In today’s Social Velocity interview I’m very excited to be talking with the co-founders and editors of the new History of Philanthropy blog: Benjamin Soskis, Stanley Katz, and Maribel Morey.
The HistPhil blog launched this past June and focuses on how history can shed light on current philanthropic issues and practice.
Because how can we hope to create social change without understanding the results of efforts that came before us?
Ben, Stanley, and Maribel are all academics with specialities related to history and philanthropy. Stanley is on faculty at Princeton’s Woodrow Wilson School and has also taught at Harvard, Wisconsin and Chicago. Benjamin is a Fellow at the Center for Nonprofit Management, Philanthropy and Policy at George Mason University and a consultant for the history of philanthropy program of the Open Philanthropy Project. And Maribel is a professor of history at Clemson University and is currently writing a book, From Tuskegee to Myrdal, which describes how and why white Americans in big philanthropy transformed from proponents of segregated education to advocates of racial equality.
Nell: Stanley, you write, in your inaugural post for the HistPhil blog, about the tendency of philanthropy to get swept up in “new” approaches that actually aren’t all that new. Is there really anything new in philanthropy right now? Are there any structural or cultural developments or approaches in philanthropy that are significantly different than in the past?
Stanley: It is hard to separate rhetoric from reality in the current environment of philanthropic hype. From my perspective, the current boasting that all is new in philanthropy (see the recent New York Times “Giving” section), is pretty uninformed (naïve?).
One of the most common claims, repeated frequently in the New York Times piece, is that philanthropists are no longer simply trying to alleviate the “symptoms” of distress, but in fact are aiming to remove the underlying causes of social and physical problems. This attempts to distinguish what the large foundations are doing from what the traditional foundations did in the 20th century (and of course no one is making this claim more loudly than Judith Rodin of the “new” Rockefeller Foundation.)
But the emphasis on the elimination of problems by identifying their root causes was the innovative claim of the founders of the first American foundations, best articulated by Andrew Carnegie and John D. Rockefeller, Sr. So from this point of view there is not much new in the current aims of big philanthropy.
But what is actually new, and there is a lot that is new, is the determined focus on short-term, measurable, results — this is the mantra of the genuinely new “strategic” philanthropy. The older foundations of course aimed to be effective, but they defined effectiveness much more loosely and measured it less precisely than current large foundations. This is an enormousdly important attribute of the current mega-foundations, and all the other foundations that have jumped on the “strategic philanthropy” bandwagon.
The current foundation rhetoric also makes use of a wide range of business metaphors, none more important than the notion that philanthropy is best thought of as “investment” in change, and frequently characterized, using the language of hedge funds, as “bets” on successfully producing change. Much of the current language of philanthropy is drawn from venture capital activity, and the new philanthropy can also be thought of as “venture” philanthropy. This is a new attitude.
The original philanthropists knew they were adapting the then modern techniques of business organization and management to their grantmaking, but they thought of philanthropy as different from business. That distinction seems to have eluded much of the current generation of philanthropists.
But I need to say that I am a little uncomfortable with these large generalizations, since not all current philanthropists speak or act as I have just suggested — nor did the earliest generation of philanthropists. But there is something new in the philanthropic air. The question is whether that air is as salubrious as its current advocates claim.
Nell: Stanley, philanthropy got its modern day start in the missionary work of Europeans and Americans in third world countries. What, if any, parallels do you see in philanthropic work in developing parts of the world today?
Stanley: Here the important fact is that the Rockefellers (John D. Sr. and Jr.) originally intended the Rockefeller Foundation to be a missionary foundation, operating mostly (possibly entirely) in China. For a variety of reasons, in particular the influence of their advisor Frederick T. Gates (a minister who had turned in a secular direction), they abandoned the missionary focus in favor of a secular focus. Their work in China, and especially the founding and support of the Peking Union Medical School, continued to have a missionary flavor, but their work in Africa and other tropical areas was more early medical philanthropy than missionary philanthropy. They turned to the eradication of tropical diseases both because they were attractive to current medical research capacity, and because it was politically safe to engage in medical experimentation abroad — a lesson that Big Pharma learned from them later in the century.
But the emphasis of the large foundations, beginning in the 1960s, with grant-making in the underdeveloped world, was quite different, and unrelated to any neo-missionary instinct. Many of the large American foundations at mid-century thought they could assist the process of decolonization and local self-determination by supporting a wide range of development activities in what was then called the Third World. They later came to be attacked by neo-Marxists for allegedly supporting US and Western imperialism in the developing world, but that is a big subject all in itself.
Ironically, there is now a burgeoning effort by American evangelical business people to invest in private development projects, especially in East Africa, and this is a throw-back of sorts to much earlier notions of philanthropic support of development. But it needs to be contrasted with the massive Gates Foundation public health efforts in Africa and elsewhere — an effort purely “strategic” in its inspiration.
Nell: Ben, historically, philanthropic giving has not grown above 2% of US GDP, why do you think that is and do you think there is any hope of changing that?
Ben: The answer to the 2% conundrum is the holy grail of the nonprofit sector, and I don’t pretend to have any certain answer about it myself. It’s worth noting, though, that 2% of GDP is still pretty good relative to other developed countries (in fact, by many measures, it’s one of the best rates). But it’s still confounding why it hasn’t budged for more than four decades. There’s obviously a tangle of causal factors at play, and I’ll just offer a few possibilities that have occurred to me in the course of my research, without making any claims that this is an exhaustive list.
