Report #150: January 2009

1. INCOMING ADMINISTRATION CAN PARTNER WITH PHILANTHROPY, BUT MUST PRESERVE SECTOR’S INDEPENDENCE
President-Elect Obama can partner with the social sector – philanthropists, social enterprise and those they support – to address some of the large challenges ahead, including new poverty at home, climate change, unequal access to quality education and health care, and the need for post-war reconciliation and reconstruction abroad. But, as with all partnerships, it is important to recognize what each party brings to the table and to strengthen each in the process. In the case of the social sector, it may be that its most important asset is its independence not only from government, but from the snap judgments of markets or electoral politics, influenced by the 24-hour news cycle. The independent sector may be the only sector able to take risks, withstand criticism and make long- term investments in the public interest. That freedom must be preserved. This is what Global Philanthropy Forum Founder and Aspen Institute Vice President Jane Wales wrote in a Jan. 6 op-ed in the San Francisco Chronicle. It forecasts the key issues that will be addressed at the upcoming Global Philanthropy Forum, scheduled for April 22-24, 2009, in Washington DC.

2. SPEAKERS SAY FOUNDATIONS SHOULD CONSIDER MORE POLICY ADVOCACY TO ENGAGE INCOMING OBAMA ADMINISTRATION
Philanthropy has an opportunity to think boldly about engaging the incoming Obama Administration, and all philanthropies should at least consider more policy advocacy. John Morton of the Pew Charitable Trusts stressed the importance of advocacy during one of five "Election Insights” teleconferences organized last month by the consultancy Arabella Advisors (see next item for more from each discussion). Panelists across the discussions stressed the need for foundations to stay on task with issues and priorities, and to continue funding in areas of concern. Do not assume that the incoming administration can solve all problems on its own, or do so in the way you wish, even if the new President agrees with your priorities. Jane Wales related her experience in the early days of the Clinton Administration as an example. During that time, foundations became complacent and reduced their support for arms control organizations, allowing a robust public education infrastructure to atrophy. When it came time to rally a public constituency in support of the Comprehensive Test Ban Treaty, there was no arms control movement to which to turn. Government will now be looking to philanthropy for its agility and expertise and its willingness to stay with an issue over the long term – so foundations must remain active and vigilant.

Just because the President-Elect is supportive of most environmental grantmaking efforts, for example, the election itself was certainly not “mission accomplished,” according to Tom Steinbach of the William and Flora Hewlett Foundation. Especially with the economic recession and the pressure it is putting on the nonprofit sector and grant budgets everywhere, Steinbach notes that support needs to remain on critical issues, even those not directly addressing the economy. Nonprofits must also make sure that other concerns, such as greater energy efficiency, are included in economic recovery efforts. The political game is still being played even as the environmental team has switched from defense to offense, Steinbach says.

3. TELECONFERENCE DISCUSSIONS OFFER IDEAS FOR FOUNDATIONS IN FIVE PRIORITY ISSUES, INCLUDING HEALTH, EDUCATION, POVERTY
The economic crisis will naturally overshadow and influence the five issues beyond the economy that President-Elect Barack Obama has said will be his priorities: health, education, global development, environment and poverty. But representatives for the incoming Obama administration stressed during teleconference discussions led by consultancy Arabella Advisors that the President-Elect is committed to each issue. Nonetheless, other speakers said that funders need to think carefully before making any cuts to grantmaking, because grantees will already be struggling from cuts made by the government and corporate funders.

Speakers discussed ideas for funders in each of the five issue areas in separate, hour-long teleconferences, though there was some overlap, particularly between the environment and poverty. During the poverty discussion, Robert Greenstein of the Center on Budget and Policy Priorities said that the intersection of poverty and the environment needs to be better understood, with stronger coalitions tackling both issues at once. He calls them natural partners – that, for example, we can cap emissions in a way that reduces poverty, if we would just take the time to align our approaches. At the donor level, Greenstein calls for more collaboration between funders of environmental causes and funders of poverty alleviation. He also calls for greater communication between their grantees, so that each can build off of common interests and strengths.

