1. REPORT SEES INCREASING TENSION BETWEEN GRANTEES AND FOUNDATIONS; A LEADING CAUSE OF NONPROFIT LEADER BURNOUT

Foundations seem to be a leading cause of burnout among current nonprofit leaders. According to a survey by CompassPoint Nonprofit Services and the Eugene and Agnes Meyer Foundation of 2,000 nonprofit leaders nationwide, there is deep dissatisfaction, "even anger," with institutional funders among nonprofit leaders, who resent funder influence in everything from succession planning to program development. Only one in three of the nonprofit leaders surveyed said donors have a good understanding of what nonprofit jobs entail. The report on the study, Daring to Lead 2006 , finds the dissatisfaction so widespread that it suggests more pushback against this funder-grantee dynamic may be in the offing. Funders should be alert to the impact that their funding mechanisms, and not just their funding decisions, have on nonprofit leadership, according to the report. So in addition to increased general operating support and multi-year support - two ideas that survey respondents said would help them most - foundation representatives should listen to nonprofit leaders more closely and have candid conversations with them about what they need. They should also attempt to simplify their grant processes.

2. SOCIAL ENTREPRENEUR PROPONENT CALLS ON FOUNDATIONS TO ALTER THEIR PRACTICES, HELP CAPITALISM EVOLVE TO GENERATE SOCIAL VALUE

Through grantmaking, asset management practices, and effective public policy activities, foundations can play a critical role in supporting what Jed Emerson calls sustainable capitalism, but this will require a fundamental change in foundation practice. Emerson, a senior fellow at the Generation Foundation of Generation Investment Management and a new visiting fellow at the Skoll Centre for Social Entrepreneurship at Oxford University, wrote an essay for the Case Foundation about this new practice, a market-based approach that seeks to generate returns on investments that include a blend of social and environmental as well as economic values. It's a practice that he says is evolving from the 19^th Century concept of industrial capitalism that focuses exclusively on increasing market share, and only considers social needs, through charity, after profit generation. In an online interview with Alliancemagazine, Emerson says foundations are still trapped in this 19^th Century framework, concerned about the distribution of assets over time, instead of managing assets for full value creation. Emerson continues that foundations are too hesitant to take greater risks, which limits their social impact, and that few foundation executives show real leadership by holding their peers accountable and challenging them to achieve their full potential.

3. WHY DON'T FOUNDATIONS PAY CLOSER ATTENTION TO SOCIAL IMPACT OF ASSETS? WEB DISCUSSION SUGGESTS IT'S BECAUSE THERE IS LITTLE INCENTIVE TO DO SO

In his Case Foundation essay and Alliancemagazine interview, Jed Emerson says that foundations should be paying closer attention to the 95 percent of their assets that isn't spent out in an average year. This argument was the focus of conversation in a just-completed online discussion hosted in part by Alliancemagazine's Caroline Hartnell at the Skoll Foundation's Social Edge Web site. Hartnell started this discussion about Social Capital Markets by asking why more foundations don't align their investments with their missions. Several posts suggested it was because of the difficulties involved and a lack of clarity about what types of investments are legal for foundations. Or perhaps it's because foundations aren't demanding that their investment managers invest through a "social screen." One post, from a StanfordUniversityundergraduate, suggested that foundations should tie compensation of their managers to how well they invest their assets in socially responsible ways. Foundations are not investing in explicitly socially responsible ways, according to a second post from this student, because there is no incentive to do so.

4. LATEST BUDGET ANALYSIS FINDS PROPOSED FEDERAL CUTS WOULD POSE MAJOR CHALLENGE TO PRIVATE PHILANTHROPY

Increased private giving, including foundation funding, would not be able to offset the overall cuts in federal spending in program areas of concern to nonprofits that are proposed in President Bush's FY 2007 budget. That's according to the latest analysis of federal budget changes and their impact on nonprofits from Alan Abramson, Lester Salamon, and John Russell of the Aspen Institute and JohnsHopkinsUniversity. In "The Nonprofit Sector and the Federal Budget: Analysis of President Bush's FY 2007 Budget," the researchers indicate that the president's budget would reduce overall federal spending in areas of interest to nonprofits, outside of Medicare and Medicaid, by a total of $78.6 billion over the next five years below current levels, after adjusting for inflation. As a result of these overall reductions, federal support of nonprofits, excluding support of nonprofit health organizations through the Medicare and Medicaid programs, would fall by a cumulative total of $14.3 billion over the same period. Future reports from the Aspen Institute's Nonprofit Sector Research Fund will update the analysis as the FY 2007 budget moves through Congress.

5. ECONOMIST: FOUNDATIONS SHOULD ADOPT BUSINESS-LIKE PRACTICES

The rapid wealth-creation of recent years and its uneven distribution is in large part the reason for a "new enthusiasm for philanthropy," which is creating the field's own kind of "industrial revolution." As its size and influence continue to grow, philanthropy is likely to become an "increasingly hot political potato" around the world, according to the Feb. 25 The Economist. In a 14-page "Survey: Wealth and Philanthropy", the news magazine said that philanthropy is shedding some of its pervasive "amateurism" by adapting business concepts to create what the magazine coined "philanthrocapitalism."

