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nonprofit advocacy

Why Philanthropy Must Speak Out: An Interview with Grant Oliphant

In today’s Social Velocity blog interview, I’m talking with Grant Oliphant, president of The Heinz Endowments (and frequent contributor to their excellent blog).

Prior to running The Heinz Endowments, Grant was president and chief executive officer of The Pittsburgh Foundation for six years. Before that, he served as press secretary to the late U.S. Sen. John Heinz from 1988 until the senator’s death in 1991.

Grant frequently leads community conversations around critical issues such as public school reform, civic design, the ongoing sustainability of anchor institutions, domestic violence, riverfront development and various socio-economic concerns. He also serves extensively on the boards of local nonprofit and national sector organizations, including the Center for Effective Philanthropy, which he chairs. He has also served on the boards of Grantmakers Evaluation Network, Pennsylvania Partnership for Children, and the National Children’s Book and Literacy Alliance.

You can read other conversations with social changemakers in the Social Velocity interview series here.

Nell: You have written on the Heinz blog and elsewhere about the importance of philanthropists speaking out against government policies or decisions that are at odds with their work. However, philanthropy is often hesitant, because of both real and perceived limitations, to become too political. What do you think philanthropists, and the nonprofits they fund, can and should do to speak out against political decisions that are at odds with their missions?

Grant: This question makes my brain hurt. I mean, seriously, we live in a time when everything is labeled as political—affirming the science of climate change, standing up for equity, denouncing racism, defending basic math, you name it. A cultural institution we support recently faced criticism from its own docents for posting an inclusion policy they condemned as “political” because it welcomed all visitors, including immigrants. When your core values are suddenly defined as political, what are you going to do—run from your ideals and hope they somehow survive in the shadows? Or are you going to step into the light and advocate for what you say you believe in?

We have to remember this is about policy and the marketplace of ideas and values, not politics. Philanthropy shouldn’t be about trying to influence who wins an election, and private philanthropy can’t lobby on specific legislation. But foundations of all ideological bents have long understood that on some issues, the only way to bring about meaningful change is to persuade the broader culture that it matters and then translate that into supportive policy. In telling the story of its own impact, philanthropy loves to point at successes like universal vaccinations. But now even vaccines are under attack, along with the science informing them. So what should philanthropy do—stand mutely by and pretend it doesn’t have a point of view on saving lives and preventing suffering, or for that matter on the importance of science as a basic decision-making tool for public policy? You can’t win the battle of ideas by hiding.

We have to speak honestly about the perils of policy rooted in magical thinking and so-called alternative facts. That sort of candor is described as courageous in the foundation world, but really what’s brave about speaking the truth when everything you believe in and work for is under attack? We are witnessing a jaw-dropping assault on fundamental institutions of democracy—the press, the judiciary, free speech, basic notions of civility, even the right of the people to assemble. The American system of philanthropy, which hinges on an engaged civic sector, simply cannot work in the context of dysfunctional or broken democracy. Speaking out against these attacks is basic self-defense for the sector but it’s so much more than that. It’s really a defense of the democratic freedoms and governance that make philanthropy matter in the first place. And if we’re not willing to fight for that, then what in the world do we stand for?

Nell: Some argue that philanthropy is at least partly to blame for the divides currently impacting our country because philanthropy is a result of wealth inequality and sometimes perpetuates inequity. What are your thoughts on that?

Grant: Martin Luther King commented on this far more eloquently than I ever can, and recently Darren Walker at The Ford Foundation has done some excellent writing on it. There’s not much more I can add. No question, the ideal goal for philanthropy should be to help create a society where it is no longer necessary. And it’s fair to ask whether a by-product of massive wealth disparity can really address the social inequity that in some ways helps drive it.

At the same time, to dismiss philanthropy as merely a symptom of inequality is to understate both the enormous value of enterprise creation and the positive social impulse that drives philanthropy at its best. Foundations and other forms of philanthropy may be imperfect expressions of an imperfect system but they also can do tremendous good, especially at a time when government is paralyzed and the private sector has become so removed from social and community concerns.
So much of the social good that philanthropy has helped support—from sensible thinking on climate change to marriage equality—is being unraveled right now, and that’s terrifying. But if nothing else maybe it’s giving those of us who are privileged to work in this field a renewed appreciation for the value philanthropy really can contribute and a heightened sense of responsibility and urgency to actually deliver it.

Nell: What role do facts play? We are arguably living in a “post-truth” world where opposing sides can no longer agree on a common set of facts. How can the social change sector hope to create change when there is no longer agreement about what the current reality is? What do we do about that?

Grant: I’d joke that the Bowling Green massacre changed my thinking on this, but I worry folks might miss the sarcasm. This is a scary time. We have leaders just making stuff up and hiding behind disinformation machines posing as media. It’s bizarre but that’s the landscape now, and I hope the social sector wakes up to it in two critical ways.

