Philanthropy: Spending Vs. Investing

August 19, 2008 – 9:26 am

One of the big shifts that is occurring in philanthropy is a change in the way donors perceive how charitable giving fits into their overall financial picture. The most fundamental aspect of this shift is a movement from seeing giving as a “spending category” to seeing it as an “investment category”. There are a number of implications:

  1. When donors view giving as an investment category, they view it as a positive aspect of their financial picture rather than a negative cost. For example, if the cost of your grocery shopping goes up, it negatively impacts your budget. But if the amount you are saving goes up, this is a positive change to your financial picture.
  2. Donors can begin thinking about giving as a percentage of their assets rather than a percentage of their income. Wealthy donors in particular have far more assets than income and so thinking about giving as a percentage of assets would dramatically increase giving. This is the argument put forth by investment manager and philanthropists Claude Rosenberg in Wealthy & Wise. The book demonstrates mathematically that donors can give far more to charity without jeopardizing their financial well being if they think about giving as a percentage of assets.
  3. Donors can begin thinking about nonprofits as organizations they want to support rather than “sellers” of “goods” whose costs they do not want to support. When you buy something from Target, you don’t care about their operating costs, you just want the lowest price. But when you invest in Target you recognize that quality organizations take money to run and you are supportive of well spent operational costs.
  4. The value that donors expect shifts from a short term perspective (such as “buying” the right to feel like you helped someone) to a long term perspective (such as “investing” in the continued success of a high impact nonprofit).
  5. Nonprofits stop seeing donors are “customers” who they must separate from their cash (or even fight a war over) and start seeing them as investors; literally stakeholders of the organization.
  6. Corporate donors also see a shift where “corporate social responsibility” moves from being a cost that they attempt to reduce to an investment in the community from which they derive their profits.
  7. More mission related investment opportunities open up as people become comfortable with blended investments that offer financial and social returns.
  8. The field of philanthropy becomes more focused on building a philanthropic market place as the importance of functioning financial markets becomes more clear.
  9. Wealth managers begin serving the philanthropic needs of their clients as they begin to recognize that giving is not a cost for their client (that should be minimized) but is instead an asset allocation question that is directly intertwined with their clients’ broader wealth management needs.
By Sean Stannard-Stockton | Comments (0)

Tactical Philanthropy as a Growth Industry

August 18, 2008 – 10:11 am

Recently Wealth Manager magazine wrote a very nice article about the growing trend of wealth management firms specializing in serving philanthropists and positioned my firm, Ensemble Capital Management, as being on the leading edge.

Strategy without tactics is the slowest route to victory, wrote Sun Tzu in The Art of War. Twenty-six centuries later, acknowledging, accepting and exploiting the distinction as a business model is the new new thing in philanthropy.

Strategic philanthropy refers to the big-picture goals, which is to say the popular image of organized giving. Ending poverty, curing cancer, etc. fall under the heading of strategy. The financial plumbing that supports such causes and primes the money pump is tactical philanthropy. The two sides have always been a part of philanthropy, of course. What’s different is the growing specialization of services for each—particularly when it comes to the tactics.

“Philanthropy is broadly understood as the giving of money for social purposes,” says Sean Stannard-Stockton, a principal at Ensemble Capital Management, a Burlingame, Calif. shop that specializes in philanthropic-related money management and financial services for wealthy individuals. “And yet,” he adds, “ there’s been almost no attention to how you structure those financial transactions.”

Until recently, that is. Attention is very much on the rise when it comes to the financial aspects of philanthropy, which Stannard-Stockon and others tag as tactical philanthropy. There is increased focus on the financial processes that make strategic philanthropy possible, he reports. In fact, the trend is so compelling that it convinced Ensemble Capital to re-brand itself four years ago as a specialist wealth manager in the burgeoning niche of tactical philanthropy…

…Arguably, the leading edge of the philanthropy boom is represented by the independent firms that are embracing a philanthropic-centric business model. Consider Ensemble, which was founded in 1997 as a traditional wealth manager, but four years ago began specializing in providing philanthropic services for individuals. Related efforts have since spilled out into the wider world: Stannard-Stockton started his blog, TacticalPhilanthropy.com, in late 2006, raising his profile and leading to his monthly Financial Times column “On Philanthropy.”…

… If the business model of philanthropic planning is compelling, it’s only a matter of time before debate begins in earnest on best practices. One of the emerging topics under discussion includes the question of how to provide philanthropic planning in a way that minimizes—if not eliminates—conflicts of interest. Framing the subject that way recalls the debate over fees versus commissions that first began bubbling in the wider financial services community in the early 1990s. A similar dialogue appears to be forming in tactical philanthropy as it relates to individual clients.

