Report #154: September 2009

1. Economic Recession May Be Compelling Funders to Be More Responsive to Grantees; Surveys of Arts Grantmakers Suggest Trend Toward Fewer, Longer, More Flexible Grants
Could the current economic downturn, and grantmakers’ response to it, be, as one arts funder put it, “the beginning of the end of funders’ focus on project grants, and the beginning of more appropriate and informed funding strategies genuinely tailored to each recipient’s needs?” The affinity group Grantmakers in the Arts’ Summer Reader included this suggestion in a snapshot of recent surveys of arts grantmakers. Holly Sidford of Helicon Collaborative writes that researchers did detect a growing appetite among funders to think in fresh ways and support meaningful change, including different nonprofit business models. More than 25 percent of interviewees are reshaping their arts programs altogether, heading in the direction of “negotiated operating support” or long-term strategic partnerships, with fewer, longer and more flexible grants tailored to achieve greater impact. Most of these foundations began rethinking their approach before the recession, but the current crisis is solidifying their resolve, according to Sidford.

Most arts funders have reduced their budgets for current grants by at least 10 percent, and most are projecting further reductions in the next two years. However, the article reports that funding to the arts is holding steady relative to funders’ other commitments. Meanwhile, several funders surveyed expressed hope that the current crisis will teach arts grantmakers lessons about humility, flexibility and focus – specifically, the need for less bureaucracy and more responsive practices at all times, not just now.

2. Former Foundation Official Calls for More Mission-Related Investing, A ‘First Step’ to Fix Economy, Society; Retool Investing, Focus on Agriculture
The pace toward mission-related investing has been “glacial” among foundations, according to a former foundation treasurer. A recent book by Woody Tasch of the nonprofit Slow Money and formerly of the Jesse Smith Noyes Foundation argues that part of the problem lies in what Tasch calls a “cultural iron curtain” between those who give grants and the money managers overseeing assets. Tasch claims that this is a symptom of an economic culture focused on speed and short-term thinking, which leaves philanthropy with the task of “putting band-aids” on deep wounds caused by unfettered globalization and consumption. Tasch aims to illustrate these points through Inquiries into the Nature of Slow Money: Investing as if Food, Farms and Fertility Mattered, a collection of essays he has written over the years calling for a new way of thinking about the connections among food, soil and capital. Tasch explains that the slow money movement, an outgrowth of the slow food movement, seeks to support entrepreneurs building new commercial relationships that enhance quality of life for farmers, food consumers and their communities. Movements toward socially responsible investing, microfinance and social entrepreneurship are first steps in the direction of reintroducing whole-earth ideas (such as preservation and restoration of soil fertility and local food communities) into investing and private enterprise, he writes.

3. Two Scholars Argue Independence of the Nonprofit Sector Is Tied to Public Perceptions, Government Action; Mark Rosenman Cautions about Recent Incursions on Independence
How independent is the independent sector? Ultimately, according to two scholars, it is only as independent as government, and the larger public thinks it should be. If the public is not getting what it expects from the tax-exempt sector, according to Ray Madoff of the Boston College School of Law, then the focus should be on ways the government can improve the situation. Madoff spoke at a June 19 discussion at the Hudson Institute on the recent monograph from the Philanthropy Roundtable arguing that calls for greater regulation should not be based on the misperceived notion that philanthropic assets are public monies.

Meanwhile, a recent essay from Mark Rosenman of the Aspen Institute-affiliated Caring to Change and formerly of the Union Institute cautions that over the last couple of decades, the sector has in fact lost some of its independence in mostly subtle ways. For starters, the sector has allowed itself to be assigned responsibility for what are, in effect, failings of the state and the state’s role in caring for its citizens, Rosenman writes in “Independence: A Matter of Definition,” included in the third volume of The First Principle of Voluntary Action. This working-paper series from the U.K.’s Baring Foundation features essays on nonprofit sectors in various countries. In the U.S., Rosenman writes that the sector’s freedom is not assured, not protected by the Constitution or by case law, and has been and still can be overridden at “the whim of politicians.” He also identifies another subtle shift that has damaged the sector’s independence from government: the rise of government contracting over public grants. He says this has been “particularly damaging” to the sector’s independence, since it curtails how they define, address and assess the accomplishment of their missions.