First, we need to stop confusing facts with persuasion. Our sector loves to throw data at people and preach from what we assume is our scientific and moral high ground. But neuroscience has taught us that people rely more on their emotions and “gut feelings” to make important decisions than they do on reason. It turns out we are more likely to be persuaded by a good story than by a good fact. I’ve long thought our sector could do better at simply bearing witness, at telling stories that help people see themselves in the lives and suffering of others. That’s the most basic work of philanthropy, this process of sowing compassion. In a time of unprecedented division when humanity’s notions of who we mean by “us” are being challenged as never before, philanthropy needs to get back to that.

But, second, at the same time we need to fight like hell against the normalization of “alternative facts.” Data may be a weak tool to shift closely held beliefs but over time it can move civilizations. Think about how dismissive the medical establishment was initially of the idea that germs cause disease and how conscious our society is today of antibacterial everything. Truth wins in the end, but we need to remember the end can take a long, long time to arrive. Give up on science and suddenly you end up in the Dark Ages for a millennium. For philanthropy that means continuing to invest in science and research, but it also means investing in the institutions and processes that help facts become more broadly known, including journalism. And it means not backing off when propagandists try to peddle their lies as just an alternate reality. We need to have the courage to call that nonsense out.

Nell: For many in the social change sector these are dark days. What gives you hope?

Grant: Oh wow, I could so easily sink sanctimonious piety here, which is not what any of us needs right now. The truth is, there are plenty of days I despair over what’s happening, and it’s important to acknowledge that. If you work in the social sector and these aren’t dark days for you, then you seriously aren’t paying attention.

For me, though, hope is connected with purpose. If we only feel hope when it seems like we’re making progress or winning, then that’s not really hope, is it? It’s expectation. And there is absolutely nothing about the goals we are fighting for that can be taken for granted. Every single step of humanity’s journey toward justice and sustainable community has been marked by hardship and reversals, and often outright losses, so who are we in this era to only feel hope if the circumstances are right?

If it were up to me, Rebecca Solnit’s “Hope in the Dark” would be required reading for us all right now, because the only way any of this gets better is if people of good intent keep pushing, even when we don’t know what the outcome will be, even when it feels like we’ve lost on something irredeemable, like the climate. We have to be humble enough to own that none of us ever really “controls” anything, but over time somehow progress still happens as long as we keep at it.

The other day the President tried to drag my hometown of Pittsburgh into his myopic decision on the Paris climate accords. I loved how local leaders here and all over the country responded with a collective roar of “no way,” which was not just about saying “that isn’t us” but went beyond that to “we’ll do it ourselves.” That’s what gives me hope—all the people I get to work with every day who greet the darkness by bringing the light of their own creativity and unrelenting determination.

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10 Great Social Innovation Reads: Feb 2017

Whew, are you as exhausted as I am? As I said last month, with the January inauguration of President Trump, it seems we moved into hyper drive. And February didn’t slow down a bit. From debates about the right political role for nonprofits, to advocacy in new areas like science, to efforts to reinvent journalism, to new grassroots organizing campaigns, to new ways to think about marketing in the nonprofit sector, there was a lot going on in the world of social change.

Here is my pick of the 10 best reads in the world of nonprofits, philanthropy and social change in February. If you want a longer list, follow me on Twitter @nedgington. And check out past months’ 10 Great Reads lists here.

  1. A big contributor to the exhausting pace is the daily onslaught of new and shocking pronouncements from the Trump administration. One with a potentially huge impact on the nonprofit sector was Trump’s call for an end to the Johnson Amendment, which limits the election-related activity of nonprofits. Many argued that this would be a destructive development for the sector, from limiting the collaborative position of the sector, to moving philanthropy away from social change and toward politics, to contributing to an elimination of the charitable tax deduction, to increasing dark money contributions to political campaigns. But others disagreed arguing that repealing the Johnson Amendment would level the playing field with for-profits.  As always, the HistPhil blog gives some much needed historical perspective on the issue.

  2. Another victim of Trump’s ire in February was the news media. Journalism has been struggling for years amid falling advertising revenues and a changing digital landscape. But it seems the Trump administration may just be the impetus the industry needs to reinvent itself. As Jeff Jarvis argued: “Now we reinvent journalism. Now we learn how to serve communities, listening to them to reflect their worldviews and gain their trust so we can inform them. Now we give up on the belief that we are entitled to act as gatekeeper and to set the agenda as well as the prices of information and advertising. Now we must learn to work well with others. Now we must bring diversity not just to our surviving newsrooms — which we must — but to the larger news ecosystem, building new, sustainable news services and businesses to listen to, understand, empathize with, and meet the needs of many communities.” And Nieman Lab hosted a conversation among journalists and editors from The New York Times, The Wall Street Journal and The Huffington Post about the future of journalism. And Democracy Fund launched a cool new project, the Local News Lab, aimed at making local news more sustainable.

  3. In these uncertain times where many nonprofits are feeling under attack, advocacy has become a more important tool than ever. Writing in the Stanford Social Innovation Review, Jim Shultz offers some guiding questions for developing your nonprofit’s advocacy strategy.

  4. And speaking of new levels of advocacy, while scientists once strived to remain separate from politics, some scientists are finding themselves in the political arena just by investigating areas at odds with the Trump administration, like climate change. And some scientists created a network of scientists who could offer temporary space to U.S. scientists stranded overseas by the immigration ban.