Stannard-Stockton has already staked out his position. “Just as we advise on investments in a non-sales format, we advise on giving in the same way,” he says. “We get paid for managing assets, so we have no conflict in helping people decide between the various vehicles.”

You can read the full article here.

By Sean Stannard-Stockton | Comments (2)

The Importance of Bill Gates & Warren Buffett

August 14, 2008 – 9:09 am

It is hard to imagine that it was just two years ago that Bill Gates announced he would be stepping down from his full time role at Microsoft (at the tender age 52) to work on his foundation full time. Warren Buffett quickly followed with the announcement that he would be giving the bulk of his wealth to the Gates Foundation. I think that this dual announcement was the tipping point in the Second Great Wave of Philanthropy. Ted Turner’s $1 billion gift to the UN in 1997 that sparked the creation of the Slate 60 laid the groundwork, but the Buffett/Gates combo was the event that captured the public’s attention.

But the importance of Buffett/Gates is not simply the amount of assets in play. In the grand scheme of things, tens of billions of dollars doesn’t really amount to much. Instead, the Gates/Buffett announcement will come to be seen as the clarion call to action that spurred people of all walks of life to embrace “giving while living” and ended the traditionally dominate choice to give to charity at the end of one’s life. Buffett said at the time of the gift that he had always planned to give at this death, but that his wife’s passing and Gates’ philanthropy had inspired him to give now.

Now we get the news that Andrew Forrest, the richest person in Australia, is going to give away nearly all of his fortune before he dies. While Forrest did not directly cite Buffett’s example, you can read in this CNBC article that Forrest and Buffett share a lot in common.

Part of the trend can be attributed to the increasing global wealth and the natural tendency for people to give more as they find that they have more than they need. But separately from “doing good”, both Forrest and Buffett cited another growing trend, the desire to not harm their children by giving them too much wealth. Buffett’s mantra is to give your children “Enough so they can do anything they want, but not so much that they can do nothing.”

In my own practice as a wealth manager, I find that my clients (both those who are philanthropic and those who are not) are highly concerned with trying to avoid giving their children too much rather than figuring out ways to give them more. What’s so interesting to me is that plenty of evidence (such as that presented in the wonderful book Philanthropy: Heirs & Values) shows that the best way to pass assets on to your children in a way that preserves the wealth and does not spoil the children is to have the entire family engage in philanthropy together.

And so we see that philanthropy is not just an extra service for wealth managers to provide to their clients, it is a core element of wealth management in a post-Gates/Buffett world.

By Sean Stannard-Stockton | Comments (0)

‘Blood money’ that became a force for good

August 12, 2008 – 10:11 am

My newest column from the Financial Times is out. For those that read the print edition, my column has been moved to the Tuesday edition. For those keeping score, this column marks the one year anniversary of my On Philanthropy column. You will find the full archive of my past columns here.

‘Blood money’ that became a force for good

By Sean Stannard-Stockton

Published: August 12, 2008 - Link to original Financial Times column

Like everyone who lost a loved one on 9/11 Steve and Liz Alderman were devastated when their 25-year-old son, Peter, was killed in the World Trade Center attack. Like many, they chose to honor their son’s memory by creating a foundation in his name.

Of the 303 non-profit organizations launched in response to 9/11, only 27 were still operating five years later, according to a study by the NonProfit Times. What has kept the Peter C. Alderman Foundation going is his parents’ focus on maximizing the impact of their foundation through rigorous analysis. In the words of Peter’s father, Steve: “We will abandon anything that doesn’t work.”

When the Aldermans received $1.4m from the September 11 Victim Compensation Fund, Liz thought of it as “blood money” and almost turned it down. She told me recently that she used to lie awake at night thinking about the people she wanted to kill to avenge Peter’s death. But, with Steve’s encouragement, they accepted the money and launched a private foundation to help victims of terrorism and mass violence round the world.

