Opinion Blog : Entries Tagged With 'accountability'
| June 12, 2008 07:00 AM |
Maps for Driving ChangeSteve Jobs unveiled the new iPhone 3-G, to oohs and aahs. One of its most impressive features is a pairing of GPS and mapping that allows users to instantly locate themselves and search for nearby items of interest – restaurants, shops, etc. What will really impress me, though, is when we’re all able to see more information about people and resources. I’d bet anyone reading this can quickly search for a Starbucks, or some other commercial resource, anywhere around the globe. But what if you wanted to find which neighborhoods in your community had the highest rates of lower income Latinos with diabetes, or children living in poverty? What if you wanted to map the flow of foundation grants to various regions or neighborhoods? What if you also wanted to find, and contribute to, that information through your cell phone? As Buckaroo Banzai and Buddhist sages put it, “wherever you go, there you are.” But for too many people around the world, the inverse is true—wherever you are determines where you can go. Place matters to our quality of life far more than whether we can find good coffee or a particular kind of food or entertainment. Our prospects for enjoying clean air and water, healthy food, freedom from violence, and opportunities to learn may be tied more closely to where we live than any other characteristic. Place is where the intersection of race, class, and power is shown in starkest relief. Advocates, planners and funders are increasingly using GIS mapping to analyze a host of issues. Civil rights lawyers, environmental justice activists, and community organizers are using maps to anchor dialogue with community members, adding their on-the-ground knowledge to “official” data, and also to make their case to policy makers and judges. The same day as the iPhone launch, a group of academics and advocates gathered in Oakland to inform an Opportunity Agenda study on the use of maps to support health equity advocacy. Bill Lann Lee, former assistant U.S. Attorney for Civil Rights during the Clinton Administration and a co-founder of Opportunity Agenda, noted how much he and his colleagues would have liked to use maps (the way modern technology makes possible) when suing to stop the lead poisoning of low-income children or to prevent violations of voting rights. Participants heard how the Kirwan Institute and Legal Services of Northern California use maps to make powerful cases for the harmful effects of structural racism, and also about how health researchers and government agencies are using GIS to analyze health and environmental issues. Mapping also shows great promise for making visible the flow of grant dollars to specific places, the demographic and other attributes of those places, and even the specific subsets of people served in those places. HealthyCity.org has developed innovative methods for mapping the service areas and branch locations of grantees and graphically displaying the relative size of grants, all on top of a set of more than 60 demographic and health indicators and the locations of resources such as schools, parks, fire and police stations, and other nonprofit organizations, for funders like The California Endowment, First 5 Los Angeles, and a coalition of 22 private and public funders supporting early childhood programs. As I’ve written elsewhere, this approach holds promise not just for planning, but also for accountability and philanthropic equity issues. Mapping the reach of grants may be far better than asking individual foundations and their grantees to gather demographic and other information, as a bill in the California Assembly, AB 624, would do. To take this approach to scale, we’d need to make the grants data already disclosed by foundations more accessible to advocates, and supplement that with data about the geographic and demographic reach of those grant funds. (This would mean bringing the grants databases out from behind the firewalls of services like the Foundation Center or Foundation Search, or paying the costs of providing free public access to that data.) At the recent NetSquared conference on innovative use of technology for social good, GIS mapping was at the core of 7 of the 21 featured projects, out of 180 nominations from around the world. Here are short summaries, in alphabetical order (complete descriptions here):
Early ancestors of Web-based GIS include Neighborhood Knowledge California (developed at UCLA by Neal Richman, one of the foremost evangelists of using GIS for community benefit), and the network of sites in the National Neighborhood Indicators Project, such as Metro Boston Data Common. Recent notable developments are VolunteerMatch, which adds the ability to map volunteer opportunities, and the launch of Policy Map.
Whatever you think about the potential benefits and shortcomings of GIS, we should expect this use of GIS mapping with in-depth demographic and resource data to grow quickly, and to be available over future generations of iPhones and other cell devices very soon. Questions to address are:
Are there any questions or concerns you have about pro-social uses of GIS? Are there examples of the successful use of GIS that you’d like to share? [Full disclosure: I am a proud co-founder and member of the governing partnership of HealthyCity.org, a project sponsored by Advancement Project, and am involved in supporting its continued development.]
Posted by Katie Harrington
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| July 23, 2008 10:49 AM |
Giving Vs. Free“Not everything that counts can be counted, and not everything that can be counted counts.” Back in May, Stephanie Strom of The New York Times wrote an article about increasing challenges to the tax-exempt status of nonprofits. I think there are plenty of rational positions to take on issues like whether universities should be required to pay out a certain percentage of their endowment, whether nonprofit hospitals deserve full tax exempt status, or if nonprofits who serve wealthy clientele (such as the opera) should be given a tax exemption. However, there is another theme to the article that I want to explore. Strom writes about how last year the Minnesota Supreme Court denied a property tax exemption to a nonprofit day care agency because (in Strom’s words) “it gave nothing away.” Audrey Alvarado, executive director of the National Council of Nonprofit Associations, agreed with Strom’s interpretation of the court decision declaring that the court “is saying, ‘wait a minute, charities are supposed to give things away for free.’” This is a disturbing concept. Recently I’ve been writing about how philanthropy is not defined by making the gift of money, it is the impact that the gift achieves. The idea that “free” equals maximum impact is asinine. Nonprofits are not supposed to “give things away,” they are suppose to provide public goods and services (goods and services that benefit society as a whole). The government also has the role of providing public goods and services. But imagine the outrage if the government made it policy to only give things away for free: No more toll bridges, museums all free, welfare checks and college tuition aid given without any expectations of the recipient. Doing good is not the same as giving something away for free. Let’s set aside the intellectual argument for a minute and just look at how nonprofits actually work. According to the Urban Institute, in 2005 nonprofits collected $1.6 TRILLION in revenue. Nonprofits are simply not in the business of giving things away for free. The Minnesota Supreme court ruling is damaging because it reinforces the idea that running a nonprofit is easy (jeez, you’re just giving stuff away, how hard can that be?) and it validates the idea that nonprofits should keep operating expenses very low. (If you’re just giving things away, why would you need a complex infrastructure and highly talented employees?). Why then has the court taken this position? It seems to me that the court is essentially saying that the products and services that nonprofits offer have no knowable value and therefore should be given away for free. In a world where measuring impact is difficult, the court is saying that if the impact is not accounted for it can be assumed that it is zero. If the court believed that nonprofit products and services had value, then it would have made more sense for them to argue that nonprofits must provide products and services at a lower cost than the for-profit market can achieve. Writing in a comment on my blog Tactical Philanthropy, Dan Moore, vice president of public affairs for GuideStar and former chief law enforcement official overseeing charitable organizations in the Attorney General’s Office in the State of New Mexico, wrote: “[The court asks] ‘where’s the difference’ between a for-profit and a nonprofit provider? Or rather, ‘where is the charity’ in this work? Giving things away for free is a simple(istic) proxy for measuring the difference. From the government’s perspective, they are ‘giving away’ tax revenue. They want to know what they are getting in return. Finding ‘no difference’ in the Minnesota case, the government is looking to collect some tax revenue.” It seems to me that the court is putting the social sector on notice. In the absence of effective impact measurement, the court will assume that nonprofit impact is zero and therefore nonprofit goods and services must be given away “for free.” Impact measurement might be difficult. Accurate quantitative measurement might be impossible. But like it or not, the social sector better get moving on demonstrating their impact or risk an erosion of their tax exempt status.