Health
Irwin Redlener of the Children’s Health Fund and a health advisor to the Obama campaign noted that research and science will drive most of Obama’s efforts. Consequently, one of Redlener’s five summary recommendations included continued funding for research, along with the need for more demonstration models, greater scalability, and a focus on expanding programs by enlisting other funders.

Education
Private philanthropy has the ability to be radical and bold in a way that government can’t, so education funders should continue to support innovation, research and development. Education funders should work to develop models that can be replicated by others, from the government on down. Among other ideas shared at this discussion was the importance of and need for greater advocacy and communication – to spread the word about what works and what doesn’t in education and to engage people on these issues.

Global Development
Among ideas offered at this discussion was the need for foundations to focus on the other 95 percent of their assets beyond grantmaking. Foundations should actually invest, through mission-related investments or other means, in small and growing businesses in the developing world as a means to create good jobs, provide services for the poor, and rebuild communities. Another idea: help corporate leaders consider offering sabbaticals for employees to work for or offer direct assistance to NGOs (or even emerging businesses) in the developing world.

Environment
Many ideas were shared for foundations at this discussion, including the need to augment government policies toward greater energy efficiency, as well as working to invest more of foundation assets in clean energy, from wind to biomass. Foundations can also help leverage land conservation practices and help preserve critical resources, such as the Great Lakes. And foundations can support and engage sportsmen and other non-traditional environmental constituencies.

Poverty
Robert Greenstein of the Center on Budget and Policy Priorities stressed the need for advocacy not only at the federal level, but also in the states. In fact, in terms of decisions made over the next few years, Greenstein encourages funders to try to help those organizations at the state level influence the decisions made there as they face steep budget cuts, to make sure those decisions do not further increase poverty at a time when it is already rising. During recessionary periods, states cut back on eligibility criteria for health care coverage and various kinds of job training or child care programs, and it can take years to get that funding back up to pre-recessionary levels.

4. FOUNDATION LEADER CALLS ON FOUNDATIONS TO HELP OBAMA ADMINISTRATION PURSUE ‘PROGRESSIVE RESTORATION’
Philanthropy needs to help the Obama Administration effectively play offense, to ensure that a “progressive restoration” takes place, according to Gara LaMarche, President and CEO of The Atlantic Philanthropies. Speaking in November at the annual meeting of Southern California Grantmakers, LaMarche noted that grantmakers should establish a pooled fund, setting aside resources in 2009 to create “as large a treasury as possible” to ensure the new administration has the support – and push – it needs to make its proposed changes. LaMarche cites the first two years of the Clinton Administration as a caution to what could happen instead, with those supporting the status quo outwitting those pushing for change. This was just one of several ideas LaMarche proposed for how the nonprofit sector could and should change to seize opportunities presented by larger societal changes. This is no time to think small, he says, calling on foundations to – among other things – collaborate more with their colleagues, working with them as partners in grantmaking.

LaMarche also suggests that foundations should consider working to enlist more ordinary citizens in philanthropy by offering matching grants in smaller amounts. Essentially, this would work to help turn the record numbers of people who became political contributors for the first time in this year’s national elections into philanthropists– and one small way to keep them engaged. Above all, LaMarche calls on philanthropy to change too. He asserts that society is in such a fix right now partly because of what he calls the pervading “atomization of philanthropy”: that most philanthropy leaders sat out the most profound debates of the age, from the growing divide between rich and poor to the Iraq War’s “massive waste.”

5. FOUNDATIONS CALLED ON TO TAKE ADVANTAGE OF OPPORTUNITIES PRESENTED BY INCOMING ADMINISTRATION, CURRENT ECONOMIC CRISIS
Echoing the Arabella Advisors teleconference discussions (see items #2 and #3), Nick Turner of the Rockefeller Foundation told attendees at a joint conference of the Council on Foundations and the Brookings Institution that philanthropy has an opportunity to set a new paradigm for private and public action in addressing society’s problems. But the window of opportunity is small, and it has presented itself now, with the incoming Obama Administration and the current economic crisis. Now is the time to work to inform and influence policymaking, especially – but not exclusively – at the federal level.