“Using the money for a good cause was the best revenge,” Steve told me. “The only way for us to counteract great evil was with great good.”

Today the Peter C. Alderman Foundation, in partnership with Harvard University, builds mental health clinics and provides local doctors with the tools they need to treat the emotional wounds of victims of terrorism and mass violence in places such as Cambodia, Uganda and Rwanda. Its work has attracted partners such as the US Department of Health and Human Services and the pharmaceutical company, Eli Lily.

When I spoke to the Aldermans about their foundation, I was struck by the fact they, unlike most philanthropists who talk about the grants they have made, talk about the effect they have had. With an annual operating budget of $500,000 they have set out to help people across the globe. Liz and Steve found that, to have the impact they were seeking, they had to identify outstanding partners and find ways to leverage their giving.

“Starting a foundation was like starting a small business,” Steve said. “Our daughter, Jane, even got her MBA when she realized that we didn’t know enough about business.” She is now the foundation’s executive director.

The Aldermans represent the vanguard of philanthropy - individuals who have recognized that philanthropy is not defined by the act of giving but by the achievement of impact. It is both an emotional act of love by the giver as well as a strategic investment in our social fabric. The Aldermans have discovered that the most emotionally satisfying philanthropy is a gift that has impact.

Unlike many relatively small foundations, the Peter C. Alderman Foundation has an in-depth strategic plan. Through its mental health clinics, the foundation has reached 65,000 people with traumatic depression. Many grantmakers simply measure themselves by the scope of their activities, but the Alderman foundation goes further and documents that it has seen 80 per cent of the people it has treated return to productive lives.

In Cambodia, where the legacy of the genocidal Pol Pot and the brutal Khmer Rouge still grips the populace, the Aldermans have proved they can treat traumatic depression. Demand has been so large that the foundation created a second clinic to eliminate the 14-month waiting list. Importantly, the Aldermans have shown they can achieve their mission cost effectively; the Cambodia clinic system provides services at a cost of $50 a head.

The Peter C. Alderman Foundation is not the first to have a strategic plan, strong partners and demonstrated impact. But it is part of an emerging group of relatively small family foundations that are demonstrating how to use effectively these tools.

The Aldermans have shown that the most effective way both to help people and soothe their own emotional wounds is through a focused strategy and measurement of impact.

I was struck by how the Aldermans talked like seasoned social action experts with impact data and leverage statistics dominating our conversation. But, in the end, the Aldermans are grieving parents trying their best to make sense of a devastating loss. “I’ve realized that you can’t cry when you’re working on the computer,” Liz said. “You get the keys all wet.”

The writer is a principal and director of tactical philanthropy at Ensemble Capital Management and author of the blog TacticalPhilanthropy.com.

By Sean Stannard-Stockton | Comments (0)

Network for Good Charity Badge & Philanthropic “Markets”

August 11, 2008 – 11:20 am

A couple weeks ago my wife decided to raise money to save an art therapy program at a public school in a disadvantaged area of the San Francisco Bay Area where we live. She had spent the last year as a volunteer art therapist at the school during a program to complete her masters degree.

The situation of many of the students was seriously dire. When my wife completed the program, the only thing that made her feel OK about leaving the kids was that they’d have a new therapist next year. Then the California budget cuts kicked in and the program was cut.

The amazing thing is that this was a volunteer program. But they needed to pay a supervisor $1,000 per year (or about $1.25 per hour) to oversee the volunteer therapists.

So my wife took it upon herself to raise the money to save the program. We brainstormed about various ways to do it. We thought about putting on an art related event that people would buy tickets for. We wondered if people in the relatively affluent area where we live would want to support a program in a low income area a couple of towns away where they’d likely have no personal contacts. But she decided that she just had to get it done.

Two weeks ago she created a Network for Good fundraising widget and sent an email around to about 75 people with our offer to match whatever gift they made to the program. About a week later the program was fully funded with enough extra that they can either fund half of a second year or provide money so the volunteer therapists (all students) don’t have to pay for the kids art supplies.

What made this work was Network for Good has created a seamless transaction system that lets people very easily create a web link through which anyone can make a contribution and get a tax deductible receipt.

