Philanthropy Resources

When I led the U.S. Small Business Administration (SBA) in San Francisco, I was struck by the enormity of people who thought they could start and run a restaurant profitably. Mind you, many of these individuals had never even worked in a restaurant, engaged in wholesale food purchasing or developed menus beyond their family units. A business plan?  No chance. But most had a concept, a name picked out and a fervent belief they would be successful. Not surprisingly, restaurants represented the greatest chunk of failures on SBA loans, and those were establishments that had business plans and capital to fuel their launch.
 

There is a parallel in our world, of course. There are scores of people out there that think that they’re capable of starting and managing a nonprofit. It can’t be that difficult, right?
 

As I shoved my Chronicle of Philanthropy into my laptop bag in anticipation of landing in Northwest Arkansas recently, my thoughts were interrupted by the individual in the adjacent seat, “Excuse me.  Do you work with charities?”
 

“Yes,” I answered.  “Why do you ask?”

“I’m thinking about starting a non-profit to help kids with literacy,” he responded.  “I’m going to call it Each One, Reach One, Teach One.”
 

He looked to me for approval, but received instead a rapid-fire string of questions: “Have you been involved as a board member of any non-profit organizations? Have you looked around your community to see if any good literacy programs exist to which you might lend a hand?” Etc.
 

A bit startled, he answered no to all of them, then retreated with a, “Like I said, I’m just thinking about it right now.”
 

I encouraged him to check with his United Way to learn about community organizations with a focus on literacy, and he said he would do so.
 

We’ve all had those conversations, with our friends as well as perfect strangers. Somehow, there’s this passionate, altruistic desire to give back coupled with the notion that putting together and running a non-profit can’t be that difficult.
 

The "putting together" side of that equation is fairly accurate. The fact that we now have 1.1 million charities in this country is testament to that. Comply with the laws of your state for incorporation, determine your charitable purpose, pull together a few friends to serve on your board, send off your eligibility request for tax-exempt status to the Internal Revenue Service and, voila, you’re in the charity business.
 

The precipitous decline in our U.S. economy in 2008 and the strains it placed on charities catalyzed a call from the philanthropic community for collaboration and consolidation in the non-profit sector. Perhaps weeding out the charitable marketplace isn’t a bad thing, we proffered. Likewise, I’ve heard sentiment expressed recently that the IRS revocation of 501(c)(3) status of charities failing to file their 990 PF forms is not such a bad thing, either, under the rubric that charities that can’t handle such basic regulatory checks shouldn’t be permitted to exist in perpetuity.
 

I can’t refrain from the obvious question, however: what if we required more on the front end to secure 501(c)(3) status? Perhaps requiring incorporators to demonstrate how their proposed charity will distinguish itself in the marketplace by meeting a need (in the community or otherwise) that is not served already by another charity. How about charging a registration fee sufficient enough to make people think twice about creating a new entity, and simultaneously create more resources for the IRS to undertake a broader review of the non-profit sector? If nothing else, that might encourage more due diligence and encourage people driven more by altruism than ego to give their time and talents to an existing nonprofit.
 

In the meantime, we can continue to have those one-on-one conversations.

What do you think?

Dr. Sherece West is president and CEO of the Winthrop Rockefeller Foundation in Little Rock, Arkansas. She will be participating in a panel discussion on philanthropic leadership at the SECF Annual Meeting in November.

I recently read a blog post from Pablo Eisenberg entitled, “The Social Innovation Fund: Innovation for What?” In it, Mr. Eisenberg criticized the Obama Administration’s Social Innovation Fund for focusing too small an investment on only a few large, well-known nonprofits and engaging only a small number of very large foundation supporters.

In particular, Mr. Eisenberg points to rural communities that will essentially be left out of the game, and notes an opportunity for innovation that the fund will certainly miss:

Thousands of small nonprofits in rural areas and in regions currently underfunded by philanthropy are in desperate need of financial support. To meet this need, the Administration could use the Presidential bully pulpit to urge the foundation community to create new, large rural and regional foundations with the capacity to reach out to these overlooked nonprofit organizations and their communities.

Working in Arkansas, a predominantly rural state, I completely agree with Mr. Eisenberg’s criticism of the Social Innovation Fund and about missed opportunities in rural philanthropy, and I hope he’ll speak more to that during his live debate at the SECF Annual Meeting. But I also think that those of us who live in rural states bear our share of the responsibility for changing the game. Before we create “new, large rural and regional foundations,” those of us who are already working in rural areas need to ask ourselves some serious questions:

• What are we going to do to make rural America a priority for national funders and the federal government?

• What are we going to do to attract public resources to leverage our grantmaking and make scalable best practices?

• What are we going to do to influence public policy decisions?

• What are we going to do with our limited resources to be part of the solution as opposed to continuing to perpetuate the problems through grantmaking practices and approaches?

I can think of three things.