Given the persistence of that rate, it makes sense to look for some equally persistent characteristic of the American nonprofit sector that has also remained unchanged over that long timespan. A recent article in the Chronicle of Philanthropy can give us a clue to a possible candidate. As part of their Philanthropy 400 ranking of the nation’s largest nonprofits, they note how little the list has changed from when it was first tallied in 1991 (especially when compared with the churning of the list of the largest for-profit companies). In part by dint of habit, and in part because of the power of the institution’s “brands,” Americans have tended to stick with a handful of large charities—through scandals, evolving social needs and changing fads.
As I pointed out to the Chronicle reporter (though my observations got a bit lost in translation; Josephine Shaw Lowell, a founder of the American charity organization movement, wouldn’t have suggested that bigger is better, only that a degree of centralization in charity administration was necessary), we can trace this development back to the turn of the last century, when charity reformers instituted a process of centralized, bureaucratized and professionalized giving. That is, from the late 19th century-scientific charity movement onward, individuals were warned that their disparate giving was too often haphazard, scattered, wasteful, and overlapping, and so were encouraged to hand over the administration of charitable resources to a centralized institution. The community chests and the United Way came out of this impulse; Catholic Charities succumbed to it as well.
It’s very possible that the development toward more centralization and professional administration has bolstered American giving by providing citizens with more confidence and by making decisions about where to give easier. But I think we also have to wonder whether it imposed a sort of cap as well, since it might have removed some of the immediacy, intimacy and individuality from the charitable exchange that could push individuals to give beyond an initial comfort point (which very well might be around 2%).
The Chronicle suggests that we might see more disruption in the list in the coming years, or at least that some of the big names, like the United Way, might be ceding ground. If that is the case, and if some of the space they occupied is filled with smaller upstarts, it’s possible we might see some movement beyond 2%.
Another possible factor worth considering for the persistence of the 2% rate is the declining role of religion in determining charitable allocations. I don’t only mean that the percentage of total giving going to religious institutions has been steadily declining over the last few decades. But also that giving itself has, for many Americans, become an increasingly secular activity.
Again, we can trace this back to the early 20th century, when charity reformers sought to “secularize” giving by stripping it of any sectarian taint and endowing it with a degree of rationality; the indiscriminate giver in their rhetoric was often an easily-duped priest. But it is also possible that the religious impulse to give is more easily able to push past the equilibrium of 2% and to ask individuals to make even deeper financial commitments.
Yet another factor preventing giving from crossing that 2% barrier might be media coverage of nonprofits. As I quipped in an article on the subject in the Chronicle last March, borrowing from Woody Allen, the coverage is generally pretty weak—and the portions are too small. That is, the media grants the sector relatively little attention, and when it does, it seems to suffer from what New York Times reporter David Clay Johnson has called a “Madonna-whore” complex: alternating between feel-good human interest stories and stories focused on nonprofit abuse. But stories that chronicle the difficult and important work many nonprofits are doing on a daily basis—they just don’t have the journalistic juice to make it into print. As the former nonprofit beat reporter for The New York Times, Stephanie Strom, told me, “A nonprofit just doing good isn’t news because everyone knows nonprofits are supposed to do good.” This might be changing, with a number of important online journalistic ventures out there, but I think there is a deep deficit in public knowledge about what nonprofits are doing—and this deficit could sap the public’s willingness to give more.
You also have to combine this media deficiency with the general conceptual muddle that has emerged with the blurring of private and public lines of funding social welfare provision in the last half century. Not only do American givers and tax-payers have to contend with a federated system (to say nothing of international structures of governance), in which various jurisdictions take up differing responsibilities for addressing social ills and needs. But we also inhabit what political scientist Jacob Hacker has termed a “divided welfare state,” in which public and private lines of responsibility for social welfare are increasingly blurred. Obviously, there’s opportunity in this blurring. But as scholars such as Lester Salamon have pointed out, it also can represent a sort of existential threat to the nonprofit sector’s distinctive identity and mission, which in turn might be restricting American’s willingness to dig in and give more.
Finally, it’s worth pointing out another powerful strain in the American charitable tradition—the devaluation of monetary gifts themselves in favor of the “helping hand.” At the turn of the last century, even while scientific charity reformers were attempting to rationalize giving, they were also trying to preserve traditions of neighborly assistance. The fact that such assistance could not be easily quantified and rationally appraised was regarded as a mark of its worth. And in many senses, it was considered a higher form of giving than monetary contributions. That idea is still with us today; and it’s possible that by focusing too much on the 2% rate, we miss other forms of voluntarism that have had more variability and elasticity over the years.
Nell: Maribel, during the Gilded Age great wealth concentrated among a few brought large philanthropy (Carnegie, Rockefeller, etc.) but also contributed to a subsequent progressive period (as the pendulum swung back against that excessive wealth). Do you see parallels between the Gilded Age and today, and do you think we are heading for a more progressive period? And what role do you think philanthropy will or won’t play in that?
Maribel: Indeed, many late nineteenth- and early-twentieth century Americans looked at Andrew Carnegie’s and John D. Rockefeller’s wealth (and even their philanthropy) with some suspicion.
Reflecting these Americans’ anxieties, for example, the United States Congressional Commission on Industrial Relations called John D. Rockefeller Sr. and his son in 1915 to defend the independence of the Rockefeller Foundation. As many scholars have noted, the Rockefellers had established a division of economic research in 1914 within the one-year-old foundation; and a few months later, the Ludlow massacre occurred at the Rockefeller’s Colorado Fuel Iron Company where women and children died when the state militia assaulted the strikers’ tent camp.
