Monthly Archives: June 2007

Demonstrating Impact: Philanthropy’s Urgent Call to Action

June 29, 2007 – 4:00 am

I’m on vacation this week and will return to normal posting on Monday. This post originally appeared on April 30, 2007. During the Council on Foundations conference in Seattle I attended a session called Demonstrating Impact that really influenced my thoughts on a number of subjects. I’ve been amazed by how many times this post has been emailed around. It continues to attract readers and sits at the very top of the list of my most widely read posts.

Demonstrating Impact: Philanthropy’s Urgent Call to Action

Before I came to Seattle, I told my readers that they could assign me to cover the sessions they found most interesting. Holden Karnofsky, whose project GiveWell he refers to as The World’s First Transparent Grankmaker, dropped me the following note:

To me [Demonstrating Impact: How Foundations Can Show Their Value] is the one that you most have to go to. You have argued consistently (and strongly) for more foundation transparency. You should ask the foundations the questions you pose in your posts: why not share everything they have on a website? Why not publish things that are currently "internal," like evaluations of specific charities (as opposed to "overall programs")? Why not blog?

Mark Sedway, director of the brand new Philanthropy Awareness Initiative, had shot me an email last week encouraging me to attend. Reading the description of the session it looked like a class on how foundations can engage in better PR.

I was wrong.

Demonstrating Impact was an incredible session. The room was packed, every corner of the room full of people pressed against the walls and people outside trying to poke their heads in through the doorways. I have over five pages of single-space, type written notes. What I want to share with you isn’t just a blog post. I’m going to have to figure out how to put this all down on paper in a more comprehensive way, but I’ll share some highlights now.

The panelists were:

  • James Canales, CEO, The James Irvine Foundation
  • James Knickman, CEO, New York State Health Foundation
  • Joel Fleishman, author of The Foundation: A Great American Secret

The discussion was nominally about how foundations can do a better job letting influential Americans and the general public know about the good work they do. But at the root of this is a discussion about identifying and measuring the impact of foundation grantmaking. And at the root of that is a discussion about transparency and the sharing of information about what works AND what doesn’t work.

Yes, foundations do great things and most people don’t understand the magnitude of these good works (the very existence of emergency 911 service is attributable to the Robert Wood Johnson Foundation, Fleishman pointed out). But what I found so incredible about the session was the advocating for communication to be designed right into the program strategy from day one. Fleishman talked about The Wallace Foundation and how they do grantmaking in teams with Program, Research and Communications all taking part in strategy design from the beginning.

To me the most important part of Fleishman’s message, the most important message of the session and maybe the conference, is that transparency is NOT about public accountability, it is about improving the sector of philanthropy. It is about improving the way that all of us do our jobs. It is about transforming ourselves from a series of silos to an integrated, robust intellectual capital platform upon which all future grantmakers, big and small, can draw.

Sharing the good works of philanthropy is not enough. A good bit of debate centered on how and why foundations should share their failures as well. To me the issue of why failures should be shared, and why doing so is not a risk for the organization if handled correctly, was nailed by James Knickman:

“We need to frame our release of “failures” as an attempt to learn. No one tells scientists they are a failure when one of their experiments don’t work!”

That’s it right there. What philanthropy is engaged in is an experiment. An experiment in how we can all make the world a better place. We don’t know what the right answer is. In fact, the “answer” is probably evolving as quickly as we can design experiments. But by being transparent, by sharing successful ideas and failed ideas. By judging ourselves not on the outcomes of each grant, but on the body of knowledge that we contribute to the field, we will truly transform philanthropy.

Knickman gave as an example a project by the Robert Wood Johnson Foundation. He called it “the most successful failure I’ve ever seen”, because it really changed the way people approached the issue since the project really seemed like it should have worked.

Humans don’t like to talk about their own “failures”. But halfway through the session, someone from the audience who identified herself as a professor of marketing stood up to say that people who admit their mistakes publicly are viewed with more trust afterwards. We need to reframe transparency away from some sort of thing that philanthropy is being forced to consider by outside forces and instead celebrate transparency as the mark of an organization that is truly committed to improving the field.