Posted by Kelsey Walker
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| January 14, 2009 10:00 AM |
Competition vs. Cooperation at the Base of the Pyramid (BoP)There are two competing philosophies that, at first glance, seem to both provide value to the base of the pyramid (BoP) approach – competition and cooperation. In my mind, the BoP theory is as close as any to a “free-market” approach to development, as it promotes competition that will bring the best products and services to meet unmet demand. Competition is a part of a self-regulating market. It inhibits price-gouging, encourages multiple product and business model designs, and provides consumers with choice – all key tenants of the BoP philosophy. However, as organizations working at the BoP compete, their focus can shift – from the customer to the competitor. If competition is not dealt with properly, it becomes a battle of resources and reputation, instead of a fight to serve the poor in the best way possible. A similar phenomenon has plagued the NGO community over the years, and this is partially caused by serving two masters – the “client” on the ground and the “donor” (agency, charity, government) in the developed markets. Were the NGO community unconcerned about serving the latter, we would probably not see as many fancy websites or media releases – but the truth of the matter is that we need both constituencies. I am not saying that we do not need BoP organizations to engage in competition on the ground, but rather that from what I have seen that is not where the battle has been waged. From my perch at the William Davidson Institute, I have seen that as competition heightens, resources and energy shift away from improving direct delivery of goods and services towards building legitimacy in established markets. Leaders tell their teams: we have to have a case study written about us; it is time to re-brand ourselves; our Web site needs a facelift; why don’t we try to co-brand with a company, etc. When it comes to organizations that are attempting to work at the BoP, but still reliant on legitimacy (i.e. funding and talent) from developed markets, there may be value in cooperation — a word that can leave free-marketeers shuddering with fears of inefficiencies. Why cooperate? According to NextBillion.net’s Rob Katz, the base of the pyramid market is still largely a free-for-all. The vast, untapped nature of the market means that it will take numerous organizations, working together, to spark more interest and investment in the BoP before the stakes are high enough to worry about stashing resources. According to Katz, “I would note that no VC fund in its right mind cooperates with its direct competitors, but it is a testament to (a) the size of the market and (b) the sub-optimal state of the field that Acumen Fund and others are looking to cooperate as much as we are when it comes to supporting small and growing businesses at the BoP. If this were a truly commercial opportunity, we could not be working together as we do. The fact is, it is still VERY much a hybrid space, and we need to band together to create a commercially viable, investable asset class. That’s why there’s plenty of cooperation. “I’m not the only one who thinks so, either. Brian Trelstad at Acumen Fund and Willy Foote of Root Capital have both articulated these ideas to me recently, and each notes that the need to cooperate in a hybrid space is what’s driving the growth of the new Aspen Network of Development Entrepreneurs. Think about how microfinance has grown – 30 years ago, non-commercial, hybrid microfinance institutions were all banding together at conferences. Gradually, with a lot of philanthropic support, they’ve developed a real industry, and now microfinance is a commercial, investment-grade asset class. We need to do that with small and growing businesses serving the base of the pyramid market.” Despite the benefits of cooperation, and the numerous networks that have been established to promote cross- pollenization in the field, such as ANDE and PDMS/Pulse, BoP organizations, like any business or NGO, are concerned with their own growth and survival. Take talent, for example. The war for talented individuals with the skills and the passion to work at the BoP is intense. If an employee at a U.S. intermediary organization were to decide that he or she may be better suited for a project on the ground, how likely is it that his or her employer would say, “Oh yes, that sounds great, we want you to have the greatest impact possible.” It is much more likely that the organization would do everything in its power to hold on to that highly-skilled person, regardless of whether or not it resulted in the greatest good for society. This is partially because we believe that our organization, and our cause, with which have sacrificed so much for, must be doing the most good. Let’s take another salient example – intellectual property and technology rights. In the field of transporting water, there are many competing designs. The producers of the Hippo Water Roller, a South-African based design, have chosen to not patent their technology. Co-founder Cynthia Koenig told me that this is because: “Rather than trying to control our design, we’d prefer to serve as an inspiration for similar tools. After all, we’re trying to solve a problem, and realistically, we won’t be able to distribute Hippos to all the 1.1 billion people who lack easy access to water.” It’s main competitor – The Q-Drum, which is also located in South Africa, has chosen to take out a patent for its similar design. I’m not saying that either approach is better. In fact, founders of both organizations may believe that their approach to competition vs. cooperation may result in the best outcome for the BoP. Many staunchly believe that design for the BoP should be open source, but others point to the fact that patents can create incentives for innovation and result in better quality control. Which approach results in the greatest good for the greatest number? Maybe the inherent enigma is tied to the fact that most BoP organizations are still serving the dual interests of talent, donors, and media in the developed world while providing on-the-ground services to customers that probably can’t even read their glossy English Web sites. However, there has certainly also been a push for greater cooperation in the BoP space, as we have learned from our NGO colleagues. In my mind, there is value in both cooperation and competition. I think that there is something to be found in the delicate balance of bringing together diverse perspectives on the back-end to establish a market of free competition that leaves the fate of the organization in the choice of the end-user.
Posted by Kelsey Walker
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| January 26, 2009 10:00 AM |
Obama’s Call for Service, a Spur to Giving SectorThe giving sector got a big push from President Obama in his inauguration speech. It also got what should be a big wake-up call. So while nonprofits and foundations may be riding high, anticipating a surge in giving championed by our new president, they also have a lot of work to do to be better stewards of the time, know-how and money Americans give. In his speech, Obama called for a “new era of responsibility” and the “recognition on the part of every American” of the shared duties of “giving our all to a difficult task.” But he also cast part of the blame for the meltdown in our economy to “our collective failure to make hard choices and prepare the nation for a new age.” While it plays an irreplaceable role in addressing urgent social problems and their root causes, the giving sector faces serious operating challenges it must address to be effective at fixing those social problems. Nonprofits are expected to do too much with too little, and too few are willing or able to invest in building their internal operations or to raise their voice to speak out and work for social change. And too many nonprofits still act as if their cause entitles them to support without having to adapt their fundraising to better engage and serve the givers they depend on. Big nonprofits and foundations also are moaning, respectively, about the difficult of raising money and the loss in the value of their assets because of the decline in the economy. But instead of getting their own houses in order, they and the trade groups that represent them are tripping over one another in a rush to grab a piece of the government’s massive financial bailout package. Foundations are flush with donated wealth dedicated to charitable purposes, flush even with the decline in the value of their assets because of the sinking capital markets. Their job is to serve as vehicles for investing assets givers have dedicated to charitable causes in return for generous tax breaks the givers enjoy. Yet foundations treat those assets as a source of private wealth and influence they make it their job to hoard and grow. Far too few foundations are willing to give more than the five percent of assets they are required to pay out each year in grants and overhead. And far too few are willing to use their voice or their shareholder role to try to shape public policies and the business strategies of companies in which they invest. In a regulatory system with few rules and weak teeth, foundations operate pretty much as they wish and are accountable to no one but their own boards, boards that typically sleep at the wheel. That lack of accountability can result in serious damage: Foundations were among the charitable investors that lost millions of dollars in the Madoff investment scandal, losses that might have been avoided had foundations been subject to greater oversight and required to disclose more about their operations and investment practices. The economic crisis, Obama said in his speech, “has reminded us that without a watchful eye, the market can spin out of control” and that “a nation cannot prosper long when it favors only the prosperous.” The giving sector does not operate under a “watchful eye,” and regulation of the sector favors big foundations and their wealthy donors, groups that have had the clout, and have exercised it, to successfully fight efforts to tighten regulation of them. The giving sector can make a huge difference in the effort to fix America’s social problems. But to truly become an effective vehicle for social change, the sector first must take a hard look at how it operates and fix what is wrong. Nonprofits need to strengthen their operations, build their capacity so they can secure and absorb more giving, and raise their voice on important policy issues. Foundations need to pay out more, give more to support nonprofit operations, be more open about what they do, and speak up on social change. And government needs to do a better job policing the giving sector and making sure it operates fairly and in the light of day. Rooted in values he called the “quiet force of progress,” the giving sector can continue to serve effectively if it is willing to be brutally honest about itself and work harder and smarter to engage and justify the “faith and determination of the American people” on which Obama said the nation relies.