In response, the organization decided to organize a study on industrial relations under this new division and selected a close working friend of John D. Rockefeller Jr. (William Lyon Mackenzie King) to direct it. From the perspective of the American public, it was hardly easy to trust that gilded age tycoons who had undermined the rights of workers in the process of accumulating their wealth would have the interests of the people in mind when they funded social scientific projects to study the American populace. From this perspective, the Rockefeller Foundation was the playpen of industrialists who had defined interests in society and their policy-oriented social scientific research would be—far from disinterested—an extension of those interests.
And far from ignorant of Americans’ suspicions about gilded age levels of wealth, Andrew Carnegie himself discussed it head-on in The Gospel of Wealth (1889). Aware that Americans might find socialism an attractive alternative to capitalism, for example, he pitched philanthropy as the better form of wealth redistribution.
Today as then, Americans are confronting and discussing the great influence of leading philanthropists in public policymaking and of wealth inequality more broadly. However, I am not convinced that we are necessarily heading for a more progressive period.
I say this because I don’t see contemporary Americans reflecting the same level of angst about elite philanthropy nor with the broader topic of wealth concentration. Congress isn’t questioning leading philanthropists as it did with the Rockefellers in the early twentieth century nor do leading philanthropists seem threatened by Americans’ potential voting patterns, as Carnegie had been.
One key explanation might be that these earlier Americans entertained a vastly different meaning of American democracy than their successors today. For them, American democracy promised economic opportunity (or rather, freedom from class divisions) and an equal voice over public concerns. Today, it seems that the general American public and their representatives in Congress aren’t as convinced of this definition of American democracy. With a narrower understanding of American democracy, it might simply be more difficult for contemporaries to see how wealth inequality and elite philanthropy in public policymaking are democratic threats.
Philanthropies committed to resurrecting a more progressive period might just need to focus on ways to revive this earlier (dare I say, more robust) definition of American democracy and help empower Americans to fight for it.
Photo Credit: HistPhil
There is an interesting report out today on the effectiveness of the Social Innovation Fund (SIF). Authored by the Social Innovation Research Center (SIRC), a nonpartisan nonprofit research organization, the new report details what has worked and what hasn’t in the six year history of the SIF.
Launched by the Obama administration in 2009, the SIF — a program within the Corporation for National and Community Service — provides significant funding to foundations that follow a venture philanthropy model by regranting that growth capital, along with technical assistance, to evidence-based nonprofits in “youth development, economic opportunity, and healthy futures” areas. In 2014, SIF expanded its efforts to include a portfolio of Pay for Success (social impact bond) grantees.
Now, 6 years on it is interesting to take a look back to understand what, if any, effect SIF has had on the nonprofit sector. The effect of the SIF is also critical given that, as of right now, the House and Senate have both defunded SIF in their respective funding bills.
To date, the SIF portfolio is made up of $241 million of federal investments and $516 million in private matching funds, which was invested in 35 intermediary grantees and 189 subgrantee nonprofits working in 37 states and D.C.
The SIRC report focuses on the current progress of SIF grants made during the first three years of the program (2010-2012). The report finds two clear positive results for the SIF so far. The SIF has:
- Added to the nonprofit sector’s evidence base about which programs work, and
- Built the capacity of nonprofit subgrantees, especially in the areas of “performance management systems, evaluations, financial management, regulatory compliance systems, and experience with replicating evidence-based models.”
On the negative side, however, the report finds that the SIF put real burdens on funders and nonprofits with its fundraising match requirements and the federal regulatory requirements. The report also finds that the SIF has had little effect on the sector as a whole because the SIF has not very broadly communicated their learnings so far.
To me, of course, most interesting are the report’s finding about capacity building at nonprofit subgrantees. There is such a need for nonprofit capacity building in the sector, and this was a clear goal of the SIF.
The SIF is one of few funders that do more than pay lip service to performance management by actually investing in building the capacity of nonprofits to do it. However, the SIF has been criticized for mostly selecting nonprofits that already had strong capacity. And indeed, the SIRC report finds that the SIF was most successful among those nonprofits that already had high capacity (in performance management, fundraising function, etc.) prior to SIF funding. Indeed, the report found that “poorly-resourced intermediaries working with less well-resourced community based organizations have been at a disadvantage.”
One SIF grantee in particular, The Foundation for a Healthy Kentucky, really struggled to build the capacity of their subgrantees whose starting capacity was so low. As they put it:
During the course of participation, it became clear that…[SIF] was really better suited for replicating existing programs or, at a minimum, investing in well-established programs that had some level of sophistication around organization systems and evaluation.
This mirrors earlier criticism of the SIF that it was set up to grow only those nonprofits that were already doing well, while those nonprofits that struggled with basic capacity issues were left out. The SIF has struggled to determine whether it is funding innovation (new solutions with limited capacity), or proven solutions (with a long track record and the corresponding capacity). It seems the two are mutually exclusive.
What the SIF is trying to do is such tricky business. To identify, fund and and scale solutions that work is really the holy grail in the social change sector. Certainly there are hurdles and missteps, but I think it’s exciting when government gets in the social change game in a big way. Six years is really too soon to tell. So I hope that this brief SIF experiment is allowed to continue, and we can see what a social change public/private partnership of this scale can really do.