Brookings’ Bruce Katz said that the current economic crisis is an “inflection point,” presenting a signature moment for making the sorts of investments that deliver on multiple goals – restoring the economy, alleviating poverty, growing more sustainably. The conference was convened in large part to discuss and glean feedback on the Brookings’ Blueprint for American Prosperity, which Katz says points the way forward on issues in metropolitan America. Karl Stauber of Virginia’s Danville Regional Foundation noted that rural areas must not be left out of such discussions. At a breakout session on creating a greener economy, Stauber said that a supply and demand construct is one way to think about this: with supply largely coming from rural areas and demand largely from metropolitan areas. He cited carbon sequestration as an example where the rural context is being left out of discussion and planning – and yet the sequestration will actually happen in rural areas.

6. CALLS FOR FOUNDATIONS TO TAKE RISKS, BE BOLD IN TOUGH ECONOMY; INCREASE PAYOUT, RELEASE GRANT RESTRICTIONS
Although several leaders in the field caution foundations to consider making only small moves at deliberate speed in any changes they make during these tough economic times, several nonprofit observers argue the opposite: that now is the time for boldness and risk-taking. Peter Karoff of nonprofit consultancy The Philanthropic Initiative notes in his organization’s latest e-newsletter that perhaps the biggest philanthropic concern – what he terms a “moral hazard” – would be in philanthropists doing nothing. If funders do not respond, especially in a time of crisis, they send a message that they either do not care – or care enough – or that they do not have the courage of their convictions. “If we do not act when we can and when we should, we have indeed done harm,” Karoff writes. Bob Ross of the California Endowment, meanwhile, says funders should balance responsiveness (to communities in need) with responsibility (to prudently steward assets). In the inaugural issue of Thought>Action>Impact, a new bimonthly e-journal from the Council on Foundations, Ross notes that despite a need for level-headed continuity, foundations also must be willing to reexamine old assumptions, suggest and weigh new ideas and welcome out-of-the-box thinking.

Editors of the Nonprofit Quarterly called on foundations to increase grantmaking and offer more program-related and mission-related investments. Downturns in the economy are the time for foundations to increase giving, not cut back, they write – and a time to increase support for advocacy and increase commitment to the nonprofit sector. Carrying on this line of argument, Pablo Eisenberg of Georgetown University writes in a Nov. 27 Chronicle of Philanthropy opinion piece that foundations should increase payout to at least 6 percent of assets – refusal to change their ways during an economic recession is “reprehensible.” The Advancement Project’s Pete Manzo, a board member of the National Committee for Responsive Philanthropy, wrote on NCRP’s blog that foundations should release restrictions on grants they’ve already made, something that he says those in the for-profit sector, including mortgage lenders, started doing nearly a year ago. Not only would such a move offer nonprofits greater flexibility to weather the storm, it could also help increase trust and openness between foundations and nonprofits.

7. IN ECONOMIC RECESSION, FOUNDATIONS CALLED ON TO HELP NONPROFITS COLLABORATE MORE, EVEN MERGE OPERATIONS
To help nonprofits through this economic recession, several nonprofit leaders have argued that foundations should help nonprofits to better network, even encourage those pursuing similar work to merge. Aaron Hurst of the Taproot Foundation, which helps arrange pro-bono corporate assistance for nonprofits, is among those calling for nonprofit mergers. On his organization’s blog, Hurst suggests five ways foundations could support nonprofit mergers, from hiring a consultant to help a nonprofit identify merger opportunities, to providing incentives, such as offering two existing grantees a multi-year grant for at least 1.5 times the combined current amount of funding. His “bonus idea”: lead by example and merge with another foundation to show how you were able to cut overhead costs by 50 percent and therefore give out more money to the community. But Clara Miller of the Nonprofit Finance Fund isn’t so sure mergers are the answer. In a chat on Foundation Center’s PhilanTopic blog, Miller cautions that mergers could result in middling nonprofits becoming only marginally better, but not better enough to justify the time, expense and even pain. The economies of scale are subject to the laws of diminishing returns, she notes.