First, we can become advocates.  We can help policymakers in Washington correct their misconceptions of rural America as an agrarian Utopia and help them see the true challenges of joblessness, poverty and out-migration that rural communities face. We can inform the process of advocating federal dollars so that rural localities could collaborate on initiatives that would benefit broader regions. We can go to the Hill and talk with our congressional leaders about funding formulas. We can support research that informs the policy debate. We can bring in technical experts to help us consider the best short?term and long?term approaches. We can use our convening power to spur conversation and educate policymakers and advocates about what is best for our rural communities.

Second, we can be activists. Philanthropy is sometimes called the research and development arm of society. At our best, we can use our unique role to identify and understand the dimensions of deeply rooted social problems, test strategies to address them, and serve as a catalyst for change. The creation of new economies in rural areas with livable wage jobs; building the capacity of our nonprofit infrastructure to play its vital role in rural society; and bringing to scale the outstanding work of many of our nonprofits to provide services and supports to rural citizens — all of these are more likely to happen with activism. I know that “activism” is a scary word to most funders, but we need to get over our fear and begin collecting good data, educating our constituencies to develop community change goals and actively influencing how resources are attracted to and used within our communities.

And finally, we can be accelerants, the catalysts for change that light a fire under rural grantmaking. Nationally, more needs to be done to grow the capacity of our vitally important community foundations in rural areas and the affiliate structures in those areas with affiliates. But community philanthropy must include those who live and work in rural communities as part of the solution and not simply as the recipients of benevolent gifts. Foundations and communities must join together in collective or collaborative strategies for community change.

Yes, Mr. Eisenberg is right. Rural America deserves philanthropy’s attention. But it’s up to us to make sure we get it.

Reason #10 – November’s not really that far away.

Even though summer’s just begun, we’ll all only get busier as the year goes on. Don’t let the Southeast’s premier event for grantmakers get lost in the shuffle. Register now to secure your spot and check it off your list.

Reason #9 – The “Clash of the Titans” is for real.

Right now, there are two strong opinions in our sector about what foundations could and should be doing. How that conversation develops will doubtlessly influence how federal and state policies about philanthropy are shaped. No one represents the two sides of the debate better than Pablo Eisenberg and Dr. Leslie Lenkowsky. These two thought leaders will go head to head at the SECF Annual Meeting — and you can have a front row seat. 

Reason #8 – It’s better than having a crystal ball.

The SECF Annual Meeting follows immediately on the heels of what will to be a very critical election. You’ll hear the “morning after” impressions from experts about what the results could mean in terms of legislative policy for philanthropy, investment strategies for foundations and the short and long-term future of grantmaking.

Reason #7 – The Great Recession’s not over yet.

Things may be looking up, but we’ve still got a long way to go. At the SECF Annual Meeting, you’ll learn new strategies for tackling the full suite of recession-related realities — from internal investment approaches to ways to develop a community workforce and jobs.

Reason #6 — Powerful philanthropy starts with meaningful conversation.

There’s no place like the SECF Annual Meeting to gather with sector-leading peers in a format that encourages open, honest communication. In fact, the exchange of ideas in hallways and elevators alone has sparked ideas that have changed communities. Although we can’t promise everyone a life-changing moment, we can guarantee you’ll leave with plenty to think about.

Reason #5 — The Gulf Coast gets our support.

SECF secures meeting sites years in advance, and at the time we set this year’s Annual Meeting in Mobile, Alabama, no one could have foreseen the disastrous oil spill that now challenges the Gulf Coast.  While we wish the spill had never happened, we’re heartened that we have a chance to help by visiting the region, helping to generate revenue for the community, and learn about the role foundations will play in the ongoing recovery efforts.

 
Reason #4 — We ditched the stuffy dinner.

Conversation is key. Instead of plated entrees and podiums, we’ve heard the call for more informal networking — loud and clear. This year we’ve replaced the chairman’s dinner with a grand, Southern-style reception. We’re talking heavy on the hors’deouvers and mingling, and light on the interruptions. In fact, we’ve minimized the talking heads and stuffy panels throughout the entire Annual Meeting, and emphasized the opportunity for more discussion, interaction and collective reflection.

Reason #3 — Mobile invented Mardi Gras.

That’s right. Mardi Gras began in Mobile, Alabama, and the spirit of celebration and hospitality still imbues this beautiful city, along with great restaurants, breathtaking architecture and plenty of galleries and shops. What better place to celebrate and share the great work of your foundation? Although we’ll take a look at the serious issues facing our country, our communities, and our philanthropy, we’ve also made sure there’s time for you to enjoy a taste of Mobile and explore one of our region’s historic gems with your friends and colleagues.

 
Reason #2 — You just might sleep easier, because it’s free.

There’s nothing like a good night’s sleep — and yours could be free! Complete your SECF Annual Meeting registration by July 1 and you could win one free night at either The Battle House or Renaissance Riverview Hotel. All you’ll need to do is show up and snooze. (After a full day of action-packed Annual Meeting sessions, that should be a cinch!)

Reason #1 — All your friends and colleagues will be there.