I’m writing furiously in a Starbucks with a half eaten sandwich next to me. I have another session I have to attend soon. The great thing about blogging is that there is no page limit and there is no final draft (the same could be said of philanthropy). I wanted to get my first impression of the Demonstrating Impact session down while it was still fresh. I’ve completely ignored important themes of the debate that I can’t cover right now. But I’ll be returning to this topic frequently.

Thanks for reading.

Nonprofits vs. For Profits

June 28, 2007 – 4:00 am

I’m on vacation this week. This post originally appeared on March 3, 2007. I wrote this well before the Some Nonprofits Just Suck debate exploded. The fact that this post has been so widely read and a debate on the subject recently raged for two weeks shows that as a community, we have some important principals we need to hash out.

Nonprofits vs. For Profits

Employees of nonprofits, who toil away at below market rate pay scales (a scandal), must get really tired of the “new donors” who are demanding that they act more like for profit businesses and treat them like they aren’t very smart.

I think that the trend towards venture philanthropy, social enterprise and market-based solutions is very positive and should be encouraged. I think that it is terribly exciting that the Silicon Valley tech elite and the New York centered, “masters of the universe” financial wizards have turned their attention to philanthropy. At the heart of the technology and financial revolutions that have taken place over the past few decades is a focus on innovation. Applying this same innovation to improving the state of the world is going to have a dramatic impact.

But before we get carried away and start assuming that Google knows more about global warming than the Environmental Defense Fund, that Bill Gates knows more about vaccines than the World Health Organization, or that the founder of an online auction company knows more about the poor of India than Mother Theresa, let’s make sure these new donors know that nonprofits function differently than for profit businesses for a reason:

Nonprofits are paid by one customer (the donor) and deliver products and services to another customer (the cause there are advancing). This makes things tremendously complicated. I advocated recently that nonprofits need to remember that “the customer is always right” (See The Agitator’s post on when this isn’t true, which I completely agree with). But what happens when one half of the customer base is demanding something that hurts the nonprofits ability to serve the other half? Nonprofits do not exist to serve donors; they exist to serve a cause. The new donors need to understand that nonprofits will almost always know more about what is best for the cause than the donor does. So cut them some slack and don’t tell them to change until you’ve really done your homework.

Administrative expenses are not evil. There is such a thing as waste in both for profit and nonprofit financial statements. But the administrative expense by itself is not going to tell you that. I would venture that The Four Seasons hotel has higher administrative expenses than Motel 6. Does that mean Motel 6 is a better hotel? Sometimes great businesses have to spend more money to produce their product or service than their lesser competitors do.

Market based solutions are great when they are appropriate, but they aren’t always appropriate. Innovations like carbon trading are great alternatives to scolding people to think more about the environment. But the nonprofit sector exists because there are things people want that for profit businesses don’t deliver.

Markets are great when society is fine with whatever outcome is generated. If markets decided that athletic shoes are going to cost $120, you might think that is too high, but few people will believe it is “wrong”. But if society is unwilling to accept a market outcome (for example, electricity prices so high that elderly people can’t afford to heat their homes and die as a result), than you must impose some sort of modification to the market system. You can’t ask the “free market” to pick the most efficient quantity and price if you are unwilling to accept the outcome.

Markets are great when all costs associated with a product or service is borne by the trading partners. But markets cease to function when third parties have to pay. Cigarette smoking is the classic example. Since we know that smoking creates costs that people other than the tobacco company or the smoker pay (for instance health care costs generated by second hand smoke), than we know that the “correct” price and quantity of cigarettes will be miscalculated by a free market.

Markets are great when all benefits associated with a product or service is enjoyed by the trading partners. But when third parties enjoy the outcome, markets also cease to function. For example, the more people around you are vaccinated against a disease, the less likely you will be to get it. Therefore, people who do not pay for a vaccination derive benefit from people who do. Under these conditions, the market is generating incorrect prices and quantities, since the cost of the product does not reflect the value being gained by third parties.

