York Times uses the headline, “$10 Million Gift to Help Head Start Through Shutdown” and Politico writes, “Philanthropists pledge $10 million to restore 7,000 Head Start seats.”
Tucked within both articles, after terms like “donation” and “gift,” are brief mentions that the money might be paid back as a no-interest loan if government restores funding after the shutdown. However, to those scanning headlines and not reading the entire article, it is not clear that the Arnolds have made an impact investment in the form of a bridge loan to the Association.
With increased interest in social entrepreneurship and impact investing, many use charitable language to describe financial transactions ranging from donations to impact investments. Until the concept of impact investing becomes as mainstream as charitable giving, taking the time to distinguish between the two could increase awareness, and eventually adoption, of both traditional and untraditional forms of financing for social good.
Language matters and those raising capital from local residents, as well as those in the media writing about these transactions, should differentiate between the desired financial transaction and its charitably-minded purpose. Crowdfunding may bring impact investing to new audiences, and let’s make sure that the message gets there clearly and accurately.
Photo Credit: zeh fernando
In my eyes, December was about three main things: the After the Leap conference about moving nonprofits to manage to outcomes, predictions about how the social sector will evolve in 2014, and the impact of the second annual Giving Tuesday. Added to the mix were some demonstrations of the growing wealth inequality (a prediction for 2014 from many) and a dash of controversy about the beloved TED Talks. It all made for a very interesting month.
Below are my picks of the 10 best reads in the world of social innovation in December. But please add to the list in the comments.And if you want to see more of what catches my eye, follow me on Twitter, Facebook, LinkedIn, or Google+.
You can also find the list of past months’ 10 Great Reads here.
- I already linked to several people’s great 2014 prediction pieces in my 5 Nonprofit Trends to Watch in 2014 post, but Tom Watson’s Trends and Collisions That Will Challenge the Social Sector in 2014 in Forbes is particularly thought-provoking. He takes what he calls a “meta approach” by analyzing themes from big social sector thinkers and “adding a few morsels to the stew.”
- One of the predictions on both my and Tom’s list was that the growing wealth inequality will become increasingly obvious. Robert Reich helps this trend by providing a scathing critique of modern philanthropy, arguing that it is becoming less about solving wealth inequality and more about reinforcing it: “Fancy museums and elite schools…aren’t really charities…They’re often investments in the life-styles the wealthy already enjoy and want their children to have as well.” And Peter Capelli, writing on the Harvard Business Review blog, seems to agree, but on the corporate side. He takes issue with “companies that pay poverty-level wages or thereabouts to their employees [while] spend[ing] a good deal of effort to be good corporate citizens in other areas.”
- Some people claim the second annual Giving Tuesday was a great success with a 90% increase in day-of online donations over last year, but others, like Michael Rosen, argue that Giving Tuesday is not actually channeling new money to the sector.
- The first-ever After the Leap conference in December promoted nonprofit performance management. Perhaps the high point of the conference was Nancy Roob’s (head of the Edna McConnell Clark Foundation) stirring keynote pushing both foundations to fund outcomes management and nonprofits to demand it. The Stanford Social Innovation Review did a great interview with her where she makes many of the same points, and an interview with Mario Morino, the main organizer of the conference.
- Writing in The Guardian, Paula Goldman from Omidyar Network discusses how, with impact investing, the blending of social and profit motives is really starting to take hold: “Fifteen years from now…We’ll look back on a host of innovations benefitting millions of disadvantaged people – in education, in healthcare,…in solar lighting—and will have a hard time remembering the day when people viewed charity and business as working towards opposite goals.”
- Leon Neyfakh writes a fascinating expose in the Boston Globe about donor advised funds, which he claims is “where charity goes to wait.” $45 billion—more than the endowment of the Bill and Melinda Gates Foundation – currently sits idle in donor advised funds and that amount is growing fast. A huge financial opportunity for the sector.
- The Center for Effective Philanthropy released a new study about how much impact foundation CEOs think their philanthropy has had. Philanthropy heavyweights Paul Brest and Lucy Bernholz each give their take on the study’s findings.
- I have loved writer Steven Pressfield since I read his fabulous The War of Art last summer. His blog about the creative process is a fount of knowledge and inspiration. His post in December about envisioning and embracing the future in your industry applies to nonprofits too.
- The idea of networked approaches to social change has been around for several years and is gaining momentum. Writing in the Nonprofit Quarterly, Mark Leach and Laurie Mazur describe “the power and promise of networked approaches to social change…creat[ing] a force larger than the sum of their parts.” Definitely a trend to watch.
- And finally, I love it when someone steps back and asks some hard questions about something that everyone else assumes is amazing. Benjamin Bratton does just that about the beloved TED Talks, which he claims “dumb-down the future.”
Photo Credit: Imperial War Museums
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: