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organizational effectiveness

Putting Wealth to Work for Social Value Creation: An Interview with Jen Ratay

In this month’s Social Velocity interview, I’m talking with Jen Ratay. Jen is executive director of the Silicon Valley Social Venture Fund – SV2, a community of families and individuals who come together to learn about effective giving and impact investing while pooling their resources and skills to support promising social ventures. Prior to taking the helm of SV2, Jen served as program officer at the William and Flora Hewlett Foundation where she led its Organizational Effectiveness grantmaking program that helps grantees build high-performing organizations.

Nell: SV2 is a strategic partner of the Social Venture Partners network of affiliates across the country that fueled the development of the venture philanthropy model of making large investments of money and expertise to grow proven nonprofits. The venture philanthropy model is almost 20 years old now, where do you think it stands? What have you learned and where do you think venture philanthropy goes from here?

Jen: Twenty years ago in the heart of Silicon Valley, SV2’s founder Laura Arrillaga-Andreessen launched a team sport approach to grantmaking that pooled donor resources for investment in promising nonprofits. Laura and her peers went beyond pooling monetary donations and invested their time and professional skills to help high-potential nonprofits build strong organizations and scale their impact.

From its earliest days, SV2 focused on finding and funding innovative nonprofits poised for dramatic scale, creating a philanthropic version of venture capital. SV2’s giving approach, along with the broader Social Venture Partners network it helped inspire and now partners with, helped catalyze the global movement known as venture philanthropy.

Not unlike venture capitalists, venture philanthropists believe the success of a great idea is contingent on building a leadership team that can effectively execute against a compelling plan. Key elements of the venture philanthropy approach include offering larger and longer-term grants to support nonprofit growth and core operations, tying continued funding to outcomes and measurable results, and providing coaching and management assistance to nonprofit leaders.

As venture philanthropy has evolved over the years, we’ve learned a number of lessons.

First, venture philanthropy’s historical focus on investing in individual organizations, while important, has rarely been sufficient to drive major paradigm shifts or sustained systems-level change. Achieving transformative impact often requires strengthening the capacity of networks and social movements and engaging government and the business sectors in addition to scaling high-performing nonprofit organizations.

Second, we’ve learned how essential it is for nonprofit CEOs to not just be strong organizational managers but also highly-collaborative network leaders and movement builders, a different skillset altogether.

Additionally, venture philanthropy, which resonates with many Silicon Valley professionals, is not a perfect analog for investing in nonprofits. To be effective, donors must understand that nonprofits differ from for-profits in many meaningful ways including governance, funding flows, scaling challenges, organizational culture, and what it means to attain financial sustainability. It takes time to understand these complexities and execute well – whether as an individual donor or as part of a collaborative donor group like SV2.

Looking ahead, I’d be surprised if we don’t see continued rapid growth in venture philanthropy, as wealth transfers from one generation to the next and Millennials and other new philanthropists seek high-impact ways to put their wealth to work for social value creation. As part of this growth, the hands-on venture philanthropy model with its focus on experiential grantmaking and donor learning continues to be an attractive entry point for emerging philanthropists, whether in Silicon Valley, Seattle, Bangalore or Beijing.

Nell: The philosophy behind the venture philanthropy model is that we should scale proven solutions, but significant growth to nonprofit organizations is tricky because often those organizations lack basic capacity. When does scaling make sense and how can funders effectively support it?

Jen: Yes, scaling nonprofits – even those with proven program outcomes – can be tricky.

For early stage nonprofits, there’s often a capacity building Catch 22 – a nonprofit needs basic organizational capacity to be able to step back from the daily treadmill of client needs and service delivery to invest in strengthening the organization and laying a foundation for future growth.

Compounding this, nonprofits don’t currently work within a well-functioning social capital market that supports organizations through each stage of growth. While making a large impact does not necessarily require a large organizational budget, nonprofits do need a reasonable level of revenue to develop certain core capabilities. The majority of nonprofits also face what has been termed the “social capital chasm,” the huge gap between their current budget and the $10 million or more they would need to move toward full scale.

On top of these financing barriers, compensation for nonprofit employees typically lags behind – sometimes far behind — that offered by foundations and for-profits. There’s no equity for nonprofit founders or executives, which, in highly competitive labor markets like Silicon Valley, can make attracting and retaining top talent a challenge.

And don’t get me started on the nonprofit overhead problem – our sector’s wildly unhelpful myth that at least 85 percent of an organization’s income should go toward programs rather than core operations. This myth is not only illogical, but damaging, as it constrains organizational growth and impact that hinges on strategic investments in infrastructure, people, processes and capabilities.

Despite all this, candidates for nonprofit scaling do exist. Common across them, they have promising programs based on early evidence of impact and compelling business models. They have strong, connected boards of directors and leaders who are coachable, collaborative and brave. Perhaps because of these qualities, these organizations also have the ability to attract talent and new sources of funding over time in competitive human and social capital markets.

Funders can help by playing the higher risk role of “Big Bettor”. A funder willing to make a significant multi-year investment in a promising small or mid-sized nonprofit organization can help them prepare to cross that daunting social capital chasm. These funders clear the way for other funders, signaling an investment in the organization is worth the risk. Early Big Bettors who help a nonprofit prove its model make the waters safer for other grantmakers to jump in.

Nell: The SV2 model is a bit different than other Social Venture Partner models, how does geography play into this? Do you think Silicon Valley funders think about philanthropy and the nonprofit sector differently, and if so how?

Jen: I do think Silicon Valley funders tend to think somewhat differently about philanthropy and the nonprofit sector.

In my experience with Silicon Valley’s giving culture, it’s not uncommon for donors, particularly those coming from the technology sector, to prioritize clear, measurable social impact, innovative or disruptive products and services, tech-enabled platforms, and a lean startup management approach to social change efforts.

On the nonprofit side, we have a crisis in Silicon Valley.

Local community organizations are struggling amidst a perfect storm of increased demand for their services, exorbitant operating costs, and competition for staff talent in one of the tightest labor markets in the country.

Silicon Valley is ground zero for income inequality. Skyrocketing wealth, including 76,000 millionaires and billionaires who live in Santa Clara and San Mateo counties alone, is found alongside rapid displacement of vulnerable families. Even with the nearly $5 billion boom in philanthropy from 2008-2013, 30 percent of Silicon Valley residents require some form of private or public assistance to get by. One in three local kids aren’t sure where their next meal will come from.

SV2 Partners, Alexa Cortes Culwell and Heather McLeod Grant, recently authored a report, The Giving Code: Silicon Valley Nonprofits and Philanthropy, that is elevating an important discussion around the region’s prosperity paradox. This data-rich report shines a light on a sobering donor knowledge gap around acute local needs and understanding of the local nonprofit ecosystem. Much of Silicon Valley donors’ philanthropy flows out of the region.

Alexa and Heather’s research also found a two-way empathy gap between donors and nonprofits. The reality is that Silicon Valley donors and nonprofit professionals tend to run in different circles, and they often have very different life experiences.

The Silicon Valley prosperity paradox, knowledge and empathy gaps are adding urgency and ambition to SV2’s work.

Our mission is to unleash the resources and talents of Silicon Valley to support promising social ventures to achieve measurable impact. An increasingly important role for us is to nurture empathy within and across Silicon Valley. As part of this, we’re sparking tough conversations via experiential poverty simulations and workshops with Silicon Valley donors on topics such as redefining power and privilege in the funder-fundee relationship and philanthropy’s role in advancing equity.

SV2 differs from SVP Network affiliates in that SV2 expanded beyond grantmaking to nonprofits to also invest in mission-driven for-profit companies and provide our donors experiential learning in impact investing. I’m seeing emerging Silicon Valley donors using both grants and investment tools to drive social change, following in the footsteps of Silicon Valley philanthropic leaders like Pam and Pierre Omidyar and Jeff Skoll, one of the earliest SV2 Partners.

I’ve also observed a trend of Silicon Valley donors thinking hard and in a more sophisticated way about where exactly their money sleeps at night. Are donors’ financial assets invested in alignment with their core values and social impact priorities? If the answer is no, local donors I work with are increasingly motivated to change this.

Nell: Prior to running SV2 you ran the Hewlett Foundation’s Organizational Effectiveness program investing in the capacity of nonprofit organizations, so building strong nonprofits is obviously near and dear to your heart. What holds nonprofits and their funders back from creating stronger organizations and how do we get beyond that?

Jen: In my view, trust is the critical lubricant between funders and grantees on the path to building strong, sustainable nonprofit organizations.

Yet it can be hard – even scary – for nonprofit leaders and funders to have courageous, authentic dialogue amidst the very real funder-fundee power dynamics.

This was equally true when I was a grantmaker at the Hewlett Foundation as it is now that I’m on the other side of the table as a nonprofit leader responsible for raising SV2’s entire operating budget each year to make payroll and fund SV2’s learning programs and grantmaking.

When striving for authentic relationships, it helps to consider this: Does it feel like we as funders and grantees are accountable to each other? Or is the grantee solely accountable to a funder? When something goes wrong with a grantee organization, does a funder run away or dig in and engage more deeply? Do funders think to ask a grantee “Is this an effective use of your time?” And respect it when the answer is no?

Whether in Silicon Valley or elsewhere, funders can help build strong organizations by making certain to keep their net grant high — that is, the net actual value of the grant to a nonprofit after subtracting out the costs to the nonprofit of applying for and reporting on the grant.

I’d also encourage funders of all stripes to consider doubling down versus abandoning organizations during leadership transitions. Leadership transitions are inevitable milestones that all organizations face, and are a high-stakes and often fragile time for nonprofits. These transitions can also be a time of revitalization and great opportunity for a nonprofit to evolve toward its strongest and highest-impact future.

Photo Credit: SV2

 

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Nonprofit Capacity Building Works: An Interview with Kathy Reich

In this month’s Social Velocity interview, I’m talking with Kathy Reich. Kathy leads the Ford Foundation’s BUILD initiative both in the United States and in 10 global regions. BUILD is an essential part of the foundation’s strategy to reduce inequality, a strategy arising from the conviction that healthy civil society organizations are essential to driving and sustaining just, inclusive societies. To that end, Kathy guides Ford’s efforts to implement sector-leading approaches to supporting the vitality and effectiveness of institutions and networks that serve as pillars of broader social movements.

Before joining Ford in 2016, Kathy was director of organizational effectiveness and philanthropy at the David and Lucile Packard Foundation, where she led a cross-cutting program to help grantees around the world strengthen their strategy, leadership and impact.

Kathy has long been a friend of the Social Velocity blog. You can read my interview with Kathy when she was at the Packard Foundation here and a guest blog post she wrote for the blog here.

You can also read interviews with other social changemakers here.

Nell:  You recently moved from the Packard Foundation to the Ford Foundation in order to launch their BUILD initiative, which is all about strengthening organizations. What are your goals with this new initiative and what successes have you seen so far? And what are you finding in terms of the areas where nonprofits need most help?

Kathy: The Ford Foundation has two big goals in mind for BUILD. First, we want to foster a measurably stronger, more powerful set of civil society organizations and networks working to address inequality around the world. Second, we aim to build understanding within the Ford Foundation, and ultimately throughout the field of philanthropy, about how strengthening key institutions can advance social justice.

The foundation has committed $1 billion over five years to BUILD because we believe that the fight against inequality needs resilient, durable, and fortified civil society institutions. Individuals and ideas also are critical, but the key role of institutions as drivers of sustained social change is a core, and sometimes overlooked, aspect of social justice work.

Each of the BUILD grantee organizations and networks will receive five years of support, at levels higher than what they have historically received from the Ford Foundation. Much of this support will be as flexible as we can legally make it; most grants will include generous general support. The remainder of each BUILD grant will provide support for nonprofit organizations and networks to strengthen their strategies, leadership, management, and finances. Each BUILD grantee will develop and then implement its own institutional strengthening plan. Although Ford Foundation staff will consult on drafts of these plans, the grantee will be “in the driver’s seat” in determining their institutional strengthening priorities and how best to address them.

So far we’ve made about 90 BUILD grants, and honestly it’s a bit early to say how well they are working. We do know where organizations are planning to spend the money. The vast majority of BUILD grantees, 79 percent, are choosing to strengthen their core operations, investing in areas such as financial management, fundraising, communications, evaluation, and HR. About two-thirds also are investing in strengthening capacities critical to social justice work, such as legal, research, network building, and advocacy. Close to half are investing in strengthening their strategic clarity and coherence, 36 percent are investing in leadership development and governance, and 32 percent are choosing to deepen their organizational commitments to diversity, equity, and inclusion.

It’s important to note that BUILD is not the Ford Foundation’s only investment in strengthening nonprofit institutions. BUILD is part of FordForward, the Ford Foundation’s multi-pronged effort to make philanthropy part of the solution to inequality in a deep and lasting sense. In addition to BUILD, two other aspects of FordForward focus on strengthening nonprofits. The foundation is giving more general support grants across all program areas, with a goal of making general support our default type of grant whenever possible. We also are increasing overhead rates on project grants to a minimum of 20 percent, to more adequately address the indirect costs of executing projects and programs.

Nell: This is a pretty innovative approach to capacity building, how do you plan to share what you learn with other funders and with the sector overall?

Kathy: We’re planning a robust evaluation and learning strategy, although we’re really just getting started. Our hope is to share some early findings by year’s end. We’ll be focusing on three sets of key questions throughout the five-year initiative:

  • Do BUILD grants work? Do the organizations and networks that receive this funding become stronger and more durable over time? And if so, what if any impact does that have on the organization’s effectiveness?
  • If the BUILD approach works, what about it works? Is it the general operating support, or a specific kind of organizational strengthening, or something else?
  • Have we changed the way we do business at Ford, moving away from one-year project grants in favor of larger, more flexible grants?

Along with our evaluation and learning plan, we’re also developing a communications strategy to share what we learn with the field and engage in dialogue with others. We’ll be publishing evaluation results, speaking at conferences, and making active use of social media.

Nell: Both the Ford Foundation and the Packard Foundation are rare funders in that they are very committed to creating strong nonprofit organizations through heavy investment in capacity building. Do you think philanthropic and government funders are starting to follow your lead? Or what will it take to make that happen?

Kathy: Well, we certainly hope they are! It’s important to acknowledge that capacity building grantmaking is not new; in launching BUILD, we’ve learned from and appreciate the work of leaders in this field like the David and Lucile Packard Foundation, as well as the William and Flora Hewlett Foundation and the Evelyn and Walter Haas Jr. Foundation.

Over time, we hope that the ranks of capacity building funders will grow. We hope that BUILD will influence other donors by contributing to the evidence base that nonprofit capacity building works—that stronger, more durable, and more resilient organizations and networks are more effective at achieving their missions.

We also hope to contribute to the evidence base about what kinds of capacity building work best for organizations and networks of different types and sizes, working on different issues in diverse geographies. That’s a tall order, but one of the great things about being a global funder and being able to invest significant resources in BUILD is that we’re able to try this grantmaking approach with a broad range of institutions.

Nell: The Ford Foundation made a very public move two years ago to focus their efforts on fighting inequality. But that goal has arguably become harder given the political winds. How does a foundation like Ford navigate achievement of their desired impact in a potentially more difficult external environment?

Kathy: The Ford Foundation has worked in the U.S. and around the world for more than 70 years, and we’ve seen a lot of upheaval during that time. We’re acutely aware of the challenges facing our work, but we’re moving ahead with optimism and with what my boss Darren Walker calls “radical hope.”

BUILD is a big part of that hope. I believe strongly that in uncertain times, a BUILD approach to grantmaking is one of the smartest choices a foundation can make. By giving our grantees multi-year general operating support, we are giving them the resources and the flexibility to pivot their work quickly in the face of new realities. By also giving them thoughtful and flexible institutional strengthening support, we are enabling them to invest in their own leadership, strategy, management and operations at a time when they have to be at the top of their games.

Photo Credit: Ford Foundation

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Investing in Stronger Nonprofits: An Interview with Linda Baker

linda-baker-524x643In this month’s Social Velocity interview, I’m talking with Linda Baker. Linda is the Director of Organizational Effectiveness at the David and Lucile Packard Foundation.

In this role, she leads the Organizational Effectiveness (OE) team as they invest in grantees to build their core strengths and maximize their impact. Through these investments, the OE team aims to build healthier, better connected organizations and networks ready to bring about greater change in the areas the foundation cares most about. The OE team works in collaboration with the four program grantmaking areas of the foundation, and also engages with the broader field on capacity building and good philanthropic practice.

Linda has also served the foundation as program officer in the Local Grantmaking and Children, Families and Communities programs, and as an analyst and associate editor in the Center for the Future of Children.

If you want to read interviews with other social changemakers in the Social Velocity interview series go here.