  5. The Johns Hopkins Center for Civil Society Studies released a new online database that lets you slice and dice data on the U.S. nonprofit economy. Fascinating.

  6. Some nonprofits have enjoyed dramatic donation and follower increases as a result of the election. One of these, the ACLU has developed a pretty impressive social media strategy and plans for a much larger ground game. Similarly, Planned Parenthood is using their increased support to develop their grassroots organizing efforts.

  7. All of these efforts to resist the Trump Administration got David Brooks thinking about resistance movements throughout history and which might be most applicable now.

  8. Taz Hussein and Matt Plummer offered a wakeup call to social change leaders who think they don’t need to generate demand for their social change work: “It’s time [nonprofits] and their funders heed business findings on increasing noise in the marketplace and the need to make any new offering, even a life-saving one, stand out. In other words, they need to pay what it takes to actively drive demand.”

  9. And speaking of marketing in the nonprofit sector, Ann Christiano and Annie Neimand argued that nonprofits needs to stop “raising awareness” and instead create strategies for changing behavior: “Because abundant research shows that people who are simply given more information are unlikely to change their beliefs or behavior, it’s time for activists and organizations seeking to drive change in the public interest to move beyond just raising awareness. It wastes a lot of time and money for important causes that can’t afford to sacrifice either. Instead, social change activists need to use behavioral science to craft campaigns that use messaging and concrete calls to action that get people to change how they feel, think, or act, and as a result create long-lasting change.” Amen!

  10. Writing on the PhilanTopic blog, Kyle Crawford argued that chatbots — computer programs that conduct a conversation via voice or text — have a real role to play in social change, and nonprofits should become early adopters of this new technology.

Photo Credit: Max Pixel

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10 Great Social Innovation Reads: January 2017

In January it seemed as though we moved into social change hyper drive.

With the inauguration of a new president, a litany of controversial executive orders, numerous efforts to block or minimize them, and advice for or frustration with the nonprofit and philanthropic sectors’ responses, the world of social change moved at warp speed.

Add to that lots of predictions and advice for the nonprofit sector, and some small, but inspiring efforts to feed and comfort those in need and January was a very busy month.

Below are my picks of the 10 best reads in January, but feel free to add to the list in the comments. If you want a longer list, follow me on Twitter @nedgington, and if you want to see past months’ lists go here.

  1. Some still struggled to understand the 2016 election. Continuing his 4-year series on the smaller cities of America for The Atlantic, James Fallows argued that while Americans distrust national policy and institutions they still have faith in local government: “City by city, and at the level of politics where people’s judgments are based on direct observation rather than media-fueled fear, Americans still trust democratic processes and observe long-respected norms.”  And Eytan Oren offered some insight into how social media and major technology companies took civic engagement to a new level in the 2016 election.

  2. A few days before Trump was inaugurated, President Obama gave a farewell speech that focused on the need for greater civic engagement, and he and Michelle Obama launched a new foundation to help deliver on those ideas. And Pew Research crunched the numbers on how America changed over his 8-year term.

  3. Quite quickly after his inauguration, President Trump signed several executive orders, and a “resistance” movement that is rather unprecedented in U.S. history mobilized in response.   thing the resistance movement has going for it is their savvy use of social networks.

  4. In particular, Trump’s executive order banning immigration from 7 Muslim-majority countries created some soul-searching in the philanthropic sector. Inside Philanthropy‘s David Callahan expressed frustration about a seeming silence among philanthropic leaders on Trump’s immigration ban, asking “What’s the point of being in charge of society’s risk capital if you don’t take risks at a moment like this?” But 50 philanthropic leaders signed a strong statement against the ban.

  5. Amid all of the uproar surrounding the immigration ban, there was light in small places. A group of people from New Jersey launched a supper club that creates community among and raises money for Syrian refugees.

  6. Because January started a new year, there were the usual posts predicting what the new year will bring for philanthropy and nonprofits.

  7. But this year was different because several writers argued that the nonprofit sector needs to move more strongly into advocacy. And there was lots of other advice about how nonprofits should approach the Trump era, from building resilience, to messaging more effectively in a “post-truth” world, to making America “good” again, to answering 12 “Ifs”.

  8. A rather more sweeping bit of advice for the social change sector came from Pablo Eisenberg who argued that the organization Independent Sector should no longer be an association of both nonprofits and foundations, but just nonprofits. The HistPhil blog asked him to elaborate on the history of that important institution.  

  9. BoardSource, GuideStar, BBB Wise Giving Alliance, and the Association of Fundraising Professionals partnered to release a new method for evaluating a nonprofit’s fundraising effectiveness. The method looks at three metrics in a nonprofit organization: the fundraising net revenue, the cost of fundraising, and the dependency quotient (the percent of the budget funded by the nonprofit’s top 5 donors). Because let’s remember, as Rick Moyers pointed out, Development Directors Are Not Miracle Workers.

  10. Finally, a tangent into something small and really cool. The idea of little free libraries that have been cropping up on people’s front lawns has gone in a new direction. Mini food pantries have started helping neighbors in need.