In the PhilanTopic discussion, Miller calls on foundations to collaborate more, since none has enough capital on its own to help a nonprofit become sustainable. Supporting efforts to partner, coordinate and share resources and information are key ways foundations can help communities in need, according to the nonprofit Community Giving Resource’s Smartlink.org. Among five tips for foundations to help the economy, SmartLink.org called for collaborative, community-wide efforts, akin to that which developed in Louisiana after the 2005 Gulf Coast Hurricanes. SmartLink.org notes that this would be helpful in providing economies of scale and improved services for families and individuals in need. Meanwhile, Michael Seltzer, formerly of the New York Regional Association of Grantmakers, echoes the call for collaboration in an “A to Z Grantmakers’ Guide for Uncertain Times” post for the Foundation Center’s PhilanTopic blog. Many entries in his alphabetical list focus on the need for foundations to collaborate, both with other funders and with their own grantees. Grantmakers can set a tone that encourages trust and cooperation among different organizations, he says – especially now, in a time when organizations feel insecure and competitive.

8. PROMINENT CRITIC CALLS ON FOUNDATIONS TO TARGET GIVING TO VISIBLE, TANGIBLE PROJECTS IN COMMUNITIES HIT HARD BY RECESSION
The issue isn’t simply whether foundations will ramp up giving to help nonprofits weather the economic storm, according to Rick Cohen, but also how foundation grantmaking will be targeted to right a sinking economy. Cohen, formerly of the National Committee for Responsive Philanthropy and a correspondent for the Nonprofit Quarterly, writes in an op-ed in The Nonprofit Times that in communities where the recession is undermining families, incomes, neighborhoods and jobs, foundations should consider doing things that are visible, tangible and promising. Specifically, Cohen cites “on-the-ground anti-recession efforts” that some foundations are already doing, including funding worker centers for immigrants and workforce partnerships. Regarding the latter, which advance the economic conditions of American workers by linking employers and employees to emerging jobs, Cohen expressed surprise that only about a half-dozen funders have signed on to the National Fund for Workforce Solutions.

Meanwhile, building a “green-collar workforce” is one of seven issues that Arabella Advisors says lacks the attention it deserves relative to impact. The for-profit philanthropic consulting firm has released its second annual High-Impact Giving Opportunities, which is intended for all donors, from the smallest to the largest. In addition to ideas to increase youth political engagement, address the global food crisis and tackle neglected global health issues, the Arabella guide says that the many green employment opportunities, with jobs from low- to high-skilled needs, are under-funded but of critical importance in tackling climate change, as well as in creating new, stable careers.

9. REPORT CALLS ON FOUNDATIONS TO FORM NATIONAL COALITION ADDRESSING KEY POLICY ISSUES RELATED TO MORTGAGE CRISIS
The economic recession first started as a crisis in the housing market, due to mortgage defaults and subsequent foreclosures. And foundations still have roles to play in this ongoing crisis, according to the Neighborhood Funders Group. In fact, a recent Issue Brief from NFG calls on foundations to form a coalition providing leadership and developing a national voice to address key policy issues related to the mortgage crisis. Preserving the American Dream: Understanding and Addressing the Subprime Mortgage Crisis provides an overview of the crisis and highlights strategies that some communities are using to mitigate it. It also offers possible intervention strategies that foundations can pursue. These include helping homeowners in a bind better understand their rights and ways they can actually avert foreclosure – many lenders offer alternative structures to help borrowers avoid foreclosure, for example. But convening both local and national coalitions to focus on foreclosure-related issues is key, according to the publication. The publication quotes George McCarthy of the Ford Foundation stating that a national coalition could press for stronger oversight of mortgage lending, greater funding for foreclosure counselors, refinancing strategies and fairer bankruptcy reform, among other ways to help.