There’s always been people with big hearts and an important cause they want to support. Now it is easy (and cheap) to make the transaction really, really simple. This is the beauty of a functioning market. A market makes it easy and cost effective for people to engage in financial transactions. That’s the whole point of a market and the reason why I think the emergence of a philanthropic capital market is so important.

Today, if I hear about a book I’m interested in I type the title into the custom search bar in my browser and am taken directly to amazon.com. I can then order the book with one click (Amazon has my credit card and mailing address pre-stored). Because of this I’ve read a ton of interesting books this year that I never would have bought if I had to remember the title and trek to the local bookstore (or, in a pre-market environment, had to find the author and asked her to have a copy of the book created for me). I also have a stack of very interesting books I’ve never read on my bookcase, but that’s another story.

Markets help people find the products and services they want to find in an easy and cost effective way. The people that supported my wife’s fundraising clearly wanted to support the program. But if she had had to put on an event or walk door to door, she might never have decided to raise the money. If she had mailed out requests, some of the people who wanted to support the event would not have taken the time to find a checkbook and a stamp and mailed in their support.

Marketplaces also provide trust. You’ll buy something from a store you’ve never heard of if it is located in a mall you frequent. But you won’t buy the same thing at the same price from someone who approaches you in the parking lot. We live in a country where trust in nonprofits is quite low. A better marketplace can help fix that.

At the end of the day what matters is that the kids my wife worked with, who live incredibly hard lives, will have a stable adult who cares about them in their life. Everyone wants to make the world a better place, but a functioning marketplace where costs are low, convenience is high, fraud is low and trust is high can help people move from wanting the world to be better to making the world a better place.

By Sean Stannard-Stockton | Comments (2)

links for 2008-08-09 [delicious.com]

August 9, 2008 – 12:30 am
By Sean Stannard-Stockton | Comments (0)

Problems vs. Paradoxes in Philanthropy

August 7, 2008 – 6:07 am

I’m always amazed at how differently my remarks can be interpreted. The follow two comments were left regarding my post from yesterday about measuring impact at a wedding:

David:

Comparing a ‘moment’ at a wedding to changing peoples lives is an apples to oranges comparison. This argument does not hold water.

For a ‘low hanging fruit’ example, look at measuring the impact of an organization whose mission it is to combat chronic homelessness. Either a person is chronically homeless, or not. We may quibble over the definition of chronic homelessness. It may be expensive to track the homeless to know whether there has been a relapse. But it is most certainly not a ‘fantasy.’

Looking at a harder case, say an organization whose mission it is to increase democracy, one may argue that measuring the impact here is truly impossible.

If that organization has a clearly articulated mission, supported by a theory of change, and well developed strategies and program logic flow to inform their tactics, then they will necessarily be measuring impact. Whether this be the number of youth registered to vote in a given timeframe, or the number of contributors to a given blog.

The challenge here is NOT that it is a fantasy. The challenge is that it is time intensive and thus expensive.

We, as nonprofit professionals, should not write off impact and attribute it to some kind of wizardry that is as allusive as a magical moment at a wedding.

Rather, we should seek to innovate around how to reduce the cost of outcome/impact measurement and improve our methods. We should also be discussing how we balance the cost of impact measurement with the challenge of allocating capital in our organizations with imperfect information.

These are the real issues. This should be the real discussion.

And then…

Christine Egger:
Sean, what a beautiful post. This touches directly on the important stuff, for me: the ephemeral, completely qualitative, terribly important work of paying attention to what it means to have generated something good. Where you use the word impact, I usually use the word meaning — what meaning, what value, has been created because a certain process (activity, engagement) took place?

One of your statements in particular made me smile: “In a perfect world we would measure the impact, compare it to the cost of achieving said impact, and we’d be able to perfectly allocate resources to the highest impact projects.”

I smiled because I’ve spent a lot of time thinking about words like perfect, and how they tempt us to arrange our options-for-action along a straight line, from less perfect to more perfect. I’m honestly not sure that straight line exists anywhere, except for just a split second if that, and only in our imagination. In other words, the fantasy isn’t that perfect picture you painted, but the concept of perfection itself.