Photo Credit: Jens Schott Knudsen

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Making Philanthropy More Equitable: An Interview with Aaron Dorfman

Aaron DorfmanIn today’s Social Velocity interview, I’m talking with Aaron Dorfman, President and CEO of the National Committee for Responsive Philanthropy (NCRP), a research and advocacy organization that works to ensure America’s grantmakers are responsive to the needs of those with the least wealth, opportunity and power. Before joining NCRP in 2007, Dorfman served for 15 years as a community organizer with two national organizing networks, spearheading grassroots campaigns on a variety of issues. He also serves on the board of The Center for Popular Democracy.

You can read other interviews in the Social Velocity Interview Series here.

Nell: What is your take on recent concerns about donor advised funds locking too much philanthropic money away from directly reaching nonprofits? Is the recent growth of DAFs a good thing or a bad thing, or is it more complicated?

Aaron: It’s definitely complicated.

On the one hand, I’m sympathetic to how much easier DAFs have made things for donors. I do some of my own charitable giving through a small DAF, and I love the convenience of it. I have no doubt that other donors also find DAFs to be a very helpful development in philanthropy.

However, many of the concerns raised by critics are also valid.

There is little or no evidence that DAFs have contributed to an increase in overall charitable giving, for example, and there certainly isn’t any evidence that the funds have boosted giving to historically marginalized communities. So, if there has been no increase in overall giving, then what DAFs have done is to delay the giving.

Another concern is that DAFs provide donors with significant tax advantages over private foundations – but at the cost of transparency. Most DAFs don’t accept unsolicited proposals, and reporting by sponsoring institutions doesn’t identify grants with individual funds. Practically speaking, that means that most of these funds are inaccessible to most nonprofits. They’re traditionally housed at community foundations, but they’re not directly open to receiving proposals from community-based nonprofits, though proposals may be steered there by foundation staff acting as gatekeepers.

We found this to be true in a recent in-depth assessment we conducted of the Oregon Community Foundation. This was especially the experience of nonprofits serving and/or led by communities of color, who already have the hardest time accessing mainstream philanthropic support.

The lack of access by community nonprofits is even more troubling when you consider the fastest growing of the DAFs: the funds located at the giant financial industry warehouses like Schwab, Fidelity and Vanguard. There, no one is putting nonprofit proposals in front of donors who might be interested.

The lack of adequate reporting reinforces this problem of access: since the IRS does not require DAF sponsors to report which funds made which grants, grant seekers cannot take advantage of reports to identify potentially like-minded donors. (DAF sponsors have begun making greater amounts of information available about their grants, but what they provide is of limited help to grantseeking nonprofits because they don’t identify which funds made which grants.) This is further compounded by the fact that at present the major foundation database (Foundation Center) doesn’t systematically track giving by the likes of Vanguard, Schwab and Fidelity, most of whose funding simply doesn’t appear in the database.

Nell: Some people have argued that since philanthropy itself is built upon an inequitable market economy it can serve to reinforce that inequality. Is there a disconnect, or can we expect philanthropy to appreciably contribute to greater equity? What do you make of the debates about philanthropy that redistributes wealth and philanthropy that simply reinforces power and economic imbalances?  

Aaron: There is no question that philanthropy can and has done both of these things.

When the Ford Foundation provides support for grassroots community organizing, or for litigation to protect and expand civil rights, that’s an example of philanthropy clearly contributing to greater equity.

When Atlantic Philanthropies, The California Endowment and other funders supported advocacy that contributed to the passage of the Affordable Care Act (Obamacare), that, too, was a case of philanthropy appreciably contributing to a more equitable society.

These are just a couple of examples of funders who understand their goals and their vision for society to be disruptive to the status quo; funders who understand the role unjust economic systems have played in the issues they would like their dollars to help overcome. The “disconnect” between market economics and progressive philanthropy is not impossible to overcome, and many of the more than 200 grantmakers that have signed on to NCRP’s Philanthropy’s Promise initiative are leading the way in showing other funders how to do just that.

However, when certain foundations support elite universities, when they invest only in white-led cultural organizations that emphasize European-American culture, or when they invest in advocacy to privatize public education at the expense of low-income communities – then you have some clear examples of how philanthropy reinforces inequality.

There was a great series of articles published recently in The Nation that explores these ideas, and what the future of philanthropy might be for those of us who hope to see a greater philanthropic contribution to fairness, equity and justice.

Nell: You have written before about philanthropy’s historical role in funding social movements. What do you make of philanthropy in the Black Lives Matter movement? How involved has philanthropy been, and how involved do you think philanthropy should be?

Aaron: There is a paradox here. Philanthropy has always under-funded social movements. However, philanthropic funding has also been essential to the success of social movements. We documented this in a 2014 paper Freedom Funders: Philanthropy and the Civil Rights Movement, 1955-1965.

The Black Lives Matter movement has thus far received very little support from institutional philanthropy. A group of foundation staff members have formed Funders for Justice as a way to learn together and to accelerate the flow of funding to the movement. They’re making headway, but the movement is still receiving very little support. Some individual donors, mostly younger and working through the Solidaire Network, have been able to move money more quickly to the movement.

The Hill-Snowdon Foundation, a small family foundation based in D.C., has been a real leader on this. They dipped into their corpus and have devoted new resources to creating the Making Black Lives Matter initiative and are attempting to organize their peers in philanthropy to invest in black-led organizing and in the Movement for Black Lives. The foundation is a past winner of the NCRP Impact Awards, which recognizes smart philanthropy that empowers underserved communities and achieves real results.

Also, Black professionals in philanthropy have been organizing through the Association of Black Foundation Executives and its Philanthropic Action for Racial Justice initiative.

I should add, too, that movement leaders have rejected some philanthropic support that was offered to them because it came with too many strings attached. In some respects, it’s been a good thing that the movement has not been dependent on philanthropy, since foundation support so often serves to rein in radical social movements.

Nell: The nonprofit sector has historically stayed away from advocacy work, but that seems to be changing. What role do you think nonprofits can and should play in advocacy, and will there be more of a push for that in the future?

Aaron: Advocacy and community organizing are among the best ways for foundations and nonprofits to leverage their limited dollars in pursuit of their missions. By changing public policies and/or the regulatory framework, we can transform society and build the kind of nation we all want to inhabit. Any nonprofit or foundation that is serious about achieving its mission must understand how advocacy fits into their overall strategy.

NCRP has challenged grantmakers to devote at least 25% of grant dollars to funding nonprofit advocacy and organizing, but fewer than 100 of the largest 1,000 foundations in the country meet that benchmark. The number of serious advocacy funders is increasing, but slowly.

Nonprofit advocates bring the voices of people and communities to policy makers. They are a greatly needed counter balance to the growing influence of corporate lobbyists, who often advocate only the narrowest self-interests of their industry. I think many, many people in our sector understand this and that we will see an expansion of nonprofit advocacy in the coming years, and that an increasing number for foundations and high net worth donors will provide ever-increasing resources for that advocacy work.

Photo Credit: NCRP

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Advocating for the Value Nonprofits Create: An Interview with Tim Delaney

UntitledIn today’s Social Velocity interview I’m talking with Tim Delaney, President and CEO of the National Council of Nonprofits, the nation’s largest network of nonprofits.

The National Council of Nonprofits helps nonprofits identify emerging trends, engage in critical policy issues, exchange proven practices across state lines, and advance their missions through advocacy. Previously, Tim served as a partner at a large law firm (helping prosecute the impeachment of a Governor and leading the firm’s government relations practice), Solicitor General and then Chief Deputy Attorney General (leading his state to win several cases in the U.S. Supreme Court), and founder of the Center for Leadership, Ethics & Public Service (championing ethical leadership and civic engagement).

You can read interviews with other social change leaders here.

Nell: Historically, “advocacy” has been a dirty word in the nonprofit sector. Organizations have been afraid of getting into trouble with the IRS for pursuing too much lobbying behavior. But that seems to be changing. What are your thoughts on how involved in advocacy 501(c)(3) organizations can and should be?

Tim: Yes, it’s perplexing that using words like “advocacy” and “lobbying” could get a nonprofit employee’s mouth washed out with soap. But seriously, advocacy is not just a right for nonprofits that is protected by the First Amendment; it’s a profound responsibility and effective tool to advance nonprofit missions.

Nonprofits provide a way for Americans to come together to solve problems, large and small. And they often do so through advocacy: simply standing up and speaking out for something they believe. Americans came together through nonprofits to advocate successfully in securing the right of women to vote (via suffragist groups), establishing Social Security (spearheaded by Townsend Clubs), desegregating schools (leadership by NAACP), securing civil rights (Dr. King delivered his “I Have a Dream” speech and undertook much of his work as President of the nonprofit Southern Christian Leadership Conference), and so much more.

But advocacy is not just for social movements. Advocacy includes standing up for your nonprofit’s right to be paid reasonably for services it provides under a government contract. Advocacy includes telling the story of your nonprofit’s impact to a reporter. We see advocacy as the answer to one key question: who can I talk to today to advance my nonprofit’s mission?

A barrier many nonprofits run into comes from what I call the “3 As” –uninformed academics, accountants, and attorneys who advise nonprofit boards by passing along false lore that there “might be legal problems” if a nonprofit does “too much” lobbying. Nonprofit staff come back from advocacy training fired up, but boards extinguish that passion based on false lore. After hearing stories like this from across the country, we’ve decided to turn advocacy training around. The traditional approach of “it’s legal” sought to counter the false lore, yet too often it led people to focus on arcane issues more remote than the fine print on your airline ticket or apps that you never read. Therefore, we now focus on “why” advocacy is essential to mission advancement and “why” nonprofits need to be engaged at the state level to protect against government attacks on tax exemptions, nonprofit independence, and charitable giving incentives.

As part of our effort to get nonprofits past those old barriers, we’ve joined together with Alliance for Justice, BoardSource, Campion Foundation, the Forum of Regional Associations of Grantmakers, and Knight Foundation to create Stand for Your Mission, a free website that provides nonprofit board members with information they need to be effective advocates in advancing nonprofit missions.