To read the full SIRC report go here.
Photo Credit: Obama signs the Serve America Act in 2009, Corporation for National and Community Service
Note: I was asked by UnSectored, a community platform for rethinking social change, to write a post as part of their month-long conversation leading up to the William James Foundation’s Annual Gathering about how we sustain social enterprise. Below is that post. It originally appeared on the UnSectored blog where you can see the other posts in the conversation.
There is an awful lot of hype around the social entrepreneurship movement. Don’t get me wrong, I’m excited about the growing focus and energy around social change. But I think we need to take a step back and recognize that nonprofits have been working on social change for a really long time.
Often nonprofits get less airtime in the social innovation movement than their for-profit, social change counterparts. Perhaps that’s because the for-profit form of social change is new, so it seems more interesting, sexier, apt to create more change. And, of course, the idea that business can be reworked to address public goods is incredibly compelling.
But among the glorified world of social entrepreneurship, some are beginning to question the hype. Like Liam Black (“Letter to a Young Social Entrepreneur”) and Daniel Ben-Horin (“Between the Quick Exit and the Long Sojurn”)
Real social change is hard, long, exhausting work. As Daniel Ben-Horin says “This ‘making a difference’ stuff can be a real grind, as it turns out.”
And amid the hype around social entrepreneurship there is a tendency to dismiss those who were working on the long haul of social change before it was cool: the nonprofit sector.
The current hype around for-profit social entrepreneurship sometimes reminds me of the dot.com bubble, or the sub-prime mortgage speculation. We have to be careful of the hubris that accompanies new trends.
The nonprofit sector is an enormous part of our economy and has a long history of working towards social change. If we were to cast it aside completely, we’d lose the tremendous resources (money, people, mind-share) that are being invested in that sector every day. Without its oldest component, the broader movement to solve social problems is doomed. So instead of tossing it aside, let’s remake it, re-envision, restructure and reinvent it.
What does that mean? It means that the best and the brightest in the social innovation field need to figure out how to innovate in the nonprofit as well as for-profit sector. It means that the emerging social capital market creating financial vehicles for budding social businesses should also support social entrepreneurs in the nonprofit space. It means philanthropists should share investor prospects with impact investors, and vice-versa.
What’s more, innovation requires that investors interested in a social return own portfolios that include not only social businesses, but also nonprofit deals. Many more foundations should explore mission-related investing so that their money can go to both nonprofit and for-profit social change efforts. Nonprofits interested in growth should have access to capital and management expertise to scale. And a nonprofit that’s solving social problems should get just as many resources, respect and mind-share as a social business that’s doing the same.
In essence, we need an “unsectored” approach to social change.
Which means a shift in attitudes, laws, accounting standards so that social entrepreneurs are not restricted by outdated structures and incentives.
There’s no magic bullet for social change. But by focusing all of our energy on only one piece of the social innovation puzzle, we run the risk of less change — or none at all.
Photo Credit: unsectored.net
I’m excited to announce that I have a new post up at the Chronicle of Philanthropy’s Mission:Innovation blog. It is reprinted below. The Chronicle’s Mission:Innovation blog is one of my favorites and was launched last year. Nicole Wallace, a senior writer at the Chronicle, manages the blog, which “reports on nonprofits that are taking bold, new approaches to the way they work, explores what charities can learn from other disciplines, and provides advice from experts on how organizations can better foster new ideas.”
I’m honored to contribute to the blog. Here is the article:
“Innovation” has become such a buzzword lately, particularly among people working on social change. But let’s take a step back and talk about what the word could really mean. Innovation is more than just new ideas. To me, it means taking a completely new approach to how we finance, structure, and prove social change.
The nonprofit world has never lacked new ideas to address problems. In fact, you could argue that nonprofits are innately entrepreneurial, being borne out of a recognized market failing and a new idea to remedy it.
The need, then, is not more new ideas. Rather, true innovation lies in reinventing a field built on social change.
Here are some ways that is starting to happen:
New support mechanisms. The avenues for sending money to social-change efforts are increasing significantly. What started 10 years ago with venture philanthropy has now expanded into nonprofit campaigns to raise growth capital, foundation loans and other investments in organizations, social-impact bonds, and investments that seek both financial and social returns. And that creates an opportunity for social-change efforts to be much more flexible and (we hope) successful, because access to enough and the right kind of money can often make or break a great idea.
A converging economy. We used to suffer from pretty strict delineations among the public (government), private (business), and nonprofit sectors, but that is changing. True innovation is happening where those lines blur—like businesses that make a profit solving social problems. Or governments developing new mechanisms to finance and evaluate nonprofit efforts, such as the Department of Justice’s Pay for Success program.
Proof of social change. Nonprofits used to be viewed as benevolent charities that received donations to support their good work. That’s not enough anymore. Nonprofit donors and social investors are increasingly demanding a social return on investment—proof that the organization is making a difference—in exchange for their money. And nonprofits are now competing not only with other nonprofits but also with for-profit social entrepreneurs. So nonprofits can no longer focus on how many children they’ve read to, meals they’ve served, or animals they’ve saved. They must track and prove how they have changed lives, changed systems, or changed communities.
Although these innovations are encouraging, there is room for so much more. What if:
- The best and the brightest of Generation Y worked to remake existing organizations from the inside out instead of just starting their own social-change groups?