4. Report Suggests International Giving May Not Be Too Affected by Economic Recession, but Donors Need to Aid Sustainability Efforts
The effects of the economic recession on international philanthropy may not to be as dire as some predict, but the over-reliance of developing countries on external donor resources is a worrisome trend. These are two leading insights from the Hudson Institute’s Center for Global Prosperity, which recently released its fourth report focused on global private giving. The report is now called the Index of Global Philanthropy and Remittances in order to further distinguish philanthropy from remittances as some find it problematic to lump both together. Remittances mainly occur within families and without any explicit intent to serve the broader public good or anything beyond the immediate or extended family. Private flows, which include remittances, according to the Index, account for 91 percent of America’s total economic engagement with developing countries, while government aid accounted for only 9 percent, down from 12 percent in 2006.

This year’s index suggests that multi-year commitments from donors provide some financial stability for many international NGOs during the recession, and greater awareness among the public about the need for international giving should also help buffer the field. In fact, the index notes that the trend to watch in global philanthropy is the potential power of small donations done on a large-scale through new Internet platforms with transparent reporting and information sharing. However, that power may only exacerbate growing consternation over international giving’s “sore spot”: International donors account for more than half of the government expenditures from nearly half of 52 low-income developing countries surveyed for this report. Furthermore, donors account for more than 75 percent of the budgets in more than one-fifth of these countries. This is at odds with donor aid policies and pronouncements about sustainability.

5. Digital Media Is Helping Democratize Philanthropy; Book Says Emerging ‘CauseWired’ Sector Abandons Philanthropy’s ‘Top-Down Paternalism’
A maturing social entrepreneurship movement and the advance of digital media is blurring the line between traditional charity and social causes and expanding and democratizing the practice of philanthropy. In a recent book, philanthropy consultant and onPhilanthropy.com publisher Tom Watson tracks the impact of digital media on causes, both charitable and political, and explores “online social activism” or “peer-to-peer philanthropy,” areas of an emerging sector that he calls “causewired.” This sector is helping abandon the “top-down paternalism” that characterizes much of traditional philanthropy, Watson writes in CauseWired: Plugging In, Getting Involved and Changing the World. Watson says this sector is bound together by a growing critical mass of users, and foundations and other traditional givers are providing money to help it further develop and expand. He compares it to the period some 15 years ago as the web first started gathering mainstream steam.

Watson concedes the growth of internet philanthropy has been nothing like the explosive power of the commercial web itself or the revolution that technology has sparked in national politics. However, personal involvement and a desire for information, metrics and results are slowly and steadily changing the formal nature of philanthropy, Watson writes. He suggests that new online interactions are connecting people as never before, which is a “powerful (and positive) trend” that will have huge impacts on various areas of American life, including the nonprofit sector. One such impact he identifies is the breaking down of barriers between activities, such as philanthropy and political organizing. Increasingly rare is the individual, according to Watson, who separates her causes in “neat little boxes labeled ‘politics’ and ‘charity.’”

6. Foundations Can Engage Audiences through New Media in Ways Analog Media Never Allowed, According to Guide; Traditional Media Still Often More Effective
Now more than ever, given the relative ease and affordable cost of new media, two-way communication between a foundation and its audiences can be more than just rhetoric. According to the latest GrantCraft guide, the days of one-way communication from a funder are numbered, if not over. In the digital age people increasingly expect to create, share, challenge and take part, acting immediately on messages in ways that analog media never allowed, according to Communicating for Impact: Strategies for Grantmakers. Communication includes all the ways a foundation advances its programs and the work of its grantees by connecting with clients, community leaders, the press and other donors and constituencies, according to the guide. Though noting the potential of new media, the guide concedes that traditional communications tactics are often more effective than relatively untested tools, such as blogs or social networking sites. Furthermore, fundamental questions of sound communications strategy apply regardless of tactic: What are the objectives? Who is the audience? What action should they be provoked to take? What is the best way to reach and engage them?

Through an online-only section of GrantCraft’s communications guide, “What’s a WIKI Anyway?”, readers can increase their understanding of new communications terminology. It includes links to sites offering information and tutorials in using new media, as well as quotes from grantmakers on how they’re using specific tools, such as blogs, Twitter, Facebook and Buzzword.com.

7. Microfinance Analysis, Part I: Field Survey Suggests Need for a ‘Time-out’ to Reassess Role in the Face of Economic Recession; Growing Credit Risk Tops List of Concerns
The microfinance industry is at a crossroads, and Andrew Hilton of the British think tank the Centre for the Study of Financial Innovation argues that it should take a “time-out” to reassess its role and answer fundamental questions: Should such institutions shift from their essential social role to a potentially more sustainable profit-seeking model? Should they develop into full-service financial institutions, becoming part of the formal financial sector? A recent survey of the sector from Hilton’s organization finds that the economic recession has affected microfinance as much as it has other sectors, and the spread of microfinance has significantly slowed. The continuing effects of the recession could accelerate the pace of structural change in the industry.