10. REPORTS CALL ON FUNDERS TO FUNDRAISE FOR GRANTEES IN MANNER OF VENTURE CAPITALISTS; GRANTEES’ MOST FREQUENT REQUEST
Foundations should work to influence other philanthropists’ funding choices by fundraising for causes in the manner that venture capitalists seek peers’ vetting of specific investments. This is according to a report from the venture philanthropy nonprofit REDF in a new series highlighting ways that private-sector financing practices could be adapted to improve nonprofit funding. Written by the organization’s Cynthia Gair, Out of Philanthropy’s Funding Maze – Roadmap #1: Strategic Co-Funding calls for more strategic co-funding among foundations, defined as joint funding with a particular set of goals aimed at solving a long-term problem. Gair calls the enormous resources spent in navigating the “twisted paths and blind alleys” of grantmakers “dysfunctional”, as nonprofits chase after small grants. Initiatives seeking to solve complex social problems – from helping the poor to tackling environmental issues – cannot be expected to succeed unless we change the way nonprofits access capital, by providing them more money, more efficient money and more stable money. As valuable as non-financial activities such as building community networks or influencing policy are, funders should help raise more and longer-term money if they want to play a long-term strategic role in the life of grantees.

Meanwhile, a new report from the Center for Effective Philanthropy (see next item) echoes REDF’s publication calls for more strategic co-funding, and specifically for greater foundation help in soliciting additional funding for grantees. Help raising money from other sources is the most frequent request from grantees of foundation program officers surveyed by the Center – and yet, according to the report, the typical foundation provides just 22 percent of its grantees with assistance in securing additional funding. Worse, funders offering such support often tell nonprofits what they already know – ie, suggesting potential funders that the grantees already know. What really makes a difference, according to this report, is when foundations introduce grantees to new funders, or when they recommend a grantee to other funders.

11. FOUNDATIONS ARE MORE TALK THAN ACTION IN PROVIDING SUPPORT BEYOND GRANTS, REPORT FINDS; MOST IS ‘INEFFECTIVE’
The fifth and final tip for foundations to help in this recession from SmartLink.org (see item #7) is to give more than money, by bringing together experts or providing specialized skills for grantees, based on the kinds of help the grantees say would be most helpful. A new report from the Center for Effective Philanthropy finds that such non-financial foundation support can be effective – it can “power up” a foundation’s giving – but that foundations are more talk than action in providing it. According to More Than Money: Making A Difference with Assistance Beyond the Grant, the majority of grantees of a typical large foundation receive no assistance beyond grants, and most such assistance is currently provided in ways that are “ineffective.” Further, there is little knowledge about what works and what doesn’t that is based on, or even informed by, the perspectives of grantees receiving such assistance, the report finds. Only about a third of respondents, made up of foundation CEOs and program officers, say they “always” follow up with grantees to understand the effects of the assistance they provided – and nearly 90 percent of those who “always” follow up report that they do not look for changes in grantees’ work or operations related to the assistance they provide.

Still, the report isn’t a blank call for more non-grant assistance from foundations. The Center notes that such assistance needs to be intentional – it needs to contribute to the achievement of a foundation’s programmatic goals. If it cannot be integrated into the program strategy, it may not be worth doing. In addition, there is a need to concentrate such assistance: consider selecting particular grantees to receive more assistance rather than providing small amounts of assistance across many grantees.

12. HEWLETT’S PAUL BREST RECOMMENDS AGAINST STANDARD PRACTICES, FROM PERPETUITY TO MISSION-RELATED INVESTING
Considering the crises society is currently facing, it may be highly strategic for a foundation to partially spend down its endowment to solve a timely problem, leaving a smaller foundation to exist in perpetuity. That’s according to Paul Brest of the William and Flora Hewlett Foundation, writing in a Dec. 4 blog entry on The Huffington Post, where he’s become a regular contributor. Brest’s contention that, in general, a philanthropic dollar today is likely worth more than a dollar spent tomorrow follows on what he and his co-author Hal Harvey of the ClimateWorks Foundation write in Money Well Spent: A Strategic Plan for Smart Philanthropy (see next item). Brest and Harvey write essentially in favor of foundation time limits, or grantmaking for the present. Philanthropy is expected to grow along with society’s needs, they write.

In their book, Brest and Harvey criticize or recommend against many standard or faddish philanthropic practices, from existing in perpetuity, to favoring project support over general operations, to engaging in mission-related investing. But they write about these practices that they say are largely ineffective in achieving social impact in polite, reasoned language, without coming down hard on any issue. Except, that is, for what they call “a mistake”: the common practice of foundations refusing to build relations with politicians and policymakers. Political leaders are as eager to meet with foundations as any other entity, and foundations should present themselves as sources of impartial research and expert advice.