For profit business models aren’t perfect. Neither are nonprofits. I don’t think the solution to the world’s ills is for nonprofits to act more “business-like”, instead I see a future where the line between the for profit and nonprofit business model begins to break down. Where for profit business recognize that doing “social good” does not have to be at odds with profits. And where nonprofits recognize that doing “social good” does not mean ignoring the lessons of the business world.

The Giving Carnival: Edition One

June 27, 2007 – 4:00 am

I’m on vacation this week. This post originally appeared on January 23, 2007. This first edition of the Giving Carnival brought together many of the philanthropy bloggers. Bill Schambra created a panel discussion at the Hudson Institute about aligned investing after reading the Giving Carnival posts and invited Allison Fine and Lucy Bernholz to sit on the panel.

I’ve morphed the Giving Carnival into my podcasts, but if any other philanthropy bloggers want to revive the Giving Carnival in its original format, let me know and I’d be happy to hand it over.

The Giving Carnival: Edition One

Welcome to the first edition of The Giving Carnival. The topic of this edition is the debate surrounding the LA Times coverage of The Gates Foundation investment policy (you can read the two part article here and here).

Thanks to everyone for sending in your submissions. The response was so positive that I’d like to make The Giving Carnival a bi-weekly event. This is going to be a traveling carnival meaning that future editions will be hosted by other Giving Blogs in addition to being hosted here.

Social Media Tools for Philanthropy

June 26, 2007 – 12:00 pm

I’m on vacation this week. This post originally appeared on February 22, 2007. The interplay between social media tools (web 2.0) and philanthropy has been a continued theme here. This post ended up being one of my most widely read posts and was one of the first posts featured by the Chronicle on Philanthropy’s Give and Take blog when they first launched.

Social Media Tools for Philanthropy

Earlier this week I asked for examples of “donor-created social media on philanthropy research” after Maryann Devine at SmArts & Culture suggested that GiveWell was the first social media of its kind.

So far, I’m inclined to point to GiveWell as the first real attempt by donors to utilize social media tools. But I doubt they will be the only ones for long. In response to my request for examples, Philanthropy Australia dropped me this comment:

The Australian philanthropy sector is in a unique position because unlike the UK, USA, Canada and New Zealand there is no mandatory reporting and no overarching body with responsibility for the endorsement and regulation philanthropic bodies (foundations & trusts, namely). What this means is that more often than not, foundations are very private and reluctant to become transparent, share information in a more public field (though they do enjoy collaborating with each other on projects). The history of the sector, to date, has not been recorded in a central location, and this means that rather than sharing what they’ve learned from their mistakes, each individual foundation has a tendency to re-invent the wheel.

And this is something that they’ve identified as a problem that needs solving. We’re currently working on adopting social media tools to develop solutions to these issues – namely, a project we’re developing at the moment is a knowledge bank of Australian philanthropy – which encompasses a database of previous grants, a database of projects seeking philanthropic funding, as well as our key piece, a collation of resources using wiki software that documents the philanthropy sector – the ‘nuts and bolts’ of grantmaking, primarily, but also mapping the sector and recording its stories and history.

It’s a huge project but one we feel will be invaluable. Of course, building its content will require a shift of attitude/culture in these foundations (see above comment about privacy!), and a lot of the resources will be password protected to our members (one of the reasons they find membership valuable is that they can network with other grantmakers in a secure/private environment through us). The wiki software will also allow them to collaborate on resources themselves, again in a secure environment.

You can read the entire comment here.

There is a whole network of people who are bringing social media tools to nonprofits, such at CompuMentor, the NetSquared Community, NTEN, and blogger/consultant Beth Kanter. Can a similar movement be started to bring these tools to donors (individuals, foundations, etc)?

It may be a scary concept to some people to think about donors being able to say anything they want online and asking tougher and tougher questions of nonprofits. But I encourage everyone to look to Katya Andresen’s take on this issue. She experienced first hand the impact of GiveWell posting negative comments about Network for Good, where she is head of marketing. Her response, in my opinion, was an amazing example of how to deal with “Donor 2.0” issues.