The survey included some particular criticisms of foundations. Among the criticisms: foundations still devote too little effort to measuring results and have "unjustifiably" high administrative costs. Foundations also need to be more transparent about their operations and their research, communicating what they've learned to avoid duplication of effort, especially failures. The real scandal with foundations, though, is how much money "is pissed away," wasted on ineffective activities that don't have an impact, according to HarvardBusinessSchool's Michael Porter. And Lester Salamon of JohnsHopkinsUniversitythinks foundations should start to behave more like philanthropic banks, offering a range of financial products such as loans and loan guarantees in addition to grants.

6. REPORT SUGGESTS FOUNDATIONS MAY CONTINUE TO LOSE INFLUENCE ON NONPROFIT SECTOR, FACE MORE SOCIAL PRESSURE TO SPEND ASSETS

The notion that endowed foundations are the face of philanthropy has less and less validity, and trends suggest that foundations will continue to lose their traditional influence in the nonprofit sector. That's according to Donors of the Future, which suggests that the foundation sector risks losing its significance as newer, more informal giving methods continue to take root. Marcia Sharp of Millennium Communications Group Inc. conducted this scan of philanthropy's future as part of a project sponsored by the Forum of Regional Associations of Grantmakers and the Council on Foundations. Based on a review of studies as well as interviews with experts, Sharp identified 12 key trends expected to affect charitable giving in the years ahead. Beyond increasing racial and ethnic diversity among donors as in society at large, two other trends are: the increasing visibility and complexity of faith-based giving and the very rapid growth of diaspora giving. Mainstream philanthropy has so far failed to tap into either trend, with the result that billions of dollars are being donated outside the sector's established channels. And because most of these growing, alternative modes of giving take place through non-endowed options, foundations may face increasing societal pressure to pay out their assets faster and spend down their assets altogether, according to the report.

7. NONPROFIT SECTOR NEEDS TO IMPROVE CULTIVATION, RETENTION OF EFFECTIVE LEADERS TO AVOID IMPENDING CRISIS, STUDY SAYS

A new study adds to concerns about an impending crisis in nonprofit leadership, and offers recommendations about what foundations can do to address it. Thomas Tierney of The Bridgespan Group reports in The Nonprofit Sector's Leadership Deficit that over the next decade the nonprofit sector needs to attract and develop the equivalent of 2.4 times the number of leaders currently employed in the sector, a daunting challenge but one that this white paper says must be met to avoid wasting charitable dollars. The sector's growth and baby boomer retirement are contributing factors to the looming deficit. The sector needs to improve its development and retention of effective leaders, according to the report, which offers general ideas for improvement. A central point is that foundations need to offer more general operating support and help reduce the stigma attached to overhead costs in nonprofits, or at least award project-specific grants that include funds to address leadership capacity-building needs.

8. COMMENTARIES, REPORT OFFER SPECIFIC IDEAS FOR FOUNDATIONS TO COUNTER LEADERSHIP DEFICIT IN THE NONPROFIT SECTOR

While The Bridgespan Group white paper offered general ideas to stem the coming leadership deficit in the nonprofit sector, more specific ideas, particularly for foundations, were shared in the package of 14 commentaries on the study's findings that Bridgespan commissioned and released along with the study. Commentators touched most frequently on the issue of nonprofit overhead, with several calling on foundations and the nonprofit sector to launch essentially an overhead campaign. Lorie Slutsky of the New York Community Trust writes that foundations should consider investing in public education and public relations campaigns that enlist the country's leading philanthropists to explain that there should be serious investments in nonprofit staff just as there are in business personnel. Paul Light of New YorkUniversityessentially agrees, writing in his commentary that if nonprofits don't stand together against constant public pressure to cut operating costs, the sector will continue to be one in which leadership jobs are "destinations of temporary resort."

Bridgespan released its study at Grantmakers for Effective Organizations' annual conference in March, at which GEO also released a report that offers concrete examples of foundations of all types and sizes funding leadership development and identifies lessons learned. Investing in Leadership: Volume 2 follows up on a report issued last year that provided a general overview of leadership development practices, which GEO says are increasingly recognized by foundations as a key driver of nonprofit effectiveness. Besides improving nonprofits themselves, funding for leadership efforts helps foundations understand better the daily challenges faced by nonprofits and ways to improve their own practices in response, according to the report's conclusion.

9. TWO REPORTS OFFER IDEAS FOR FOUNDATION SUPPORT OF PUBLIC POLICY, ESPECIALLY THE NASCENT PRACTICE OF EVALUATING SUCH WORK

Two recent reports offer specific ideas regarding foundation support of public policy work and, in particular, about how foundations can evaluate their impact on policy advocacy. Evaluating foundation work in the area of advocacy is a practice that is said to be in its infancy and one that's more complicated than evaluating other types of grantmaking. The California Endowment has released The Challenge of Assessing Advocacy, in which the consulting firm Blueprint Research & Design Inc. identifies seven widely agreed upon principles for evaluating advocacy and recommends what it calls a prospective approach to the practice. Among the guiding principles: expand the perception of policy work beyond influencing actions by elected officials to include coalition building, research, and monitoring policy implementation; and think of evaluation as a tool for learning, not a yardstick to measure whether a project failed or succeeded. The report defines a prospective approach as one that monitors and reports on advocacy efforts throughout the project and not just at its conclusion. Unlike a traditional retrospective evaluation approach, a prospective approach allows for mid-course corrections or changes as needed.

