Philanthropy Daily Digest 08/23/2011

  • I’ve written in the past about the role of “creative tension” in philanthropy. In this article, the author explains that the human brain evolved to hate uncertainty — which leads us to figure things out — but that while useful, this habit encourages us to value being certain over being right. The author concludes that we must trade certainty for “provisional truth”.

    tags: philanthropy

  • Bribing the poor to vaccinate their children seems to work, even though it offends liberal donors for seeming patronizing and conservative donors who think the poor should take self-responsibility. Interesting piece that forces us to think about whether we value what works even if we don’t like that it works.

    tags: philanthropy

Posted from Diigo. The rest of my favorite links are here.

Robust Intermediaries Key to Social Impact Bond Success

This is a guest post by Steve Goldberg. Steve leads Social Finance’s Social Impact Bond development, and is author of Billions of Drops in Millions of Buckets: Why Philanthropy Doesn’t Advance Social Progress.

By Steve Goldberg

Goldberg PhotoSocial Impact Bonds (SIBs) have the potential to help accelerate the social capital markets in many different ways. Rather than viewing them in isolation, it is important that we recognize the way in which they may catalyze the impact investing movement and bring other forms of private capital to the table. But considerable work must be done to create the conditions to attract, retain and grow these kinds of funding.

SIBs are an innovative addition to the impact investor toolkit. SIBs raise funds from private investors, which are then used as working capital by nonprofit organizations providing prevention programs that can reduce the need for costly government remediation and safety net responses, such as emergency shelters and incarceration. If an independent evaluator determines that the nonprofit programs have lowered the demand for government services beyond a predefined metric, the government repays investors their principal plus a rate of return; otherwise, investors lose their capital.

From a financial perspective, SIBs differ greatly from the conventional mechanisms for funding social services. Private investment offers possibilities that are both more muscular and more complex. Although various kinds of impact investing have been around for decades, there is a consensus among analysts that the field is “now emerging from infancy” and “stands poised to become a powerful vehicle…to address significant social and environmental issues” (see Investing for Impact: Case Studies Across Asset Classes).

However, it is by no means a foregone conclusion that impact investing will realize its potential, which has been estimated in the hundreds of billions of dollars. Although the idea of using profit-seeking investment to generate social and environmental good is moving from a periphery of activist investors to the mainstream, a host of challenges must be overcome to bring the new industry to life.

For instance, to attract capital, SIBs must offer both a compelling investment thesis—how the investment will generate financial returns and increase social impact—and a rigorous business case that convinces prudent investors that it’s safe to take the plunge. While a sizable and motivated group of prospective impact investors finds the SIB investment thesis—that cost-effective nonprofit preventive programs can reduce governmental expenditures, yielding savings to fund returns to investors—plausible and attractive, the investors for the first round of SIB pilots will likely be foundations and charitable trusts of high-net-worth individuals, who are willing to test the concept.

Developing detailed business cases for specific SIBs will be challenging, given the inherent uncertainties involved in producing and measuring social outcomes. Social Finance has been conducting extensive research on various evidence-based interventions, growth-ready nonprofits with strong track records of successful delivery, and the costs and outcomes of existing and proposed services, all of which must be presented in credible financial models. We know that investors will conduct demanding due diligence, as well.

The intensive focus on outcomes imposes stringent requirements for defining metrics, establishing target outcomes, collecting data, and evaluating results. The government’s obligation to repay investors, the amounts due and their timing will be contingent on the results of an independent evaluation, so clear definitions of desired outcomes and unambiguous numerical measures and targets must be set up front. A robust data collection system must be developed and faithfully maintained. The entire system must provide real-time data that can guide and track ongoing operations and provide oversight capability to inform mid-course adjustments, as necessary.

The key to overcoming all of these barriers and weaving together the many players that are needed to make SIBs work are robust intermediaries. SIB intermediaries will need to serve as specialists with expertise in finding effective intervention models, conducting due diligence on nonprofits, organizing public-private-nonprofit partnerships, structuring transactions, raising capital, and managing the whole complex project. Intermediaries must also convince investors that the outcomes can be produced and measured; government agencies that prevention programs can deliver savings; and nonprofits that SIBs can attract long-term growth capital necessary for scaling.

SIBs represent a significant step forward in building the impact investing industry. Its potential has yet to be demonstrated in the United States, but with careful attention to the challenges outlined above, it is poised to catalyze private capital toward advancing social good.

