Inside Philanthropy

Fundraising focus critical during slump

2008-10-06T06:11:00.000-05:00

With the economy tanking and its impact on charitable giving uncertain, nonprofits should stay calm, stay focused and keep a long-term perspective.

Two new reports suggest Americans keep giving even in tough times, and nonprofits should gear for tough times by tuning up their fundraising fundamentals.

“When the economy shows stress, whether it is a recession or not, giving may grow more slowly,” says a new report by the Giving USA Foundation that looks at historic trends in giving during recessions and economic slowdowns. “It is important to note that giving still grows.”

A separate study for the Association for Healthcare Philanthropy that looks at historical data on economic cycles and charitable giving says total philanthropic giving during the past four decades grew at double the growth rate of gross domestic product, accelerating since 1996.

But the weak economy and political uncertainty could be a short-term drag on charitable giving, and while tax increases could reduce the cost of giving, they also could slow down wealth creation, the study says.

In its report, the Giving USA Foundation says the most important step nonprofits can take to raise funds during a recession or downturn is “to ask people for contributions in a clear and focused manner.”

Key steps to successful nonprofit fundraising, the report says, include:

* Working closely with the board “to make sure each board member is a current donor and an advocate for the organization’s vision and purpose.”

* Developing and following a “fundraising, communications and stewardship plan” that will make it easier to stay focused, maintain momentum and “say no to good ideas that could divert resources unproductively.”

* Focusing on efforts to renew gifts from current donors. “Take no donor for granted,” the report says. “Thank donors, recognize their contributions and let them know of the accomplishments they have made possible.”

* Maximizing the use of all fundraising tactics available, including thank-you calls by volunteers; online giving options; information about planned giving sent to loyal, long-term donors; and effective use of public relations and media relations.

The study for the Association of Healthcare Philanthropy says nonprofit hospitals and health-care systems enjoyed high growth rates since the mid-1960s because of greater professionalism in their fundraising practices.

So a key to effective fundraising in today’s tough economy, the study says, is “continued attentiveness to building the trust of established individual, corporate and foundation donors in the value and openness of our efforts.”

By putting their fundraising fundamentals in order, nonprofits can gear themselves to effectively address critical social needs that only will grow as the economic storm rises.

Nonprofits must gear for tough economy

2008-09-29T06:34:00.000-05:00

Nonprofits stressing over the sinking economy and capital markets should focus on the big picture and work to make sure their finances, operations and supporters are secure, says an expert on nonprofit finance.

“At the end of the day, the biggest risk is to the people we serve,” says Clara Miller, founder and CEO of the Nonprofit Finance Fund, a New York City-based nonprofit that provides financial and advisory services to nonprofits and their funders.

Nonprofits should take a hard look at their finances to be sure their bank accounts are safe and their cash is accessible, and they also should assess their revenue streams, she says.

While the looming recession may cause giving by individual donors to dip, for example, and while causes like the arts that depend on discretionary giving could suffer a bigger decline than social-services, she says, individual giving historically has not declined as much during recessions as some nonprofits may fear.

Government funding could decline, Miller says, and while some nonprofits actually could see an increase in government support to cover rising demand for services, the reimbursement rate for services nonprofits provide could decline.

So while a nonprofit that makes home-care visits might receive more government dollars to cover more visits, for example, it might receive fewer cents per dollar on the cost of each visit.

The expected tightening in government funding for nonprofits likely will increase the need for charitable giving to fill the gap, “and that’s a tough place to be,” Miller says.

So nonprofits should move carefully and not look for quick fixes.

“It’s important not to panic and over-diversify lines of business,” she says. “This is a time to be watchful and keep the powder dry.”

Uncertainty about the economy represents an opportunity for nonprofits to “reach out and communicate with the board, staff and funders,” Miller says. “That will make everybody feel better. Information is important.”

Nonprofits “do have a tendency to grit our teeth and make it through bad times,” she says. “That’s a strength. But it can be a weakness if in fact it’s so bad we need to be talking to one another and making contingency plans.”

And in working with foundations, which often make grants based on a “two-year rolling average” and “often, especially in bad times, maintain their giving levels,” she says, “conversation is very important, reaching out is very important.”

Still, nonprofits should recognize that “foundations are not going to fill the breach lost by government cutbacks,” she says.

“If you get most of your revenue from fundraising from government sources, it’s unrealistic to expect philanthropy to replace those funds,” she says. “If government is looking at very bad economic times and cutbacks in direct services, that’s where we are going to feel some pain.”

And instead of working on strategic plans for the long-term, nonprofits should focus on contingency planning that looks at specific financial scenarios, Miller says.

Ultimately, surviving and thriving in tough economic times requires leadership, she says.

“We want to be here for people who need us, so part of what we’re trying to do is live to fight another day,” she says. “This is about making sure we preserve our programs and services for the people who absolutely need them.”

Wall Street plunge a wake-up call for charity

2008-09-22T05:58:00.000-05:00

The financial quicksand swallowing some of Wall Street’s biggest players is a powerful reminder that nonprofits must find solid ground rooted in the basics, and that givers can dig deeper to address urgent social needs.

Instead of stressing, nonprofits should focus on strengthening their operations, stepping up their fundraising, and diversifying and cultivating their donor base, experts say.

“These situations are always a reminder of the importance of saving and preparing as a nonprofit for the lean times, whenever possible,” says Fred Stang, director of development at the Triangle Community Foundation in Durham, N.C.

Nonprofits “should not go into panic mode” and should “be patient and see how the financial picture falls out,” he says. “They might need to readjust fundraising projections to be more realistic, but they should not make the assumption that their donors do not have any funds available to support their mission.”

Nonprofits that previously may have taken a “fairly passive approach to their fundraising” by limiting their efforts to distributing newsletters and an annual appeal, for example, now have the opportunity to “step up” and use more active tactics like phoning donors, he says.

The slumping economy and turmoil on Wall Street will put more pressure on nonprofits that serve people who are “on the edge financially,” Stang says, with more people likely to lose their homes and jobs, and to find it harder to get loans.

“Things will most likely tighten up for a lot of their clients,” he says.