We know what your mama told you: “If all your friends jumped off a bridge, would you do it, too?” But in this case, we think she’d approve. All of your friends and colleagues are coming together to share ideas, meet new leaders and thinkers, learn from experts and enjoy the fellowship of philanthropy. Shouldn’t you?

Don’t miss out. Learn more and register now. See you in Mobile!

• Nonprofits do not perceive funders to have communicated their responses to the economic downturn clearly, if at all.
• Nonprofits report that funders have offered them little useful help in responding to the challenges of the downturn. 

• Clearly communicate with grantees about their own responses to the economic climate.
• Be involved helping grantees consider changes they are making in response to the economic climate.
• Work to build better relationships with grantees, particularly by taking the time to understand the goals and strategies of grantee organizations.

I’ve just returned from the SECF Family Foundations Forum in Charleston, South Carolina. It was an incredibly rich and meaningful time together, complete with ample opportunities for foundation networking and much sharing of great grantmaking resources. Once again, I was impressed with the level of engagement among the 70 trustees and staff who attended. Their commitment to their foundations and communities, and their sincere desire to continually learn how to do their great work even better, is truly inspirational.

One saying popped up a few times during this meeting, “If you’ve seen one family foundation, you’ve seen one family foundation.” That’s very true. Family foundations are in essence extensions of the families that steward them, and are every bit as diverse. It spawned some great discussions and exchanges of ideas.

One topic that generated discussion was that of politics and philanthropy and, specifically, the relationship between our field and government in light of the new administration. To me, it underscored the point that the jury is still out on whether a deeper level of engagement from government will be a plus or minus for our field.

Some of the discussion centered around last week’s article in the Wall Street Journal about the very palpable mutual admiration between foundations and the current administration at the Council on Foundations meeting. But I was at that meeting, as well as other philanthropy conferences, and I've also heard a different view. Many were still feeling the sting of the proposed cap on charitable deductions in 2009, which was beaten back with bipartisan opposition, but has reappeared in the President’s 2011 budget.

Then there’s also the question of the Social Innovation Fund.  Many applaud it, and it will no doubt have a significant impact on some terrific organizations. There’s another perspective, however, that the White House, in creating this fund and the bureaucracy to support it, essentially is saying they think the government can affect change and invest this money better than foundations.

It’s still too early to tell. I believe that the real litmus test for the Obama Administration and its embrace of philanthropy and supportive philanthropy policy may not come until we see what happens when and if tax reform arrives on the front burner.

But there’s one key observation that comes from being among our family foundation members this week. Legislation and policy have alternatively targeted or all but ignored philanthropy for generations. And for generations, families with charitable values have found a way to keep the foundation fires burning.

Dr. Elinor Ostrom of Indiana University won the 2009 Nobel Prize in economics for her research into the role of voluntary associations in solving a wide range of public challenges. Typically, society manages its “public assets” (i.e. fish in the ocean, lumber in public forests, etc.) in one of two ways in order to avoid uncontrolled consumption. First, society treats the public asset like a private asset and submits its consumption to market forces. A good example is offshore oil leases in which potential users competitively bid to lease the “land” and extract oil. Second, society can manage public assets through regulation. An example of regulation is the issuance of fishing licenses that limit the species and number of fish that can be pulled from public waters. In theory, the public’s interests are protected through these two approaches.

Dr. Ostrom won the Nobel Prize for her work exploring a third way to govern the use of public assets known as “voluntary agreement”. Over many years, she documented dozens of examples in many countries where consumers of public assets voluntarily reached agreement to limit and control consumption and users were often more satisfied with the results than under marketplace or regulatory schemes. Voluntary agreement is based on the principle of “reciprocity”- -the belief that the beneficial acts of one party obligates others to reciprocate with equally beneficial acts. Reciprocity also develops trust and improves cooperation.

Deeply imbedded in the concept of voluntary agreement is evidence that it works best from the bottom up. Grassroots groups and users of assets who are closest to the scene reach more effective and durable rules than top-down efforts. Apparently, empowering the people who have the most at stake to regulate the use of a public asset is the key ingredient. How these rights are defined through “rules of the road” such as policies, practices, court decisions, and other official acts seems to be a big help in governing these scarce public resources. Dr. Ostrom has provided us with an empirically rigorous demonstration of these propositions around the world.

This is where foundations should pay close attention to advocacy that starts with grassroots support. The formula that has worked for years in philanthropy is a three-pronged approach to (1) build a large group of local supporters in favor of an effective social intervention (such as a nurse-family partnership based on a well-researched model), (2) independently evaluate a demonstration project to show that it works, and (3) advocate for the elimination of public policies that resist wide-scale adoption and expand public policies that support adoption. All too often, foundations take a “build-it-and-they-will-come” approach before considering best-practices, evaluation, or advocacy. This is known as the “Lone-Ranger” approach which most often leaves them mired in perpetually funding programs that rightfully should qualify for public financial support.

 Admittedly, it will take a long time to build grassroots coalitions of the right people, start community interventions that use best practices, and develop advocacy maps so that grantmakers know in advance the public policies they want to change. However, the Lone-Ranger alternative rarely succeeds.