Philanthropy Daily Digest 08/20/2011

  • Brad Smith writes on the GOOG/Jumo deal and focuses on the fact that the for-profit GOOD is buying the nonprofit Jumo. While this sort of transaction may be rare, there’s nothing legally wrong with it as long as they do it right. The Jumo assets just have to be used for charitable purposes.

    Who knows, maybe Jumo will be positioned to have more social impact under the GOOD brand and the foundation grants that seeded the company will have more impact.

    tags: philanthropy

Posted from Diigo. The rest of my favorite links are here.

GOOD Buys Jumo, Seeks Social Connective Tissue

goodmagazineJumo is supposed to be Facebook for nonprofits. Founded by Facebook co-founder and chief digital organizer of the Obama 2008 campaign, Chris Hughes, Jumo launched with great fanfare and grant funding from the Ford Foundation, Omidyar Network and Knight Foundation.

GOOD is a publishing and marketing company “for people who want to live well and do good”. Founded by Ben Goldhirsh, the son of the founder of Inc Magazine (a hugely successful traditional print magazine), GOOD was one of a handful of “philanthropy magazines” that launched in 2007. While the other “philanthropy magazines” folded, GOOD has evolved to encompass online content, live events, and now a kind of advertising/marketing agency that helps organizations do socially connected campaigns.

Now GOOD is buying Jumo. Interesting…

First off, why isn’t Jumo working on a standalone basis? While Hughes says that the organization had a “very successful start” and counts over a million users, in all my surfing of the philanthropic web I haven’t once found reference to activity on Jumo other blog posts saying how great it is going to be.

While people like Amy Sample Ward and Beth Kanter are far better sources to comment on the technology aspect of Jumo, from a donor perspective I must say I don’t understand the drive to create a social network based around nonprofits. Nonprofit and for-profit brands may be ways that people define themselves and thus be the sort of thing that people want attached to their online social persona. But for the vast majority of donors, nonprofits are not the central way that they seek to organize their social network.

GOOD on the other hand seems to be figuring out that there is a huge interest in social sector related content, especially when it is presented as an integrated part of the fabric of life, not somehow separate from politics, business, culture, food and technology. Rather than being for “donors” or “philanthropists” or some other adjective that applies to only a slice of people’s persona, GOOD proudly proclaims it is “for people who give a damn”.

So what will GOOD do with Jumo? Speaking to the New York Times, Goldhirsh said “I’ve always felt the real potential of GOOD was to connect people wanting to take action with the organizations and businesses that could help them do that, and Jumo is the connective tissue that will allow and enable that to happen.”

We’ll have to see how Goldhirsh puts that vision into action, but I’m struck by his choice of words. Rather than seeing a social sector-social network as a standalone entity unto itself, maybe it is the “connective tissue” that ties everything together.

Let’s imagine a 20-something Millennial. She works at a for-profit company importing sustainably grown coffee that hopes to turn a profit while leveraging the power of the free market to pull people in the developing world out of poverty. She listens to U2, makes microfinance loans on Kiva and loves Apple products so much that she wears a t-shirt with the Apple logo. She’s a political news junkie and is disgusted with both parties. She makes donations to nonprofits but feels that the products that she buys, people she votes for and where she chooses to work are just as important elements of her impact on the world.

Our 20-something Millennial doesn’t define herself by the nonprofits she supports.

She defines herself as someone who gives a damn.

What she wants isn’t a special place she can visit to express her social self before returning to the “real world” of work, life and play. Instead she wants a world full of work, life and play that is built around a connective tissue that infuses all of her life with meaning.

There is no work-life balance in our Millennial’s world. No need to “give back” as if her success in life somehow extracted value that must be repaid. There is only meaningful experiences that honor the many priorities of the individual: self, family, and member of the global community (and many smaller communities).

There is great need for nonprofit oriented transactional platforms, such as Global Giving, Charity Navigator and GuideStar. But I doubt there is a need for a nonprofit oriented social network.

I look forward to seeing what GOOD does with Jumo. If they pull things off, they might just move from being a content platform for people who give a damn to an immersive experience, extending across the online and offline worlds for a new generation that views social impact as the connective tissue that connects their interests and passions.

Philanthropy Daily Digest 08/19/2011

Posted from Diigo. The rest of my favorite links are here.

Filtering Myself

This October marks five years of writing Tactical Philanthropy. During most of that time I’ve written a blog post almost every day. If you include my Daily Digest posts, I’ve averaged 1.8 post per weekday for a total of 2,093 posts since October 2006.

I’m often asked how I write so frequently. The key for me was that at the very beginning I made a commitment to myself to post each day, even when I didn’t feel like it and I wrote my posts first thing in the morning before my day got too busy.

