Opinion Blog: Philanthropy, Responsible Investing
| March 15, 2010 10:03 AM |
Advocacy Funding Pays Off BigA new report underscores the big impact giving organizations can make by investing their charitable dollars in advocacy, community organizing and civic engagement. Seventy nonprofits in Los Angeles County, Minnesota, New Mexico and North Carolina that received charitable investment in policy work generated nearly $14 billion worth of benefits for their communities over five years, plus other monetary gains, says the National Committee for Responsive Philanthropy. The return on each dollar of those investments ranged from $89 to $157, the report says. “Foundation support turns indifference into democracy and the benefits of a thriving democracy are indeed substantial,” says Aaron Dorfman, executive director of the group. In a new report on policy investment in Los Angeles County, the latest in a series of studies the group has made, it found 15 local nonprofits from 2004 to 2008 generated nearly $6.9 billion in benefits for local citizens from $75.5 million invested in their advocacy, organizing and civic-engagement work, or $91 in benefits for every $1 invested. The benefits included $2.6 billion in higher wages, $2.2 billion in health-care savings, and over $2 billion in increased use of public transit, construction of new schools and expanded affordable housing. Kafi Blumenfield, CEO and executive director of the Liberty Hill Foundation in Los Angles, says the research shows “foundations best serve their own objectives and generate the greatest impact on communities when we support advocacy and organizing at the grassroots level.” The report recommends foundations step up grant for advocacy and organizing; help donors understand the benefits of advocacy funding; back collaboration among community groups; pool resources with other grantmakers; and invest over the long term in the capacity of grassroots groups. By investing in policy and community work, and in building nonprofits’ capacity, foundations and other giving organizations can spur progress in addressing the symptoms and causes of urgent social and global problems.
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| March 3, 2010 09:30 AM |
The Right MeasuresI still remember the embarrassed silence that followed when a colleague, over a decade ago, stood up in a room full of foundation leaders at a Council on Foundations conference and asked “What if we all committed to one common goal – to end child poverty in the U.S. in ten years?” People reacted as if she had made a rude noise. It was awkward, but beautiful too. Her question evoked the possibility of collective progress to a vital goal, and at the same time, it indicted everyone in the room, called our commitment and judgment into question. Our sector is obsessed with the search for measurable impact in specific initiatives, but, as that story illustrates, resists calls to commit to such clear, measurable objectives like eradicating child poverty. The American Human Development Index is an important tool, new to the U.S., that could help us resolve that tension. The Index measures the three areas that most of us would agree are the basic building blocks of a decent life: health, education and income. The Index is modeled on the approach taken by the annual U.N. Human Development Report, which has now been instituted in over 160 countries; in fact, the Human Development Report is so well accepted and well known around the world, that some reports on the progress of World Cup soccer teams also highlight their respective Human Development Index rankings, and as Bill Pitkin observes, if the rankings determined the results on the field, the Netherlands and Australia would meet in the finals this June. The Human Development Index approach was developed by economist Mahbub ul Haq and incorporates the “capabilities approach best articulated by Amartya Sen, the Nobel Laureate economist. (Chapter 2 of Sen’s book “Development as Freedom” should be required reading for all philanthropic and social sector leaders.) I’m not capable of fully describing and advocating the capabilities approach – but in a nutshell, it is akin to what parents want for their children. If we dig deeper than “I just want them to be happy,” most parents want their children to develop the capacity to choose their paths, so far as they are able. If we were to survey a wide range of health and human service professionals, chances are they would say they want the same for all the people they serve. (The capabilities approach has many virtues; among others, it employs a strong “informational base” – it is possible to ask people what they want for themselves, their children and their communities and then measure progress in their capacities to achieve it – and unlike other theories of justice, you don’t need to imagine a pre-social contract state of nature or an original position in which people are blind to the advantages they will enjoy by birth.) In the U.S., the Human Development Index has been championed by the renowned venture capitalist Bill Draper and Ed Cain, the VP of Grant Programs for The Conrad N. Hilton Foundation, who were colleagues at the U.N. Draper and Cain were driving forces behind the first annual American Human Development Report, published by the Social Science Research Council. (For more on the genesis of the Index and the American Human Development Report, see the forewords to the report by Sen and Draper.) The American Human Development Index can be a powerful tool for determining the greatest need, targeting resources to those needs and then measuring philanthropic impact, even when that impact is incremental. By using the Index in conjunction with