Nell: You recently took over leadership of the Packard Foundation’s Organizational Effectiveness program. What are your plans for the future of this program? Where do you see opportunities for change or growth in the work Packard does to build stronger nonprofits?

Linda: It is an incredible honor to lead the Organizational Effectiveness (OE) team. I’m proud to be a part of a foundation that actively embraces a commitment to effectiveness by helping our nonprofits partners strengthen their fundamentals so they can better achieve their missions.

The best capacity-building grantmaking happens in open and authentic conversation with nonprofits. At the Packard Foundation, this means that changes in OE funding are driven through continuous listening to our nonprofit colleagues about where they are strong and where they would like to grow – as leaders, organizations, and networks. While many of the funding requests remain similar to the past (like support for strategic planning and fund development planning), a few topics have recently become more prevalent. For example, as nonprofits and leaders focus on movement building and their ability to be flexible and strategic in an ever-changing environment, we are hearing more requests for funding on leadership development and diversity, equity and inclusion. We have also seen an increase in interest in projects that focus on nonprofits better understanding their financial situation and increasing their financial resilience.

I’m also excited about our participation in the Fund for Shared Insight, a funder collaborative that supports nonprofits in seeking systematic and benchmarkable feedback from the people they seek to help. This collaborative believes that foundations will be more effective and make an even bigger difference in the world if we are more open—if we share what we are learning and are open to what others want to share with us, including our nonprofit partners and the people we seek to help. It is early days, but the possibilities are promising.

Nell: The Packard Foundation is way ahead of the pack in terms of actively investing in stronger nonprofit organizations. What do you think holds other foundations back from providing capacity building support (like planning, leadership development, evaluation, etc.)? And what can be done to get more foundations funding in these areas?

Linda: This work is incredibly important. People are the engine of change, and they need appropriate training, tools and support to get their work done. The good news is that momentum seems to be building. Last year we talked with twenty foundations who reached out to us on this work—and we are always happy to provide insight to our peers in this way. I’m also encouraged by the standing-room-only crowds at Grantmakers for Effective Organizations (GEO) conferences, which often focus directly on the importance of capacity building.

An increasing number of our peers have embraced this approach to grantmaking. Both the Hewlett Foundation and the Meyer Foundation have OE programs similar to ours. The Ford Foundation’s BUILD program works to support institutional strengthening in a big way. Many others support the capacity of leaders – we particularly admire the work of the Haas Jr. Fund in this area.

JPMorgan Chase and the Aspen Institute recently issued a report discussing roles and opportunities for business in nonprofit capacity building. And the 2016 GEO publication on capacity building is full of examples of foundations providing capacity building support to nonprofit partners.

For any foundations on the fence, we will soon be releasing our 2016 Grantee Perception Report data that shows that our grantees who receive OE support rate the foundation as more responsive and a better partner. Data from our evaluation last year shows that one to two years after their OE support ended, nearly 80% of grantees reported significant increases in capacity and 90% reported continued investments in capacity building a year after grant completion. We are confident that these investments build lasting change.

Another bright spot is the feedback work of the Fund for Shared Insight that I mentioned earlier, which is investing in stronger nonprofit organizations through experimenting with investments in feedback loops. Shared Insight provides grants to nonprofit organizations to encourage and incorporate feedback from the people we seek to help; understand the connection between feedback and better results; foster more openness between and among foundations and grantees; and share what we learn.

Nell: You have been actively involved in the Real Costs effort to get funders and nonprofits to understand and articulate the full costs (program, operating, working capital, fixed assets, reserves, debt) of the work nonprofits do. How do you see that movement progressing? Are minds changing? Are we, or when will we, reach a critical mass of nonprofits and funders embracing full costs?

Linda: As you and your readers know, this question is fundamentally about the relationship between funders and nonprofits. Nonprofits that have trusting relationships with their funders and an understanding of what it takes to run their organization can talk with funders about what it truly costs to deliver outcomes over the long term. In response, funders with a nuanced understanding of a nonprofit’s financial requirements will be able to structure grants more effectively to achieve those outcomes.

The move for funders to understand the financial resources nonprofits require for impact is gaining steam. I’ve been encouraged by the level of interest and conversation in California alone, and I know conversations are happening nationally too. The Real Cost Project in California is gearing up for the next phase, and we are pleased to be supporting that work and to be thinking about these ideas at the Packard Foundation. I am hopeful that California funders will continue to embrace the conversation and consider how funders can strip away unnecessary processes and promote transparent dialogue about how to best support the work of nonprofits.