Based on an international sample of microfinance practitioners, investors, regulators and observers, Microfinance Banana Skins 2009: Confronting Crisis and Change finds that this year, the sector’s top concerns – “banana skins,” in the Centre’s terminology – were focused on credit risk (or the inability to repay loans), uncertainty about liquidity, the impact of global recession and over-indebtedness. Last year’s main concerns about weak management and governance issues now seem like “small beer” in comparison, according to the report. However, it’s not all gloom and doom. Several respondents said the testing times could be healthy for the field. One respondent noted that a shake- up in the market would be painful in the short-term, but beneficial in the end: “The flight to quality is a bumpy ride.”

8. Microfinance Analysis, Part II: Reports Raise Serious Questions about Field’s Hope Compared to Its Hype; Primer Advises Donors away from Intermediaries
A recent study and a primer for donors both report that microfinance is not producing as much social benefit as boosters claim, suggesting that the practice might not be the best way to alleviate poverty or empower women. A rare, randomized study of the impact of microfinance, which its authors assert is the first of its kind, finds mixed results of the practice and concludes that microcredit does not appear to be the “miracle” for social betterment that’s often claimed. Instead, at least in the short-term – less than two years – it simply allows households to borrow, invest and create and expand businesses with no impact on measures of health, education or women’s decision-making. This statistics-heavy report, The Miracle of Microfinance? Evidence from a Randomized Evaulation, by a group of authors affiliated with the Massachusetts Institute of Technology concludes that claims that microfinance empowers women or allows families to keep children in school have been overstated or are at least premature.

Meanwhile, a primer for donors from the philanthropy division of a financial-services company, Northern Trust, mixes into its recommendations serious questions about whether the field is providing too small of a benefit compared to other approaches to reduce poverty. This primer asks if investing in poor communities’ large-scale industries, or in their communitywide health and education programs, is a better way to alleviate poverty than micro-enterprises that only employ a few individuals and benefit fewer people in sum. Also, does microfinance essentially shift the burden for poverty reduction away from governments and state-funded economic development programs that provide assistance to a country’s most vulnerable citizens? Although it does not refute these claims and concerns, the primer notes that the benefits of this approach to poverty reduction are clear as microfinance plays a unique role in building intangible assets of “human dignity and personal agency.” Philanthropy is essential to supporting further growth and sustainability of existing microfinance operations, driving innovations in technology and product development, among other things.

9. Growing Chronic Hunger, Especially in Africa, Is A ‘Man-Made Catastrophe’; Authors Call for Expanding Green Revolution, Offer Other Ideas for Philanthropy
So much of the world’s chronic, everyday hunger is now “a man-made catastrophe,” according to two Wall Street Journal reporters. They argue that hunger is caused not so much by natural disasters or ruthless dictators, but by people and entities, from government officials to anonymous citizens, doing what they misguidedly thought was best. In a new book, Roger Thurow and Scott Kilman offer ideas for philanthropy and other actors, specifically to reclaim the “squandered promise” of the Green Revolution to help end famine and tame chronic hunger, the “most primitive scourge of all.” Published by PublicAffairs, Enough: Why The World’s Poorest Starve in an Age of Plenty is another book in a recent spate of publications with a particular focus on Africa. This book emphasizes the need for the continent to maximize its agricultural potential and help its people, which they say are hungrier than ever before. The authors write that “unenlightened self-interest” in rich countries of the world has betrayed the effort of Africans to help themselves and propelled the world toward a greater food crisis. Farm subsidies and food aid policies on both sides of the Atlantic render the sharpest criticism. Charities are also part of the problem, according to the authors, as they’ve become part of the “Iron Triangle” of entrenched interests preventing necessary reform of food aid policies.
 
Nonetheless, the authors offer reasons for optimism, profiling entrepreneurs who are mixing capitalism and humanitarianism and developing a number of breakthroughs in the push to end hunger. The authors call on philanthropists to help establish a global fund to aid small farmers in Africa, akin to the philanthropy-created Global Fund to Fight AIDS, Malaria and Tuberculosis. The most efficient way to fight hunger and boost rural economies is first to help these poor farmers grow enough to feed themselves, they write. Another critical need is to invest in Africa’s agricultural infrastructure, from roads to rural electrification to irrigation.