GIS asset mapping tools, like Healthy City (launching statewide California service on March 3), philanthropic, nonprofit and civic leaders can see where the greatest needs are in health, education, standard of living. The Index also could help leaders track progress index over time to judge whether targeted investments push the dial upward in a community’s overall well-being. “Successful investments in health care should, for example, result in measurable increases in a community’s life expectancy (which the index shows is lowest in Kentucky’s 5th congressional district, for example),” observes As Kristen Lewis, Co-Director of the American Human Development Project “Successful investments in education should result in fewer drop-outs and higher enrollment rates (these are lowest in Arizona’s 4th). Successful investments in the standard of living should result in well-paying jobs (particularly rare in California’s 20th district).” Another important tool built on the Index is the Common Good Forecaster, which enables users to estimate the benefits a community would reap from increases in education levels, and a compatible tool is the Self-Sufficiency Standard. 1 The Index is only sensitive to the variables that it measures; for some philanthropic initiatives, a more detailed index like the Self-Sufficiency Standard, or a custom, tailored index may be preferred (one great, as yet untold story is how The California Endowment used a series of indexes – and help from Healthy City - to select 14 communities in California on which to concentrate under its new strategic plan.) But a composite metric like the American HD Index can enable comparisons across different regions, and even internationally. The beauty of the independent sector is that everyone can choose which causes to pursue. That can make it difficult to maximize the scale and impact of resources dedicated to a problem, but that freedom is more valuable than the inefficiency it allows. The promise of ever-improving data leading to smarter philanthropic decisions – pushed by tools like the Human Development Index, the Self-Sufficiency Standard, HealthyCity.org and others – is that a broad range of philanthropic and nonprofit enterprises, acting independently and employing different strategies, will converge toward a shared goal, like eliminating child poverty, as my colleague so rudely demanded over a decade ago. [1] Full disclosure: United Way is a partner with the American Human Development Report in the Common Good Forecaster, and I work for a United Way affiliate, United Ways of California, which also supported the publication of a report conducted by United Way of the Bay Area assessing the proportion of California residents earning less than the standard [. I’ve been a fan of Amartya Sen’s capabilities approach, however, for over a decade (I’ve written about it often, such as here and here), and that may do more to explain how I ended up doing the work I do now than it influences what I write in this post. I also am a proud founding member of Healthy City, a tool I’ve recommended in this space previously .
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| February 28, 2010 10:32 AM |
A Revolution in Foundation Transparency“We think the foundation should have glass pockets.” – Russell Leffingwell, Chair, Carnegie Corporation, 1952 Hot on the heels of rolling out real time tracking of foundation grants in support of Haiti, the Foundation Center has quietly launched a new project with the whimsical name Glass Pockets. With a mission to “bring transparency to the world of philanthropy” Glass Pockets offers reports on how transparent large, well known foundations are. These reports rate the foundations across 28 elements of transparency and accountability such as whether they explain their grantmaking process, provide a public assessment of the foundation’s performance and whether they offer a knowledge center that shares program evaluations and lessons learned. You can currently find reports for a number of large foundations including:
Most importantly, the reports offer direct click-thru access to each element. So users can quickly find the Gates Foundation’s investment policies, the Ford Foundation’s grantmaking policy, or the Hewlett Foundation’s knowledge center. Glass Pockets also offers a fascinating Foundation Transparency 2.0 database that shows the social media tools being used by over 400 foundations. From the database you can directly access the Twitter feeds, Facebook pages, blogs, e-newsletters and other tools being used by some of the country’s largest funders. Finally, the site offers a Google-based search tool that lets users search the websites of thousands of private foundations. For instance, a search for the term Haiti brings back The Boston Foundation’s Haiti Relief & Reconstruction Fund, The Gates Foundation’s statement on their response to the earthquake and the Case Foundation’s blog post on ways that individual donors can support Haiti. This is fascinating stuff! Not only is Glass Pockets suddenly the most important way to access important information about foundations, but the reports begin to set a level of expectation for large, staffed foundations to share more about their activities and what they know with the public. For instance, the reports note that the Ford Foundation does not make its 990-PF available, the Kellogg Foundation does not have a mechanism in place to allow grantee feedback and none of the foundations listed above share an assessment of their own performance with the public. Talk about information overload. Glass Pockets offers users direct links to a deep library of information about foundations. I could get lost for days exploring this place!