Doug Bauer, senior vice president at Rockefeller Philanthropy Advisors in New York City, says that, with last week’s roller-coaster ride on Wall Street, “people on both sides of the ask and give are kind of holding their breath.”

Nonprofits should have “as diversified a fundraising base as you can have,” he says.
“So when you hit rocky times like this, you can navigate through it.”

And because the markets “have not performed to anybody’s liking,” he says, investment returns on endowments and donor-advised funds are down.

Individual givers, whether high-net-worth, ultra-high-net-worth or middle class, are “thinking twice about who they’re giving to and why, and probably sticking to groups close to them,” he says.

So givers likely will focus on “need-to-do giving rather than nice-to-do giving,” he says, and will “support institutions that really matter to them.”

The skidding economy, particularly in the New York metro area, is likely to reduce tax revenues, a reduction could cut into discretionary spending for nonprofits that support the social safety net, he says.

Charles Collier, senior philanthropic adviser at Harvard University and the author of Wealth in Families, says nonprofit fundraisers should “try to be a non-anxious presence when you meet with donors.”

Even if nonprofits do not plan to solicit prospective givers immediately in the increasingly grim economic climate, he says, “you can still have a cultivation visit with your best donors and that is a good thing to do.”

In the face of donors’ fears about the economy, he says, “you listen and try not to be reactive to their anxiety.”

At a visit with an older Harvard alumnus last week, for example, Collier says he “asked about and talked about his family, and in doing so got new information.”

Collier also asked about the alum’s estate plan “without asking if we were in his estate plan.”

Many prospects “will value and enjoy a conversation surrounding their family or their estate plan without having to focus on the downturn in the capital markets,” he says.

But he also says a couple he was scheduled to visit last week cancelled the meeting, most likely because “of their own anxiety about where the economy is headed.”

Stang of the Triangle Community Foundation says the economic slide represents an opportunity for givers to “step up to the plate.”

Those who are more fortunate, he says, can “realize that, though our own stock portfolios might have decreased, we still can eat, we still have shelter, we still have a job,” he says. “And that brings out the generosity in people.”

Arts education needs investment

2008-09-15T05:40:00.001-05:00

Supply of the arts is outpacing demand, a critical gap that arts advocates and investors need to help bridge.

The arts help drive the U.S. economy, and arts advocates have done a good job building arts program and access to them.

But they also have failed to invest enough in arts education to build an audience for the arts.

That is the conclusion of a new RAND study for the Wallace Foundation that urges policymakers in the arts and education to focus more on changing public policies to strengthen and expand arts education.

Connecting kids to the arts helps ensure they will become arts consumers as adults, creating the demand needed to help cultural life in America thrive, the study says.

National and state standards for the arts content that schools should teach are comprehensive, the study says, but too few students actually get that education because state, local and district policies fail to provide the resources or school time to teach the arts.

And over the last 20 years, the study says, state arts agencies have invested less than 10 percent of their grants in arts learning.

The study recommends that state arts agencies and policymakers survey arts education in their states, develop high-school graduation requirements for the arts, publicize exceptional arts-learning programs, and push for changes in state policy to increase the amount and breadth of arts-learning opportunities.

“For policy change to happen at the state level, the entire arts community needs to get behind it,” an author of the study says. “Arts educators can’t do it by themselves.”

A 2007 study by Americans for the Arts found nonprofit arts and culture fueled $166.2 billion in spending in the U.S. in 2005, generated $29.6 billion in annual federal, state and local tax revenue, and accounted for 5.7 million jobs.

In addition to enriching our culture, the arts clearly are big business.

But until arts advocates and investors focus more of their effort and resources on closing the gap between demand and supply, the arts will fall far short of their potential to transform civic society into a culture that is truly civil.

Nonprofits must invest in human capital

2008-09-08T06:27:00.000-05:00

People are nonprofits’ most valuable asset and they must be smarter about finding, engaging and keeping the staff they need.

A new report from the Nonprofit Listening Post Project at Johns Hopkins University, for example, says nonprofits can be more effective at recruiting and retaining staff -- particularly from among “Millennials” born between 1982 and 2002, and Baby Boomers born between 1946 and 1964 – by focusing on their mission.

“Offering staff a life of meaning can be a powerful tool for recruitment,” says Lester M. Salamon, who wrote the report and directs the Center for Civil Society Studies at the Johns Hopkins Institute for Policy Studies.

Nonprofits also need to show they value their workforce by putting a high priority on personnel issues and adapting themselves to the diverse needs and interests of employees and prospective employees.

To attract Millenials, for example, nonprofits are shifting their recruiting to the internet and looking for ways to offset student-loan obligations, the Hopkins report says.

Other strategies nonprofits can use to be more effective at recruiting and retaining employees include:

* Selling their organizations’ “context,” including physical environment, work environment and mission.

* Taking the initiative on recruiting by reaching out to young professionals who may not know much about nonprofits, an approach can include recruiting young people as board members and donors.

* Redefining work and the work environment by redesigning benefits to reflect new family structures, offering flexible hours, and using focus groups to keep in touch with worker concerns.

* Staffing and investing in human-resources departments.

* Offering relief to recent college graduates who face debt burdens.

* Reaching out to diverse communities in recruiting.

The workforce is changing and becoming more diverse, and nonprofits must move quickly to make sure they reflect and connect to the interests, need and values of the workers they will need to thrive and grow.

A long way to go for United Way

2008-08-29T07:05:00.001-05:00

United Way of Central Carolinas in Charlotte, N.C., needs to find its way fast.

Ousting Gloria Pace King as president and launching a probe into its board’s approval of her lavish pay and benefits are important first steps.

But United Way is headed for a perfect storm, and its board cannot afford to wait too long to change the way it does business.

On Sept. 5, United Way kicks off its annual fundraising drive, which last year raised a record-high total of nearly $45.3 million.

This year, the slumping economy and rising costs are driving up demand for services at United Way’s partner agencies and putting added pressure on givers.

Even before United Way’s board announced Aug. 26 it would fire King if she does not quit by Sept. 30, at least two employers had scrapped their United Way workplace campaigns in the wake of disclosures about her compensation.

That number now has grown to at least 12 employers that accounted for $160,000 in giving in last year’s drive.