Posted by Kelsey Walker
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| February 9, 2009 10:15 AM |
Brandeis Betrays Its GiversIf Hollywood ever remakes a Three Stooges movie, Brandeis University should get a leading role. The school’s decision to shutter its art museum and peddle its artwork is a knuckleheaded move worthy of Moe, Larry and Curly, making a hash of the trust of givers who gave dollars and art to the school. Panicked by the plunge in the value of its endowment because of the collapsing economy and, apparently, losses from funds it invested with disgraced investor Bernard Madoff, the school’s move is a crass poke in the eye of its supporters. Givers give because they trust charities to use their gifts the way the givers intend and expect them to be used. Precisely because the economic crisis is putting them under growing financial stress, nonprofits need to be clear-headed, ethical and vigilant in honoring the intent of their givers and steering clear of ham-fisted moves like the one Brandeis aims to pull off. The intent of givers matters: Princeton, for example, recently agreed to pay nearly $100 million in settling a lawsuit by a donor’s family that had charged the school violated the terms of a gift by failing to use the money for the purpose for which it was given. Now, by shutting its museum and hawking for quick cash a collection of artworks that were intended to be perpetual gifts, Brandeis has become a role model for nonprofits behaving badly. Giving is the lifeblood of nonprofits, and it is rooted in trust. To survive the deepening financial crisis, nonprofits must work harder than ever to earn and keep the trust of their givers. But if, like bumbling fools, they whack their givers upside the head, nonprofits will shoot themselves in the heart.
Posted by Kelsey Walker
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| February 12, 2009 01:00 PM |
Why I Wish Nonprofits Would Stop Using the Word ‘Minorities’We’ve got to stop using the word “minorities” to describe the communities we serve. It doesn’t have any value. It never has. I’ve been thinking a lot about language lately. How it can inspire or enrage, clarify or condemn. The English major in me wants to take a red pen to all the useless jargon we promote in our organizations, starting with how we talk about the people we serve. Because part of the role of nonprofits, I believe, is not only to drive social change, but to also reframe the way America looks at social problems. For years, we’ve made a pity party out of the fact that “XX percent of the people we serve are minorities” as if this were in itself a reason to support our cause. One of my first jobs was as a grantwriter for a small community development agency. Way back when I literally knew nothing about nonprofits or philanthropy, it baffled me as to why our grant language was littered with terminology about “serving minorities” and helping “at-risk youth.” A minority compared to whom? At-risk of what, exactly? A better term to use that is highly regarded by academics is “people of color” which encompasses all people who are non-white. It’s a term that I prefer, and one you’ll notice me using a lot here on this blog. The term “people of color” has a more positive connotation than “minorities.” “People of color” have cultural significance, while “minorities” conjure up images of people that are worth less than the majority, marginalized, minor. As an African American, I’ve never wanted to be known by a term that makes me feel like I don’t matter. That reminds me I’m not majorly important just because of my race. Many nonprofits use the word “minorities” as a blanket term to indicate that they provide services for underrepresented groups including African Americans, Hispanics, Asian Americans, Pacific Islanders, Native Americans, and so on. Why don’t we just be specific and name the communities we serve rather than being lazy with it? In Washington, DC, many nonprofits serve 100 percent African Americans. Much better to say that than to call your youth or homeless clients “ethnic minorities.” It means nothing except to connote a group of people that get stuck on the bottom of society’s shoe. Anyway, as we know in this country the minority is becoming the majority. As the New York Times has reported: Ethnic and racial minorities will comprise a majority of the nation’s population in a little more than a generation, according to new Census Bureau projections, a transformation that is occurring faster than anticipated just a few years ago. The census calculates that by 2042, Americans who identify themselves as Hispanic, black, Asian, American Indian, Native Hawaiian and Pacific Islander will together outnumber non-Hispanic whites. Four years ago, officials had projected the shift would come in 2050. As the times change, we might as well get rid of the antiquated language that remains a huge barrier to our cultural competence.
Posted by Kelsey Walker
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| February 27, 2009 11:00 AM |
Selling Vs. Selling OutThe real question is not whether social investing will become real, or whether it will become a more important asset class. Social investment is growing, and its growth is in line with societal trends that are both on the rise in their acceptance and in line with the realities of limited environmental resources and economic transformation. Based on the trends I’m seeing, I’m declaring the question settled. Yes, social venture capital is both a valid emerging asset class and in the forefront in its ability to deliver scalable social impact at low cost and provide an actual financial return that helps support the mission and the enterprise. So the only question remaining is how are you going to manage exits? Nobody wants to end up like Ben and Jerry’s, where soon after a multinational acquired it, key facets of its social mission were cut from the company. What kind of social mission was lost? The ethical rule that Chunky Monkey would never have bovine growth hormone was kept under the Unilever regime; it was a value that consumers bought every time they bought a pint and was on the label. What was gone? Hidden charitable subsidization of a social mission through non-profit partner ice cream shops. At those shops, 40 percent of the workforce was composed of at-risk youth who learned from social workers and job supervisors how to have a bank account and to complete a high school equivalency exam. Exit is what matters now. The question is no longer can you build the second generation of socially responsible business, enterprises that bake their social mission into their business operations. The question is not even can those businesses make enough money to pay off investors. The question is, can the social mission survive the exit of the founders and the sale to new owners? Can it do so while still rewarding the people and the investors who took the risk to build a big business that delivers scalable social impact along with profit? Judy Wick of White Dog Café has recently sold her iconic Pittsburgh restaurant but retained the rights to the brand and the ability to swoop back in to take over if she feels the mission is being compromised. While there’s a lot to like in that approach, we at Good Capital have come up with something with our portfolio company Better World Books (BWB) that has a lot to commend it. We have created a new social impact model which carves out a 5 percent ownership stake for the company’s key literacy partners and grants stock options based upon the non profits’ ability to hit their stated literacy targets and increase the volume and quality of books collected in book drives that provide BWB with its inventory. Here’s a slide presentation on the details All the stockholders have to be satisfied if BWB sells. That means Books for Africa’s interests will have to represented at the table when the company negotiates with a buyer, if that should happen, say, five years from now. Unlike Ben and Jerry’s, where the private philanthropy of the owners was stripped away after the sale to the multinational, we will have set a price on a non profit’s meeting its literacy goals. That price will be equated with shares in BWB that have a financial value. The mission can’t really go away in this company after a sale. If BWB ever does sell to a larger company, the mission has been baked in, and the social return will be directly convertible to a financial investment. We have aligned the interests of the social mission and the financial mission in a way that has rarely been done before, perhaps never in the context of a private, for-profit company. How this will exactly play out will be determined by a mix of market conditions, BWB’s ability to execute as a fast growing business, and the ecosystem of goodwill, partners, and advisors it continues to accumulate around itself. But in this deal at least, selling should not result in selling out. The non-profits and the social mission are going to be counted in a way they’ve never been counted before.