Among other things, Brest and Harvey note that to achieve lasting change, funders should not start fixing a problem unless they are prepared to help see it through, or at least identify others who will continue the effort. Foundations fail more by being too eager to try the new, and by being too diverse than by being too deep, failing to build the expertise, relationships and reputation to make grant dollars go as far as possible.

13. BREST & HARVEY BOOK AIMS TO GUIDE ‘SMART PHILANTHROPY,’ BASED ON SOUND SCIENCE, WITH DEFINED GOALS, APPROPRIATE RESOURCES
Especially in tough economic times, it’s critical that foundations help to ensure they’re making as much of a social impact with grantmaking as possible. And now as ever, they need to be smart, according to Paul Brest of the William and Flora Hewlett Foundation and Hal Harvey, formerly of Hewlett, now at ClimateWorks Foundation. The two teamed up to write Money Well Spent: A Strategic Plan for Smart Philanthropy, written for individual philanthropists as well as foundation program officers and advisers to help them design giving strategies to bring about results, akin to the many books written imparting guidance on business strategy for business leaders. As such, it’s not a guide to funding in any particular program area, but a framework for mustering expert knowledge to affect policies in an area of interest.

Strategic philanthropy, according to Brest and Harvey, consists of clearly defined goals, commensurate with resources; strategies for achieving goals, based on sound evidence; and feedback to keep the strategy on course. It deploys resources for maximum impact, to make the biggest possible difference in improving the world. And it involves at least some risk. Going further, they write that strategic philanthropy is about improving the world, but it is not about being heroic. It’s about intentionality and focus – getting the job done effectively, whatever the job is clearly defined to be. They write that those who seek social change should heed concerns about unanticipated consequences of their actions, and they should bear the burden of proof. But this burden can be met with a sound, empirically based understanding of the situation and a carefully worked-out strategic plan with plenty of feedback at all stages of the process.

14. WITHOUT MORE TRANSPARENCY, ‘PHILANTHROCAPITALISM’ AUTHORS SAY FOUNDATIONS MAY IMPEL DEMANDS FOR MORE REGULATION
Public demand for stronger oversight and regulation of foundations is likely if grantmakers don’t become more transparent in their work and provide sharper analysis of their impact. That’s according to The Economist’s philanthropy reporter Matthew Bishop and former British international development official Michael Green, writing in their recently published book Philanthrocapitalism: How the Rich Can Save the World. The book, which coins a phrase in a rally for “a golden age” of philanthropy, was published just as the economy went sour. But the authors still see sweet promise in philanthropy’s future, noting that only approximately one in 10 of the world’s richest people currently give to philanthropy, and many of the richest are moving from their wealth-creating to wealth-distributing years. In a Nov. 29 post to their blog, Bishop and Green note that most of the forces that gave rise to huge fortunes, from information technology to globalization to super-celebrity, are not likely to disappear anytime soon. And of course, the framework that they document as having developed over the past decade, with a shift to a more business-oriented philanthropy, is still in place. The authors see promise in the dozens of people and organizations they profile as being engaged in “philanthrocapitalism,” from Bill Gates – the movement’s de-facto leader – to the Rockefeller Foundation’s Judith Rodin, to Bono, to, recently, Wal-Mart.

What’s needed, they write in the book, is a new “social contract” spelling out what it means to be a good billionaire in terms of how much is given and in what way, how much tax is paid, whether the money has been made in a legitimate way, and what the rich can expect from everyone else in return. Also key is figuring out the appropriate roles of for-profit and nonprofit activities in social entrepreneurship, as well as the division of labor among the nonprofit sector, business and government. The authors propose that the philanthropists with the most impact are those that are creating more market incentives for companies to do good and engaging more directly in international diplomacy. Specifically, they suggest philanthropists could fund the sort of gatherings where political enemies, perhaps even those involved in international terrorism, can meet and talk in a way that would cause a political storm if they were organized by the government.