But a lot has changed in the last five years. The amount of online information about philanthropy has gone from a trickle (a trickle that was largely ignored by most people in philanthropy) to a fire hose of information about all things social sector related.

In early 2009, I reluctantly starting using Twitter and then embraced it when I realized its potential to act as an effective information filter so that I could weed out the noise and focus on the signal. Once upon a time, the most informed people where the ones with access to the most information. But in a world of information overload rather than information scarcity, the most informed people are the ones who are best at filtering out the noise to get at the signal.

A few months ago I started experimenting with filtering myself. Rather than writing every day, I started writing longer, more robust posts twice a week and featuring a weekly, carefully selected and edited guest column.

A few interesting things happened:

  • Readership stayed constant and then started increasing over the last month even though we’re in the slow, “dog days” of summer when my emails to nonprofit and foundation employees return far more “out of office replies” than normal.
  • “Engagement”, as measured by reader comments and the number of Twitter references of my posts increased sharply.
  • My ability to stay on schedule dropped off as the urgency of my daily routine faded and my ability prioritize my posts fell due to the more flexible schedule and the increased effort I’m putting into each post.

There is a certain safety in blogging every day. Like brushing your teeth, it becomes a part of your routine and requires almost no self-discipline to stick with once you’ve made it a habit. But blogging less regularly is tough. It is tough to stare at a blank screen not sure what to write about and hear a voice telling you that you can put it off until tomorrow when maybe, hopefully, you’ll have something halfway intelligent to say.

I write all of this by way of explaining that much as I use Twitter, Google Reader and other tools to try to filter the huge amount of information available about philanthropy in order to seek out the real knowledge laying hidden in the cloud of noise, I plan to continue working to filter myself. To reduce the flow of blog posts, while hopefully increasing the value of the posts I do publish.

So far I’m finding this new course difficult to execute, but worthwhile when I’m able to follow through. My goal is to publish original blog posts every Wednesday and Friday, feature a carefully selected guest post every Monday and continue using the Daily Digest post to share with you those interesting bits from around the web that make it through my philanthropy filters and deserve, in my opinion, to be more widely read.

Tactical Philanthropy continues to be a grand experiment for me. I’m not sure how this new approach is going to work. Frankly, I worry that if I’m not here each and every day, readers might themselves lose their habit of reading and the Tactical Philanthropy community might disperse. But hopefully, reducing the noise and increasing the signal will increase the value for those who care.

Let me know what you think. Are there other ways I could make Tactical Philanthropy more valuable for you? Is my strategy of filtering myself the right approach? Or does it simple represent a break in my self-discipline of daily blogging that runs the risk of reducing the relevance of Tactical Philanthropy?

[Update: If you choose to share your thoughts with me regarding this post via an email or comment, please let me know whether Tactical Philanthropy content is “pushed” to you via some sort of subscription or if you “pull” the content by visiting the blog directly. Thanks!

Philanthropy Daily Digest 08/16/2011

Posted from Diigo. The rest of my favorite links are here.

Preparing Nonprofits for Social Impact Bonds

This is a guest post by Bill Pinakiewicz, the Director of the New England Program for the Nonprofit Finance Fund (NFF). Bill is a senior member of the NFF team that has been engaged by the Rockefeller Foundation to assess the feasibility of using the Social Impact Bond and other Pay for Success approaches in the U.S. social sector.

By Bill Pinakiewicz

Bill PinakiewiczSocial Impact Bonds (SIB) and Pay-for-Success (PFS) financing structures have generated considerable “buzz”. In part, this is about the promise PFS and SIB have for changing the way we think about the funding of social programs. SIB and PFS have the potential to provide supplemental, sustainable private capital to fund social programs that work. As government at all levels continues to cut budgets for social programs, the potential for a new source of capital is alluring, and who can argue with the wisdom of funding what works?

Once launched, the success of a PFS or SIB rests squarely on the performance of service providers. They must deliver programs that achieve the positive social outcome metrics specified in contracts with governmental payers in order to release payments to private investors. If service providers fail to hit these metrics, there are predictable consequences. Individuals, families and communities involved in the programs fail to receive promised improvements. Private investors incur losses. Reputations suffer.

It’s surprising then that the public dialog on PFS and SIB to date has focused so little on engaging service providers. Contrast this with the extensive analysis of the incentives and requirements for engaging governments and private investors that has dominated the public dialog during this same time. Certainly, engaging government and private investors is necessary for launching PFS and SIB in the U.S. However, given the key role service providers will play in successful execution, a comparable focus on their capacity requirements and readiness issues is required for PFS and SIB to take root in the U.S. with meaningful systemic impact.