Posted by Kelsey Walker
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| March 6, 2009 11:34 AM |
Remix CultureAs the recent copyright woes of Obama poster artist Shepard Fairey show, there’s a war raging over what some now are calling a new art form in the emerging Web 2.0 culture—remix. Broadly defined, remix is collage, a recombination of existing, reference images or music and video clips from popular digital culture, elements of which are mashed up into something new. As thousands of people share and produce their own mashups and remixes online, an urgent question is emerging across today’s cultural landscape: Should remix be outlawed as a violation of an artist’s or photographer’s copyright or—as long as the remix is significantly altered from the original—should remix be permitted by law to be shared freely, via social media, across the Web and in popular culture at large? At the New York Public Library last week, remixer/street artist Fairey, copyright scholar Larry Lessig, and author Steven Johnson all argued for free expression, saying remix is a form of self-expression and free speech that should be allowed to flow mostly unrestricted across today’s burgeoning digital world. “Remix is literacy in the 21st century,” Lessig said. The chief of Stanford University’s Center for Internet and Society, Lessig is the author of Remix: Making Art and Commerce Thrive in the Hybrid Economy. He said that failing to legally protect remixes as original forms of art and expression “will make pirates of our children…We cannot kill this form of expression; we can only criminalize it, drive it underground. We can’t make [remixers] passive, we can only make them pirates.” For his part, Johnson, author of The Invention of Air, a new book about the history of information flows in American and British society, said remix has “deep roots in the Age of Enlightenment and among America’s Founding Fathers.” He said that Thomas Jefferson, no less, remixed the Bible to produce his own underground version of it; Johnson refers to that effort as “the original American remix.” Said Johnson: “Where do we think innovation and creativity come from—protecting ideas or setting them free, allowing them to circulate freely?” Fairey rounded out the talk, citing remix as one of the early 21st century’s most popular forms of free political expression. Fairey said his most “potent” remix is not his iconic, 2008 Obama Hope poster [over which he is being sued by the Associated Press and is countersuing for the right to have made it]—but his 2005 remix, Greetings from Iraq, a reference to a 1930s-era, WPA-produced Yellowstone Park tourism poster. “This referenced something that advertised a geyser to go see; I’ve made that geyser into an explosion, figuring it as something to go run from,” Fairey said. “...Remix is all about making references; references are how you establish a point of view in popular culture, and they are crucial to my work as an artist.” What do you think? [Fairey’s 2005 remix, left; the original Yellowstone poster, right]
Here are some of Lessig’s examples of popular remix, which he included as part of his talk:
What do you think? Protect remixes or crack down on them?
Posted by Kelsey Walker
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| March 9, 2009 09:00 AM |
Giving Sector Should Get Over Sense of EntitlementSlapped in the face by the economic crisis, nonprofits should be focusing on how to best run their shops, serve their clients and engage their givers. The news is grim: Paul Light of New York University expects 100,000 of the 1.3 million nonprofits in the U.S. to fail this year, while a new survey by consulting firm Marts & Lundy says the recession has triggered roughly 20 percent in staff cuts at nonprofits. And barely a day passes without reports of charitable retrenchment. But despite the reality check, nonprofits and foundations alike seem lost in their delusion of entitlement. Instead of getting their act together and making their own way, nonprofits are rushing to belly up to the federal-stimulus buffet while moaning that the federal government is ignoring them and that proposed limits on tax deductions for charitable contributions will hurt them. And foundations continue to squeeze out crocodile tears about the decline in the value of their investments, forced tears that cloud the vision of foundation officials so badly they cannot read the bank statements showing they still control vast wealth. That wealth, which givers donated to foundations to support charitable causes, is not the personal piggy bank of foundations’ boards and staff, or an investment portfolio for perpetuating their personal power. Despite the drop in its value, foundations can and should use that wealth to address the urgent needs of nonprofits and the communities they serve, needs that are escalating in inverse proportion to the free-fall of the U.S. economy. Foundations need to do a lot better. In “Philanthropy at its Best,” released last week, the National Committee for Responsive Philanthropy prescribes benchmarks designed “to assess and enhance” grantmakers’ impact. Saying the largest U.S. foundations give only one of every three dollars, for example, to benefit “the economically and socially disadvantaged,” the watchdog group wants every foundation to make its board more diverse, and to invest at least half its annual giving in meeting the needs of low-income communities, communities of color and marginalized groups, and one-fourth for advocacy, organizing and civic engagement. Foundations should in fact be required to give more of their assets in return for the generous tax breaks they and their donors enjoy, and they should indeed be pushed to give more to groups mainstream philanthropy often ignores. And instead of griping about the plunge in the value of their assets all the way to their expensive luncheons and gala dinners, foundations should be digging deeper than ever to address urgent social and global problems that simply are getting worse in the economic crisis. But forcing foundations to pick their boards and make their grants to better reflect the complex demographics of the communities they serve would betray the free choice in which democracy and the charitable marketplace are rooted and on which their survival and success depend. And where would the mandates stop? Should foundations also be required to make their boards and grants better reflect the broad range of spiritual belief, political affiliation, sexual orientation and cultural taste in their communities? And who would be the final judge of whether the makeup of the board and grants was correct? The pain and suffering the economic crisis is causing for millions of people, including the most vulnerable among us, underscore the need to foster a charitable marketplace that will expand and improve giving and its impact, and produce the most effective solutions to our most urgent social problems. That requires a charitable marketplace that is open, competitive and fair. Nonprofits must be free to develop the strategies and partnerships they believe will strengthen their operations, more effectively serve their clients, and better engage givers. Foundations and individual givers must be free to invest in the charitable causes they choose. And because they have failed to show they can police themselves, nonprofits and foundations must be subject to tougher regulation that is even-handed and requires they be more open and accountable for the way they do business. Regulations also must require that foundations pay out a bigger share of their assets in grants. Foundations now must pay out only five percent of their assets each year, and they can count overhead costs as part of that payout. In donating their assets to foundations, givers dedicate those assets to support charitable causes, and receive big up-front tax breaks in return. Instead of sitting on their assets, foundations should give more of those funds to the charitable causes they were donated to support. In a collapsing economy, the tired claim by foundations that paying out more of their assets will force them out of business rings hollow, whiny, self-serving and plain selfish. With Washington policymakers at a loss to know how to fix our malignant economy and overwhelming social problems, foundations and nonprofits need to get over their sense of entitlement, face reality and make their operations and programs leaner and smarter. Moving beyond their belief that their cause alone entitles them to the support they need, nonprofits must prove their value and effectiveness in a fiercely competitive charitable marketplace that will get only more cut-throat as the economic crisis deepens. Foundations, which do not get a license to operate virtually unchecked simply because they control donated wealth, need to stop making empty promises that they can police themselves. Instead, foundations must start giving the taxpaying public a full accounting of their operations and a fair return on the tax breaks they and their donors enjoy. In the face of the damage the imploding economy is causing, the indispensable role the giving sector plays in addressing social and global problems has never been more clear. Playing that role effectively will require that givers and nonprofits alike stop complaining and instead develop strategies and partnerships that can succeed in the charitable marketplace.