15. ‘PHILANTHROCAPITALISM’ CRITIC TO LAUNCH RESEARCH NETWORK TO ASSESS IMPACT OF DIFFERENT APPROACHES TO PHILANTHROPY
Matthew Bishop and Michael Green’s book Philanthrocapitalism (see previous item) has generated much debate in the sector. Probably its biggest critic, Michael Edwards, has announced that he’s working to launch a network of universities, think tanks, nonprofits and foundations to provide empirical research on the impact of different approaches to philanthropy and social change, beyond simply philanthrocapitalism. Edwards, formerly of the Ford Foundation and now affiliated with New York University and other organizations, earlier this year wrote the book Just Another Emperor, which provoked various online discussions about philanthrocapitalism. (Edwards has also developed a summary of responses to his book.) Edwards first reported about the developing network in a July online chat at NextBillion.net. In a recent email, he confirmed that the network will launch next year.

And more research of the type the network is expected to provide is what’s needed, according to Tim Ogden of the website and blog Philanthropy Action. During the Global Philanthropy Forum’s summer online discussion [http://www.philanthropyforum.org/forum/Discussion_Forum1.asp] led by Edwards about philanthrocapitalism, Ogden suggested that this so-called new style of giving isn’t any better than the old: it too has so far failed to invest in evaluating its activities. The reason there’s a debate at all about the value of philanthrocapitalism is due to a lack of time and money invested in real measures of and reliable data on impact, he said.

16. FOUNDATIONS CAN HELP SUPPORT SOCIAL BUSINESSES; MUHAMMAD YUNUS SAYS THEY OFFER MORE BENEFITS THAN CHARITY
The Nobel Prize-winning microfinance pioneer Muhammad Yunus says foundations can help make capitalism more multi-dimensional – not just focused on profit maximization – through the funding of social businesses. Yunus’ latest book, Creating a World without Poverty: Social Business and the Future of Capitalism, lays out what he means by the concept of social business: a business designed to meet a social goal, selling products at prices that make it self-sustaining, with any profit made staying in the business to finance expansion and to create new products or services. Yunus suggests foundations and others could help start social businesses through social-business investment funds, which would operate parallel but separate from their traditional practices. Foundation money invested in social business will be recouped continually, allowing the foundation to continue to support good works without exhausting its funding. That is, where a charity dollar can be used only once, the social-business dollar recycles itself again and again, delivering benefits to more and more people. He says there are myriad ways that foundations can use the concept to tackle entrenched social problems, from health care to renewable energy to, most significantly, ending poverty – specifically, by funding centers that help spread information technology to the poor.

Yunus says that the social business concept is slowly catching on among the broader social entrepreneur field as practitioners see they can achieve more social benefits than is possible through traditional structures. He calls on the social entrepreneurship movement to devise and sharpen appropriate tools and institutional facilities needed to support this new type of enterprise. He posits that social businesses will become a familiar fixture on the world business scene within a few years, especially as many young people in rich countries turn to the concept as a promising new way to gain fame and improve capitalism.

17. REPORT SAYS NONPROFIT SECTOR NEEDS TO DEVELOP TRUE MARKETPLACE, WITH GREATER TRANSPARENCY ABOUT GOALS, RESULTS
The nonprofit sector lacks the robust flow of timely, accurate information that is a hallmark of high-performing markets such as stock exchanges, commodity markets or eBay. Thus, honest conversations about nonprofit performance are difficult to have, and duplication and waste of human and financial resources among nonprofits is likely to be as high as fundraising costs. What’s needed, according to a report written by the for-profit consultancy McKinsey and Company in partnership with the William and Flora Hewlett Foundation’s Philanthropy Program, is a fully formed nonprofit marketplace where high-quality information flows freely among donors, grantees and the public about goals and strategies, measures of progress and success, and actual results achieved. The Nonprofit Marketplace: Bridging the Information Gap in Philanthropy is intended as a roadmap to such a nonprofit marketplace, accelerating initial steps already underway to improve the supply of information assessing nonprofit performance and social impact and to increase donor demand for such information.

