Philanthropedia Blog

Archive for May, 2010

Philanthropy’s Biggest Opportunity (Part IV)

May 28th, 2010

This post has been cross-posted at Tactical Philanthropy, where I am guest blogging this week. You can read part I here, part II here, and part III here.

In the first three parts of this article, I described what an impact-based social capital market is, why it matters yet doesn’t currently exist, how we can jumpstart its creation using a catalyst, and what other elements need to come together to make it a reality in the next 2-5 years. I will use this last post to address some common issues that people raise when discussing the concept:

Issue: An impact-based social capital market focuses too much on “thinking” and not enough on “feeling” which is a core motivation for donors.

Answer: An impact-based social capital market is based on a simple premise: ensuring that charitable contributions are going to organizations that are actually having an impact. In that sense, it includes a component of “thinking” in that it nudges donors to not waste their money on organizations that do not prioritize having impact. However, it is incorrect to assume that this precludes feelings from playing a role in donor decision making. As we say at Philanthropedia, donors participating in an impact-based social capital market will choose causes with their hearts, and organizations with their minds. In that way, there is perfect alignment between what donors are passionate about – contributing to a cause they feel connected to – and an impact-based social capital market which allows them to make sure these contributions are given to high-impact organizations.

Issue: Donor behavior cannot be changed and donors do not want to participate in an impact-based social capital market.

Answer: In my mind, there is little evidence to support the claims above. For example, Charity Navigator has successfully changed donor behavior, even if on the basis of the wrong set of metrics. So while it is certainly true that getting people to think about impact is no walk in the park, I believe we can achieve that goal if we as a sector collectively focus on a common set of beliefs and corresponding language, and then invest to create appropriate products and services that help guide the donor.

Issue: The catalyst you proposed suffers from many important limitations, for example X, Y, and Z.

Answer: Undoubtedly, all catalysts will have both pros and cons – this is an expected consequence of any approach that we can possibly think of. Spending too much time worrying about being a bit more “right” is a mistake however – instead, we need to focus attention on the much bigger challenge of putting together the other necessary elements of an impact-based social capital market once we have a “good enough” catalyst.

That is the approach we have taken with Philanthropedia too: we have explicitly aimed for a set of recommendations that are good enough and inexpensive to source. This mindset, combined with a methodology that focuses on continuous improvement, can produce great results over time: for reference, compare our national climate change research results to our Bay Area climate change results (choose a random organization and click on “expert assessment” to read expert comments). The rise in quality of expert comments in the span of less than 6 months is staggering!

Conclusion

I hope that this 4-part article provides a clear definition of the concept of an impact-based social capital market and its related elements. Obviously, there are many remaining questions and challenges and I welcome your feedback in the comment section or at feedback@myphilanthropedia.org.

If you want to get more involved, please reach out to the email above as well. You will be joining a group of more than a 1000 experts and tens of organizations that are committed to the vision that I described above.

Thanks for reading!

Philanthropy’s Biggest Opportunity (Part III)

May 27th, 2010

This post has been cross-posted at Tactical Philanthropy, where I am guest blogging this week. You can read part I here, part II here, and part IV here.

In part I and II of this blog post, I explained what an impact-based social capital market is and why it is the biggest opportunity in philanthropy, and elaborated on how we could jumpstart its creation by using a “catalyst” that has certain specific characteristics. In the last two parts, I want to focus on the remaining elements that need to come together to create an impact-based social capital market and answer some common questions and concerns.

An impact-based social capital market will require at least two more important elements:

Minimum scale: It is important to recognize that the catalyst I described in the previous part needs to compile information on nonprofit impact on a sufficient minimum scale in order to attract enough donations that can jumpstart the creation of an impact-based social capital market. What is this minimum scale? Although different organizations might have different answers, for us at Philanthropedia this means covering the most prominent 8-9 national social causes and 4-5 local causes. (Note: we will have this minimum scale by the end of the summer and our research results continue to rise in quality thanks to the hundreds of experts participating.)