Posted by Kelsey Walker
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| March 20, 2009 11:00 AM |
Nonprofit Accounting Rules Not the Solution to For-Profit AccountabilityIn The New York Times Feb. 17 op-ed, “Soup Kitchen Accounting,” Dietrick and Granof suggest that the banks now being bailed out with our tax dollars need to be held to strict public account and therefore should take a page from the nonprofit accounting manual. God forbid. We do not approve of torture. If the question is how to make banks more functional, or how to ensure that they are now doing the right thing for us with our collective investments, you have to look elsewhere. To be sure, banks requiring public money to bolster balance sheets or fund unprofitable operations should be required to account for themselves, fulfill explicit objectives and—well—deliver. But nonprofit accounting is a fast track in the wrong direction. No matter how badly the money center banks have been managed (and these folks have evidently broken all previous records on a number of counts), they don’t deserve the dysfunctional, punitive accounting rules that hamstring the nonprofit sector now. Our rules are management-unfriendly in numerous and inordinate ways. They violate the matching principle, conflate regular operating revenue with capital infusions (to general puzzlement of boards, funders and managers) and faithfully reinforce a sector-wide logic error: the substitution of inputs (how, in dysfunctional and paralytic detail, did you spend the money?) for a metric of true transparency—results (what happened as a result of spending the money?) This has let to a debilitating sector-wide obsession with meaningless benchmarks such as overhead rate and fundraising expense—to the detriment of understanding what works, robust capitalization and constantly improving results. And thus to the banks. We need to look at the banking system for what it is, necessary public infrastructure. And the goal here is to save them from failure. Beyond the blood sport of punishing them, our enlightened self interest would encourage us to seek solutions that allow them to recover. And that would include returning them to profitability. And an uncomfortable “aha” for us is that for money center banks, conventional lending of the type we need to be able to lubricate the economy is largely unprofitable. Moreover, most banks now accommodate two or three shadow decision-makers in the person of regulators from the OCC, FDIC, Federal Reserve and others. Several layers of bureaucratic and regulatory oversight has already slowed loan production, workouts and operations, reducing already narrowed margins to zero and demoralizing the last bank staff standing. We can tell you…nonprofit accounting would be the final straw. Nonprofit accounting takes us far, far away from the ownership information that we, the outraged – and reluctant – equity holders should expect. The authors’ point about accountability is reasonable, but their conclusion is not. As the adage goes, “accountant, heal thyself!” The conclusion should be that if the trusted professional infrastructure of the economy—bank regulators, bond rating agencies, consulting firms, securities dealers and yes, accountants—had been doing their jobs with the perfectly adequate tools that for-profit accounting and disclosure rules provide, we might not be in this mess. And then the nonprofit sector, (hampered as it is with an obfuscatory and expensive set of accounting rules) would not be cleaning up the human damage with food banks, homeless shelters and emergency medical clinics.
Posted by Katie Harrington
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| July 1, 2009 12:07 PM |
Time for nonprofits to declare independenceNonprofits are society’s unsung heroes. Sadly, however, many see themselves as victims and supplicants, or at least act as if they are. Nonprofits are heroic because they address the symptoms and causes of urgent social and global problems that government and business cannot or will not take on. Nonprofits work hard for little pay, continually are expected to do more with less, and face growing scrutiny and expectations from funders. And in the current economic recession, with rising demand for services, nonprofits face growing pressure to reduce costs and increase their fundraising and impact. With those kinds of seemingly intolerable working conditions and stress, people who work at nonprofits often feel alone, under siege and burned out. They stick with it, however, because they care, and because they find fulfilling the job of making a difference and working with people in need and with other people who care. Yet, needing revenue to meet their payroll and pay their rent, and fearing they lack the know-how to map a business strategy to sustain their organizations, they are too quick to swallow funders’ demands and consultants’ advice without critically questioning it. Nonprofits are not victims and should not underestimate the knowledge of their staff and board, the value of their programs and services, the extent of their impact in the communities they serve, or their potential to generate even more contributed and earned income. Rather than falling prey to the herd hysteria the recession has unleashed in the giving sector, nonprofits should treat the economic crisis as an opportunity to get back to basics and recognize the value and impact of the work they do and the untapped potential they possess to do more and do it better. That means scrutinizing their mission, board, staff, operations and programs with brutal honesty. It means using common sense to look for ways to improve their efficiency, impact, fundraising and communications. And it means finding smart supporters and partners who care about their cause and understand that getting involved by making a donation, volunteering, serving on a board, collaborating or even merging requires recognizing the organization’s true needs and potential. Nonprofits play an indispensable role in America, serving both as the safety net for the most vulnerable among us, and as the research-and-development arm to find ways to fix our biggest social and global problems. America’s economic crisis has underscored nonprofits’ role and value, and compounded the challenges they face. To fulfill their role, expand their value and meet those challenges, nonprofits must stop acting like victims and start thinking and working as independent and entrepreneurial agents for social change.