The report urges all philanthropic stakeholders to open up their databases and file cabinets and share relevant information. Specifically, the report notes that foundations routinely uncover great nonprofits and ideas that they pass up for funding because they don’t fit their strategy. Instead of filing that information away, they could pass on these leads to other donors, in effect leveraging their knowledge. Among other recommendations, the report also calls on foundations to: increase grantmaking transparency by placing their due diligence criteria and grant information on an open, online database; fund efforts to build key intermediaries and market infrastructure to improve effectiveness of the overall marketplace, including creation of a nonprofit version of rating services in other sectors, such as Zagat and Consumer Reports; and alleviate some of the administrative burden on nonprofits by aligning application and reporting systems across foundations, modeled after the common online application used by most colleges.

18. REPORTS: WEB IS FUTURE OF COMMUNICATIONS, AND FOUNDATIONS MUST ADAPT TO, USE ONLINE MEDIA TOOLS TO ADVANCE SECTOR
Nearly 90 percent of foundation communications representatives said in a survey that their websites and the Web, broadly defined, is now the most effective communications tool, and 95 percent see the importance of the Web growing over the next two years, along with a shift away from print. The communications firm DeSantis Breindel produced Foundation Communications: The State of the Profession for the Communications Network’s annual meeting in September. The report notes that although the Web’s importance and opportunities are growing, a challenge for foundations is keeping websites fresh with new content.

An even bigger challenge is getting up to speed with the Web and the new potential it brings. Another report released at the Communications Network meeting reports that new forms of online media keep springing up, and foundations must adapt to and use these new communications tools to advance the sector’s future. Written by consultants David Brotherton and Cynthia Scheiderer, Come on in. The Water’s Fine: An Exploration of Web 2.0 Technology and Its Emerging Impact on Foundation Communications states that failure of foundations to hold on to or expand their audiences by going beyond using traditional media and even their own Web 1.0 sites will only compound the challenge they already face in failing to convince many influential Americans about the value of philanthropy to society. Opting out of new, more transparent, participatory media makes foundations appear even more insular than they are, and risks more scrutiny and less support from the next generation of grantees, policymakers and others.

Foundations should consider the potential of Web 2.0 technologies in advancing society the way earlier foundation-funded communications tools have, such as the Public Broadcasting Service and the 911 emergency system. Still emerging, Web 2.0 tools, including interactive websites, podcasts and blogs, offer a number of obvious opportunities for foundations, but the most exciting aspect, according to Brotherton and Scheiderer, is the ability for a feedback loop where none existed before and the ability to communicate more effectively with a range of audiences.

Related Reading

Survey: Philanthropy Research Organizations Need to Do Better Job of Distributing Information
A survey of wealthy philanthropists found a set of diverse and evolving practices, including a predominant reliance on peers for information, a narrow and negative view of evaluation, and difficulty with exiting established relationships with nonprofits. ‘I’m Not Rockefeller’: 33 High Net Worth Philanthropists Discuss Their Approach to Giving, from the University of Pennsylvania’s Center for High Impact Philanthropy, suggests that academic centers and research organizations need to do a better job of synthesizing, packaging and especially distributing information to increase the likelihood their work will be used in donor decisions. The reason? Most respondents did not know about or refer to the many academic and nonprofit resources in their areas of interest – and nearly a third did not consider themselves “philanthropists,” despite giving an average of nearly $1 million annually. This suggests nonprofits may need to reconsider the vocabulary they use or better define the term.

Report Cautions Foundations Not to Become So Strategic That They Limit Success
In efforts to become more strategic, foundations must be careful to avoid limiting their success by having an overly narrow grantmaking focus or an overly strict evaluation process. That’s according to a briefing paper from the consulting firm TCC Group, originally known as the Conservation Company. Written by the organization’s Paul Connolly, Maximizing Foundation Effectiveness: Aligning Program Strategy, Organizational Capacity, Strategic Planning and Performance Assessment to Achieve Success offers a framework for understanding foundation effectiveness as well as examples of foundations that have aligned their strategy with their grantmaking. It counsels foundations to pursue strategic giving that doesn’t inhibit community-based nonprofits from participating. And it also cautions foundations from tracking too many performance indicators during evaluation, citing the Wallace Foundation’s shift from assessing every aspect of the foundation’s activities to scaling back to only the most essential developments. “In organizational performance assessment, less is more,” says the Wallace Foundation’s Christine DeVita, quoted in the paper.