Nell: The National Council of Nonprofits has been on the forefront of the movement to get government to recognize the importance of funding nonprofits’ indirect costs. The recent OMB ruling mandating a minimum 10% indirect rate on most government grants and contracts with nonprofits seems like a watershed moment, but 10% is still pretty low and many nonprofits don’t understand the implications or how to benefit. What are your plans at the Council of Nonprofits to continue to move this issue forward?

Tim: As you noted, the 10% of modified total direct costs is just the minimum. For tens of thousands of nonprofits, just getting to 10% will make a huge difference. In its most recent State of the Sector Survey, Nonprofit Finance Fund found that 57% of nonprofits are being paid indirect cost rates of 9% or less. And Urban Institute found that of nonprofits reporting a problem, a quarter said that governments were paying them zero for indirect costs.

Now compare those paltry sums against research from Bridgespan showing that a more accurate range is about 25 to 35%. Certainly each case is different, but being reimbursed nothing or just 5% year after year when your real legitimate costs are always higher is debilitating, eroding effectiveness. Delivering sustained impact is impossible. So getting those nonprofits up to just the minimum will enhance sustainability to make a difference in their communities.

Importantly, 10% is just the floor. If a nonprofit is properly allocating costs and documenting its indirect costs, it can receive reimbursement for whatever those costs are, whether they are 20, 30, or even 40%. Getting paid for the true costs of delivering services can reduce burdens on nonprofits to fundraise for the difference, which frees funders from having to subsidize governments and allows nonprofits to dedicate more time to missions instead of diverted to filling funding gaps.

Seeing the OMB Uniform Guidance go into effect is just the beginning and underscores the importance of nonprofit advocacy. The mere issuance of OMB’s mandate doesn’t mean that the tens of thousands of local, state, and federal employees scattered across multiple departments, agencies, divisions, and offices will follow it or apply it properly. First, they need to become aware of it (which still has not happened), then receive training (same), and apply it consistently (same). Plus, states and localities often have contrary laws and policies on their books, requiring advocacy to change them to conform. OMB’s mandate involves a giant systems change, but the federal government still has not informed the system of what is required and the need to change policies and practices to abide by it.

David Thompson and Beth Bowsky on our team have been conducting dozens of in-person presentations and webinars across the country to ensure nonprofits are aware of their rights and how to advocate for proper implementation of the Uniform Guidance. Plus, we have been working with multiple state and local government associations to spread the word, and written numerous published pieces, including an overview, “Know Your Rights … and How to Protect Them,” that highlights potential compliance challenges.

In addition, we’re creating a series of short training modules for nonprofits to better understand their indirect costs. The key is for nonprofits with government grants and contracts to stand up for their rights to fair indirect cost reimbursement and to let their local state association of nonprofits and us know when governments are not living up to their obligations. Working through our network gives a nonprofit cover (so it isn’t fighting alone and having to worry about backlash) and strength in numbers to protect those rights.

Nell: This issue is also part of the larger movement to overcome the Overhead Myth in the nonprofit sector, the idea that “overhead” (or indirect costs) are bad and should be limited as much as possible. How close are we to truly overcoming this myth both among nonprofit donors and nonprofit leaders (who often keep themselves in these handcuffs)?

Tim: We still have a long way to go. OMB’s Uniform Guidance is a huge step forward because the federal government has now expressly acknowledged that indirect costs are legitimate and necessary. The sector needed a powerful external validating voice to overcome decades of treating mythology as orthodoxy. It’s inspiring to see that many private grantmakers have now adjusted their own policies or started to re-examine their past policies that unfairly limit payment for indirect/overhead costs.

However, the anti-overhead culture is deep seated and will take a long time to root it out. That’s true on both the funding side and the nonprofit side, given the powerful disincentives against claiming full costs. Nonprofits were forced to keep overhead artificially low by underinvesting in their infrastructure, staff training, and many other necessary expenses. Until we get so-called “watchdog” groups and reporters to stop using overhead ratios as false proxies for nonprofit efficiency (and get them to stop reporting overhead ratios as if they are a problem), and until all nonprofits are communicating with donors about their impact and what it truly costs to deliver that impact, everyone will still have work to do.

Nell: In both of these areas (advocacy and overhead) and in many others, nonprofits are treated like a second-class citizen. How do we get to a place where the critical role nonprofits play in our economy and in solutions to social challenges is recognized, and nonprofits are fully supported with the tools they need to be successful?

Tim: First and foremost, nonprofits must embrace our role as the place Americans come to solve problems and resolutely assert our role as advocates for the people and our communities. We often are on the front-line of vexing social challenges, giving us front-row seats to see the problems and the solutions. Who are we to hoard knowledge of solutions that could help our fellow neighbors? With the knowledge we hold and the clout we have (10% of the American workforce), we deserve a seat at policymaking tables. We need to proudly stand up, step forward, claim our space, and speak out for government to leverage its resources to solve problems at their source.

We need to tell the full story, not just of how many people were fed or acres preserved, but also the economic impact of the sector as a whole. For instance, CalNonprofits (the state association of nonprofits in California) published Causes Count about the economic clout of California’s nonprofits, and Donors Forum (the state association of nonprofits and grantmakers based in Illinois) released research on Social Return on Investment, showing the economic and social value of dollars invested in nonprofits.