Service providers require a more engaged and influential presence in this public dialog in order for PFS and SIB to be implemented with systemic impact in the U.S. The field needs to identify the opportunities, challenges, risks and capacity requirements that will enable a broad pool of service providers to participate in PFS and SIB. Opportunities for incubation should be developed to prepare the service provider community to be PFS and SIB ready, even if they never actually participate in one.

The reason for this is that the truly disruptive aspect of PFS and SIB is the potential they have to change the way we think about how social programs are delivered. PFS and SIB promise to accelerate an inexorable shift in the social sector from a focus on “outputs” to a focus on “outcomes” in defining and measuring the success of service providers and the programs they deliver to society’s most vulnerable individuals, families and communities. With the possibility of PFS and SIB, the days of the focus on “outputs” (we served 500 individuals in our recidivism reduction program) are numbered. The days of a focus on “outcomes” (we reduced recidivism by 15% among individuals involved in our program) have arrived.

This is not as radical as it may seem. Persistent budget pressures are compelling governments and philanthropies to deliver more measurable positive outcomes for every dollar they “invest” in social programs just to maintain current levels of impact, especially given the magnitude to which need has increased. When allocating funds and evaluating programs, government and philanthropies in increasing numbers are already requiring service providers to set and meet outcome metric targets.

All of this presents an opportunity for the social sector to build an enabling environment to support the identification, growth and proliferation of high-performing service providers that deliver programs that work. First, let’s continue disciplined due diligence to find service providers who are ready now to participate in PFS and SIB. Nothing will galvanize the movement toward outcomes and what works in the sector more than successful proof-of-concept PFS and SIB transactions. Second, invest also in the incubation of PFS and SIB capacities and expertise among service providers who are not yet ready. Preparing a pipeline of service providers ready for PFS and SIB is needed both to reach the critical mass required for PFS and SIB to have meaningful systemic impact and to equip providers for the pervasive focus on outcomes that is all too certain to come.

Philanthropy Daily Digest 08/06/2011

Posted from Diigo. The rest of my favorite links are here.

Increasing Philanthropic Impact Through Criticism

In his guest post about the lack of criticism in philanthropy creating a failure of the information markets needed to create impact, Tony Wang demonstrated how infrequently guest authors on this blog are critical of foundations. This theme resonated with a  number of readers who share Tony’s concern that a culture that avoids criticism of donors and funders will end up with underperforming philanthropy.

Building on this theme, Bill Schambra of the Hudson Institute recently emailed me a link to a 2005 article about the the interaction between four major education funders and Frederick Hess of the American Enterprise Institute who had written an article critical of their grantmaking strategies. In the article, Hess argued – as Tony did – that there is not enough criticism in philanthropy and made a case for foundations to encourage and welcome critical input. Hess even did a study similar to Tony’s showing how rare criticism in the sector is.

I’ve reprinted Hess’s argument below with some text removed due to its length:

“Good intentions shouldn’t insulate education scholars, reformers, or philanthropists from criticism. Even when we regard critiques as wrong-headed or inadequate, we should recognize that such scrutiny keeps us honest, helps others assess our arguments, and helps protect us from hubris. In a democracy, the hurly-burly of rough public discourse is essential.

One may honor the noble intentions of philanthropists… and still discuss the limitations of their efforts.

This does not mean that a critic’s view is the “right” one; only that such a perspective is crucial to the democratic process and the spirit of public accountability. Unfortunately, respect for the nobility of philanthropy and fear of offending philanthropists make such hard looks rare.

Just how rare such critiques are has rarely been documented. In light of the controversy stirred by my article, I thought it appropriate to explore the media coverage bestowed upon the foundations discussed in the article. They appear to routinely receive kid-glove treatment from the press and the education community; even obliquely critical accounts are hard to find.

My research assistants and I examined how the educational activities of the Annenberg Challenge, Broad Foundation, Gates Foundation, Milken Family Foundation, and Walton Family Foundation were depicted in major national media from 1995 to 2005. Using Lexis-Nexis, we searched the New York Times, Los Angeles Times, Washington Post, Chicago Tribune, Newsweek, and Associated Press. We examined all 46 articles available on the Annenberg Challenge and the first 25 on the educational activities of the other four foundations (in the case of the Walton Family Foundation, where just nine articles were located, we also examined articles on the Children’s Scholarship Fund that mentioned the Walton Foundation). We coded each article as primarily positive, primarily negative, balanced, or primarily factual.