- The social-capital market that’s emerging to provide financial vehicles for budding social businesses also included support for social entrepreneurs in the nonprofit world?
- Venture-philanthropy funds (growth capital for nonprofits) shared investor prospects with social-venture funds (growth capital for social businesses) and vice versa?
- All nonprofits interested in growth and with a proven model for success had access to enough capital and management expertise to expand?
- A nonprofit that solves social problems received as many resources and as much respect and attention as a business that solves a consumer need?
These things require sweeping, fundamental changes to the current structures of the nonprofit, government, and private sectors. To me, that’s real innovation.
Photo Credit: mademoiselle lavender
In this month’s Social Velocity blog interview, we’re talking with Carol Thompson Cole. Carol is President & CEO of Venture Philanthropy Partners (VPP), a philanthropic investment organization (co-founded by Mario Morino) that helps great leaders build strong, high-performing nonprofit institutions. She has over thirty years of management experience in the public, private, and nonprofit sectors. She served as Special Advisor to President Clinton on the District of Columbia and was the Vice President for Government and Environmental Affairs at RJR Nabisco.
You can read past interviews in our Social Innovation Interview Series here.
Nell: This year marks Venture Philanthropy Partners’ 10 year anniversary. And in fact, venture philanthropy itself is only a little bit older. How has the concept of venture philanthropy changed since it first came on the scene?
Carol: People began talking about “venture philanthropy” about 11-12 years ago. Back then, it meant many different things, depending on who was speaking. Today, it still means many different things, but those organizations that work within this philanthropic mindset, like Venture Philanthropy Partners, have learned some important lessons along the way and share some common characteristics like a focus on performance, long-term financial commitments, investing in capacity and building infrastructure, and bringing resources in addition to capital to the table, to name a few.
At VPP, we actually moved away from using the term “venture philanthropy” a number of years ago as we realized that our approach was not a strictly “venture” approach. We are much more about blending some of the ways private equity firms approach their financial investments with many of the lessons learned and techniques developed by philanthropists through the years. We usually call ourselves a “philanthropic investment organization,” and we work to maximize all available resources, including capital, time, the skills and experience of our team, and the power of our network, to improve the lives of low-income children and youth in the National Capital Region.
Venture philanthropy arose out of the tech boom in the late 1990s, when many young entrepreneurs making their fortunes online decided to shift their resources into philanthropy. They saw a real opportunity to apply their business and management knowledge to nonprofits to create real, sustainable change for our society. These entrepreneurs decided to take the principles of venture capital that helped them become successful and shift that over into philanthropy.
Of course, the main strategies of venture philanthropy have been used, in some form or another, by grantmakers long before the late 90s. Venture philanthropists focus on high-engagement approaches to their grants, work to build capacity of organizations to scale their programs, and seek measured and proven outcomes as a result of their investment. Above all else, venture philanthropists use high-engagement techniques to bring more than just money to their partnership with nonprofits. Different grantmakers have refined their own ways of implementing these strategies, but they remain at the core of venture philanthropy, even a decade later.
Nell: When venture philanthropy started in the late 1990s it was thought to be a true innovation that could transform the nonprofit and philanthropic sectors. Has it lived up to those original ideas?
Carol: Venture philanthropy is a true innovation, but the nonprofit and philanthropic sectors are large and complicated systems. Venture philanthropy is an effective tool that has helped us deliver strong results for the children and youth in the National Capital Region. VPP is focused on identifying outstanding nonprofit leaders with strong programs and bold ambitions to grow. We give them growth capital to build their infrastructure and scale their organizations through serving more children and youth, by increasing their outcomes and impact, or through influence – making systemic change that ultimately allows for many more lives to be changed. Our first fund has grown to serve an additional 16,000 youth.
Clearly, venture philanthropy has worked for us, but it is not the only answer for the nonprofit sector. It can be a useful tool to deliver results, but creating those results is more important than the way those results are created.
Nell: Venture philanthropy was in many ways the precursor to what has now become the social innovation movement. How do you think venture philanthropy fits into these new worlds of social investing, for-profit social entrepreneurship, and other areas where the public, private and nonprofit sectors are converging?
Carol: Again, venture philanthropy is a tool to be deployed in grantmaking. At VPP, we are focused on bringing a high-engagement model to our nonprofit partners and delivering results for the children and youth of the region. Social investing, social entrepreneurship, and other innovations coming out of the convergence of sectors are examples of similar tools to drive results. At the Harvard Social Enterprise Conference in March, where I spoke along side Paul Carttar of the Social Innovation Fund, there was a lot of discussion about what type of organizational structure is best to create social change and what type of funding an organization should seek out to achieve its mission. What became clear is that people need to focus on goals and strategy, not methods. Venture philanthropy complements programmatic sources of funding because it can help some organizations scale very effectively to help those who need it.
Nell: The federal government took a step into the world of social innovation last year with the Social Innovation Fund, which was based largely on the venture philanthropy model. What do you think of the SIF and how do you see government’s role (at both the local and federal levels) evolving from this?
Carol: VPP is a member of the inaugural portfolio of the Social Innovation Fund, and we are honored to be included among the other intermediary funders. We applied to SIF because the challenges in our community are too big and complex to be met by a single funder, a single nonprofit, or a single sector. What we need now is a “network” of nonprofits, funders, corporations, local governments, and the federal government working together to solve our most intractable problems.