Demand: Without a critical mass of donations, the market will obviously not work. As we think about inspiring donors to give based on impact, we need to consider the following:

  • Building a donor audience is difficult and costly. That is why partnerships are a key tool in the battle for a better philanthropy because they can expose information to millions of donors quickly and effectively. Fortunately, GuideStar has taken the lead with their TakeAction initiative that we proudly support. In addition, Charity Navigator has announced plans to follow a similar path and I am excited to see how they progress. We should also not forget local initiatives such as GiveMN, which have done an amazing job of mobilizing donors and have tremendous potential if they decide to focus on impact.
  • We are currently experiencing a tectonic shift in technology with the advent of social networking and social media. This creates a unique opportunity to leverage the power of personal connections to inspire people to give based on impact.
  • Finally, we need to acknowledge that there is a lot more research necessary in order to find effective ways to motivate donors. I am not sure whether the right approach is to utilize Twitter or Facebook, Philanthropedia’s concept of mutual funds, or the many other ideas that I have seen, but I do know that we need to put a lot of effort into finding out if we are to create an impact-based social capital market.

I hope the post above combined with parts I and II gave you an idea of the different elements that need to come together to create an impact-based social capital market. I will use tomorrow’s post to answer some common questions and concerns, describe how you could join the effort of creating this market, and conclude.

Philanthropy’s Biggest Opportunity (Part II)

May 25th, 2010

This post has been cross-posted at Tactical Philanthropy, where I am guest blogging this week. You can read part I here, part III here, and part IV here.

In the first post of this 4-part article, I described what an impact-based social capital market could look like and why I believe it is philanthropy’s biggest opportunity. In this follow up post, I want to elaborate on why such a market has not materialized so far and what we can do to make it a reality in the next 2-5 years.

To understand why an impact-based social capital market does not currently exist, it is helpful to start with the graph I used to summarize the concept:

What is particularly important to realize about marketplaces is that they require a critical mass before producing any tangible benefits. In other words, a market that distributes $50 thousand a year is not very interesting; a market distributing $1 million per year is intriguing, and a market dispersing $10+ million per year is fascinating. Of course, the fact that marketplaces require a critical mass to start is not all bad: on the flip side, once started, marketplaces are a very reliable source of capital and tend to grow sizably due to inherent network effects.

Given that an impact-based social capital marketplace does not exist currently, it is no surprise that the vast majority of nonprofits not only ignores the Internet as a viable funding channel, but also does not invest resources in measuring and reporting their impact. After all, nonprofit leaders need to use optimally the limited resources at their disposal – and their very rational conclusion is that it does not pay off to focus on participating in a marketplace, which does not exist and therefore cannot provide much-needed capital.

So how can we jumpstart the process of nudging people to give for the right reasons (i.e. based on impact) on a scale that allows a market to form subsequently? I would like to propose a simple approach: to overcome the lack of critical mass, we need a catalyst that can get a sufficient number of donors to give based on impact. This will create incentives for nonprofits to participate in this marketplace in order to tap into a reliable and growing capital pool while also increase the effectiveness of the limited philanthropic dollars.

So what could this catalyst look like? There seems to be three important characteristics:

  • The catalyst needs to provide information about nonprofit impact at a cost that is bearable.
  • The catalyst needs to be scalable – i.e. meet donors in the causes and issues they care about today as opposed to dictate what donors should be concerned about in the first place.
  • The catalyst needs to provide actionable information that can actually engage donors in a world characterized by limited attention spans and overwhelming content.

There have been many attempts to create such a catalyst, some of which Philanthropedia reviewed in a recent whitepaper. Our conclusion was that none of the existing solutions offered an attractive combination of features that could satisfy all three of the important characteristics outlined above. To fill that gap, Philanthropedia has spent the last 3 years developing a methodology that has all three key characteristics in order to realize the potential of the impact-based social capital market that we believe in so much.