Dumping King may buy United Way a quick cosmetic fix for its annual drive, but its board needs a major makeover, both in its mindset and in its policies for setting employee compensation.

The board also needs to find a better way to tell United Way’s story.

Since a financial scandal in the early 1990s at United Way of America seriously eroded trust in local United Way affiliates throughout the United States, United Way has worked hard to revamp its business model and restore its reputation as a respected and important community player that promotes charitable giving and invests donors’ dollars in critical health and human services.

United Way of Central Carolinas has been one of the biggest success stories. Under King, it has dramatically increased the dollars its raises.

Key to United Way’s effectiveness has been the compelling story it has to tell: The Charlotte region’s booming affluence masks entrenched social problems and urgent human needs for those living in poverty or on its margins, and United Way serves as an indispensable broker in tapping that affluence to address those problems.

Equally critical to United Way’s success have been corporations that sponsor United Way workplace campaigns, make corporate gifts to United Way, and employ many of the individuals who make larger gifts, which now account for over half the dollars it raises.

Corporate executives have played a big role on United Way’s board, which ultimately is accountable for the organization, its operations, its impact and the trust on which its effectiveness depends.

Ultimately, charity is about trust: People give their money, time and know-how to charities not only because they address causes the givers care about but also because they have earned the givers’ trust by serving as smart and effective stewards of the resources they receive.

But United Way’s board has not been smart enough: It is not enough just to care, and it is not acceptable to look the other way on pay in exchange for fundraising success.

Trading excess in pay for success in fundraising can trigger a public-relations storm that can sink even the most established and productive money-raising efforts.

A board, like a parent, must set boundaries and enforce discipline.

But United Way’s board abdicated its responsibility.

And the board’s decision to pay its $20,000 a month for up to four months to Mac Everett, a retired Wachovia executive who has been named interim president, is not likely to persuade donors it has learned its lesson.

Nonprofits play a vital role in addressing community needs, and they need executives and staffs who are smart and compensated fairly, indeed generously, but not excessively.

So board members must understand that, to fulfill its mission, a charity must be able to tell a story that makes people want to support and be part of the organization, not to shun it when it needs them most.

And today, with a recession looming, agencies serving Charlotte’s most vulnerable populations need United Way, and United Way needs the support of the community.

Government can do better for charity

2008-08-25T06:09:00.001-05:00

With some nonprofit leaders pushing hard for closer ties with government, the time is ripe for those working in the charitable marketplace to think hard about how to partner with government more productively.

But in seeking a greater partnership, nonprofits also need to recognize the limits of government and the obstacle it can post to social progress.

Despite access to vast resources and regulatory power that can have a big impact on charity, government has failed to use its assets to develop innovative and even-handed partnerships with nonprofits to address critical social problems.

Government has proved a weak cop in policing foundations and nonprofits, a bully in menacing charitable groups that oppose its policies, a failure at creating innovative incentives to giving and volunteerism, and ham-fisted in channeling public funds to religious charities while ignoring discrimination in who they hire and serve.

For their part, nonprofits and foundations often act as if their social mission frees them of the obligation to account for themselves in return for the tax-exempt status they enjoy.

There has got to be a better way to tackle urgent social problems.

Nonprofits and foundations address the symptoms and causes of those problems, often serving as civil society’s research-and-development arm.

But nonprofits lack the resources and power more readily available to government.

As the Washington Post reported recently, some nonprofits leaders are calling for a special White House office or government agency to focus on nonprofits, community initiatives and volunteerism, while others are pushing for greater collaboration among charities, corporations and government.

Jockeying for influence in a post-Bush administration, nonprofit leaders rightly are looking for ways to play a greater role in shaping public policies and leveraging government resources.

But nonprofits need to be smart, and to be careful what they wish for.

The charitable marketplace in the U.S. plays an indispensable role by taking on difficult and messy jobs no one else wants or cares about.

Because of their independence, nonprofits can be creative and entrepreneurial, can take risks and can team up with partners that make sense and that recognize true collaboration requires giving as well as taking.

By treating government as a potential partner that requires cultivation and engagement, nonprofits can find ways to put its resources to productive use and develop innovative and productive collaborations.

But in making use of taxpayer-support resources, nonprofits also must recognize their obligation to be more open and accountable about the work they do and the results they generate.

While it is not the answer to society’s toughest problems, which are more effectively addressed through strategies that are market-driven and collaborative, often spearheaded by nonprofits willing to take risks, government has the resources and power to make it an important partner in developing, supporting and investing in those strategies.

But in seeking closer ties with government, nonprofits must not forget it can be slow to take change or take risks, quick to meddle, and arbitrary in using its power.

Fundraising fuels social change

2008-08-18T05:57:00.000-05:00

Charitable fundraisers are critical to the job fixing our communities, and our communities are taking on a dramatically new look.

With non-white minorities now expected to become the majority of the U.S. population in 2042, eight years earlier than previously projected, fundraisers have an unprecedented opportunity to help transform their organizations and philanthropy.

The challenge is to engage the emerging American majority in the charitable marketplace.

According to a new report from the Census Bureau, the new majority will consist of Americans who identify themselves as Hispanic, black, Asian, American Indian, Native Hawaiian and Pacific Islander.

That new majority, which will eclipse non-Hispanic whites, will reshape the demand for services from nonprofits, as well as the pool of donors, board members and volunteers that nonprofits will need to engage to sustain themselves.

Key players in helping nonprofits tap that giving pool are professional fundraisers, whose job is to connect their organizations with givers in addressing the symptoms and causes of social problems.

Fundraising aims to engage individuals and other partners and secure their money, services, products, time and know-how in making our communities better places to live and work.

And with the U.S. population undergoing sweeping demographic change, including the growing role and influence of younger generations, fundraisers have a big job to do preparing their organizations to better serve the new majority and provide it with a compelling case for getting involved in giving.

That will require that fundraisers better understand the changing dynamics and demographics of giving.

Despite the emergence of the new majority, organized philanthropy and the nonprofit sector remain predominantly white enclaves.

But that is changing.

In North Carolina, for example, a donor-advised fund known as NCGives works with consultants as partners to build the giving capacity of African Americans, Latinos, Native Americans, women and young people.