Grantmakers in Health has released The Path to Policy Change: Practical Steps and Lessons from Health Funders which offers lessons learned and examples about how to approach public policy work generally and in all particular areas of such work: advocacy, communications, community organizing, the use of data to make issues come alive for policymakers and other audiences, and evaluation.

10. REPORT SAYS FOUNDATIONS ARE INCREASING SUPPORT FOR COMMUNITY ORGANIZING, AN EFFECTIVE STRATEGY TO ADVANCE ISSUES

Community organizing, defined as building a broad-based, grassroots organization rooted in a low- to moderate-income community, is receiving greater support from more funders, according to a report from the Center for Community Change. The report attributes the increased foundation support to greater awareness that organizing is an effective strategy to advance issues that grantmakers care about, as well as to improve communities and achieve policy change. Promising Practices in Revenue Generation for Community Organizing identifies some of the new funders supporting organizing, and reports that others have entered the field by using intermediaries and funder collaboratives, which work to take away some of the perceived risk and controversy in funding organizing. The report suggests that foundations could enhance the field by increasing general operating support and multi-year commitments, as well as by hiring organizing activists as program officers. And funders should do as much as they can to ensure their support does not come at the expense of or undermine grassroots support of organizing entities.

11. CONSISTENCY, CLARITY CRUCIAL TO EFFECTIVE FOUNDATION COMMUNICATIONS, REPORT FINDS; ALL STAFF SHOULD BE INVOLVED

Foundations should adopt a holistic approach to communications, in which all staff have some responsibility for communicating with grantees and not just rely on a communications officer to do the job, according to a new report from the Center for Effective Philanthropy. In fact, only four of the 10 foundations rated highest by grantees in clarity of communications in a CEP study employ a full-time staff member for communications. Foundation Communications: The Grantee Perspective also reports that foundations of all sizes and types, and regardless of how wide or narrow a grantmaking focus, can achieve high ratings in communications practices from their grantees. What's crucial is consistency and clarity in both personal and written information from the foundation, according to the report, which grew out of the Center's other projects, especially its Grantee Perception Reports that assess how well a foundation's relations with its grantees compare to the relations of other foundations with their grantees. This new report offers many "practical steps" that foundations can take to improve their communications practices, including conducting an audit of communications resources, and ensuring the foundation is staffed appropriately, so program officers have enough time for high-quality interactions with grantees.

Clarification

Philanthropy Expert Has Praise For as Well as Concerns About Nonprofit Panel; Urges Foundations to Increase Their Support for Sector-Wide Advocacy Efforts
In our last issue, we reported on Duke University Professor Joel Fleishman's concern that the Nonprofit Panel convened by Independent Sector might not follow through on its recommendations regarding needed accountability reforms in the nonprofit and philanthropic sectors. In a paper that was delivered at a January conference sponsored by the FoundationCenter, the Milbank Memorial Fund, and the RockefellerArchivesCenterat the PocanticoConferenceCenterof the Rockefeller Brothers Fund, Fleishman also had significant praise for the Panel's efforts. In particular, he cited Independent Sector for playing "an imaginative, vigorous and so far successful role" with the Panel, the largest gathering of nonprofit scholars and practitioners of its kind. According to Fleishman, "It is not an overstatement to describe that entire [Panel] process as a heroic one..."

Fleishman went on in his paper to call for expanded foundation support for the "infrastructure" activities - including advocacy, research, public education, and executive education - that benefit the foundation community. While noting that some foundations have been generous in their support of these activities, he indicated that "shameful" is not too strong a word to describe the current, overall levels of foundation support for field-building efforts, and suggested that foundations come up with an additional $5 million a year to safeguard the interests of the foundation sector. A March 28 press release from the Panel on the Nonprofit Sector announced that the Panel has asked Fleishman, along with Rebecca Rimel of The Pew Charitable Trusts, to lead a special Advisory Committee on Self-Regulation of the Charitable Sector.

Of Related Interest

GlobalGiving Index Serves As a Preview of What May Be to Come: A Philanthropy Stock Market
The Economist's Feb. 25 "Survey: Wealth and Philanthropy" called for the establishment of a philanthropic capital market, with its own equivalent of a stock market, investment banks, research houses, management consultants, and so on. Though it's limited only to the specific projects in its registry and to direct donations made to them, the GlobalGiving Index is at least a step in the direction of a global philanthropy stock market. Housed at the Skoll Foundation's Social Edge Web site, the Index was established at the turn of the year as a weekly accounting of the money donated through GlobalGiving, a partly foundation-funded, Web-based microfinance program. It lists the week's most popular grant area (e.g., education), geographic region, and top five projects, in addition to reporting the GlobalGiving index, which fluctuates from a base of 100 = $26,615, which was the weekly average of donations in 2005.