Our methodology is focused on extracting information about nonprofit impact from the very people who spend their entire days focused on it: program officers at foundations, nonprofit senior staff, university faculty, policy makers, consultants, journalists, and so on. As any other methodology, Philanthropedia’s approach suffers from both pros and cons, however, it scores very well on the three most important dimensions for a catalyst:

  • High quality at low cost: we ask experts for 40 minutes of their time per year and in return offer rich information about a handful of nonprofits that donors use to direct their donations effectively in causes they care about. It is worth noting that despite earlier discussions our latest research demonstrates that experts are a great source of information and we can successfully compile ever better information from them. Stay tuned for a blog post on that or see for yourself by comparing the impact comments from our 2009 national climate change research to our 2010 Bay Area climate change research (choose a random organization and click on the “expert assessment” tab).
  • Scalability: our approach works in all social causes and all geographic regions because the types of experts I outlined above are present in virtually each social cause.
  • Actionable information: while still a work in progress, our expert funds provide an easy to understand yet smart donation strategy for donors.

In conclusion, I hope this post gave an idea of the necessary features of a catalyst that can jumpstart an impact-based social capital market and demonstrated that such a catalyst can be built successfully. In tomorrow’s post, I will turn my attention to the remaining elements that need to come together to create an impact-based social capital market.

Philanthropy’s Biggest Opportunity (Part I)

May 24th, 2010

This post has been cross-posted at Tactical Philanthropy, where I am guest blogging this week. You can read part II here, part III here, and part IV here.

One of the best parts of my job at Philanthropedia is that I get to spend a lot of my time thinking about how to make philanthropy better. And when I say better, I am not talking about incremental improvements (10% or 20% better) but rather disruptive improvements (10x or 100x better), which Philanthropedia is focused on.

With this four-part blog post, I would like to tell you about one such disruptive improvement to philanthropy: creating an impact-based social capital market. My goal is to define this concept, provide a common framework and terminology that we can use to discuss it, and ultimately inspire as many of you as possible to join me in making this vision a reality.

What is an Impact-Based Social Capital Market?

An impact-based social capital market concept has several important characteristics:

  • Donors reward nonprofits first and foremost based on the impact of their programs. Surprisingly, my own research reveals that there is a shortage of good definitions of impact, so let me provide the definition that we use at Philanthropedia for reference: a high-impact nonprofit is a nonprofit which produces lasting improvements that address the core problems in a particular social cause.

It is worth adding that the focus on impact does not exclude other relevant organizational characteristics (e.g. leadership, staff, marketing, operations, or finances). It also does not exclude using emotional appeal to inspire donors to give. Instead, philanthropists need to focus on impact first because without it nothing else really matters. As we say at Philanthropedia, donors participating in the impact-based social capital market will choose causes with their hearts and organizations with their minds.

  • The market needs to be focused on organizations (rather than individual projects or informal initiatives). Despite the emotional appeal of individual projects, only organizations can develop the capacity to tackle the big and important problems we face in a meaningful way. Otherwise, we are doomed to continue making tiny progress on disconnected fronts as opposed to tackling core issues in a way that can really make a lasting and substantial difference.
  • The market needs to engage individual donors, because they provide the bulk of philanthropic capital today: more than 80% of total charitable giving. I will come back to this point below when I explain why an impact-based social capital market can dramatically improve philanthropy.
  • Finally, a market cannot exist without a marketplace where supply and demand meet. The Internet presents a tremendous opportunity to build such a platform because it is both ubiquitous and very low cost.

At this point, most people imagine a simple graph to summarize the concept like this:

Why Does an Impact-Based Social Capital Market Matter?

To understand why an impact-based social capital market has the potential to improve philanthropy dramatically, we need to recall that more than 80% of all charitable contributions come from individuals ($229 billion out of $285 billion in 2008). And yet individual donors today are bombarded by cleverly crafted marketing messages that omit the most important thing in the nonprofit world: what impact the organization is having. And if donors actually decide to seek extra information to make a more informed decision, they are mostly limited to looking up irrelevant financial ratios and basic 990 information. Therefore, not only are philanthropists wasting billions of dollars funding nonprofits without real impact, but we are also not rewarding good organizations properly, which further diminishes philanthropic effectiveness.

One way to look at this status quo is with desperation at the magnitude of the challenge that many others have attempted to tackle before. However, I choose to see the inefficiency of today’s philanthropy as an amazing opportunity to improve the sector. As a matter of fact, I believe that solving this inefficiency is the only way for philanthropy to remain relevant in the 21st century and become an effective tool for solving social issues.