Located at the North Carolina Community Foundation, and funded by the W.K. Kellogg Foundation in Battle Creek, Mich., NCGives is working to help ensure that all Americans can be effective investors in the work of healing and repairing our communities.

With their fundraising staff leading the way, nonprofits can do a lot more to engage communities of color, women and young people as staff, board members, volunteers and donors.

By more closely reflecting and connecting with the populations they serve, nonprofits can find ways to better sustain themselves for the long-term and more effectively address the problems facing their communities.

Tough times create opportunity for nonprofits

2008-08-11T05:46:00.000-05:00

The economy is hurting. Soaring energy costs are driving up the cost of doing business. Candidates hunting for campaign contributions are strong-arming donors. And terrorism and the Iraq war are breeding fear and uncertainty about the future.

For charities, already struggling to meet rising demand for services with limited resources, the convergence of these growing pressures and their potential impact on giving can breed despair.

But nonprofits need to move beyond gloom and doom, and the sense of entitlement to which too many of them fall prey, and focus on doing what it takes to build their organizational capacity.

Advancing their mission effectively will require being smarter about running their businesses, delivering services, generating earned and contributed income, advocating for change, forming partnerships that work, and working to help shape the public policies underlying the symptoms and causes of the social problems they exist to address.

Those changes are needed because givers, funders, volunteers, board members and prospective partners expect nonprofits to be more accountable and to increase their effectiveness and impact.

The charitable marketplace is huge, growing fast and in need of clear-headed thinking and practical, enterprising ideas to make it be as good as it can be.

Tough economic times can be a catalyst for fostering new strategies to create more productive and collaborative models for delivering services and generating the resources nonprofits need to take on the urgent social problems our communities face.

Investment needed in nonprofit policy work

2008-08-04T07:40:00.000-05:00

Nonprofits can do a lot more to help shape the public policies that affect their work and constituents.Working to fix flawed policies at the root of social problems is a key role nonprofits should play.

But far too many nonprofits fail to play that role because of concerns that the law limits their advocacy work, and because they lack the resources to be effective advocates, says a new survey by the Nonprofit Listening Post Project at Johns Hopkins University.

Among nonprofits that engaged in any lobbying or advocacy, for example, fewer than 15 percent devoted as much as 2 percent of their overall budget to that work, the report says.

And while roughly half of nonprofits surveyed undertook limited forms of advocacy or lobbying, such as signing correspondence to public officials or distributing materials on policy issues, only a third engaged in more involved forms of participating, such as testifying at public hearings or organizing a public event.

The survey says nonprofits may shy from lobbying, compared to advocacy, because of existing laws limiting their involvement.

Lobbying consists of voicing a position to a legislative official on a specific piece of legislation, while advocacy consists of voicing a concern or information about policy without expressing a position on a particular piece of legislation.

The Johns Hopkins report recommends foundations invest more in nonprofit policy advocacy, that nonprofits be encouraged to get more involved in advocacy, that small and mid-sized nonprofits receive more training and other assistance to encourage advocacy, and that more resources be made available for policy work to “intermediary” groups in specific fields of interest.

“Our nation’s nonprofit organizations are widely expected to play a key role in helping to promote democracy and civic action, and our survey results indicate that they are making strenuous efforts to fulfill this expectation,” Lester M. Salamon, author of the study and director of the Center for Civil Studies at the Johns Hopkins Institute for Policy Studies, says in a statement. “However, financial and other constraints are limiting their ability to do so.”

Compounding the lack of resources, support and expertise for policy work, as well as the concern about legal constraints, are other hurdles nonprofits face, including rising demand for services, ongoing pressure to sustain their organizations, and fears that policy work could result in a loss of funding from foundations, givers and government.

To clear those obstacles, nonprofits should work to educate their boards and funders about the importance of policy work, and to secure their support to equip their organizations to be more effective policy advocates.

Threats to Latinos a challenge for nonprofits

2008-07-28T06:43:00.000-05:00

Advocates for Latinos have become targets of hate campaigns that underscore the critical role nonprofits play protecting minority rights and strengthening civic life in a democracy.

One of the great champions of nonprofits was Alexis de Tocqueville, the 19th-century French writer who saw in nonprofits a distinguishing hallmark of our ongoing “democratic revolution,” which he believed faced a continuing threat from the “tyranny of the majority.”

Instead of expecting government to take care of their problems, a solution that could lead to government running their lives, Americans team up and work to fix what is wrong.

Those “associations” that Americans form – known today as “nonprofits” -- also represented for Tocqueville an important safeguard against the tendency of majorities and government to run roughshod over the rights of minorities.

Tocqueville’s insights and fears are important to remember in the face of growing intolerance in America for Latino immigrants and their nonprofit advocates.

As The News & Observer in Raleigh, N.C., reported recently, two of the state’s leading Latino advocates have been the target of threats and racist messages.

Because of the threats, Andrea Bazán, president of the Triangle Community Foundation in Durham and the new board chair for the National Council of La Raza, a national advocacy group for Latinos, has requested protection at some public appearances.

She was so concerned, in fact, that she sent her children to stay with her former husband and stayed away from home for several days in June, the newspaper reported.

And Tony Asion, a former police office and a successor to Bazán as executive director of El Pueblo, the leading advocacy for Latinos in the state, told the newspaper he had received death threats and messages he considers to be racist, and he now fears for staff members at El Pueblo.

Nonprofits work to advance the philanthropic mission of healing and repairing our communities and making them better places to live and work.

Yet in simply doing their job and advocating for the rights of Latinos, nonprofit leaders like Bazán and Asion now face threats that cause them to fear for their own lives and those of their children and fellow workers.

As Tocqueville recognized roughly 170 years ago, nonprofits perform a critical job in America by helping to make sure the most vulnerable among us do not fall prey to the intolerance of the majority.

But in a land of immigrants, a land in which the fading white majority is being replaced by a new majority consisting of minorities, the hate hurled at Latinos and their advocates only reinforces the indispensable role nonprofits must continue to play in safeguarding our continuing experiment with democracy.

Nonprofits can partner on back-office tasks

2008-07-21T05:59:00.000-05:00

Creating innovative strategies for social change is the focus of much of the widespread lip-service nonprofits and foundations give to the need for collaboration in the charitable marketplace.