One part of the challenge is that we are going up against misguided notions that good nonprofits should not invest in their infrastructure or their people. These ideas are embedded in our culture, and it takes time to change perspectives. If we can get a critical mass of foundations to join the conversation and consider what they can do to improve, and ensure that nonprofits have the tools to understand the financial requirements needed to get to outcomes, that will be progress.

Nell: You and your team at Packard OE have created a great Organizational Effectiveness Knowledge Center website with a deep set of resources for building stronger nonprofit organizations. Foundations are sometimes hesitant to offer resources (beyond money) to nonprofits, but you have made a conscious choice to move in this direction. Why and what could other foundations learn from your experiences here?

Linda: Thank you! We created the Knowledge Center to share our perspective and resources about improving organizational and network effectiveness with the goal of helping nonprofits, our consulting partners, and other funders make their work even stronger. The Knowledge Center is a place for us to share our perspective on a number of topics from network development to leadership and coaching to evaluation, and discuss the latest in the field from conferences and publications.

In addition to providing grantmaking support, we believe that sharing this information will increase our impact on the nonprofit sector and advance the capacity building field. Change does not happen in silos, and we don’t want our nonprofit partners to spend time reinventing the wheel. So, we decided to create a space to exchange what we’re learning and the resources available to help support organizations in this work.

We hope that the Knowledge Center will be a place to exchange learning and reflections, and we encourage users to engage with us by commenting on your experience with these topics or submitting resources that you would like us to consider sharing. And, while you’re there, leave us a comment to let us know what you think of the Knowledge Center and how we can improve.

Photo Credit: David and Lucile Packard Foundation

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10 Great Social Innovation Reads: June 2014

social innovationI have to admit, June was a busy month for me with lots of travel and events, so I was less tuned into social media. Thus, I am offering a far from definitive list of the best reads from the month. But here goes…

New data on charitable giving and social fundraising, and a new effort to create a system to classify philanthropic activity made for some exciting developments. And because it wouldn’t be a great month in the world of social innovation without lots of debate, there is also plenty of criticism of philanthropists, philanthropic consultants, and business theory. It all made for a great month in the world of social innovation.

Below are my 10 favorite reads from the last month. But this month, more than ever, please add what I missed to the comments. And if you want to see a longer list of great reads, follow me on TwitterFacebookLinkedIn or Google+.

And you can see past months’ 10 Great Reads lists here.

  1. Good news for charitable giving, it looks like total US donations will go back to their 2007 peak of $350 billion sooner than originally thought. The post-recession rebound will happen sometime this year or early next, according to new data.

  2. And adding to the data about giving, the Nonprofit Tech for Good blog shares some great statistics about fundraising, social media and mobile.

  3. The Foundation Center has embarked on a bold project to create a robust classification system for philanthropy. They have created a draft “Philanthropy Classification System,” which is a “structure for describing the work of philanthropy consisting of subjects, population groups, transaction types, and approaches (support strategies)” and opened it to public comment. Their goal is to “unleash the ability of foundations to work far more efficiently with each other and with other sectors to achieve the kind of scale that can drive real change in the world.” It’s fascinating. Take a look and give them your thoughts.

  4. The Packard Foundation is one of the great examples of foundations that understand and support nonprofit organization building. They have created a great wiki on “Organizational Effectiveness” with resources for other grantmakers interested in supporting nonprofit organization building. And my favorite resource on the list is the article from Linda Baker, a Packard Foundation program officer, urging foundations to “be the duct tape” for nonprofit grantees. Ah, if only more philanthropists thought this way!

  5. But not all philanthropy news is good news. A report on the Walton family shows that the second generation heirs to the Walmart fortune have given almost none of their personal fortune to philanthropy, despite being the richest family in America. The report and the Forbes article about it raise some interesting questions about wealth and the obligation of philanthropy.

  6. One of the newest and most talked about ways to channel money to social change is the social impact bond. But what are we learning as the pay for success movement gains steam? Gordon Berlin from MRDC shares some insights from the New York City social impact bond and demonstrates how incredibly complicated this new financing tool really is. As he says, “The future of the Pay for Success movement rests on building on the lessons learned from the first efforts to implement these new and potentially transformative financing structures.” So we need to get beyond the hype and understand if this new financial vehicle really can work.