Physicist David Bohm, among others, spent a lot of time thinking about the difference between problems — which set things up in a straight line (problem-solution, cause-effect) — and paradoxes — which are problematic situations created by very nonlinear situations. Those are situations where you couldn’t line things up one after another if you wanted to, because their very definitions looped around among each other.

Engaging with paradoxes — understanding them, working within them to improve a situation — is very different from problem-solving. I like to think we’re gradually recognizing that much of what philanthropists grapple with are paradoxes, not problems. Your post is an example of that, ending with a call to recognize rather than to find a solution.

And the metaphor of a wedding planner is really helpful, too. The most that we can do in wanting to create philanthropic experiences is to create a set of conditions that encourage and support philanthropy. That’s still plenty of work, but it’s very different from creating a set of *causes* that *result* in philanthropy.

We should seek to create the conditions that turn a gesture of giving (money, time, attention, knowledge) into a gesture of compassion (rather than a gesture of pity, or patronizing charity) but we can’t program it. I’m not sure we’d want to even if we could.

If it were any other way – if you really could generate that spark by planning to the nth degree — the spark wouldn’t mean what it does. That moment at the wedding wouldn’t have been magical, I suspect, if it really *could* have been it would have been programmed.

Perhaps we should be actively generating tools that help us recognize this impact we seek, and leave the measuring for those things that do line up in straight rows…

I am often seduced by David’s way of thinking. It would be so neat and tidy if philanthropy was like a science. But it’s not. It is a blend of social sciences and finance. And no matter what finance people like to believe, finance is part art and part science. While in science, most experts agree (for instance that gravity pulls you towards the ground, it doesn’t push you towards the sky), in finance experts disagree all the time (we’re in a recession! No, things are OK and the market is going higher!)

Philanthropy, like finance and the social sciences is difficult and messy and beautiful and powerful. It cannot be programmed or “proven” like some mathmatical theorem, but it can be approached strategically with strong measurement and evidence based decision making.

By Sean Stannard-Stockton | Comments (2)

Measuring Impact at Weddings

August 6, 2008 – 10:08 am

Recently I attended a wedding and saw a perfect demonstration of how real and tangible impact* is and yet how ephemeral and impossible it is to quantify. The wedding was going along just fine. The bride was beautiful, the groom handsome, the setting a wonderful public garden in New York. There were even little bunny rabbits jumping around the lawn (amazingly enough they were wild rabbits who live in the park).

But then, a little after dinner but before the cake was cut, something kind of wonderful happened. The band started to play a song that everyone knew, people began moving towards to the dance floor, laughing started as a couple of people who didn’t want to dance got pulled along by a spouse or child… and then everybody danced. The song seemed to last for just a moment and yet that moment lasted forever. When the band came to a halt the whole dance floor exploded into applause, everyone laughed and then people began wandering back to their seats or over towards the bar.

That moment was what made the wedding great. It was what transformed it from a simple ceremony to a true celebration and the welcoming of the newlyweds into their community of friends and family.

There’s no system that a wedding planner can put in place to insure that “the moment” happens every time. There’s no way to systematically rank the “impact” of weddings or the effectiveness with which wedding planners create “the moment”. But is still real.

A smart wedding planner will take note of those things that help create the great weddings. They’ll recognize which bands have that certain something that brings people out to dance. Some wedding planners will be better than others and some will be just terrible. And sometimes the best weddings will happen almost by accident.

One of the problems with talking about impact in the social sector is the lack of ability to accurately quantify or even identify impact. In a perfect world we would measure the impact, compare it to the cost of achieving said impact, and we’d be able to perfectly allocate resources to the highest impact projects.

But something that cut and dry is nothing by a fantasy.

Impact is real. Some nonprofits achieve more than others. Some funders are better than others, too. It might be hard to measure, but we can recognize the elements that help it to occur. And when real impact does occur in the social sector, it is amazing what we can achieve.

*Impact is the “good” that an organization achieves.

By Sean Stannard-Stockton | Comments (14)

Jacob Harold Follow Up

August 5, 2008 – 9:39 am

Well, well. Is Jacob Harold an outstanding thinker or what? I think one of the best things about the way Jacob outlines his ideas is that he paints the possibility of a philanthropic capital/information market without invoking the idea that philanthropy needs more “business thinking”.