So why has such an impact-based social capital market failed to materialize so far? And what can we do to make it a reality in the next 2-5 years? I will answer these questions in my next post.

You can now read part II here.

National Public K-12 Education Re-Running Research

May 18th, 2010

We have been hard at work researching new causes so that donors can have more Expert Funds with information about high-impact nonprofits from which to choose. We are analyzing the data from our recent surveys on Bay Area arts & culture, Bay Area early childhood education, and Bay Area middle-secondary education and will be adding that content to the website in the coming weeks. At the same time, we have turned our attention to causes at the national level and are starting new research, new surveys to identify high-impact nonprofits in 4 more areas.

In addition, because our original research in education was two years ago as a pilot study, we are going to re-run that cause with the latest version of our methodology. This blog post is to announce that we are starting that process now!

When we looked at education in the Bay Area, we divided it into two areas: early childhood education and middle-secondary education. You can read our post about that here and learn more about the problems education nonprofits are facing in this sector and how we think about the various kinds of nonprofits our experts might consider recommending. For the re-running of our national level education cause, we are going to merge the two categories into one: K-12 education.

National Public K-12 Education

We are interested in learning more about education nonprofits working at the national or multi-state level that are having a high-impact. We’re also interested in nonprofits that may not have reached that level of scale yet but have the potential to scale well and make an impact at the multi-state/national level. We are focused on nonprofits that address some part or all of the K-12 audience.

These organizations could be focused on in- or out-of-school education. They could be working on literacy, school readiness, school reform, the achievement gap, human capital, instructional improvement, curricular content development, low-performing schools turnarounds, data, standards and assessments, after school programming (ie. youth development kind of work), summer programming, parental involvement, etc. Types of nonprofits could include research, policy, advocacy, training, traditional nonprofits or community based organizations, the traditional after-school kind of nonprofits/CBOs, or even the public/charter schools themselves.

If you are an expert on any of these topics, you should be receiving an email from us soon and we hope you will be compelled to participate! If for some reason we have missed you and you think you have a valuable perspective to offer, please contact me at erinn.andrews@myphilanthropedia.org. Are there other major education buckets/types of focus areas I missed in the K-12 realm?

National Arts & Culture Research

May 18th, 2010

As I mentioned in the last blog post about our research, we’re sharing our thoughts about each social cause as we begin new research. The purpose of sharing this additional information is to explain why we think these are interesting or relevant areas to research, what we learned about the nuances of the cause, and the difficulties we faced in narrowing the scope of the research, so you, the reader, can understand what we considered as we refined our thinking about the research.

If you are an expert on any of these topics, you should be receiving an email from us soon and we hope you will be compelled to participate! If for some reason we have missed you and you think you have a valuable perspective to offer, please contact me at erinn.andrews@myphilanthropedia.org.

Additionally, I’m sure I haven’t been able to capture every nuance in these sectors, so I invite your feedback and thoughts about how you might think about this work. For those readers less familiar with this topic, I hope you will learn something new and tune in again when we have the results of this research. Thank you all for your participation!

Because we recently ran research on arts and culture in the Bay Area, I’m not going to repeat much of what we said in that blog post which you can find here. We had a similar thought process for how to narrow the scope of our research. However, I feel it’s worthwhile repeating one very important point from our local arts research: how to define the impact of arts and culture nonprofits.

High-Impact Arts and Culture Nonprofits

Impact in the nonprofit sector is always hard to define, yet I have found that it’s even more difficult to define in arts and culture. How might we measure impact in the arts world? First, from a more objective standpoint, donors or funders might look at the “staying power” of an organization which could be evaluated by measuring the growth of support over time. One could look for evidence that someone cares about this work: attendance numbers, subscription numbers, percentage of the house that’s full, and/or donor support. Second, one might look for more subjective measures: what do organizations achieve with what they have or how much programming can they produce on a given budget; what’s the scope of this activity and what’s the quality of this activity? And then there’s the dimension of whether the performance, exhibit, reading, etc. was enjoyable, interesting, or thought-provoking to an audience member.