But equally critical is the need for nonprofits to find ways to combine and share the cost of operating their back-office systems.

With the economy sinking and the cost of doing business rising, nonprofits face big challenges in running their shops efficiently and effectively.

Back-office collaboration among nonprofits could yield savings and efficiencies in securing and handling common business needs like paying rent and utility costs, providing employee benefits, operating software systems and databases, and working with consultants.

While far too few foundations will make grants to help nonprofits cover their operating costs, some foundations have been willing to invest in helping groups of nonprofits pay for products and services they can share.

Several years ago, for example, the Z. Smith Reynolds Foundation in Winston-Salem, N.C., paid for a handful of consultants to provide fundraising advice to groups that fight domestic-violence.

More recently, the foundation made a grant to help six water-conservation groups hire fundraising fellows for three years, provide them with training, and help pay for support services such as donor-database software they might share.

To help equip them to do a better job fixing the urgent problems our communities face, funders can make investments that spur groups of nonprofits to partner on back-office operations.

Through collaborations that help them reduce costs and operate more efficiently, nonprofits apply more of their time and resources to the larger job of making our communities better places to live and work.

Charity regulation needs fixing

2008-07-14T07:24:00.000-05:00

The regulation of private foundations and charitable giving has skewed the charitable marketplace and needs to be changed.

The law lets donors who create private foundations take their tax breaks up front but does not require that the foundations pay out more than five percent of their assets each year, letting them hoard their wealth.

So donors and their foundations reap big windfalls.

Donors save on taxes, and their families enjoy continuing power and influence through their foundations.

The tax breaks for wealthy donors and the low spending requirement for foundations starve social programs of funds and transfer the cost to less affluent taxpayers and to nonprofits struggling to meet rising demand for services.

A bill in Congress five years ago to require private foundations to pay out more their assets each year in grants triggered howls of protest from big foundations.

Exercising the clout that flows from the wealth they control, foundations spent millions of dollars to fight the bill, outgunning advocates for a more even-handed charitable marketplace.

What is wrong here? Consider the multi-billion-dollar bequest the late Leona Helmsley created for the care and welfare of dogs.

Helmsley, like any donor, was free to support the cause of her choice.

But as law professor Ray Madoff of Boston College pointed out in a recent opinion column in The New York Times, because it will be paid through her family’s charitable trust, Helmsley’s huge bequest exposes a continuing scam perpetrated against U.S. taxpayers by the laws that give tax deductions for charitable gifts and let donors create perpetual foundations.

Not only can donors save big bucks on the front end and let their foundations hoard even bigger bucks far into the future, but foundations also can count overhead costs, including salaries for trustees, as part of the tiny annual payout the law requires them to make.

It was the 2003 proposal in Congress to exclude overhead costs from the required payout that unleashed a flood of crocodile tears from foundations, which whined that the change could deprive them of their dream of immortality.

The laws regulating foundations and charitable gifts cost taxpayers big-time and tilt the charitable marketplace in favor of wealthy donors and their foundations.
Getting the short end of the stick are nonprofits and less affluent taxpayers.

Madoff calculates that, with her fortune warranting an estate-tax rate of 45 percent, Helmsley’s $8 billion donation for dogs really amounts to a gift of $4.4 billion from her and $3.6 billion from taxpayers.

In return for paying out a tiny share of their assets each year, private foundations yield big tax benefits for their donors, and give the donors’ families, as foundation trustees and directors, continuing power and prestige.

Many foundations now demand that nonprofits looking for grants prove their commitment to equity.

But many of those same foundations are first in line to fight efforts to make charitable regulation more equitable.

In theory, the charitable marketplace in the U.S. represents a good bargain and frees government for other tasks: Nonprofits enjoy tax-exempt status because they address the symptoms and causes of urgent social needs, and donors and foundations enjoy tax benefits because they invest in nonprofits.

But the deal has soured because the rules have allowed donors and their foundations to bulk up, like athletes on steroids.

To ensure the fairness the charitable marketplace needs to foster innovation in giving and in nonprofit enterprise, Congress needs to bring the rules back into balance.

Charity must make itself a market

2008-07-07T06:28:00.001-05:00

Giving has become a major currency in the global economy yet remains an asset whose true worth and potential are undervalued and overlooked.

Government and business pay lip service to the important role charity plays in our communities and economy, yet treat it as a second-tier vehicle for social change, one that requires special treatment.

Nonprofits and philanthropic organizations reinforce the perception they are marginal players by acting as if their good intentions entitle to them to public and private investment, and free them of the need to compete in the marketplace under the same pressures and rules that other businesses face.

To increase their impact, people and organizations working and investing in the charitable marketplace need to be brutally honest about the value they add, the challenges they face, and their need to make their own way.

By moving beyond their sense of entitlement, confronting their strengths and weaknesses, and designing smart business models, nonprofits can more effectively engage customers, investors and partners and serve as leaders for change.

And nonprofits have a great story to tell.

Whether addressing problems at home or abroad, giving is built into Americans’ DNA.

Americans see problems and give their time, know-how and money to improve and enrich their communities.

As individuals and through their families and businesses, Americans create and invest in nonprofit and philanthropic organizations to address urgent social needs.

In 2007, charitable giving in the U.S. exceeded $300 billion for the first time, with individuals giving nearly 75 percent of those dollars, and bequests accounting for nearly 7 percent more, according to Giving USA 2008.

And in 2006, over 61 million individuals volunteered, representing over one-fourth of the U.S. population, with 15 million Americans volunteering on an average day, and the average volunteer serving over 200 hours a year, according to The Nonprofit Almanac 2008.

The U.S. nonprofit sector also is big, diverse and growing, the Nonprofit Almanac says, accounting for five percent of gross domestic product, over 8 percent of wages and roughly 10 percent of job.

In addition, the estimated value of volunteer time equals nearly half the wages nonprofits pay.

Nonprofit wages and employment both have been growing in their share of the economy, and nonprofit jobs in recent years have been growing three times faster than the rest of the economy.

Beyond those impressive numbers, the resources exchanged in the charitable marketplace simply make our communities better places to live and work.