SIF represents the first step towards that new form of collaboration. Speaking at the Harvard conference, Paul Carttar said that SIF was about much more than money, and it would be a success if the public-private partnership model was adopted by others across the country. In these lean times for funding, it is important that we work together to encourage social innovation where it is needed. SIF, as well as the other public-private innovations launched by the Obama administration, like Investing in Innovation and Race to the Top, are developments that should be encouraged. If we can continue to push local and federal government to take on this role as collaborator, we will be able to achieve much higher levels of impact in our communities.
Even the largest philanthropic investments are dwarfed by public funding and are often deeply effected by availability of public funding as well as how and when it is allocated. Not every partnership needs to be as formal as SIF, but I would urge all philanthropic and nonprofit organizations to look for ways to seek alignment with local, state, and federal government efforts.
Nell: What’s next for venture philanthropy? Where does it go from here? How do you continue to reinvigorate or adapt the model?
Carol: I strongly believe that SIF represents the next step for VPP, and for all of venture philanthropy. We feel our model of philanthropy works and our first investments were successful, but we also feel like there is potential to dramatically improve the lives of the most vulnerable children and youth in our regions through intense and intentional collaboration. Because of this, we applied to SIF.
Our SIF initiative, youthCONNECT, represents the next phase of our work. Instead of single investments, we are investing in a network of high-performing nonprofits that provide a number of different services to young people from low-income families to help them thrive in adulthood. All the nonprofits in the network share the goal of bringing education, job training, and social services to at least 20,000 low-income youth, ages 14-24, in our region over 5 years. As we demonstrate success, this approach can be replicated or adapted by others around the region and the country. We will still make high-impact, long-term investments in single organizations, but we are exploring the transformative power of a network approach.
It is too early to tell the effectiveness of youthCONNECT and SIF, but I think these developments are pushing us into the next generation of high-engagement philanthropy. At VPP, we are committed to evaluation, sharing, and transparency so we can learn from each other as we work in these unexplored areas.
Nell: One of the criticisms of venture philanthropy is that it is only accessible to the largest and most successful of nonprofits. Do you see smaller nonprofits being able to access the ideas of growth capital? And if so, how will this evolve?
Carol: VPP focuses on organizations with strong leaders that deliver results. We have historically focused on organizations with budgets of $3-$50 million, but in our youthCONNECT initiative we have invested in organizations that fall below that monetary requirement but still have a proven track record in the area. Investing in smaller organizations is a different approach than some venture philanthropists have used, but these smaller nonprofits should have opportunities to access growth capital. What is most important to VPP is that an organization, regardless of size, can deliver lasting and meaningful results for children and youth in our region. Change in the lives of those who need it most will always remain our priority.
In this month’s Social Velocity blog interview, we’re talking with Mario Morino. Mario is co-founder and chairman of Venture Philanthropy Partners, one of the oldest venture philanthropy funds, and chairman of the Morino Institute, a nonprofit focused on technology for social change. His career spans more than 45 years as entrepreneur, technologist, and civic and business leader. He also recently wrote Leap of Reason: Managing to Outcomes in an Era of Scarcity, which I recently reviewed here on the blog.
You can read past interviews in our Social Innovation Interview Series here.
Nell: In your book Leap of Reason, you tell the leaders of the nonprofit sector that they need to make a fundamental shift in how they conduct business. Have you gotten any push back from nonprofits or philanthropists? Or has all of the response to the book been positive?
Mario: We are pushing for some hard changes, so we expected some hard reactions. But to our surprise, the response from nonprofit, for-profit, and public-sector leaders alike has been overwhelmingly positive.
We’ve asked ourselves why we’re not getting more push back. There are probably several factors at work. For one thing, the people who have taken the time to read the book are probably those who are more inclined to be receptive to this message. Those who are natural critics—for instance, those who believe mission and metrics are mutually exclusive or that discipline inhibits charismatic, entrepreneurial leadership—may not have read it. And so that shoe may drop at some point. The more we push beyond those already singing in the choir, the more constructive push back we’ll get.
I’d like to think that another factor is the way we presented the case. We made a forceful case, but we weren’t strident in our tone. We have a strong appreciation for the reasons why these management approaches have not been more widely adopted in the social sector. We sought to focus on what to do versus placing blame.
Nell: Do you think the majority of nonprofits will adopt an outcomes-management approach? And if so, when? What will be the tipping point?
Mario: Even when you take into account all of the work on outcomes, accountability, and mission-effectiveness over the past 15+ years, only a small slice of nonprofits (or government agencies, for that matter) have adopted an outcomes-management approach. So I fear that we’re in for only incremental adoption, unless our sector finds a way to seize the opportunity in this era of scarcity. This funding crisis can enervate or energize us. I really hope it’s the latter. In other words, I really hope this crisis will lead people to look much harder at what they do and how they can do it more efficiently and effectively. I hope it will cause them to go beyond incremental improvement and fine-tuning to rework fundamentally what it is they do.
Nell: It seems that this is a charge you are very much willing to lead. Beyond writing the book, what are you doing to lead the effort to create this fundamental shift in the nonprofit sector?
Mario: I would certainly like to join others in advancing this shift in the social sector and even lead in some areas. But I don’t think I’ve earned the stature to be the leader of a movement of this type. Even with 15+ years in the social sector, some still see me as a newbie!
As I said in the book, to help kick things off I would welcome helping to convene a select group of early adopters who have “been there and done that” and those most instrumental in helping them. I hope that a collective leadership will emerge and offer the beginning of an effort that could put our sector on a different and much more rapid trajectory.