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| February 17, 2010 10:56 AM |
Grantmakers Can Do More Than Make GrantsCharitable grants get much of the focus of the more than 75,000 grantmaking foundations in the U.S. But with the recession vaporizing over one-fifth of the value of foundations’ assets, foundations should be looking harder for additional strategies they can use to advance their charitable mission. Program-related investments, or below-market-rate investments in activities tied to their missions that foundations can count as part of their annual charitable distributions, are growing in use, according to a new study by the Foundation Center. The study, which tracked 173 private and community foundations that made at least one program-related investment of at least $10,000 in 2006 or 2007, found PRI’s for the period totaled $734 million. That is only a tiny fraction of the nearly $92 billion those foundations’ overall charitable distributions for the two-year period. But the Foundation Center also says a recent survey it conducted found over half of foundations planned to use non-grantmaking activities because of the recession, and over one in 10 of those voiced an interest in increasing their use of program-related investments. The erosion of foundation assets, and in turn grantmaking, because of the recession, the Foundation Center says, provide “the best incentive yet for foundations to consider whether PRIs – as well as other forms of mission-related investing – are an appropriate tool to advance their missions.” With social and global problems increasing because of the recession, foundations need to be more strategic about investing their resources. That means taking a hard look at program-related investments and taking a more active role as shareholders, investing in companies and capital markets that not only will promise healthy investment returns that also will advance their mission.
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| February 1, 2010 09:15 AM |
Haiti Relief Underscores Deeper NeedsWhile Americans quickly dug deep to support relief efforts in the wake of the earthquake in Haiti, the outpouring of generosity also serves as a troubling reminder of our ongoing failure to better address social and global needs that are urgent, persistent and deeply rooted. Just as they did after 9/11, Katrina and the Asian tsunamis, individuals, companies and foundations after the Haiti quake have done what Americans do best in times of crisis: They got involved and gave. What we often seem to forget, however, is that we face a perpetual crisis, one the recession simply has deepened. At home and abroad, millions are hungry, homeless, in poor health, impoverished, illiterate, and subjected to violence and intolerance. The giving sector exists in large part to address the problems vulnerable populations face. But among the nearly one million charities in the U.S., many struggle with limited resources and big operating challenges. Individuals, foundations and companies in the U.S. give over $300 billion a year to support charities, and often give more after horrific events like the quake in Haiti. But the charitable marketplace has changed dramatically in recent years in the wake of financial and ethical scandals and the collapse of the economy. Many foundations and corporations have narrowed the focus of their giving, and are demanding more business-like operations from charities seeking support. Those funders want nonprofits to be more strategic, set measurable goals, create clear metrics to gauge their impact and effectiveness, and make their staffs and boards more diverse and inclusive. These all are important goals: To address critical needs, nonprofits must be able to sustain themselves financially and engage the thinking and know-how of the full spectrum of people and institutions with a stake in making our communities better places to live and work. But in placing greater demands on charities and ratcheting up expectations for how they perform, many funders seem to be in denial about the investment charities need to meet those demands and expectations. Most charities are small, community-based groups with limited resources. Their boards often are not willing to raise money or set a vision and direction for the organization, and typically are not even aware those are key responsibilities of their board role. The recession has increased demand for services from charities and reduced the dollars available to them in what has become a fiercely competitive charitable marketplace. And foundations and corporations typically will not support charitable operations, preferring to fund special projects and address particular needs in sync with their mission or business goals. So while they expect charities to be more enterprising, efficient, effective and strategic, funders are not willing to make the significant investment charities need to improve the way they do business. After the Haiti earthquake, savvy charities used social-media strategies like text-messaging to raise a lot of money quickly. Aiding that effort was massive coverage by mass media that used the power of images and technology to communicate both the intimacy and the massive scale of devastation in a nation long ground down by poverty. Yet while they are quick to provide wall-to-wall coverage of horrific disasters in their immediate wake, the media fail to tell the ongoing story of the relentless toll poverty takes throughout America and the world. And while nonprofits serve on the front lines in the fight against poverty, their limited resources make it tough for them to more effectively tell their story to the mass audience mass media can reach. Nonprofits need all the help they can get, including greater understanding and flexibility among foundations and corporations that control charitable resources nonprofits can use to do a better job running their organizations, serving people in need, and telling their stories to engage more people in their cause.