Web 2.0 & Philanthropy

June 26, 2007 – 4:00 am

I’m on vacation this week. This post originally appeared on October 23, 2006. I’m not an expert on technology at all (I still tend to call my younger sibling back whenever she text messages me!), but I think there are some very interesting parallels between the evolution of the internet and the Second Great Wave of Philanthropy.

Web 2.0 & Philanthropy

Reader Dan Bassill, who blogs at the Tutor Mentor Connection, recently brought up the importance of the internet in changing the way that philanthropy is practiced. I think he is exactly right.

While the democratization of philanthropy is occurring about 10 years after the democratization of the stock market, philanthropy has the benefit of coming of age during the rise of Web 2.0. Like most new technologies, when the internet first went mainstream it was used mostly to facilitate old forms of business and communication. Most of the great companies of Web 1.0 did things like sell books (Amazon), or “send letters” (Yahoo’s email). Some companies actually used the new technology to create entirely new businesses like person-to-person auction based marketplaces (eBay), but for the most part the internet made old business/social/information systems work more efficiently.

Today we are seeing the rise of Web 2.0 (Web 2.0 is somewhat of a controversial phrase and it means different things to different people. I will use the term to refer to internet applications that leverage the two-way communication aspects of the web rather than facilitating one-way communications). These technologies are extremely important to the rise of the Second Great Wave (or Philanthropy 2.0 if you’re feeling overly cute). Web 2.0 technologies are most useful when a situation needs the input of the community at large. Since philanthropy is by definition about individuals focusing their attention on the community around them, Web 2.0 is a perfect platform for The Second Great Way.

Web 1.0 dropped the operating costs of traditional philanthropy, distributed information about strategies, tactics and needy causes, and facilitated transactions. Essentially, it made the philanthropic “marketplace” more efficient. These are the same types of changes we saw in the financial markets during the 80’s & 90’s. With Web 2.0, we are seeing not just a more optimized version of Philanthropy 1.0, but instead the emergence of a radically new philanthropic marketplace.

Unlike the Rockefellers, Carnegies and other early foundation founders who created entities that mirrored existing institutions, the structured philanthropic vehicles of the 21st century will create a tradition similar to the emerging Web 2.0 companies. Rather than concentrated pools of money which imitate existing institutional structures, the new philanthropists will be smaller, widely distributed agents of change who co-create the social sector that they support.

What is Philanthropy?

June 25, 2007 – 12:00 pm

I’m on vacation this week. This post originally appeared on October 20, 2006. When I started Tactical Philanthropy, Phil Cubeta welcomed me to the blogosphere and immediately initiated a debate. No cutting slack for the newbie, huh Phil?

What is Philanthropy?

Thanks to Phil Cubeta for highlighting my new blog today.

In my earlier definition of Tactical Philanthropy I stated:

"Philanthropy is at its core a series of financial transactions."

Phil takes (polite) issue with my definition, saying instead:

"Let me say that to me philanthropy at its core is a personal, moral, and political (in the largest sense of serving the polis or community) act, virtue, or way of being in the world.  Sometimes philanthropy is financial. But giving can be of time, attention, talent, or even of one’s own blood, as in giving blood, or shedding blood in a good cause.  Philanthropy at its core is a civic virtue. That said, unacted virtue, or virtue that acts ineffectively, is imperfect. Financial giving is indeed a financial transaction, or set of tools. The tools are tactical. They should answer strategic ends, and the strategies should answer to vision. And the whole ensemble should create life, energy, and disproportinate results, as when a gift sparks a cultural movement, or inspires a whole community to come together around an issue.  Giving, indeed, "transforms reality."  Some of that is "results," in the sense of metrics. But reality also changes when a businesslike donor who is all about money, metrics and results, puts her glasses on the table, looks out the window, and says, "You know, I set out to set others straight, to fix others, to help them. And now after these last few months face to face with those in need I see how blind I was, how out of touch, and how arrogant.  I have learned more and gained more from those I help than they ever have from me.  I only wish I could do more. Can I?"