As others began to follow their example, the network effect might well start to take hold. Imagine universities incorporating the outcomes-management mindset and discipline into nonprofit leadership curricula. Imagine funders offering outcomes-management grants to nonprofit leaders who show a real predisposition to use information well, and hiring seasoned staff members who have the expertise to provide strategic counsel and assistance to grantees. Imagine nonprofit leaders and staff joining together in peer-learning networks to share, learn, and push one another. Imagine government funders encouraging and rewarding successful outcomes management through new types of contracts and awards. A cadre of leaders and doers could help spark all of these things—and in doing so, spark a real movement.
Nell: What role can and should philanthropists, both foundations and individual donors, play in the effort to shift the nonprofit sector toward an outcomes approach?
Mario: Funders generally don’t provide the kind of financial support and strategic assistance that nonprofits need to make the leap to the outcomes-management discipline. While a lack of funding is by no means the only barrier, I know many nonprofit leaders who would take up the challenge in a heartbeat if funding, advice, and encouragement were available. The hard truth is that far too many funders have been conditioned to insist that every dollar “support the cause” through funding for programs. They don’t want “overhead” to dilute their grants.
To make the leap to outcomes management, nonprofits need creative funders, like the Edna McConnell Clark Foundation, that are willing to help them manage smarter through greater use of information on performance and impact—rather than forcing them to meet myriad evaluation and reporting requirements that too often do little to help the organization learn and improve. They need funders who understand that making the leap requires more than program funding, and more than the typical “capacity-building” grant. They need funders who are willing to make multi-year investments and offer strategic assistance to help nonprofit leaders strengthen their management muscle and rigor.
Nell: What does an outcomes approach look like for a social service nonprofit with an annual budget of $100,000? How does this approach apply across the sector?
Mario: It’s hard to adopt this approach if you’re in an organization that small. It would be folly to expect a nonprofit with that budget to have formal outcomes systems, metrics, and the like. That said, I’ve never thought quality and “goodness” were functions of size. Shouldn’t every nonprofit, regardless of its size and infrastructure, have a clear sense of what it’s trying to accomplish, a thoughtful strategy for how it’s going to do so, and some sense of how it will know if it gets there? It’s perfectly understandable that such a small organization may never have crafted a “theory of change” in a formal way, but the organization’s leader needs to have this framework embedded in his or her mind. If not, what’s the rationale for asking others to contribute time and money to support the nonprofit’s work? What’s the basis for asking intended beneficiaries to put faith and trust in the nonprofit’s services?
Nell: What do you think will happen to nonprofit organizations that don’t adopt a managing to outcomes approach? What does the future look like for them?
Mario: They will continue on as they have—at least for a while.
The fiasco with Greg Mortenson and the Central Asia Institute is a cautionary tale. Mortenson had a great story, and for a while his donors took it on faith that his organization was delivering on his grand promises in Afghanistan and Pakistan. Sadly, it appears the organization turned out to be better at fattening Mortenson’s book royalties than building quality programs.
I don’t mean to suggest that all nonprofits are like Mortenson’s! Far from it. But I do mean to suggest that in an era of scarcity, there will be more pressure on nonprofits to show that they are delivering on their promises. More public and private funders will finally look under the hood and ensure things are working well.
I’ve written before that with the excitement around the social entrepreneurship movement there is a danger that we are abandoning the nonprofit sector. Indeed, there is sometimes a tendency to dismiss the sector that was working on social change long before it was “cool”. Often the older nonprofit sector is left behind, partly because the sector tends to be risk- and change-averse. Again and again, I’ve heard that innovation will never become part of the nonprofit system — that nonprofits are too set in their ways. Or that the sector is too broken to emerge anew.
That attitude, though, is unacceptable. The nonprofit sector is an enormous part of our economy and has a long history of working towards social change. If we were to cast it aside completely, we’d lose the tremendous resources (money, people, mind-share) that are being invested in that sector every day. The nonprofit sector has tremendous potential for innovation. Indeed, without innovation in the nonprofit sector, the broader movement to solve social problems is doomed.
So instead of tossing it aside, let’s remake it, re-envision, restructure and reinvent it.
To that end, the Social Velocity on demand webinar titled “What Nonprofits Can Learn From Social Entrepreneurs” will help nonprofit leaders understand the new models, funding approaches, messaging, systems that social entrepreneurs are employing to create social change. If nonprofit leaders can understand this new movement and integrate some of the ideas into their work, they can achieve more social change.
This webinar will help nonprofit leaders understand the social entrepreneurship movement and the innovative people, organizations and funding vehicles that are solving social problems in new, exciting ways. It will help nonprofit leaders understand what they can do to keep up, and how to make their own organizations more innovative, attract new kinds of funding, and achieve their social change goals more effectively.
The webinar includes:
- Case studies of nonprofit and for-profit social entrepreneurs
- Examples of philanthropists and social investors who are funding social change in new ways
- How social entrepreneurs are becoming more effective at making a case for support
- What the social capital market is and how it’s evolving
- What new foundation funding vehicles like “mission-related” and “program-related” invesments are
- What “venture philanthropy,” “philanthropic equity,” and “growth capital” are and how to organizations are using them to grow their organizations
- New models nonprofit growth
- New legal structures for social change organizations
- Inspiration for taking your organization to the next level
What Nonprofits Can Learn From Social Entrepreneurs
On Demand Webinar
Photo Credit: katrinalopez
In this month’s Social Velocity interview we are talking with Dennis Cavner. Dennis is an investment advisor and philanthropist who, along with a few other philanthropists in Austin, has launched a new philanthropic investment vehicle called Innovation+. Through an extensive due diligence process over the last 6 months, Innovation + has identified and vetted a large group of nonprofits ready for significant growth and selected two which they will introduce to prospective growth investors. Their model is a compelling variant on venture philanthropy that seeks to unlock untapped philanthropic capital. It will be interesting to watch.