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| December 30, 2009 04:33 PM |
The Social Impact ExchangeThe Social Impact Exchange is a new effort from Growth Philanthropy Network and Duke University with funding from the Robert Wood Johnson Foundation. The Exchange is designed as a focal point for studying, funding and implementing large expansions of proven social purpose organizations. To that end the Exchange offers an “investment clearinghouse” (free registration needed) of top-performing nonprofits that are actively implementing growth strategies (read the full press release here). The Clearinghouse is interesting because of the way it offers some of the attributes of a stock exchange. There has been a lot of talk in philanthropy about social stock exchanges, but I’ve often found the implementation of this concept of little interest. This is because when most people think of a stock exchange, they think of the prices of stocks moving up and down as the primary characteristic. A social stock exchange which attempts to mimic the pricing elements of a stock exchange is interesting, but I’ve yet to see an implementation that is particularly exciting. Instead, stock exchanges are valuable not only because they publicly reveal prices, but because they have certain requirements for organizations to be listed and ongoing requirements to stay listed. Once an organization is listed on a stock exchange, it must adhere to higher levels of public disclosure than a non-listed company. Being listed on a stock exchange is called “going public” and a listed company is a “public company” as opposed to a non-listed or “privately held” company. This all matters to philanthropy because the organizations listed on the new Social Impact Exchange are offering public access to documents such as due diligence reports, business plans and the results of independent evaluations (it appears that currently there are not standard documents that all listed organizations must have, but see the documents listed for the nonprofit Ways to Work as examples). My friend George Overholser, has often pushed back on my urging for nonprofits to share more information about themselves publicly. George’s point is that most nonprofits are the equivalent of privately held companies, who may be damaged if they share too much of their internal issues with the public. While I’ve generally thought that nonprofits should have a higher required level of transparency than privately held companies, George’s point has always resonated with me. With the advent of the Social Impact Exchange, we have the beginning of a mechanism whereby a nonprofit that is ready to “go public” can list their organization and in exchange gain access to a wider range of philanthropic investors. In addition, the Exchange plans to only list organizations who have demonstrated extremely high levels of impact and scale readiness or have demonstrated a significant level of effectiveness, and are increasing their capacity for scale readiness (groups qualifying under each standard are identified separately). This means that if the Exchange can establish credibility for their vetting process, 1) organizations who get listed will gain a marketing advantage due to their “making the grade” and 2) donors can have an increased level of confidence in Exchange listed organizations. The Social Impact Exchange is more than just a list of nonprofits. It also hopes to be a hub for related research, publishing, education and training as well as an annual conference, business plan competition and regional meetings. While this effort is still in its infancy, I think the organizers have gotten some key elements right. With the high profile funding from Robert Wood Johnson Foundation and the involvement of Duke University, the Social Impact Exchange is one to watch.
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| June 5, 2009 10:24 AM |
“Green shoots” for new philanthropic formsI’ve been writing about information as the currency of change for a long time. Everything I have seen in philanthropic innovation in the last two decades is predicated on this simple observation—there are two kinds of philanthropy products: financial products and information products. They used to be bundled together, in the form of foundation staff, personal advisors, or community foundation program officers. In these forms a donor got both services—a place to manage the financial assets that fueled their philanthropy and professional advice on strategy, grants, and outcomes. In the early 1990s the advent of national donor advised funds showed that a huge market existed for unbundled products—donors would eagerly purchase the financial product by itself. Several billions of dollars in charitable assets were soon being managed through Fidelity, Schwab, Vanguard and others who provide best-in-class financial accountability, responsiveness, and transaction processing, with no promises of strategic advice, support or other types of information products. The market worked—we’ve had two decades of new innovations, new customers, and new financial products for donors. Nowadays, some of the same technological advances that led to scalable efficiencies in transaction processing are beginning to shape the landscape for information products and service providers. First, the broad and deep adoption of broadband access and a decade plus of online banking, travel booking, emailing and searching have changed our collective expectations about where information lives, how to get it, and whom to trust. Second, the massive storage and searching capacities that underlie systems like GuideStar now make it a commonplace assumption that basic information on nonprofit organizations should be only a “click away.” From these “expectational starting points” new behaviors begin to sprout, leading to the possibility of new products. If financial information is a click away, why not more nuanced information? This leads to systems like DonorEdge or Blackbaud’s Nonprofit Central. If there is “professional vetted information available,” why not the insights of customers or volunteers, leading to innovations such as GreatNonprofits or Keystone’s constituent response work. And if I can get information on one nonprofit, why can’t I find lots of options for action in one place (SocialActions.org) or compare the work of multiple efforts (New Philanthropy