But until nonprofits and givers get over their sense of entitlement and start building enterprising business models that break down the walls to true collaboration among nonprofits and with business and government, the charitable marketplace will remain a marginal force for social change.

Information essential to build community

2008-06-30T06:14:00.000-05:00

A new initiative by the John S. and James L. Knight Foundation aims to fill a gaping hole in the civic marketplace.

The foundation is investing $24 million over five years to help community foundations make better use of media and technology to keep communities informed and citizens involved.

The effort should serve as an important example for all nonprofits and foundations, which need to do a better job telling their story and that of their communities.

In an increasingly complex and confusing global marketplace, people and organizations need news and information they can use to make smart decisions geared to making their communities better places to live and work.

The mainstream news media once filled the critical job of delivering that news and information, which are the lifeblood of a free society.

But in the face of brutal competition in a marketplace dominated and saturated by corporate media, traditional news organizations have worked themselves into a frenzied identity crisis.

Their near-sighted solution has been to abandon their role as social watchdog and resource, preferring to pursue the safer goal of simply surviving by pandering to the fears and consumption preferences of readers, viewers and listeners.

Yet while it no longer seems to matter to the news media, social change remains the core business of nonprofits and foundations.

And social change depends on civic engagement and informed communities.

With the mainstream news media failing to keep communities informed, that essential job falls to nonprofits and foundations.

It is no small irony that the frantic drive for revenue and profits has blinded the media to the market value of news and information that address the core concerns of the communities they claim to serve.

With the Knight initiative piloting the way, nonprofits and foundations can work to meet the demand of the civic marketplace for news and information that citizens can use to heal, repair and grow our communities.

Change is a continuous job

2008-06-23T07:18:00.000-05:00

Nonprofits and givers are in the change business, and the business of change continually requires changing the way we do business.

Too often consumed with the day-to-day grind of delivering services, meeting the payroll and raising money, nonprofit managers and leaders too rarely take the time to think about changing the way they work so their organizations can work better and smarter.

Yet the demands of a global marketplace transformed by technology and the seamless flow of people, jobs, capital and information has made it more urgent than ever that nonprofits adapt to the new economy and way of doing business.

Nonprofits and their leaders must learn to be social entrepreneurs, gearing their organizations not only to deliver services more effectively and efficiently but also to make change happen.

That means adapting to their organizations the enterprising, networked, collaborative and outsourced culture of the global economy.

Change as a vision must become part of the way nonprofits think and work, and the leaders of nonprofits must make entrepreneurial leadership a value and a lesson they look for and cultivate in their boards and staffs.

“Everyone a changemaker” is the mission of Ashoka, the international social-change organization that supports the development of social entrepreneurs.

And making everyone a changemaker requires inspiration and giving every problem “as much innovation as it can humanly get,” says Sushmita Goosh, Ashoka’s president emeritus.

Nonprofits are indeed in the change business, and making change happen requires that nonprofits and their supporters invest in finding and developing individuals dedicated to changing their organizations so they can work on making our communities better places to live and work.

Politicking soils Golden Leaf search

2008-06-16T10:03:00.006-05:00

Ham-fisted politics have hijacked the effort to pick a new president for one of North Carolina’s biggest foundations.

The board of the Golden Leaf Foundation, created to dole out half of North Carolina’s share of 46 states’ massive settlement with Big Tobacco, was set in early June to name a new chief to succeed Valeria Lee, who is retiring.

But the board, made up of political appointees, yielded to last-minute requests by Gov. Mike Easley and state Senate leader Marc Basnight to delay the decision so it could consider Easley’s top budget adviser for the job.

Dan Gerlach, the budget adviser, is busy with the state legislative session and would not be able to begin the new job until the session ends, Easley reasons.

The move by Easley and Basnight reeks of back-room politics.

If Gerlach wants the Golden Leaf job, he should have applied for it months ago like the hundreds of other candidates who met the application deadline.

But after a careful search by a consultant, screening of candidates by the board’s search committee, and interviews by the full board with four finalists, Easley’s intervention seems like the clumsy move of a lame-duck governor to find an exit strategy for a top aide.

And Basnight’s intervention, in the face of bills pending before state lawmakers that would choke off funding for the foundation, looks like a barely veiled threat: Give Gerlach the job, or kiss the foundation, its assets and its promise goodbye.

Created by state lawmakers to invest in efforts to heal and repair North Carolina communities hurt by tobacco’s decline, the Golden Leaf Foundation is by definition and nature a political creature subject to the whims and agendas of politicians.

And despite the innovative grants and investments it has made, and the effort of its board and staff to maintain the organization’s integrity, the political make-up of the board has saddled the foundation with the perception that it is a political tool.

By mucking up the search for a new president and interfering with the board’s exercise of the judgment delegated to it, Easley and Basnight have further undermined the foundation’s reputation.

Arts play critical community role

2008-06-09T06:50:00.001-05:00

A study a year ago by Americans for the Arts found nonprofit arts and culture in 2005 generated $166.2 billion in spending in the U.S., up from $134 billion in national economic activity in 2000.

The study also found the nonprofit arts industry generates $26.9 billion in annual federal, state and local tax revenue throughout the U.S. and accounts for 5.7 million jobs.

Beyond the economic impact those numbers reflect, the nonprofit arts industry is critical to our communities’ quality of life and their prospect for economic growth.

To better tell the arts’ story, and to gear the arts to play a more active role in shaping public policies that affect our communities’ future, arts councils are retooling themselves.

In North Carolina, for example, the United Arts Council of Greater Greensboro is working to help the arts play a more strategic role in strengthening the local economy, improving education and attracting visitors.

The council also is working to generate the investment, participation and attention the arts need to play that strategic role.

The neighboring Arts Council of Winston-Salem and Forsyth County is spearheading efforts to better promote the arts, raise money for arts groups and facilities, and boost the arts as a force in downtown growth and economic development.

And in Charlotte, The Greater Charlotte Cultural Trust, housed at Foundation for the Carolinas, advises partner groups of the Arts & Science Council on setting up planned-giving programs, and also handles the management of gift pledges, as well as investment services for endowments that arts groups create at the trust.