Posted by Jason Chua
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| July 6, 2009 08:25 AM |
Rethinking Compensation for NonprofitsImagine that you’ve built a business that generates $10 million in revenue per year. What would be a fair level of compensation to expect? Now, imagine that this enterprise is a program that helps low-wage workers receive Earned Income Tax Credit funds, and that the $10 million is the net amount of value the program brings to low-income neighborhoods. How did this change your estimate of fair compensation? As a society, we pride ourselves on our generosity of spirit and purse – on helping people in need and on championing causes that matter to us. Why, then, do we pay so little to the people who work for the things we say matter most to us – the well-being of our children and the elderly, our environment, the interests of groups like disabled veterans or disaster survivors? In his book Uncharitable, Dan Pallotta makes a compelling case for completely rethinking compensation in the nonprofit sector . (Incidentally, chapter 2 of Pallotta’s book should be required reading in all business, law and management courses claiming to put the nonprofit sector in context.) The challenging question Uncharitable poses to all of us is what would a new approach to nonprofit compensation look like? Let’s start off by looking at approaches to compensation in the for-profit world. While nonprofit workers struggle to get adequate compensation for their contributions, the for-profit world, of course, presents compensation problems at the other extreme. Most recently, the bonuses AIG paid out using federal bailout funds has symbolized these excesses, but over the past 20+ years we’ve seen leading executives receive shockingly high amounts of pay. In the aftermath of the financial meltdown, the government’s response to the problem so far has been to appoint a “compensation czar” to set executive pay limits. A more promising approach being discussed in the finance world is tying compensation to longer-term results and productivity gains. The argument is that such an approach, sometimes referred to as “Silicon Valley Compensation,” may both preserve high rewards for innovative or significantly superior performance and simultaneously reduce the potential for kleptocracy. As noted economist Brad DeLong explains in a recent post:
Nonprofit pay dynamics also call out for Silicon Valley rules, not because pay is excessive but because it is too low. When successful nonprofits deliver extraordinary results, we all benefit, but the sector does not capture and recycle any of that value into attracting and keeping more talented people. Because it is hard to “see,” and therefore put a price upon, the value that nonprofits produce, funders, employers and watchdogs alike all focus solely on the pay nonprofit leaders and employees receive, rather than the value they create. That leaves them – and more importantly, the people and causes they serve – at the mercy of the perverse expectation that nonprofit workers should sacrifice financial stability and secure futures for themselves and their families. (Pallotta traces this distortion to the carry-over effect of Puritan ethics). Remember the thought exercise from the first paragraph? In the first example (for-profit), “fair compensation” would include a nice salary, bonuses and perhaps an exit package that will allow you to maintain a comfortable lifestyle. In the second case (nonprofit) however, you could expect no more than a base salary, simply because you work for a charitable organization. Paying people tied to the value they deliver over a longer term would seem to make sense for any enterprise. But for nonprofits, the problem is two-fold; the challenge is not just how to measure value creation, it is also where to find the surplus revenue to fund increased compensation. For all the talk and debate about results in our sector, in practice, results are rarely measured for a number of reasons. These include the time lag between providing a service or activity and the manifestation of the results, the difficulty in determining what share of the results is attributable to the service or activity rather than other factors, the lack of adequate resources to enable meaningful measurements, and the reluctance of most donors to pay for costs they do not see as essential to the continuing mission of the organization. But assume for the moment we could measure productivity gains and added value. Where, then, would the funding to pay deferred compensation for superior performance come from? Given all the attention venture philanthropy and social enterprise has received over the past 10-15 years, we’ve seen surprisingly little discussion about how to compensate organizations and people who make extraordinary contributions. There is much that funders and the government could do, such as offer loan forgiveness or ROTC-type programs that cover education costs for people who choose to work in the sector (as I’ve argued in SSIR previously). The much harder question is how to offer higher performing nonprofit workers a reasonable chance at increasing income over their careers – the ability to make a living that allows them to stay in the sector without asking their families to sacrifice too much. In a recent post, Robert Egger posed the question of whether the economic downturn, which has created a buyer’s market for talent, offers the nonprofit sector the chance to try out what he calls the “Starbucks” model . This model is one in which moderately increased compensation, significantly improved health and other benefits, could help nonprofits compete for the best people . It would be a very positive sight to see more public good organizations and their donors adopt this model. Unfortunately, the dominant trends at the moment – layoffs, hiring and wage freezes, sharp cuts in foundation and government funding – are pushing in quite the opposite direction. It will likely take years of experimentation (and yes, venture capital) to solve this challenge. There has been a great deal of energy put into prize philanthropy in recent years. What if a similar amount of funding and attention were put into bonus pools for collaboratives working on challenges suitable for result measurement? Might we learn something from the way cooperatives measure and reward contribution to the whole? Perhaps the workforces of different organizations could be assigned shares of a pool of “success funds.” Think about your favorite cause or nonprofit. If you could prove that your favorite charitable venture produces, let’s say, $5 in value for every $1 invested in it, how would you persuade donors to pay a premium for that rate of value creation, what would that premium be, and how would you allow your workers to participate in that success?
Posted by Jason Chua
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| January 18, 2010 12:29 PM |
We’re Lost But Making Good TimeDespite my many years of stridently stressing the importance of outcomes and assessment for nonprofits, I have grown increasingly worried that the vast majority of outcomes efforts will yield, at best, marginal benefit. Granted, the Edna McConnell Clark Foundation and a few others have keenly focused on the challenge of social outcomes and have dealt with them well. Yet many other efforts may end up misdirecting, even wasting, precious time and financial resources. In some extreme situations, well-intentioned efforts may actually risk producing adverse effects on nonprofits and those they serve.
Most outcomes efforts today have drifted far from that end. Too often, measurement has become an end in and of itself. - If greater benefits were the end, the sector’s dialogue on outcomes would be 95% about mission and 5% about metrics. Today, we have the ratio reversed. - If greater benefits were the end, nonprofits would be driving the discussion about outcomes—not funders. Attempts to define outcomes seldom produce positive benefits when they are imposed on organizations from the outside. - If greater benefits were the end, we would be working to help nonprofits clarify the end results they are trying to achieve. Achieving clarity of purpose produces increased benefits even if you never put a single metric in place! - If greater benefits were the end, we would properly differentiate between operational performance and organizational effectiveness. What good is it to focus on an organization’s overhead costs or fund development levels if we don’t have a clue as to how effective the organization is at creating benefits for those it serves? - If greater benefits were the end, we would own up to how much encouragement and support nonprofits need in order to define and assess what they do and how well they do it. We’ve approached this challenge as if it’s about numbers when it’s really about changing cultures. Changing culture requires large and persistent investments of time, talent, and money.
Like most people, I believe we need ways to judge our schools and how well our students are doing. But No Child Left Behind does these things poorly. It’s the classic example of metrics over mission. The current regime of “memorization and testing” and the growing battery of standardized tests risk rewarding targeted test preparation while not informing us or the students themselves whether they are developing the relevant skills and competencies they and our society and economy so sorely need. Yes, it’s very important to achieve—and measure—core competencies like reading and math. But where are the incentives for schools to educate young people to be curious, engaged citizens capable of critical thinking and problem solving? Where are the incentives to encourage collaborative development and learning? Where are the incentives to give students practical experience in the ways of life outside of school?
In the early years of Venture Philanthropy Partners, we got a lot of resistance to my push for “clearly defined outcomes” from leaders whose organizations placed a premium on being holistic with their services and functioning as “community builders.” Although I agreed with them in concept, I felt that a focus on “community building” was too soft to be a legitimate outcome. Outcomes related to “community building” are, after all, radically ambiguous compared to outcomes like reduction in teenage pregnancy and substance abuse. I now see better that serving the entire family (holistic services) and building community are some of the very things that create the environment—a web of support and community—that helps youth avoid high-risk behavior, get an education, and prepare for college or a job. But talking about “community building” was too intangible, and not readily measureable to us at the time—and, candidly, difficult to sell to our own stakeholders and the emerging field of nonprofit performance at large. I regret not being more open in my thinking back then. Instead of pushing back on what we were hearing, we should have done more to understand “soft” achievements that may in fact be every bit as real and important as “harder” outcomes. I aspire to do a better job of making them part and parcel of future efforts to assess outcomes and performance—even if that means using qualitative and/or anecdotal indicators. The point is this: When public or private funders establish performance metrics and then tie significant rewards or consequences to their achievement, organizations and people will migrate to the behaviors that will allow them to meet their defined targets. If the metrics are appropriate and closely tied to mission, this is a good thing. But if the metrics are overly simplistic and unmoored from mission, then organizations will go racing in the wrong direction. To paraphrase Yogi Berra, they’ll get lost, but they’ll be making good time.