I think that Phil is right, that philanthropy is not simply a financial act and that any financial tactic must serve a strategic need. You may be able to execute a highly leveraged financial gift, but if it goes to an inefficient nonprofit, or one that does not support your world view, the tactic goes to waste.

The word Philanthropy is a word whose definition is somewhat vague. The Merriam-Webster dictionary defines it as:

"Active effort to promote human welfare"

The blog Giving Back posted a good discussion of the definition back in August that looked at both expansive and more limited definitions. I should probably be clear about my definition.

To me, philanthropy describes the practice of passionate giving of capital resources. When I use the word, I’m not referring to volunteer work. But don’t take that as any slight to volunteers. I’m an owner of a small business and so I know full well that success in any endeavor requires both capital and labor resources and neither is more valuable than the other since neither resource has any value at all without the input of the other.

When I think about my business, I don’t think of it as a "series of financial transactions". I’m not in business simply for financial reasons, and my goals are not simply financial goals. Too often when people analyze businesses they fail to fully understand that business is more than just financial transactions.

Philanthropy faces the opposite problem. Too often people fail to realize that giving is a financial transaction and instead focus on the greater purpose for which they give. When I state that philanthropy is at its core a series of financial transactions, I do so to remind people that no matter how much you care about a cause you can help them far more if you tactically approach the gifting process and recognize it as the financial transaction that it is.

However, let us not lose sight of the greater purpose of of philanthropy. It is not only a financial transaction. It is certainly not just a tax deduction. A philanthropic gift is a exercise in being human. It is a action whose most important purpose is to make the world a better place.

May we all leave the world a better place than we found it and may we all make use of the most effective techniques when we choose to give back so that our passion is not diluted by inefficient actions.

The Second Great Wave

June 25, 2007 – 4:00 am

I’m on vacation this week. This was my very first post when I started Tactical Philanthropy. It originally appeared on October 12, 2006.

The Second Great Wave

Welcome to the Second Great Wave of Philanthropy. We are in the midst of a major cultural shift in the way Americans participate in the world of Giving. Over 100 years ago, Andrew Carnegie launched the First Great Wave of Philanthropy with the publication of Wealth, his 1889 essay on the importance of philanthropy. With his urging, many of his peers began to think about organized philanthropy in a new way and set up large private foundations to execute their vision.

Today we are in the early stages of The Second Great Wave. The First Great Wave was led by a small group of ultra-wealth individuals who created enormous bureaucratic entities that supported government efforts to build such infrastructure as libraries and hospitals. The leaders of The Second Great will be you. You and your neighbors, and the family down the block. Entrepreneurs, middle managers and millions of retiring Baby Boomers will lead the Second Great Wave. Rather than supporting status quo projects, the donors of the Second Great Wave will primarily be concerned with funding entities which promise to bring new approaches to solving social problems.

This blog will be a chronicle of The Second Great Wave. It will delve into the people, trends, technologies, strategies and tactics that are shaping the new definition of philanthropy. The Second Great Wave is happening now. You and I are not just along for the ride, we are shaping the way that the wave unfolds and how deeply its effects are felt across the nation. As someone who cares about Giving, you know how profound the experience of giving back to your community can be. At its core, this blog will be about you.

What’s Different This Time?

During the last 100+ years, much has changed in the world of philanthropy, but the dynamics of giving have been simply an extension of the First Wave. The First Wave followed a hierarchical structure of a few concentrated pools of wealth making grants to a large base of needy causes. Philanthropy wasn’t the only discipline to follow this model. Corporate organization charts, information distribution systems and political systems all followed this model.

However, as we embark on the 21st century the traditional hierarchical system structure is collapsing. While the traditional top-down hierarchical system describes the way Rockefeller’s foundation distributed grants to charities, which then provided services for the public, a flat hierarchy is the model of the Second Great Wave.