Of 146 national media articles, editorials, and op-eds examined, just five were largely critical of the activities discussed. The remaining pieces were positive, neutral, or factual, with 65 positive, 67 simply relaying facts, and the remainder balanced. In other words, there were 13 positive articles for every critical account. The stories and editorials were often accompanied by glowing headlines like “Grant Helps Principals Get Plugged In,” “The Gift Sends a Powerful Message,” or “Two Teachers Go to Head of the Class with Awards for Excellence.”

Now, I recognize that those who steer leading foundations often make concerted efforts at disciplined self-appraisal. They evaluate the effectiveness of grants, engage in self-criticism, and convene working groups to assess their giving. This is sensible and desirable. It is not, however, what I mean when I talk about the benefits of public criticism. These conversations take place privately and away from public scrutiny, allowing foundation officials to reassure themselves that they’ve heard the array of arguments, sorted through options, and made the best decision they can. I’m happy to concede that they probably have.

These sessions, however, have a limited impact. It is hard-hitting public exchanges that can most effectively change the way options are weighed, alter the attractiveness of certain courses of action, or even reframe the context in which decisions are made. The groups convened by foundations tend to include, naturally enough, their friends, allies, and grantees. Such groups are less likely than outsiders to offer a radically different take on strategy or thinking—especially given the sensible disinclination of grantees to offend their benefactor or reformers to offend the engine funding their cause.

Because negative publicity can rile boards of trustees or disrupt relationships, one readily understands why foundation leaders are sensitive to suggestions that their efforts may be ineffective or wasteful. Foundation staff feel subtle (and sometimes not-so-subtle) pressure from their boards and benefactors to support projects that will demonstrate results and earn acclaim in a window that matches their grant-giving cycle.

If, as we have seen, the disinterested media go easy on foundations, leaders in the education and policy worlds are even more hesitant to turn their piercing gaze on foundations for at least three reasons. First, philanthropists are, almost by definition, worthy of praise. After all, they are giving money away in an effort to help others. Second, academics, activists, and the policy community live in a world where philanthropists are royalty—where philanthropic support is often the ticket to tackling big projects, making a difference, and maintaining one’s livelihood. Even individuals and organizations who also receive financial support from government grants, tuition, endowment, or interest groups are eager to be on good terms with the philanthropic community.

Third, even if scholars themselves are insulated enough to risk being impolitic, they routinely collaborate with school districts, policymakers, and colleagues who desire philanthropic support. Incurring the wrath of a major giver may make it harder for otherwise blunt scholars to collaborate with skittish colleagues, public officials, or educators. The irony is that leading experts on high schools, school choice, or urban school reform, for instance, tend to avoid commenting starkly on funders like Gates, Walton, or Annenberg.

All of this results in an amiable conspiracy of silence. The usual scolds remain in the good graces of the foundations by training their fire on other, less sympathetic targets. Even if foundation personnel choose to turn a blind eye towards this phenomenon, they should be aware of how the chill of a heavy-handed response to criticism can make an already skittish education community even more reticent.

I suggest, then, that foundations need to make it conscious policy to welcome—and even encourage—criticism. I’m not talking about hired evaluations or strategic assessments conducted by friendly critics but about rigorous debate over objectives, strategies, and performance. Given that even tart-tongued observers will be unusually reluctant to share their thoughts, foundations need to make it extravagantly clear that they will not blacklist critics—or look kindly upon those who do. Of course, such debate inevitably entails critiques that may seem incomplete, wrong-headed, or unfair—especially compared to the warm bubble in which foundations have long resided.

Only this kind of scrutiny, however, will flag blind spots, wishful thinking, or ineffective spending. The point is not that skeptics are always right, but that most efforts to change policy or organizations enjoy mixed results. The value of skeptics is that they raise unpleasant issues. Whether or not the foundation personnel agree with such assessments, engaging with them is essential to forestalling the plagues of hubris and groupthink that are so much a part of human nature.

The harsh cultural change I’m suggesting will not be easy. It will require foundation boards to become more accepting of negative publicity and foundation staff to acknowledge themselves as fair game for public criticism, rather than unsoiled stewards of noblesse oblige. This may seem like a lousy deal. But I think one of the lessons of the education philanthropy I discussed is that universal approbation is incompatible with fundamentally changing troubled social institutions.

What the new breed of muscular philanthropists have spent recent years learning is that mixed reviews just may be the painful price of relevance.”