To compete effectively in a global marketplace, particularly in the face of a looming recession, the arts need to tell their story better, and communities need to embrace the nonprofit arts and culture industry as an important partner in building a promising future.

Foundations need to tell their story better

2008-06-02T06:12:00.000-05:00

Foundations need to tell their story better

A critical engine of social change, giving reflects the heart and character of America.

Yet active civic leaders actually know little about the work of the charitable foundations that can be key players in addressing both the symptoms and causes of the social problems our communities face.

A new survey finds that foundations “are isolated from many citizens on the front lines of local, regional and national efforts to improve American society.”

The survey, which was commissioned by the David and Lucille Packard Foundation for the Philanthropy Awareness Initiative, and was conducted by Harris Interactive, asked questions about foundations to individuals serving in a leadership, committee or board role in an organization working on community or social issues.
All told, the survey says, the findings “paint a picture of foundations as little known among key players in the efforts they seek to support.”

Fifty-six percent of those surveyed, for example, could not name a foundation on their first try, 60 percent considered themselves somewhat or not at all informed about foundations, only 15 percent could cite examples of a foundation’s impact on their community, and only 11 percent could give an example of a foundation’s impact on an issue they care about.

While foundation grants in 2006 represented only 12.4 percent of all charitable giving in the U.S., the impact of foundations and the role they can play is far greater than their share of overall giving suggests.

Foundation grants, whether to address immediate social problems or needs, or to fix the underlying causes of those problems or needs, can provide critical investment in improving our communities.

Funds from foundations also can help nonprofits secure investment from other funders.

And foundations can serve as brokers for social change, convening individuals and organizations that can work as partners in addressing community problems.

What’s more, foundations can do even more than they do now.

Instead of paying out only the 5 percent of their assets in grants and overhead that the law requires they pay, foundations can pay even bigger share.

Moving beyond their preference for funding programs, foundations can invest more in helping nonprofits strengthen their internal operations.

And rather than simply looking to their endowments for investment returns, foundations can be more active shareholders, making investments that are in line with their philanthropic mission, and working with the companies in which they invest to make change happen.

Ultimately, foundations can be powerful agents for social change.

First, though, foundations must do a better job telling their story, and helping the groups they support tell their own story.

Giving is for all ages

2008-05-27T05:58:00.000-05:00

Young people are passionate about change, and looking for ways to put their time, know-how and money to work improving our communities.

But by continuing to focus their chase for resources on older, more traditional givers, many nonprofits remain blind both to the immediate value and to the long-term return young people can add to their organizations.

And young people not only give relatively as much as other generations, after accounting for differences in income, education level and religious attendance, says a new study, but they are more likely than any other generation to cite the “desire to make the world a better place to live” as a key motivation for their giving.

The report, conducted by the Center on Philanthropy at Indiana University and funded by Campbell & Co., also says young people are willing to give larger amounts but will not if they are asked to give less.

A second report suggests volunteer service by young people can be an important pathway to nonprofit services.

The report, conducted by ABT Associates for the Corporation for National and Community Service, says Americorps alumni, especially minority and disadvantaged youth, are more likely to pursue nonprofit or public-service careers.

Addressing the symptoms and causes of the urgent social problems we face will require that nonprofits tap all the resources they can.

Young people represent a powerful source of staff, board, volunteers and financial contributions for nonprofits, which need to move quickly to engage young people in their work and their mission.

Big challenges in nonprofit growth

2008-05-19T06:58:00.000-05:00

The charitable marketplace keeps growing, putting even greater pressure on nonprofits and their supporters to run smart, lean, responsible operations.

Nonprofits employ more people, generate more revenue and contribute more to the U.S. economy, says the just-released Nonprofit Almanac 2008.

But growth alone does not ensure that nonprofits are making the best use of their resources.

Sadly, the charitable marketplace is saddled with fat and inefficiency.

Fueled by a sense of entitlement and righteousness, far too many nonprofits focus more on perpetuating their own organizations than on improving the way they do business or deliver services.

And while their services often overlap, far too few nonprofits are willing to truly consider, let alone pursue, consolidating their operations or even merging their organizations.

Having cultivated their own donors, volunteers and customers, nonprofits invest more time in defending and expanding their turf than in looking for the best way to put common community resources to work to address common community problems.

Nonprofits do not bear sole blame for the sloppy and self-absorbed way many of them operate.

Lacking the will or courage to ask tough questions or to encourage collaboration, foundations and other supporters are the enablers of nonprofits' waste and turf-driven mindset.

By continuing to invest in nonprofits without challenging them to be more efficient, open and collaborative, foundations and other supporters simply perpetuate the feudal fiefdoms that divide and weaken the charitable marketplace.

To address the symptoms and causes of the urgent social problems we face, the charitable marketplace needs to do a lot better.

Big challenges for nonprofits, foundations

2008-05-12T08:19:00.000-05:00

Foundations and nonprofits need to get their house in order.

A thriving charitable marketplace is critical to address the urgent social problems America faces, but that marketplace itself faces huge challenges.

Those challenges, spelled out in three new reports, include the need for more effective nonprofit boards, more investment in nonprofit leadership, and more diversity in philanthropy.

While it faces an imminent crisis because of massive turnover expected in staff leadership, for example, the nonprofit sector gets poor grades for the job it is doing to provide leadership training and professional development opportunities to aspiring nonprofit executive directors, according to a report by the Dorothy A. Johnson Center for Philanthropy and Nonprofit Leadership at Grand Valley State University in Grand Rapids, Mich.

Emerging leaders want and need mentors but worry about making nonprofit work a life-long career because of low pay, burnout, the burden of student loans, and lack of professional development, and generational differences in organizational expectations, the report says.

A second report, by Rockefeller Philanthropy Advisers, says that with public pressure growing “for foundations to be more responsive to underserved and diverse communities,” foundation leaders should “reconsider the many ways to incorporate diverse perspectives into solving our greatest challenge.”

While foundations have made “much progress” in staff and board diversity, and modest progress in the share of grant dollars targeting minority populations, the report says, the number of grants and grant dollars targeting minority populations did not increase in direct proportion to increases in staff and board diversity.

A third report, by the Urban Institute, finds that most heads of mid-size nonprofits give poor marks to their trustees for fundraising and monitoring board performance.