This shift acknowledges that no one person or entity has all the answers and instead leads to a virtuous cycle of information feedback. The philanthropists of the 21st century will be smaller in size, but much larger in numbers than the philanthropists of the last century.

Tactical Philanthropy

Strategy concerns itself with big picture concepts, tactics are about how to get things done. One of the defining characteristics of the new donors, who are driving the Second Great Wave, is their desire for effectiveness. From researching what organizations to give to, to demanding accountability from the nonprofits they support, to utilizing sophisticated giving methods, the new donors want to make sure their giving is having the most impact it can.

To practice Tactical Philanthropy is to organize, optimize, and transfer philanthropic capital in ways that maximize the impact of the donor’s strategic plan. It is the practice of transforming philanthropic strategy into reality.

Philanthropy is at its core a series of financial transactions. Just as a well-designed financial plan is valuable only if the correct savings vehicles are selected, created, and funded, a great Strategic Philanthropy plan is valuable only if the right tactics are discovered or created and finally implemented. Tactical Philanthropy concerns itself with structuring these transactions in ways that are efficient and mutually advantageous to donors and nonprofits.

Summer Reruns

June 22, 2007 – 11:59 pm

I’m going on a family vacation next week. From Monday to Friday I’m going to repost some of the very first posts I wrote for this blog (back when nobody was reading anything I wrote!) as well as a couple of the most widely read posts of the last year.

I look forward to rejoining the conversation when I return. Just because I’m not around to throw my two cents in doesn’t mean all of you can’t keep debating the issues. As Mike Myers use to say on Coffee Talk, “Talk amongst yourselves”…

Tactical Philanthropy Podcast: William Thomson

June 22, 2007 – 9:26 am

Today’s interview is with William Thomson, Andrew Carnegie’s
great-grandson. In our conversation we discuss the just announced winners of this year’s
Andrew Carnegie Medal of Philanthropy, what William’s great-grandfather
would have thought of today’s “new philanthropists”, why philanthropists need to “court risk” the blurring of
the lines between for-profit activity and philanthropy, and an emerging
philanthropic trend in Europe.

This interview was booked and recorded before I decided to have guests
participate in a follow up online conversation with listeners. We’ll
get back to that format next time with Bill Schambra.

Expand this post using the link below to read the transcript.

Read More »

Philanthropic Innovation

June 21, 2007 – 8:03 am

Alex Steffen of World Changing wrote a post a few weeks ago called The Future of Philanthropy: Innovation, Networks, Thought Leaders and the Fringe:

Good philanthropy, it seems to me, funds innovation that would otherwise never emerge, and supports action where none would otherwise be taken.

Not all good works require philanthropic support. Some are the proper role of governments. Some can be provided through businesses, or social-benefit organizations run like businesses. Some can be produced through commons-based peer production. The majority require no organization or planning at all: they are simply the things good people do for other people in the course of daily life — watching their kids, sharing food with them, listening to them when they are in distress, sharing an idea or a story with them. The vast majority of the work that keeps our societies together is not underwritten by philanthropists.

That said, there are certain key tasks which are extremely unlikely to turn a profit (so business won’t support them), not amenable to peer-production, beyond the capacity of average people to do casually in daily life and are too risky or controversial for governments to effectively support. What’s more, we know that as our need for innovation and innovation diffusion increases, these tasks grow more crucial. Indeed, much of the thinking, creativity and communication most needed to solve big planetary problems can only be funded through philanthropic effort, for it requires a combination of public-mindedness, vision and risk-taking found only in the work of great philanthropists (of whatever means).

Alex’s lengthy post discusses how to encourage innovation.

  • Hunting the Fringes
  • Feeding the Network
  • Acknowledging The Elephant of Age
  • Investing in Worldchanging People
  • Finding Our Allies

He ends with this:

Ironically, one of the biggest complaints I’ve heard from the people I’ve been talking with about this stuff over the past year or so is that they don’t have anywhere to go to talk about this stuff.

I encourage you to read the post and the extended comments that follow.