Thanks to my good friends at the Edna McConnell Clark Foundation, in the field of human services I often hold up the work of Youth Villages. Youth Villages, which helps emotionally troubled children through a wide range of residential- and community-based treatment programs in 11 states, rigorously tracks all of the children it serves, during their treatment and often for two years after they discharge. In the words of CEO Pat Lawler, “The state…shouldn’t be buying beds; they should buy outcomes, successful outcomes.”
Posted by Samantha Penabad
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| March 12, 2010 12:24 PM |
Hitting Reset on ‘Outcomes’Back in January, I wrote about my deep, nagging fear that many efforts to assess outcomes are woefully off track. Not everyone agreed with my analysis. In fact, I got hard pushback on some points, and a few commentators wondered why it had taken me so long to own up to my own limitations in my approach over the years to the topic of outcomes. The majority, however, agreed with the thesis that we’ve lost sight of the ends we’re trying to advance. In the wise words of David Hunter, Managing Partner of Hunter Consulting and former Director of Assessment for the Edna McConnell Clark Foundation: “It seems to me that the mess you describe indeed is enormous and very destructive—because few people involved in this work have thought deeply about managing towards outcomes and [they] have put the horse before the cart—focusing…on HOW to measure rather than on WHY measure…and WHAT to measure.” Sins of Commission, Sins of Omission We must be intentional about surfacing these roiling frustrations that are rarely getting voiced. If we don’t, we’re going to continue to perpetrate sins of commission and omission that prevent us from making even the slightest dent in the failing status quo that defines education, healthcare, and social services in America. The most common sin of commission is when we funders, in the name of “measurement” and “accountability,” foist unfunded, often overly simplistic, self-serving mandates on our grantees—rather than genuinely helping them define, create, and use the information they need to be disciplined managers. The sin of omission I often see is when funders and nonprofits run away from outcomes and their measurement altogether—that is, nothing assesses whether nonprofits are delivering on their promises to the families who turn to them for services. It’s About Management, Not Metrics
What Managing to Outcomes Looks Like When Canada was asked to define success for HCZ, he said, “The only benchmark of success is college graduation. That’s the only one: How many kids you got in college, how many kids you got out.” Canada could not have been clearer on the ultimate outcomes HCZ is focused on achieving. It’s not improving reading levels. It’s not getting kids to graduate high school. It’s not helping kids get into college. To HCZ, these are important interim indicators to ensure they are moving in the right direction, but, ultimately, it’s ensuring those young people make it through college that matters. With that great clarity as a starting point, Canada and his team, with the help of the Edna McConnell Clark Foundation, Bridgespan, and others, have gotten good at identifying the information they need to collect in order to manage to these outcomes. Are all the kids in the HCZ graduating from college? Of course not. But HCZ is on a very promising path. A Challenge to Us All If your nonprofit has defined your intended outcomes and maybe even progressed to reporting on them, then please stop, step back, and rigorously question what you’ve done (or plan to do). Remember the critical, first-order question, “To what end?” Think about Geoff Canada. Are you on a path to gain the clarity he has achieved (after many years of struggle!) on the ends he’s trying to advance for the children and young people he serves? I encourage nonprofits to undertake facilitated discussions, perhaps inviting informed voices to brief their boards and staff. For example, I’ve been fortunate to be deeply engaged with The Lawrence School in Northeast Ohio, which serves grades 1-12 students with learning differences and attention-deficit disorders. We have benefited greatly by having a facilitator—a seasoned, skilled professional who understands management and organizations well—lead working groups of board and staff to sort out and define fundamental aspects of what the school does and represents. The facilitator has helped us conduct concerted and lengthy efforts to gain greater clarity of mission and vision and define the school’s guiding principles and underlying values. Similarly, discussions are well along to clarify and explain more clearly whom the school serves and to define, with specificity, its educational model and how it differentiates itself from other educational approaches. The gains have been nothing short of transformational. None of this suggests in any way that summative and formative evaluation are not important, particularly for building information about what works and what doesn’t for the field or a discipline. But if we really want to help organizations deliver quality services most effectively, then our priority must be on identifying the nonprofits with the willingness, propensity, and capacity to manage to outcomes—and then helping them do just that, with strong encouragement, significant funding, and relevant expertise.
Posted by Samantha Penabad
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| February 6, 2006 08:55 PM |
Foundations and accountabilityA recent scholarly conference on “Foundations, Accountability, and Transparency in a Democratic Society” sponsored by the Rockefeller Brothers Fund raised once again the long-standing issues of accountability in the foundation world. The primary focus of the conference was the tension that has existed since the emergence of private foundations at the beginning of the 20th century, between the private nature of foundations (as “private preserves and none of the public’s business”) and their public character as influential players in a democratic society and therefore appropriately subject to democratic control. Posted by Bruce Sievers
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| February 8, 2006 03:52 PM |
Foundations and accountabilityA recent scholarly conference on “Foundations, Accountability, and Transparency in a Democratic Society” sponsored by the Rockefeller Brothers Fund raised once again the long-standing issues of accountability in the foundation world. The primary focus of the conference was the tension that has existed since the emergence of private foundations at the beginning of the 20th century,between the private nature of foundations (as “private preserves and none of the public’s business”) and their public character as influential players in a democratic society and therefore appropriately subject to democratic control. How accountable should foundations be? The first challenge in answering this question of course is defining what “accountability” means for foundations: Accountable to whom—their donors? their grantees? the IRS? the public at large? And accountable for what,performance? responsiveness? achieving equity? advancing social creativity? Neither the historical origins nor the legal status of foundations provide unambiguous answers to these questions. The current version of the debate between private and public purposes of foundations can be found in discussions of the recent recommendations of the Independent Sector Panel to the Senate Finance Committee (too much circling of the wagons?); the Council on Foundations’ action in censuring the J. Paul Getty Trust for its failure to disclose information (too mild/too harsh?); and foundation payout requirements (to increase or not?). Rob Reich’s cover essay in the current issue of SSIR raises the issue in yet a different way: Should foundations be encouraged or compelled through mandates or incentives to give preference to organizations that pursue the democreatic ideal of social equity? All of these questions return to the fundamental issue of whether there should be greater public control over foundations in a democratic society. What do SSIR readers think? Posted by Chris (Solspace)
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| October 10, 2006 06:34 AM |
The Sham of ResponsibilityIt seems we’ve come to a point where the notion of personal responsibility in public life evokes little more than nostalgia among the elderly for a time when there were more operant values – be it in government or the nonprofit sector. House Speaker Dennis Hastert “accepts responsibility” but sidesteps what appears to be his complicity in covering up the salacious and inappropriate behavior of a colleague, seemingly preferring the partisan maintenance of a Republican majority over the protection of young congressional pages. Yet for Hastert, accepting responsibility means nothing – it has no cost and serves no purpose; he maintains his position and pays no price! In something of a parallel failure of personal responsibility in the nonprofit sector, Louise Bryson maintains the board chair of the J. Paul Getty Trust after its president resigns in disgrace and the California attorney general confirms that that was the right thing for him to have done – financial misdeeds, misjudgments and what some might see as his own sophisticated version of salacious behavior, all on Ms. Bryson’s watch. Not only is there no substantive mea culpa heard from the board’s officers or members, they even refuse to reveal details of the misdeeds though the broad outlines are known, still keeping the wagons circled in their own variant on partisan protection. And the Getty folks are not alone in the nonprofit sector. The charitable community may not approach the soulless depths of politicians, but I fear we have the potential to spiral further down. The public officials who brought the world the Iraq debacle model the worst by continuing to try to lie their way out of personal responsibility for that human, political and economic catastrophe. Yet, with increasing public attention to the real and perceived abuses of charitable privilege by hospitals, philanthropies, disaster relief groups, religious organizations and others, unless nonprofit and foundation leaders are more willing to speak the truth about their own mistakes and those of their colleagues, we may soon find ourselves swirling around in just such a flushing vortex. To maintain the public trust and confidence, the nonprofit sector must be accountable for – and beyond – what laws and regulations require (as a resource, see Independent Sector). That necessitates personal responsibility by volunteers, staff and especially the board. When we fail to meet basic standards of vigilance and due diligence, of conduct, when we fail to behave ethically, it is appropriate to feel embarrassment, and it is appropriate also to act on that feeling, to make it manifest and real. A failure of responsibility must have consequences or it is a sham. To pull a facile Hastert is to continue to fail the public whose stewardship we are to serve as nonprofit volunteers, staff or board – or as public officials. Accountability, woefully, sometimes requires shame – and shame requires action.