The study calls for more support for board development and for initiatives designed to bring more diversity to the leadership ranks of the nonprofit sector.

To fix the urgent social problems we face, foundations and nonprofits need to fix their own internal problems.

With foundation investment, for example, nonprofits must develop sustainable business and fundraising strategies; build and engage effective boards; find and keep smart leaders and groom the next generation of leaders; unleash the power for productive collaboration; and work to fix flawed policies underlying the symptom sand causes of social problems.

Without greater investment to equip foundations and nonprofits to be more effective, the charitable marketplace will fall short of its underlying mission of making our communities better places to live and work.

Foundations can be more active shareholders

2008-04-28T06:09:00.000-05:00

Private foundations in the U.S. are missing a huge opportunity to put their money where their mission is.

With endowments totaling over $600 billion, much it invested in publicly-held companies, most of those foundations focus more attention on the five percent of their assets they pay out in grants than on the investment of all their assets.

And research shows most foundations delegate the voting of their proxies to investment managers, and that those managers typically vote those proxies based on recommendations of the management of the companies in which the foundations hold stock.

But a growing number of foundations are taking a more active approach to their role as shareholders, aiming to align their proxy voting with their philanthropic mission.

Building on their previous publication, “Unlocking the Power of the Proxy,” As You Sow and Rockefeller Philanthropy Advisors now have published “Proxy Season Preview 2008” to inform proxy voting by foundations.

As the two groups say, by failing to take a more active shareholder role, “foundations miss the opportunity to influence corporate policy, and may unknowingly support actions that conflict with their own guiding principles.”

The new publication explains social and governance resolutions being considered by corporations; looks at key issues and trends; provides updates on votes in recent years on specific issues; identifies key investors and organizations filing proxy resolutions; lists companies that have scheduled shareholder votes; and lists resources and reports to help foundations learn about the activities of peer organizations.

Foundations control a lot of stock in publicly-held companies and, through their proxy voting, can help shape the way those companies do business.

By investing more time and attention to their role as shareholders, foundations can make a bigger impact on the critical issues they spend so much time and attention trying to address through their grantmaking.

Nonprofits must lead for change

2008-04-21T06:38:00.000-05:00

Change is essential, and tough.

Working at the heart of constant and rapid change, nonprofits themselves are in the change business.

Their job is to address the symptoms and causes of urgent social problems.

To make change happen, nonprofits must change the way they do business, both inside their own organizations and with partners whose collaboration is needed for social progress.

Ultimately, change depends on leadership, which is rare in a marketplace in which fear, self-interest, competition and a preoccupation with management techniques drive organizations.

Effective leaders, in contrast, lead by inspiring and engaging the vision, leadership and collaboration of co-workers in their organizations and partners in their communities, says Anita Brown-Graham, director of the Institute for Emerging Issues at North Carolina State University and a trustee of the Z. Smith Reynolds Foundation in Winston-Salem.

Speaking at a Lunch ‘n’ Learn workshop in Charlotte sponsored by the Philanthropy Journal, Brown-Graham urged nonprofit leaders to work to shape change rather than waiting for change to shape them.

Citing Jim Collins’ “Good to Great: Why Some Companies Make the Leap…and Others Don’t,” she said what distinguishes great companies from good ones is a corporate culture of vision and innovation, rather than simply a visionary CEO.

That kind of leadership is critical to address the social problems we face, and requires a new way of thinking about leading.

Rooted in their passion, Brown-Graham says, leaders create a sense of urgency among the people who need to be involved in making change happen.

Those leaders build a team with the “credibility, skills, connections and formal authority” essential for guiding change, she says, and that team must operate with “trust and emotional commitment.”

For the team to be effective, leaders must show they mean business through action not words, and must repeat the story of the vision and process as often as they need to.

Members of the team must truly be part of change initiatives, and must be able to see, through short-term “wins,” that they are having an impact and that the larger goal is within reach.

And faced with a culture of resistance and fear, Brown-Graham says, leaders must continually push for change and nurture the new culture they are trying to create, using existing tools, such as promotions and incentives, to engage employees and organizational partners.

And even when wins occur, she says, leaders must be vigilant about making sure changes “stick” and are not erased by backsliding into the old way of doing business.

Social progress depends on change, which depends on leaders with the vision and courage to create a culture in their organizations and communities that will inspire and engage true partners in shaping change.

Tapping philanthropy’s true value

2008-04-14T06:36:00.000-05:00

Consumed with managing their survival in what can be a brutally competitive charitable marketplace, nonprofits are failing to lead or thrive.

Nonprofits should be addressing urgent needs, attacking their roots and brokering change by unleashing the power of giving and collaboration.

Instead, while parading as servant leaders and team players, many nonprofits practice bare-knuckle brawling, clawing for turf and knee-capping any and all rivals or potential rivals.

Enabling the failure of leadership that infects the nonprofit world are foundations that, while preaching innovation and collaboration, continue to reward nonprofits that talk a great game about the need for collaborating but in practice lack the vision and courage to truly work together to make change happen.

Nonprofits and foundations need to change the way they do business.

Facing an exodus of nonprofit executives who are overworked, underpaid, starved of board support and opportunities for career advancement, and increasingly nearing retirement, the charitable world must make a massive investment in developing existing leaders and identifying, recruiting and cultivating new leaders.

Nonprofits need leaders who not only can manage their organizations effectively but also can provide the vision to see ahead, seeing the crucial connection between organizational success and the partnerships needed to address larger social problems.

Which nonprofits, and which nonprofit leaders, are willing to leave their egos and organizational power-grubbing out of the search for shared solutions to the urgent problems our communities face?

And which nonprofits have the vision and courage to create partnerships in which they and all their partners truly are willing to make the sacrifices and build the strategic alliances and market-driven solutions critical to making our communities better places to live and work?

In the charitable marketplace, those with wealth and power are quick to preach the gospel of collaboration but slow to give up any of that wealth and power in the interest of working together to address common problems.

Fixing what is wrong in our communities will require fixing what is wrong in the charitable marketplace, and that will take leaders honest enough and brave enough to collaborate productively while competing vigorously, all the while staying true to the value and power both of collaboration and competition.