10. Growing Number of Foundations Funding Human Rights As-Yet-Still Unrecognized by U.S. Law, According to Survey of Social Justice Philanthropy
A growing number of foundations with a history of funding civil rights and social justice are redrafting their guidelines to signal interest in expanding the concept of human rights to apply to domestic concerns, including areas still not recognized by the U.S. government as rights. The Foundation Center’s second report in four years on funding for social justice finds such support still encompasses all areas of foundation activity from civil rights to health to the arts, accounting for a 12 percent share of overall giving. Social justice philanthropy, according to Social Justice Grantmaking II, is funding that supports institutional changes to increase opportunities for the most politically, economically and socially disadvantaged peoples. It includes work on diversity, criminal justice reform, health care access and economic development. It also includes human rights, both the traditional international variety (supporting political dissidents or oppressed peoples fighting repressive regimes) and a newer, domestic version that includes economic justice issues such as welfare and housing. These are increasingly recognized as rights on the international level, but not yet by the U.S. government, a discrepancy that the report presents largely as a matter-of-fact without noting possible political or public controversy.

11. Report Says Foundations Not Investing Enough in Discussions about Race and Racial Justice, or Making Case for How Racial Justice Can Advance Grantees’ Missions
According to a recent publication from the Philanthropic Initiative for Racial Equity, Catalytic Change: Lessons Learned from the Racial Justice Grantmaking Assessment, foundation leaders are not investing enough time and deliberation into internal discussions about race and racism at all levels, and they are not sufficiently making the case for how racial justice can advance the missions and goals of grantees. The publication presents lessons learned from a racial justice assessment developed by PRE and the Applied Research Center and piloted with the Consumer Health Foundation in D.C. and the Barr Foundation in Massachusetts. It notes that racial justice is not the same as racial diversity, which only requires the presence of people of color in an organization. It calls for foundations to move beyond welcome discussions about increasing organizational diversity to dig deeper and ask whether their grantmaking strategies are truly advancing racial justice.

12. Concerns over Generational Changes in Nonprofit Leadership Should Focus on ‘Unrelenting’ Demands of Job Itself, Book Says; Offers Ideas for Foundations
Funders are contributing to a pending crisis among nonprofit leaders and staffers, according to a book on generational leadership, Working across Generations: Defining the Future of Nonprofit Leadership. The book says the problem derives from a misunderstanding of what it takes in time and expense to run nonprofits. The problem is not, as many assume, that baby boomers are leaving the sector and the next generations are ill-prepared to lead. The book builds on research over the past decade in generational changes in nonprofit leadership, chiefly that of its lead author Frances Kunreuther. Written with Helen Kim and Robby Rodriguez, Kunreuther notes that the book is meant to serve as a guide to help nonprofits prepare for leadership shifts, as well as to help leaders understand each other across generational divides, increasing communication and compassion.

The book notes that concerns over the upcoming generational shift in nonprofit leadership should be less about age and experience and more about the jobs themselves. The demands of nonprofit leadership are making current leaders want to quit their jobs and future leaders uninterested in the work as is. The authors note that the sector needs to address the “unrelenting demands” of nonprofit leadership, from fundraising to finance management. Among its recommendations, the book calls for funders to help grantees recalibrate pay, benefits and time at work to make nonprofit leadership more attractive to the next generations.

13. Engaging in Public Policy Is ‘Fraught with Peril,’ But It Can Help Foundations Leverage Assets, Further Missions; Book Offers Insights, Ideas
According to analysis from James Allen Smith of the Rockefeller Archive Center, foundation-supported policymaking is more often buffeted by external political and economic events than it is in actually shaping and controlling developments. There are also no formulas to assure success, Smith writes in a chapter of a book published by the Foundation Center. Meanwhile, in another chapter, the University of Wisconsin School of Medicine and Public Health’s Thomas Oliver and public policy consultant Jason Gerson write that the policy process is fraught with peril even for initiatives put forward by the most powerful participants. Defending the status quo is immensely easier than promoting policy innovation in most branches of American government Oliver and Gerson write, adding that policymakers use research and analysis to support their positions, not alter them.