As for being “fully” supported, that’s much more difficult. According to Nonprofit Finance Fund, last year – for the second year in a row – a majority of nonprofits didn’t have the resources to meet demand for their services. That’s going to be tough to turn around, especially as many nonprofits continue to be sliced by government budget cuts. Even as studies boast that individual giving is getting back to pre-Recession levels, that doesn’t make as much of a difference as most people think. Despite the focus on individual giving, it makes up only 9.3% of the sector’s overall revenue. Foundations are an even smaller percentage: 1.9%. Government grants and contracts make up a much larger portion – 32.3% – of the sector’s revenues. That’s why our focus in this area is so important.

Photo Credit: National Council of Nonprofits

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5 Myths The Nonprofit Sector Must Overcome

nonprofit mythsAlmost two years ago three nonprofit rating organizations launched the Overhead Myth campaign aimed at eradicating “the false conception that financial ratios are the sole indicator of nonprofit performance.” Call me an optimist, but I think it might be working. I see more nonprofit leaders and funders discussing the radical idea that overhead might not be a bad thing. We still have a long way to go, but perhaps there is progress.

The bad news, however, is that the Overhead Myth is only one of many (way too many) destructive nonprofit myths. So in this new year, let’s look at those additional myths that hold the nonprofit sector back.

As we all know, a myth is a story that everyone believes, but is actually not true. Here are the 5 most egregious myths I see in the nonprofit sector:

  1. Good Nonprofits Don’t Make a Profit
    For some reason it is unseemly for a nonprofit to have more money than they immediately need. The best a nonprofit should hope for is to break even, and if they do run a profit, they should not be fundraising. To the contrary, a nonprofit with operating reserves can invest in a more sustainable organization, conduct evaluations to make sure their solution is the best one, recruit a highly competent staff, and weather economic fluctuations. For a donor it is far better to invest in an organization with the people and systems necessary to effectively tackle a social problem than an organization that is barely getting by. The best nonprofits are those that create a financial model that allows them the money mix (revenue, capital, reserves) necessary to make the best decisions and invest where and when they must.

  2. There Are Too Many Nonprofits
    I’m so tired of the refrain (mostly by funders) that there are “too many” nonprofits. Does anyone complain about how many tech startups there are? This myth comes from the fact that the sector is undercapitalized which causes organizations to compete for scarce resources. So let’s fix that problem instead. To be sure, there are times when it makes sense to bring two nonprofits that address similar needs together in order to save costs, but that’s usually the exception not the rule. The process of merging two organizations is itself incredibly time-intensive and costly, and, honestly, rarely do funders invest the amount of resources required to ensure a successful merger. Every nonprofit should regularly assess their Theory of Change and how they fit into the external market place of social problems and competitors working on similar problems. If a nonprofit finds that they are no longer adding unique value to that marketplace, then they should reorganize, merge, or disband, whichever makes most strategic sense.

  3. Nonprofits, Unlike Businesses, Are Inefficient
    This myth takes many forms: “nonprofits are too slow,” “nonprofits should sell more products or services”, “nonprofits should run more like a startup,” and the list goes on. The underlying assumption is that the for-profit world is inherently smarter, more strategic, more nimble and more effective. But the truth is that all three sectors (business, government, and nonprofit) have their stars (like Apple), their screwups (like Lehman Brothers) and the multitude in between. Inefficiency in the nonprofit sector is merely a symptom of a larger problem, which is the persistent lack of adequate capital to fund enough of the right staff, technology, systems, evaluation, marketing required to address the intractable problems nonprofits are trying to solve. Let’s talk about that instead.

  4. Nonprofits Are Outside the Economy
    This is the myth that nonprofits are “nice to have” and make everyone feel good, but are not a critical component of our lives or our economic system. But the fact is that the nonprofit sector employs 10% of the U.S. workforce and accounts for 5% of GDP. And the number of nonprofits grew 25% from 2001-2011, while the number of businesses only grew by 0.5%. As government continues to slough off services to nonprofits, those numbers will only continue to grow.  The nonprofit sector is not tangential to the economy, but rather an instrumental part of it.

  5. Nonprofits Have No Role In Politics
    501(c) 3 organizations have long been told to stay out of politics. The myth is that charity is too noble to be mired in the mess of pushing for political change (Robert Egger has written extensively on this). But the fact is that simply providing services is no longer enough to solve the underlying problems. Nonprofits are increasingly recognizing that they can no longer sit by and watch their client load increase while disequilibrium grows. Nonprofits must (and already are) advocate for changes to the ineffective systems that produce the need for their existence.

Being mired in the demoralizing and debilitating cloak of these myths wears the nonprofit sector down. We must follow the Overhead Myth’s example and start uncovering the other myths that hold the sector back. Because the power of a myth is greatly diminished when we openly admit that the myth is only that — a myth.

Photo Credit: We Shall Overcome, Rowland Scherman, National Archives

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What Does the Future Hold For Nonprofits?

fortune tellerThe nonprofit sector and the philanthropy that funds it have been changing dramatically over the past several years, and there’s plenty more change to come. This month’s Social Velocity webinar, Embracing the Future of the Nonprofit Sector, will help nonprofit leaders and board members understand how the sector is changing and what they can do to keep up.