  7. And speaking of questioning hype, Jill Lepore, writing in The New Yorker, pens a scathing critique of Clayton Christensen’s Innovator’s Dilemma. She illuminates the danger of an omnipotent theory that allows no analysis or critique. She takes Christensen’s ubiquitous business theory of “disruptive innovation” to task, arguing, “Disruptive innovation is a theory about why businesses fail. It’s not more than that. It doesn’t explain change. It’s not a law of nature. It’s an artifact of history, an idea, forged in time; it’s the manufacture of a moment of upsetting and edgy uncertainty. Transfixed by change, it’s blind to continuity. It makes a very poor prophet.”

  8. Another writer peeling away the curtain on theory that holds no weight, Phil Buchanan admonishes consulting firm FSG and the Stanford Social Innovation Review for 1) not recognizing sooner that urging foundations to create individual institutional strategies around their unique positioning and activities is flawed, and 2) failing to acknowledge that many other thought leaders have been discussing that flawed strategy for years.

  9. As an introvert myself, I loved Frank Bruni’s piece in The New York Times urging politicians to take more time alone to reflect before barreling forward. As he puts it, “Some of the boldest strokes of lightning happen in isolation, where all the competing advice can be processed, where the meaningful strands come together and the debris falls away.” Amen!

  10. If you want a visual that will blow your mind, check out Ezra Klein and Susannah Locke’s 40 Maps that Explain Food in America. Access to food is a core social challenge, and these maps lay it all bare.

Photo Credit: Spirit-Fire

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Weaving Nonprofit Capacity Building Into Philanthropy: An Interview with Kathy Reich

Kathy ReichIn today’s Social Velocity interview, I’m talking with Kathy Reich, Director of Organizational Effectiveness Grantmaking at the David and Lucile Packard Foundation. Kathy leads a cross-cutting program to help 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. She has been with the Foundation since 2001, and previously held positions in the Organizational Effectiveness and Children, Families, and Communities programs. Prior to joining the Foundation, she worked in a non-profit, on Capitol Hill, and in state and local government in California.

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

Nell: There is often a chicken or the egg scenario in the nonprofit sector where nonprofit leaders are hesitant to tell funders their real struggles and needs for fear of appearing unworthy of investment, and philanthropists are hesitant to stick their noses in the business of the nonprofits they fund, so organizational capacity needs are not openly discussed or addressed. How does the Packard Foundation uncover the organizational needs of your grantees and what would you advise other funders to do in order to have more open and transformative discussions with their grantees?

Kathy: Well, I try not to tell other people—funders or nonprofit leaders—what to do! But I can tell you what works for us at the Packard Foundation. First, we encourage each of our program officers to learn about the organizational strengths and challenges of their grantees, and to weave capacity building into grantmaking strategies. That’s a big part of the work of the Organizational Effectiveness team here at the Packard Foundation.

But we also have a separate Organizational Effectiveness (OE) program, staffed by its own program officers and with its own budget, to help grantee partners strengthen their fundamentals so they can focus on achieving their missions. Once a non-profit gets a grant from any Packard Foundation program, they’re also eligible to apply for an OE grant. We support a wide range of projects to promote individual and team leadership, organizational planning and development, and the development of healthy networks.

The application process is pretty simple and straightforward. It starts with a letter of inquiry where our grantee partners have to answer just a handful of questions: What are the objectives of your project and what do you expect to accomplish? How will this project support your organization in meeting its goals, and over the long term, enhancing its effectiveness? What special challenges or changes have caused your organization or network to focus on management and organizational issues at this time? How do you propose to use Foundation funds? Who from your organization’s staff and board has made the commitment to lead the project?

Here’s the most important part of our approach: We work very hard to be responsive to the needs of our partners. We never say, “We think you need a strategic plan, and that’s the only thing we’re going to fund.” We listen to the grantee’s assessment of their strengths and challenges, and serve in a coaching role to help them develop the OE project that best meets their needs.

Folks can read more about the Organizational Effectiveness program on our website, or on our wiki page, where we share resources, evaluations of the program, and other information.

Nell: Leadership development is something that is fairly prevalent in the for-profit sector – it’s understood that good leaders need coaching and support along the way – but leadership development is rarely supported in the nonprofit sector. Why do you think there is that disparity and what do we do to change it?