I’m back from vacation and while sitting in the sun I read an advance copy of Paul Brest’s (The CEO of the Hewlett Foundation, where Jacob works) forthcoming book Money Well Spent. I’m not going to comment on the book now, but I was struck by a study cited in the book that showed how powerful the framing of an issue can be. The study presented the classic game of The Prisoner’s Dilemma and watched how it was played depending on what it was called. The Prisoner’s Dilemma is a study in “game theory” in which two players can either behave in a cutthroat way or a collaborative way. They must make their choice without knowing what the other player has chosen. In the study cited in Brest’s book, the researchers found that if they told participants the game was called The Wall Street Game, players tended to select the cutthroat choice more frequently than if they told the players it was called The Collaboration Game. The game didn’t change, but the players significantly changed their behavior based only on what they believed the game was called.

This ties into earlier conversations we’ve had on this blog about renaming nonprofits (for-benefit organizations?). But it also shows how Jacob (as an employee at a foundation) is better able to discuss the topics he focused on than I am as the owner of a wealth management company. We’re both talking about them same things, but we present them with different frames.

All of this ties back to the debate around Philanthrocapitalism. I think that the area between disciplines yield the most interesting discoveries. I believe that “consilience” is the key to the advancements in philanthropy that are starting to kick into gear. But the next big thing is not to force philanthropy to be more “business-like”, nor is it to get capitalism to be “more good”. The next big thing is mining the knowledge of the two fields and creating something completely new.

I think Jacob is one of the people who is well ahead of most of us in understanding what that “something new” will look like.

By Sean Stannard-Stockton | Comments (0)

Social Capital Data Discussion

August 4, 2008 – 1:19 pm

Following up on Jacob Harold’s posts, Lucy Bernholz drops me a note:

Sean
This topic is all the rage all of a sudden - see RPA’s linkages newsletter and the posts at Philanthropy2173 on “data, data” everywhere. Just want to invite you and your readers to join the online discussion group that formed to talk through these issues of data standards, openness, ownership et al in the social capital markets. Discussion group is here (titled: Social Capital Data Discussion).

Thanks Lucy. I applied for membership in the discussion group today.

By Sean Stannard-Stockton | Comments (0)

Building Market Institutions for Philanthropy

August 4, 2008 – 7:37 am

(Sean Stannard-Stockton is on vacation. This is a guest post from Jacob
Harold, a program officer at the William and Flora Hewlett Foundation.)

This week I’ve been discussing the nonprofit marketplace. I’ve argued that this marketplace would benefit from better information about nonprofit performance. One post discussed the supply of information and another the demand for that information.

But markets require more than just buyers and sellers. There needs to be a place for exchange—either a real place (a local farmers’ market) or a virtual place (NASDAQ). More broadly, markets need institutions to help them run smoothly. In the private capital markets, there are entire armies of investment bankers, law firms, ratings agencies, accountants, and media outlets. These institutions help develop platforms, standards, and principles to ensure a fair, open, and (relatively) inexpensive system. Enron and the current credit crisis have proven that these systems can fail. But without them, the market would not work at all.

The nonprofit sector is, of course, different from the private capital markets: It’s often harder to describe nonprofit impact—it rarely can be measured in dollars (or yuan or pesos or shekels). Donors rightly have an emotional relationship with their philanthropy. It’s essentially impossible to compare across issue areas. There are no exchange rates across issue areas. (How many species saved from extinction does it take to equal 1000 brilliant operas?)

So the market institutions need to be different for philanthropy (flexible, patient, compassionate). The nonprofit sector already has several platforms that aggregate information and facilitate transactions: Guidestar, Foundation Center, IssueLab, Network for Good, JustGive and many others. These are all adding tremendous value; they could also benefit from more programmatic information and closer integration with private sector platforms like online banking. To facilitate interoperability across these different platforms it would be helpful to have a basic standard format to “tag” data about nonprofits. This standard could take many forms, but would need to allow for anyone to publish nonprofit information in a way that could be reorganized and remixed by others, perhaps using simple formats in XML such as RSS. (Here is a cautionary note on this.)