Capital’s reports or Acumen’s Pulse system)? These are exciting developments. And they are built around data—data that can be found, compared, searched, mashed up, re-purposed, questioned, and applied. The data are the currency of change. And rest assured, today’s data systems and information products are just the beginning. How we use these products, build off these services, interact with them as individual donors or change makers, or iterate entire new organizational forms on top of them is what the future holds. The information products for better giving are not as good as they will be, we have not yet seen all of the forms they will take, nor are they widely deployed or integrated into other financial management tools. Yet. But we’re getting there. In which case the landscape for philanthropic giving—the structures and tools that donors use to organize, aggregate, learn, give, and bank (literally) their philanthropic financial resources will change yet again. This might explain why we’ve seen a notable rise in independent philanthropic advisory firms (SeaChange Capital Partners, Rockefeller Philanthropy Advisors) in the last five years, why online giving markets (such as GlobalGiving and Kiva) have taken off, or why the never-ending stream of new social media tools are all quickly unleashed for giving-related purposes (Facebook Causes, Twitter fundraising, and blog/badge challenges). And it might be inciting new forms from familiar ones—new roles for community foundations or new services from donor advised fund vendors. We should also plan on this changing landscape of information being full of the seeds of new forms. If you imagine that any donor, anywhere, has quick, easy access to meaningful, comparable, useful data on organizations they could support and issues they care about, what kind of philanthropic entity, service provider, financial tool, public/private partnership, broker, deal platform or relationship builder would you build? That is the question we all need to ask, no matter where we work in philanthropy now, because that is the well-seeded field on which all existing philanthropic enterprises are now playing. And that is the question that some innovator, somewhere, is working on, right now, in the proverbial garage.
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| May 27, 2009 11:48 AM |
Impact Investing, the BrandThe Global Impact Investment Initiative (GIIN) is starting to think about branding and messaging. GIIN is an important, but still forming, coalition of investors who focus on both social and environmental impact as well as financial return. It’s an important group, and I am proud to consider myself a member, even if the thing of which I am a member is not fully defined yet. Membership—being part of a group of professional investors who agree on a real, if still evolving set of definitions—is important. It’s one of the things that gives an emerging market coherence. That in itself is one of the key branding elements of the GIIN, that it is a group that has agreed on some things and lives within certain definitional boundaries. It’s kind of like a club in that aspect: a voluntary association society. There is a standard, I agree with it, and that is part of what locates me on the inside. But GIIN wants to have a positive impact on poverty, economic justice and a sustainable environment. That means it needs to counter the exclusive nature of its innate and valuable club and be sure to include the voices and the perspectives of the people in the developing world; to make sure that female venture capitalists from Africa, for example, are included at the table at the highest levels. Point one: it has to be inclusive. Point two: it has to make sure its metrics for success are also inclusive. As it develops, GIIN will be one of the key drivers of evolving metrics efforts. Since it will be turning metrics into a basis for financial and social return to investors, it has to make sure that the metrics for success include what the disenfranchised in the developing world consider developments. I would point to the useful tools created by Sabina Alkire at the Ophi.org.uk project. Central to the Bhutanese Gross Happiness Index, her multidimensional indicators are a key way to make sure the benefits of Impact Investing are distributed transparently, and, potentially, more equitably. The history of colonization and empire mandate GIIN be aware of funder and fundee power imbalances every step of the way. GIIN cannot look like another version of condescending western philanthropy. This kind of thing proceeds from first principles. The first thing GIIN needs to do as it starts thinking about branding and communications is look around the room. There are plenty of marketing professionals who can build a great brand strategy. That part will be easy. GIIN is a great thing to brand. The key design issue is this one: Are all the right people, the right groups of people, all the important voices, represented around the table? Are all the people powerful and rich? Are there men who wore their first names stitched onto their blue collar work shirts? How many people who took the high school equivalency GED, but never made it to college, are in the group? Those are not people who are often listened to by the great and the good. They are called in to fix the air conditioners and heaters at the hotels where the meetings are held, but they are rarely consulted. How many maintenance men are being called in to fix the market, people one rung above the bottom of the institutional hierarchy? How many people are called in from the rung below that—the janitors—who not even the maintenance men listen to? The perception of hierarchy and power imbalance is sharply delineated at the very bottom levels, while those sitting at the tables can balance higher education and other professional credentials against power and wealth to hold their own as new models of philanthropy and the capital market are being devised. I’m sure the answer will be yes about that sort of inclusion, at least eventually. Nothing is perfect right away in that sort of effort. But the issue of who is at the table in a branding and communications plan is the key question for GIIN, I think. The brand will be built on trust, trust of the impact and intent of the capital being deployed. And that means everybody gets dealt into the game this time.