You can read all of the interviews in our Social Velocity interview series here.
Nell: Explain Innovation + to me. What is it, and how does it work?
Dennis: Innovation + is a new community effort designed to enable transformational social impact. Our goal is to match proven social innovation with human and financial capital to change the world. We seek to identify a small number of nonprofit organizations that are uniquely poised for significant growth, thoroughly vet those organizations and their growth plans, and then select the most promising candidates for investment. We will make a multi-year commitment to each organization we select, assist in the refinement of their plans, help secure funding and additional human resources, and monitor the organization during an execution phase of 3-5 years. Our selection process is not a contest, rather it is a very thorough process of evaluation that results in a partnership between Innovation + and the community organization.
Nell: Why did you, Bill Forsberg and Suzi Sosa, decide to launch Innovation +? What did you think was lacking in the Austin philanthropic market and what are you hoping it will do for the nonprofit and philanthropic sectors?
Dennis: Austin has substantial untapped potential in its non-profit market. There are outstanding organizations, already achieving meaningful impact, that are poised for a strategic investment that can bring about a transformational leap in results and scale. We believe there are substantial pools of social capital that remain uncommitted due to a lack of coordinated effort to identify and vet the most promising opportunities. Our intention is to prove this hypothesis and catalyze a community of venture philanthropists who see this potential for radical positive change for our community and our world. Bill, Suzi and I have all had experience with high growth organizations and came together in this effort over the past year. Over the past twelve years I’ve had the great fortune of involvement with the Livestrong organization (the Lance Armstrong Foundation) as a board member, Chairman, and one of the architects of the Founders Circle that provided the early growth capital for that organization. I’ve seen Livestrong grow from two staff members and an annual budget of $250,000 to generate almost $400 million for the cancer cause and have a profound effect on millions of cancer survivors around the world. If you can make the right investment of time and money at the right time, it is amazing how you can impact people’s lives.
Nell: How are the traditional philanthropists you are talking to viewing this new form of philanthropy? Are they receptive or skeptical or both? What will it take to get them on board?
Dennis: Our target market is “nontraditional” philanthropists: successful entrepreneurs who have done well and want to give back, but who lack the time or other resources necessary to identify and vet the best high growth potential organizations. Not surprisingly, they love the Innovation + approach: find really smart people who are doing proven innovative work, then supply the resources necessary to replicate or scale that model for greater impact. Traditional philanthropists are also very receptive, as they appreciate the extensive due diligence and growth plan evaluation that we are bringing to the process. Our team of community activists bring to the table a broad array of skills and experience from both the for-profit and nonprofit sectors.
Nell: What are you looking for in the nonprofits you select? What is the magic combination of characteristics?
Dennis: We are focused on identifying organizations that have high growth potential. To achieve that growth we believe that they must be doing innovative work in their fields, that their models are capable of expansion or replication, and that their leadership is both capable and driven to succeed. We are not interested in startups, so we seek a group that can demonstrate that their innovative work is effective. A sustainable funding model is essential, and we favor organizations that have components of earned revenue in their mix. Strong community partnerships and a clear picture of the partnerships necessary to achieve growth are very important. There is a consensus among our group that leadership is THE key component for a successful growth partner.
Nell: How do you think your model fits into other innovative models of philanthropy around the country?
Dennis: There are some really great things going on around the country, and I am encouraged by all of the creative new efforts. Some will be very successful, others not so much. Experimentation is necessary to find new solutions in a changing world. The Innovation + model is somewhat akin to an investment banking model. We identify a high growth potential organization, vet them very carefully, help them subscribe the financial and human capital needed to execute their plan, then monitor and report. We are not a fund, where investors commit their capital and then we decide where it is invested. Rather, we present an opportunity to a funder and they can either invest or pass, depending upon their interest and appetite. We may partner with nonprofits that are serving the needs of the community in the areas of health care, education, animal welfare, the environment, or other sectors. We are not limited by geographic scope, per se, and favor growth opportunities that have the potential for national expansion. These are audacious goals, but we believe in the power of community to achieve amazing things.
Nell: What do you think is holding philanthropy back from becoming more innovative?
Dennis: I actually believe that we are in the midst of great innovation in philanthropy. It is occurring in pockets, and Austin is one of the key development labs that will lead the way. In addition to the Livestrong example, I can cite the RGK Center for Philanthropy and Community Service at the University of Texas and their Dell Social Innovation Competition, the RISE conference for entrepreneurs and social innovators, and a vibrant and creative business community that will respond positively to innovation. As we have discovered with Innovation +, Austin has a growing number of amazing nonprofits that are inventing new and effective ways of meeting the needs of the community. We are in an era of declining government ability to provide essential support to our citizens, yet the needs continue to grow. Nonprofits and businesses must do a better job of filling the gap of these unmet needs. The formation and deployment of capital in new and more effective ways is critical to achieving that goal, and I believe that Innovation + can help lead the way.