Kathy: I think you’re right — the lack of investment in leadership development and talent management in the nonprofit sector is a significant issue. We don’t have any shortage of talented, passionate people entering this sector. But I believe that we lose too many of them before they rise to senior-level leadership positions.

Some of that brain drain happens for financial reasons: people are staggering under the weight of educational debt, or they’re lured away by more lucrative career prospects in the private sector. But much of the loss of talent is preventable. People leave because they feel burnt out and undervalued. They can’t forge career pathways and can’t access meaningful professional development. They sometimes have lousy managers. Their jobs don’t offer opportunities for promotion, or sufficient work/life/family balance.

That is all stuff that the nonprofit sector can fix. As a sector, we can even tackle some of the thornier issues around compensation and educational debt. And funders can lead the way. But philanthropy is not doing that. Rusty Stahl at the Talent Philanthropy Project, a Packard Foundation grantee partner, points out that between 1992 and 2011 foundations spent, on average, about 1% of grant dollars on nonprofit talent development. I’m not sure why there’s been a lack of investment in leadership development in the nonprofit sector over time — especially when virtually everyone seems to agree that effective leadership is one of the keys to lasting social change.

I do see some glimmers of hope. In the OE program last year, 21 of the 86 grants we awarded focused on leadership development, including projects that invested in interventions like executive coaching, board development, succession planning, and executive transition at key grantee organizations. And a number of efforts are underway throughout the Foundation to support existing and/or emerging leaders in the issue areas where we work. Clearly, though, much more is needed.

Nell: There has been a concerted effort in the past year to overcome the “Overhead Myth,” the idea that nonprofits should spend as little as possible on “overhead” (administrative and fundraising) expenses. But there is still much work to do before that idea becomes mainstream in the philanthropic sector. How do we change funder (and nonprofit leader) thinking about overhead?

Kathy: I’m a fan of so many leaders and organizations who have spoken out on this issue, including Packard Foundation grantee partners like Guidestar, California Association of Nonprofits, and Grantmakers for Effective Organizations. They’ve done a great job of making a research-based case that arbitrary, low overhead rates don’t capture the true cost of delivering non-profit programs and services. I think that there are a couple of common-sense things that funders and nonprofit leaders can do to keep this debate at the forefront of people’s minds.

First, prepare real budgets. If the funder tells you, “You can only have $25,000 for this project,” that’s fine. That’s their budget. But submit a budget for the full cost of the project, including your personnel, facilities, and other costs of doing business. Let them see what their funding covers, and what it does not. Be honest if you do not know where the rest of the money will come from. At least it will spark a good conversation with your funder about the gap, and about your real costs. Most funders do not penalize honesty. If the funder does penalize honesty, their money probably is not worth your trouble.

Second, define what goes into your overhead rate, and stick with it. Many funders have a “rule” about acceptable overhead; 15 percent, 10 percent, even 5 percent. But most do not have a standard definition for what’s included in that rate. You should have one. Define it, calculate it, and then defend it.

Nell: Philanthropy is a very personal and values-driven thing, but at the same time we need to funnel more philanthropic money towards the most effective solutions. Do you think it’s possible to get more philanthropists to give based on results rather than interests and values, or can we somehow better combine the two drives?

Kathy: I think combining values and a focus on results is not just desirable — it’s essential. None of us goes into social change work with a completely cool, dispassionate lens. We go in with passion. We want to make a difference. We bring our whole selves to this work. That’s what makes it wonderful, and that’s why we stay in it.

At the same time, resources are limited — money, people, time — and we have to be sure they’re being well-spent. Ideally, we want to make sure those resources are being better-spent than they could be on other endeavors.

At the Packard Foundation, we try to craft a balance. Our mission—to improve the lives of children, families, and communities, and to restore and protect our planet—derives directly from the values and beliefs of our founders. The way we go about that work is deeply rooted in five core values, which also come from our founding family — integrity, respect for all people, belief in individual leadership, commitment to effectiveness, and the capacity to think big. But we also are committed to scientific rigor, evaluation, and most importantly, learning. We care not only about what grant funds accomplish, but also about how we do that grantmaking, engage with grantees and improve over time. You can read about some of what we’ve accomplished over the years on our new digital timeline.

Photo Credit: Packard Foundation

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