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| March 26, 2009 06:53 AM |
Foundation Hoarding Backfires; Billions LostBy hoarding and not paying out a bigger share of their assets in grants, foundations have cost the charitable world of billions of dollars now likely lost forever because of the plunge in the value of their endowments. Givers gave those funds to foundations to support charitable causes. But the law does not require foundations to pay out more than 5 percent of their assets a year. So rather than use more of their assets to support causes for which givers gave them in the first place, most foundations hoard them, although big foundations have been willing to invest millions of dollars to fight moves to require they pay out more. Instead of giving more each year and truly honoring their givers’ intent, most foundations sit on their assets, betting the investment of those funds will earn returns big enough to cover their required payout and also build their endowments so they can operate forever. The sad irony is that while foundations hoard so they can go on forever, their hoarding has resulted in the loss of billions of dollars that now likely will never go to charity. In 2006, the last year for which data are available from the Foundation Center, the assets of nearly 72,500 U.S. foundations totaled $614.7 billion. Those foundations, in contrast, made grants totaling only $39 billion. And in 2008, with the capital markets in flames, the assets at 127 foundations responding to a survey by the Council on Foundations lost 28 percent of their value. Those assets totaled $16.9 billion at the end of 2008, down from $23.4 billion a year earlier. To put that decline in perspective, the value the endowments of all foundations lost in just one year represents the total grants they might have made over multiple years at their current payout rate. Instead of hoarding, foundations should have invested more in the charitable marketplace. Those dollars could have helped house the homeless, feed the hungry, protect women from domestic violence, keep children safe from neglect, preserve the air we breathe and the water we drink, and enrich our communities by engaging more people in civic and cultural activities. Now those billions are gone. And those problems just get worse. Still, rather than acknowledge their greed and poor judgment, foundations remain in denial. What is more, shaken by the hemorrhaging economy, a growing number of foundations are delaying or reducing their grantmaking. Foundations just do not get it. Compounding the missed opportunities their miserly annual payout represents, foundations continue to play only a passive role in overseeing their investments. What they should do is exercise greater scrutiny of their investment managers, track their investments to see if they are in sync with their missions, and push companies in which they invest to be better corporate citizens. Sadly, foundations are not alone in blowing the opportunity to expand the pool of resources invested in charitable causes. Nonprofits also are to blame because they rely too heavily on foundation grants and ignore the main source of charitable dollars. While foundations account for only 12.6 percent of charitable giving in the U.S., nonprofits invest a disproportionate amount of time and effort in seeking foundation grants. Living individuals, in contrast, account for 75 percent of all giving, with another 13 percent of giving provided by individuals through bequests and family foundations, according to Giving USA 2008. Yet many nonprofits are not comfortable asking individuals for money, or simply are not prepared to ask, and instead focus on foundations, feeding those institutions’ inflated sense of power and influence. It is time for foundations and nonprofits to face reality. Foundations are the stewards, not the creators of wealth, and their job is to make sure the donated wealth they oversee is invested in the charitable causes it was given to support. Members of foundation boards have a fiduciary responsibility to exercise discretion in overseeing assets given to their foundations. And at a time of unprecedented economic crisis, those boards should be using their discretion to spend more of those assets, not save it for a hypothetical rainy day. That day is now. So instead of continuing to withhold from charities the assets they oversee, foundations should invest a bigger share of their assets in nonprofits that show they can make effective use of those funds in addressing increasingly urgent complex social and global problems. And instead of begging for scraps or tailoring their programs simply to pander to what they believe foundations will fund, nonprofits should ask foundations for the resources they truly need to fund their current operations, build their organizational capacity and better serve their clients. Nonprofits also need to kick their addiction to foundation grants and instead invest the time and effort needed to better engage individual donors. The economic crisis and the human suffering it is causing should be spurring foundations and nonprofits to remake the charitable marketplace and replace bad habits with market-driven strategies and services.
