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Flying Over Philanthropy

What is happening overall in philanthropic capital markets?

Denise Caruso’s* “Re: Framing” column in Sunday’s (January 6, 2007) New York Times is worth a read - here’s the link. She points to a number of recent studies and actions by certain philanthropic foundations and their support organizations that emphasize the importance of long-term, general operating support. The article, and many of those interviewed and cited in the piece, speaks to the “costs” of program specific funding. In particular, this passage from Tom Tierney of Bridgespan is worth considering: “Everyone is managing against the perception that nonprofits are supposed to be low-cost and low-overhead.” The only way for nonprofits to increase their working capital is to take on more projects, which in turn keeps increasing the amount of capital they need—a “vicious cycle that perpetually starves them of capacity.”

The article goes on to cite the work of Grantmakers for Effective Organizations, Social Venture Partners International, The Center for Effective Philanthropy, the Edna McConnell Clark Foundation, The Hewlett Foundation, Compasspoint and the Meyer Foundation.* All of this work, and the focus on general operating support, is worthy of note. My only real question is whether or not it adds up to a trend or has enough heft to act as a countervailing force against what Caruso calls the “... stance that the return on charitable dollars should be tangible and measurable, and should drive capital flow in much the same way that earnings figures do in commerce.” In fairness, Caruso only points to the research and foundations she cites as “... a small and increasingly vocal group of foundation leaders challenging the benefits of this approach.” In other words, she doesn’t burden their work with being a trend or countervailing force - I threw that in. Why? Because the question that intrigues me includes that which Caruso is asking and goes up a few thousand feet higher in altitude - what is happening overall in philanthropic capital markets?

Fly up to 35,000 feet with me and the view gets really interesting - there is a lot of experimentation and variation underway in philanthropy right now. As we fly over the “landscape” of funding for public good, we see an increasingly varied and dynamic topography:

From this altitude we can see Caruso’s group focused on general operating support, as well as those focused on project-specific metrics. We also spot the various efforts at accountability and transparency, a few on knowledge sharing, and several that are trying out new ways of using technology. And over there - out that window - can you spot the efforts to directly connect small donors with international projects? They’re there, just next to the corporate social responsibility movement - over by cause marketers. Just beyond them - out another window, if you will - is the increasingly organized microfinance community. From another window we see the growing range of donor advised funds. Look over there, we can see on the horizon the socially responsible investing movement and as we continue along social entrepreneurs, double/triple bottom line investment companies, and social venture capital firms are coming into view, and - look, out that window we can see emerging social stock exchanges.Wait - over there - way on the horizon - is that the carbon trade movement coming into view?

As we fly along we see the tens of thousands of small foundations, organized around a family legacy or values, working hard to advance the causes they care about and not bothering with all the tumult around them. We also spot banks and trust companies, attorneys and accountants, consulting firms, wealth managers and multi-family offices - all providing philanthropic advising and management services. And, look! Over there! Media companies and magazines that help frame the discussions about philanthropy. And out every window we see the hundreds of millions of individuals who make a daily, weekly or annual practice of giving some amount of their time or money to make life a little better for someone else.

And on and on. You get my point (I hope). Philanthropy is not a static thing - it is (perhaps) more dynamic, robust, and diverse than it has ever been. It is global and institutional, local and individual. It is influenced by commercial interests and ageless, religious tenets. It is personal, passionate, and, sometimes, rational. There are organized influences and individualistic drivers. There are common metrics and areas of profound disagreement; active leaders in the field as well as actors who have no interest in being part of a larger field - they are focused like lasers on their own work. Foundations are bound together by legal and regulatory guidelines, but not really much more than that. Some work together, some are actively trying to influence others and share information, and some are not. Foundations are themselves a varied topographical feature on a complicated landscape of philanthropy. Philanthropy is also only one feature on a broader landscape of funding for public good. I think we need to zoom in and look close at these features - it is in this spirit that I highly recommend Caruso’s article.

And then we can fly back up for a panoramic view and see this whole, beautifully complicated landscape. When I do so I am reminded of how necessary - and yet small - each piece of the whole really is. I hope as we build expertise in each of the topographical components (foundations, double bottom line investment firms, metrics, etc) we also can find conceptual ecologists or system thinkers, chaos theorists or “bio”-diversity experts who can help us consider the interactions and dynamism, as both characteristics of and influences on the whole. Thinking about the systems helps us to see how each of the pieces, and the interactions between them, really matter. This can help us move the discussion away from “old and new,” “them and us,” “good and bad.” When your analysis focuses on the interactions then the mainstay practices matter as much as the experiments. The failures matter as much as the successes. The edges and the center both matter. And the view is really fascinating.

Of course, just as you think we might be ready to land this flight, we remember where all this private investment for public good fits into yet a larger landscape. The story of which - paradoxes, dangers, warning signs and possibilities - is told quite nicely also in Sunday’s Times, in this look at the differences between private and public investments in the city of New Haven, Connecticut. But we’ll need another airline flight to understand that whole terrain.

(Adapted from a post on www.philanthropy2173.com)

*DISCLOSURE: I have worked with, in some fashion, almost every individual and organization mentioned in Caruso’s article and have championed Caruso’s book as as a “must read” and a critical resource for philanthropy.


imageLucy Bernholz is the founder and president of Blueprint Research & Design, Inc, a strategy consulting firm that helps philanthropic individuals and institutions achieve their missions. She is the publisher of Philanthropy2173, an award winning blog about the business of giving and serves as executive producer of The Giving Channel on Fora.tv.

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COMMENTS

  • BY Denise Caruso

    ON January 9, 2008 01:15 PM

    This was a terrifically useful overview, Lucy. Thanks for writing about the column. I’m getting a lot of mail from grateful nonprofits, with the occasional naysayer. In case others are interested, there’s a discussion a’brewing over on my blog, hybridvigor.

  • BY Susan Sharma

    ON January 17, 2008 07:59 PM

    Why should NGOs be funded?  Cannot the best business schools of the world suggest a business model for philanthropic organizations so that they can generate cash with their activities and stop begging?

  • Ashley March's avatar

    BY Ashley March

    ON January 18, 2008 08:32 AM

    I would like to congratulate Ms. Bernholtz on this article.  It is one of the best celebrations of American philanthropy I have read.  It beautifully details its central glories: passionate individualism and the freedom of an astounding array of choices.

    Ashley March
    Director of Foundation Relations
    Cato Institute

  • To respond to the comment above, I believe it is possible to generate cash with activities as long as outcomes—changes in behaviors and attitudes—are measured.  There is no model yet, since every organization has its own mission statement, and the measures need to be custom crafted to fit each mission.  A mission statement that is tangibly measurable is the most compelling way to generate investment.  Interviewing philanthropists and foundations that support an organization is a first step to determining appropriate outcomes that would effectively measure the impact of programs and result in increased funding support, volunteer support, and awareness.  Organizations such as the Nature Conservancy and Duke Children’s Hospital have undertaken efforts to implement mission-related outcome measurement with positive results.  These and other examples can be found in our firm’s whitepaper at http://www.spm-nonprofit.com

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