Here are some of the future trends facing the nonprofit sector that we’ll cover in this webinar:

  • More Demand for Outcomes
    There is a growing demand for nonprofits to 1) articulate what results they hope their work with achieve and 2) track whether those results are actually happening.
  • Decreasing Emphasis on Nonprofit “Overhead”
    More and more people are realizing that you can’t just invest in programs without the staff, infrastructure and fundraising to make those programs happen.
  • More Advocacy for the Sector
 as a Whole
    The nonprofit sector has long been a fractured grouping of organizations of various sizes, business models, and issue areas. But that tide is starting to turn. We are starting to see the sector organize, mobilize and build the confidence necessary to claim its rightful place.
  • Savvier Donors
    Because nonprofits are getting more savvy, donors are as well. In addition to an increasing demand for proof of outcomes, donors are starting to realize that in such a stark economic environment those nonprofits that don’t have adequate infrastructure simply will not survive, let alone be able to adequately address the social problem they were organized to solve.
  • Increased Efforts to Rate and Compare Nonprofits
    We are increasingly evaluating nonprofits based on the results they achieve, not on how they spend their money. And to do that a whole infrastructure for evaluating and rating nonprofits is emerging and will continue to evolve as we get smarter about focusing resources on the most effective nonprofits.

These are exciting times for the nonprofit sector. This webinar will help you understand and embrace these trends.

Embracing the Future of the Nonprofit Sector
A Social Velocity On Demand Webinar

Download Now

Photo Credit: Adolf de Meyer

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Can the Nonprofit Sector Stand Up for Itself?

There is something really interesting going on in the world of nonprofit advocacy. And I don’t mean advocacy for a specific cause. Rather, I’m talking about advocating for the nonprofit sector as a whole. Three new efforts underway in recent months are vying to be the voice of the nonprofit sector. And the firestorm brewing is interesting to watch.

Robert Egger kicked it off a year ago when he formed CForward an advocacy organization that champions the economic role of the nonprofit sector and supports political candidates who include the nonprofit sector in their plans to rebuild the economy. You can read my interview with Robert about why he launched CForward here. Robert’s video about the need to advocate for the nonprofit sector is below (or here if you are reading this in an email):

And then in the last couple of months there have been two similar movements to better advocate for the nonprofit sector. Dan Pallotta released a new book last month called Charity Case: How the Nonprofit Community Can Stand Up for Itself and Change the World where he announces the creation of his new entity, the Charity Defense Council, which is also aimed at advocating for the nonprofit sector, via five efforts:

  1. An “anti-defamation league” to respond to and rectify inaccurate reports about the sector in the media
  2. Big public advertising campaigns for the sector
  3. A “legal defense fund” to challenge unproductive laws against the sector
  4. Work to create a “National Civil Rights Act for Charity and Social Enterprise” to support the sector
  5. Grassroots organizing of the sector as a whole, including a national database of every nonprofit in the country

And then the third grand effort to advocate for the nonprofit sector comes from Independent Sector, the organization formed in 1980 to “advance the common good by leading, strengthening, and mobilizing the nonprofit and philanthropic community.” Their new report “Beyond the Cause,” which interviewed 100 nonprofit organizations, recommends the creation of a national organization (probably run by Independent Sector) to push a nonprofit agenda, costing $20 million over 4 years. For Independent Sector the key issues that such an entity would address are:

  1. Changes that could limit the organizations eligible for charity status
  2. Threats to charitable tax deductions for donors
  3. A need to clarify advocacy and lobbying rules for charities and private foundations
  4. Changes to Internal Revenue Service disclosure forms that could hamper nonprofit operations
  5. Burdensome paperwork and red tape involving government contracts with nonprofits
  6. Lack of government-financed research on the nonprofit world

While CForward seems to be largely supported in their work, both Pallotta’s and Independent Sector’s efforts are drawing fire. Phil Buchanan, president of the Center for Effective Philanthropy, writes a scathing review of Pallotta’s new book and advocacy effort and concludes that “Mr. Pallotta is selling is himself—as both the nonprofit world’s messiah and its advertising agency,” and suggests that people support CForward and Independent Sector instead of Pallotta’s Charity Defense Council.

Similarly, Pablo Eisenberg, senior fellow at the Georgetown Public Policy Institute, dislikes Independent Sector’s effort to coalesce the nonprofit sector arguing that “nonprofits will never share a broad consensus about which issues are most important. The best that nonprofits can accomplish is to strengthen their individual advocacy and lobbying activities and join with other organizations in coalitions that fight for specific policy changes.”

It is really a fascinating and multi-layered debate. I strongly agree that the nonprofit sector is often dismissed in the policies of the day. But if organizations like Independent Sector have been working to create a common voice for the sector for more than 30 years with little improvement, I’m not sure what will change. Especially if 3 separate entities are all singing different verses of the same tune. They will be competing for dollars, mind-share, and the ears of policy makers. But I am a huge advocate for fixing a broken sector, so let’s see how this all plays out.

What do you think? How do we get policy makers to recognize the importance and value of the nonprofit sector?

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