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| March 17, 2009 07:00 AM |
‘Blood money’ that became a force for goodLike everyone who lost a loved one on 9/11 Steve and Liz Alderman were devastated when their 25-year-old son, Peter, was killed in the World Trade Center attack. Like many, they chose to honor their son’s memory by creating a foundation in his name. Of the 303 non-profit organizations launched in response to 9/11, only 27 were still operating five years later, according to a study by the NonProfit Times. What has kept the Peter C. Alderman Foundation going is his parents’ focus on maximizing the impact of their foundation through rigorous analysis. In the words of Peter’s father, Steve: “We will abandon anything that doesn’t work.” When the Aldermans received $1.4m from the September 11 Victim Compensation Fund, Liz thought of it as “blood money” and almost turned it down. She told me recently that she used to lie awake at night thinking about the people she wanted to kill to avenge Peter’s death. But, with Steve’s encouragement, they accepted the money and launched a private foundation to help victims of terrorism and mass violence round the world. “Using the money for a good cause was the best revenge,” Steve told me. “The only way for us to counteract great evil was with great good.” Today the Peter C. Alderman Foundation, in partnership with Harvard University, builds mental health clinics and provides local doctors with the tools they need to treat the emotional wounds of victims of terrorism and mass violence in places such as Cambodia, Uganda and Rwanda. Its work has attracted partners such as the US Department of Health and Human Services and the pharmaceutical company, Eli Lily. When I spoke to the Aldermans about their foundation, I was struck by the fact they, unlike most philanthropists who talk about the grants they have made, talk about the effect they have had. With an annual operating budget of $500,000 they have set out to help people across the globe. Liz and Steve found that, to have the impact they were seeking, they had to identify outstanding partners and find ways to leverage their giving. “Starting a foundation was like starting a small business,” Steve said. “Our daughter, Jane, even got her MBA when she realized that we didn’t know enough about business.” She is now the foundation’s executive director. The Aldermans represent the vanguard of philanthropy—individuals who have recognized that philanthropy is not defined by the act of giving but by the achievement of impact. It is both an emotional act of love by the giver as well as a strategic investment in our social fabric. The Aldermans have discovered that the most emotionally satisfying philanthropy is a gift that has impact. Unlike many relatively small foundations, the Peter C. Alderman Foundation has an in-depth strategic plan. Through its mental health clinics, the foundation has reached 65,000 people with traumatic depression. Many grantmakers simply measure themselves by the scope of their activities, but the Alderman foundation goes further and documents that it has seen 80 per cent of the people it has treated return to productive lives. In Cambodia, where the legacy of the genocidal Pol Pot and the brutal Khmer Rouge still grips the populace, the Aldermans have proved they can treat traumatic depression. Demand has been so large that the foundation created a second clinic to eliminate the 14-month waiting list. Importantly, the Aldermans have shown they can achieve their mission cost effectively; the Cambodia clinic system provides services at a cost of $50 a head. The Peter C. Alderman Foundation is not the first to have a strategic plan, strong partners and demonstrated impact. But it is part of an emerging group of relatively small family foundations that are demonstrating how to use effectively these tools. The Aldermans have shown that the most effective way both to help people and soothe their own emotional wounds is through a focused strategy and measurement of impact. I was struck by how the Aldermans talked like seasoned social action experts with impact data and leverage statistics dominating our conversation. But, in the end, the Aldermans are grieving parents trying their best to make sense of a devastating loss. “I’ve realized that you can’t cry when you’re working on the computer,” Liz said. “You get the keys all wet.”
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Todd Cohen, a veteran news reporter and editor, is editor and publisher of 
Peter Manzo is President & CEO of United Ways of California, which improves health, education and financial results for low income children and families by enhancing and coordinating the policy advocacy and community impact work of California’s 37 United Ways.
Sean Stannard-Stockton is CEO of 
Lucy Bernholz is the Founder and President of 
Kevin Jones is a cofounding principal of 