Edited by James Ferris of the University of Southern California’s Center on Philanthropy and Public Policy, Foundations and Public Policy: Leveraging Philanthropic Dollars, Knowledge and Networks for Greater Impact aims to help foundations consider the potential contributions they can make to public problem-solving in an era of more devolved and fiscally constrained public decision-making. Engaging in public policy can help foundations leverage their assets and further their missions, according to Ferris. The book features chapters from an interdisciplinary team of experts, including philanthropy consultants, academics and attorneys working with foundations, offering insights as well as ideas about foundations and public policy.

14. Surveys Offer Insight into Recession’s Effects on Nonprofits; Foundations Helping Nonprofits Retool Practices to Weather the Storm
In a recent survey report by the Bridgespan Group, Managing in Tough Times: May 2009 Nonprofit Leaders Survey, 48 percent of nonprofit leaders report that they have renegotiated grant terms with funders to devote more funds to core programs, and 33 percent of respondents reported garnering additional support from foundations in order to adjust to the economic recession. Both are signs, according to the Bridgespan Group, that funders are helping nonprofits weather the recession and that nonprofits are getting more aggressive with cost-cutting measures and increasing fundraising. Bridgespan’s survey of nearly 100 nonprofit leaders in May was just one of two recent national surveys offering some insight into the recession’s effects on nonprofits.

Both Bridgespan and the Johns Hopkins Nonprofit Listening Post Project, in its April survey of 362 nonprofits, reported that most nonprofits – 92 percent in the Bridgespan survey and 83 percent in the Listening Post Project – are experiencing financial stress, and substantial majorities expect continuing revenue declines in the coming months, particularly from private giving. However, most respondents in both surveys are also confident they’ll weather the storm. For example, only 13 percent of respondents to the Listening Post Project indicated they are concerned for their organization’s survival. The optimism is largely the result of confidence in the impact of the changes that nonprofits have recently instituted to better weather recessions, according to Impact of the 2007-09 Economic Recession on Nonprofit Organizations. In fact, almost half of respondents in Bridespan’s survey believe their organizations will be on stronger financial footing in a year’s time. The economic crisis has inspired them to strengthen their organizations by redesigning programs and processes to be less costly and more efficient, Bridgespan reports.

Of Related Interest

Alliance Magazine Launches Essay Prize on Combating Global Warming
If you had $10 million to spend in combating global warming, how would you spend it, and why? Alliance Magazine has launched the Alliance Essay Prize, in which participants are asked to answer this question.The winner will receive £1,000 – approximately $1,600 – and be published in the December issue of the magazine. For some in philanthropy, this should be easy enough to answer by looking at their grant portfolio, but the contest is open to anyone, anywhere, over the age of 16, not just those in the sector. An international panel will judge each essay of no more than 1,000 words on the originality of the idea, as well as on how persuasively it’s argued. The deadline for submission is September 30, and all essays must be previously unpublished. The following are among the questions suggested for exploration: “Would you seek to…drive changes in public behavior directly? Would you focus on challenging unsustainable consumption trends? Or on addressing questions of equity between richer and poorer countries?” All essays must indicate how the idea could be judged for success, in what timeframe it could be achieved, and what the main obstacles are to the plan’s success.

Related Reading

Book: Foundations Can Help Nonprofits Remain Strong, Effective through ‘Turning Points’
To remain strong and effective, nonprofits must periodically adjust their leadership, management, structure, governance and operating style to fit changed circumstances. Susan Gross, co-founder of the nonprofit consulting agency Management Assistance Group, wrote Seven Turning Points: Leading Through Pivotal Transitions in Organizational Life, published by the Fieldstone Alliance, as a guide specifically to help nonprofits through these pivotal moments, which arise inevitably from change and growth. These turning points include the need to improve infrastructure and management, establishing issue-area focus and discipline, decentralizing power to give staff more say, and establishing a succession or executive transition plans. Foundations can help nonprofits progress through these turning points when new tensions or problems require that they reassess and adapt their practices.

Publication Offers Ideas for Foundations to Improve Reach of Public Health Agencies
Resources devoted to public health have remained stagnant at the state and local levels even with significant increases in federal spending, according to an issue brief from Grantmakers in Health, which identifies many opportunities for foundations to broaden the reach and enhance the effectiveness of governmental public health agencies. Strengthening the Performance and Effectiveness of the Public Health System highlights efforts of national, state and local funders that have worked to improve the functionality of such agencies, mostly in ways that “push the envelope” in enhancing practice. Among other things, the report documents efforts of foundations to improve public health services, help establish a local public health authority, establish a school of public health, and advance information technology to improve knowledge and service delivery.