Posted by Mark Rosenman
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| June 20, 2007 11:14 AM |
Restricted Funding Misses the Point
How and why did this project-specific, restricted, limits-on-overhead approach get so entrenched and widespread in the first place? It has been standard practice now for decades. I know that in part, funders are looking for accountability and results from grantees. Accountability (in both directions) is a valid principle in a grantor-grantee relationship. But this seems like a classic case of the right question with the wrong answer. For starters, I challenge anyone to consistently and accurately define what precisely constitutes “operating expenses” or “overhead” or “administration” or whatever you call it. There are no FASB or IRS standards. The way various nonprofits define and report them is widely disparate. If you can’t define or measure it, how can you base your whole funding strategy on it? Funding is a significant influence on the behavior and priorities of nonprofits. By putting such a priority on overhead as a criterion for success, we are telling grantees to focus on the means, not the ends. If we told them that social outcomes were the priority, they would focus more on that. There has to be accountability, but to what? By using overhead expense to measure effectiveness, we are not connecting funding to social goals or impact! Program spending is trackable (in theory), but it tells us little about impact. No one, including Social Venture Partners, can claim piety regarding funding practices. The points above don’t even address the positives of unrestricted funding for nonprofits–more flexibility, improved responsiveness to changing community conditions, less accounting work, more priority on outcomes and impact, etc…. In our need to have an answer to the question of accountability, funders are focusing on the wrong things and in turn, focusing our grantees on the wrong things. Do you agree? What am I missing?
Posted by SSIR Editor
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| July 10, 2007 11:56 AM |
The True Test of LeadershipIn the now classic film Apocalypse Now, the scene that has always struck me as perhaps the most frightening is the one in which Captain Willard (played by Martin Sheen), on his quest upriver to find Colonel Kurtz, comes to a camp where American soldiers rebuild a bridge each day, and the Viet Cong blow it up each night. When Willard asks a soldier, “Who’s in charge here?” the soldier replies, “Ain’t you?” Discussions of leadership and accountability in the nonprofit sector are everywhere, and perennial—they repeat themselves. But sadly, they are usually overly narrow. For example, most discussions of accountability focus on transparency and governance mechanisms meant to ensure truth telling. As important as these aspects are, they approach only one level of accountability. Properly understood, accountability has at least three key levels (as I’ve written elsewhere): Leadership is too often taken up separately from accountability. In many views, accountability is on a separate track altogether—a matter of merely complying with regulations, and implementing administrative practices to support that compliance. And when leadership and accountability are discussed together, accountability is often viewed as simply a function of a leader’s character (honesty, candor, and the like). But the true test of leadership should be the same as the highest concept of accountability: Does the leader do everything in her power to accomplish the mission, to keep her promise to those served? Too often we only talk about all the reasons something cannot be done, or why it is not our job to do it. In bureaucracies (be they government, nonprofit, or private sector), the incentives are often only negative. Taking risks never results in rewards, only punishment. There is safety in the narrow view, and so it prevails. That narrower approach can keep us on the right side of the “Don’t rip us off” level of accountability, but it can also undercut the “Be effective” and “Promise keeping” levels. That narrow view won’t cure cancer, or stop global warming, or cut poverty by half, or inspire people to be their best selves; it won’t do any of the things nonprofits exist to do, or that we should demand that government accomplish. In a recent discussion with some friends, they observed that how we frame our questions makes a huge difference in what we can accomplish. Asking “How can we do it?” is worlds apart from “Can it be done?” Which question seems more likely to lead to social innovation? Which is better suited to meeting our highest duties? Devoting so much attention and energy to the “Don’t rip us off” level of accountability—particularly in the nonprofit sector—has been a huge missed opportunity. The scene from Apocalypse Now is frightening on multiple levels, but two among them are (1) no one seems to be responsible for the fate of the soldiers and their mission, and (2) the soldiers themselves feel constrained to play the role that so clearly isn’t working for them. (“Stay the course,” anyone?) If you don’t stretch to meet your promise-keeping duty—the greater vision—even the most honest and capable people can find themselves in a similar box. The job of leadership, or promise keeping, is to reveal the possibilities.
Posted by SSIR Editor
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| January 20, 2009 12:00 PM |
Prizes for Nonproft Mergers and PartnershipsThis is an update to an earlier blog posting I wrote for SSIR about The Collaboration Prize, being offered jointly by the Lodestar Foundation and the Arizona-Indiana-Michigan Alliance (AIM). This unique competition will award a cash prize of $250,000 to the best nonprofit collaboration in the country. Out of a total of 644 entries received for the competition, the blue ribbon selection committee narrowed the list down to the top thirty collaborations last December. Today the Lodestar Foundation and AIM announced the top eight finalists for the award, out of which the eventual winner will be chosen. The winner of the prize will be announced March 5th. The Collaboration Prize finalists (in alphabetical order) are:
This is an incredibly diverse list of collaborations and mergers and there is much to be admired and learned from all of them. I will be investigating these collaborations further and writing about them for SSIR and in my blog. Congratulations to all the finalists!
Posted by Kelsey Walker
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Kevin Jones is a cofounding principal of 
Marcia Stepanek is Founding Editor-in-Chief and President, News and Information, for 
Clara Miller is President and Chief Executive Officer of Nonprofit Finance Fund (NFF), the only national financial intermediary exclusively committed to social sector finance. Miller speaks and writes extensively about nonprofit capitalization and finance, and has been published recently in the Financial Times, the Chronicle of Philanthropy, Community Wealth Vanguard, Stanford Social Innovation Review, the Nonprofit Quarterly, and Worth Magazine.
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.
Mario Morino, a former software entrepreneur, is the chairman of Venture Philanthropy Partners, based in Washington, DC.
One issue has been sticking in my craw for several weeks now. I’ve recently participated in a handful of conversations, listservs, and conferences that discussed project-specific support vs. general operating support. I admit to my relative inexperience in the field (nine years), but I just don’t get it.
Paul Shoemaker is executive director of Social Venture Partners Seattle and founding president of SVP International. Previous to these positions, he acted as the group manager for worldwide operations at Microsoft Corp. and as a product manager at Nestlé USA.
Jean Butzen, 