Finally, there are a set of behaviors or principles that would facilitate the growth of this information-rich marketplace. First, we all need to be willing to let go of our information. As institutions in the nonprofit sector, we have a general (though not absolute) responsibility to share what we know for the good of all. In the long run, I’d argue this means a shift from an “opt-in” to an “opt-out” mindset for nonprofit transparency. That is, if you don’t want to make something available, that’s fine—but the default is transparency. Second, we need to stay focused on social impact. It’s difficult to make forthright judgments about how well an individual organization is creating impact. But we have to try. Honest conversation helps us learn, raises expectations, and—let’s hope—facilitates good choices.

By Sean Stannard-Stockton | Comments (5)

If you build it, will they come?

July 31, 2008 – 10:36 am

(Sean Stannard-Stockton is on vacation. This is a guest post from Jacob Harold, a program officer at the William and Flora Hewlett Foundation.)

Imagine there was a perfect database of nonprofit performance information. Would donors actually use it to make decisions? With apologies to Kevin Costner, would they calmly walk out of the cornfields of ignorance into the baseball diamond of smart philanthropy?

The short answer is: some would, some wouldn’t—but either way we need to make it as easy as possible. There is no such thing as an “average donor”. Some people give only as a reaction to a personal request, some out of guilt, some out of hope, and others out of cool rationality. Most of us give in a combination of these and other impulses, beliefs, and methods. Emotional giving will always be with us, and we should be thankful for that. But there is latent demand for better information. Even if only 10% of charitable donations by individuals were influenced by better performance information, that could change the destinations of more than $20 billion in gifts each year.

For donors to use good information we must make it easy for them. The more steps a donor has to take to get access to good information, the less likely she will be to actually use it. As much as possible, we need to have the information “near” the donor at those times when they make charitable decisions. If donors make decisions about their money when they are in the office of their financial planner or on their bank’s website, these are the times we need to have performance information available for them. When I look at my bank account on www.wellsfargo.com, I see tabs for “checking,” “savings,” and “investments”. There is no “philanthropy” tab. It’s time that changed. When an wealthy individual sits down with their financial advisor, that advisor needs to have access to good information about nonprofits so they can help the donor make a good decision.

As described in the last post, there are many different potential sources of meaningful information about nonprofit performance. But whatever the source, such information will be generally unfamiliar to donors. As it is, full-time foundation staff struggle with determining which nonprofits are most effective. So it’s crucial that information be presented in an organized, manageable, user-centered manner. It would be a revolution of responsibility to empower donors to make decisions based on performance (and to empower high-performing nonprofits to have a shot in an anecdote-driven market). Such a transformation demands patience with all players involved.

By Sean Stannard-Stockton | Comments (5)

Untapped Information

July 29, 2008 – 10:51 am

(Sean Stannard-Stockton is on vacation. This is a guest post from Jacob Harold, a program officer at the William and Flora Hewlett Foundation.)

It’s easier to figure out which inkjet printer to buy than how to write a smart check to fight homelessness. In an information age, philanthropy is caught in a strange kind of information vacuum.

To return to the toolbox metaphor in the previous post, where can we find a flashlight? Where do we get some useful information that could help donors make some better decisions? (In a future post I’ll talk about how we might make sure the information actually gets used by donors.)

One source is obvious: we should get information about nonprofits from nonprofits. In a sense, we already do: we can get financial data from the nonprofits via the IRS and Guidestar. And we can get marketing materials from the nonprofit itself—usually some generalities and a few anecdotes. But what about the substance of the work—the day-to-day struggles best summarized in an articulated strategy and whatever quantitative and qualitative measures of progress the nonprofit uses?

It is a great irony that the nonprofit sector, which has done so much to bring openness and transparency to the world, has so struggled to “open its programmatic books.” The nonprofit community (including foundations) has a ways to go, but new tools have emerged and are helping nonprofits capture and share their programmatic data.

Constituents offer a promising source of information about nonprofits. Volunteers, experts, peers, and (God forbid!), the final beneficiaries of a nonprofit’s work all offer unique and potentially meaningful insights into an organization’s effectiveness. Tapping these new sources of information will be no easy task, but in the end they may prove to provide more light than we could ever need.

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links for 2008-07-27

July 27, 2008 – 12:30 am
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links for 2008-07-26

July 26, 2008 – 12:30 am
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