With the help of a few experts, I’ve come to this definition for what a high-impact arts and culture nonprofit might look like: A high-impact arts and culture nonprofit is one which is successful at creating or producing something of value to those who care about the arts and culture. A high-impact arts and culture nonprofit is able to contribute to the field by creating meaningful work and/or helping others develop an appreciation for the arts and culture.

Scope of the Research

Given all of this information and context, we are interested in learning more about arts and culture nonprofits that serve a national or multi-state audience or influence the arts at the national level. These arts organizations could be developing or producing new work, be focused on performance, work to preserve and promote a traditional culture , advocacy, have an educational component, serve any age or type of audience, have any budget size, and/or represent any genre or discipline of art. We are interested in arts nonprofits that have had real impact and do outstanding work, NOT nonprofits that have simply been around for many years or most need additional funding. This research will be focused on organizations, not individual artists.

What else might you add to this post? What have I missed? I look forward to hearing your thoughts.

Announcing New Philanthropedia Service: Expertise on Demand

May 6th, 2010

If you are a major donor, philanthropy advisor, foundation, or expert interested in the Expertise on Demand beta, please check the bottom of this post or http://www.myphilanthropedia.org/eod for information on how to sign up.

I am very excited to announce a new Philanthropedia initiative called Expertise on Demand. This new service will act as a trusted intermediary and connect major donors, philanthropy advisors, and foundations with cause experts who can help fill knowledge gaps quickly and efficiently and channel more money to high-impact nonprofits and projects.

Expertise on Demand is very much a natural extension of Philanthropedia’s existing concept of building expert networks to identify high-impact nonprofits in different social causes. While Philanthropedia currently focuses on providing Expert Funds of recommended nonprofits, we recognize that our 1000-strong expert network may be of value to major donors who wish to dig deeper into an issue area and make a larger financial contribution. That is why we decided to create Expertise on Demand which further promotes Philanthropedia’s mission of knowledge sharing and strategic giving.

To make Expertise on Demand a reality, we are collaborating with Tactical Philanthropy Advisors, a philanthropy advisory firm. Tactical Philanthropy’s CEO Sean Stannard-Stockton is a well-known thought leader in philanthropy who envisioned the Expertise on Demand concept last year when he announced his intention to launch a similar project under the name “Tactical Philanthropy Knowledge Network.” At the time, Philanthropedia was just getting started, but as our organization has developed, Sean and I decided that Philanthropedia was the best home for this initiative because we had already built networks of more than 1000 experts through our own research.

We asked Sean to weigh in on why he thinks Expertise on Demand is so important:

“I think a key problem to solve in philanthropy is how to allow sharing of knowledge while protecting access to individuals and respecting their time and privacy. After the Haitian Earthquake, 45% of Americans made donations to support the country. Yet despite numerous foundation professionals, academic researchers and nonprofit senior staff who have deep knowledge about who is doing the best work in Haiti, few if any donors were able to capitalize on this knowledge. Philanthropedia has quickly established itself as a leading creator of expert networks in the social sector. My hope is that the Expertise on Demand platform can build the trust necessary to facilitate open knowledge sharing while protecting individual experts.”

Sean has agreed to join Expertise on Demand as chair of the steering committee tasked with designing the service. Other members of the committee are:

  • Gary Galaich, Director, Philanthropy Workshop West
  • Katherina Rosqueta, Executive Director, Center for High Impact Philanthropy at University of Pennsylvania
  • Lisa Rose, Donor Relations Officer, San Francisco Foundation
  • Nick Hodges, COO, Schwab Charitable
  • Robert Egger, Founder and President, DC Central Kitchen

The goal of the steering committee will be to help design Expertise on Demand over the next few months, before the official beta launch of the service to coincide with the Social Capital Markets conference in October.

If you are a major donor, philanthropic advisor, or foundation that wants to tap into the Expertise on Demand expert network, please send us an email at eod@myphilanthropedia.org indicating the issue area that you are interested in.

If you are an expert who wants to join the 1000+ strong Philanthropedia expert network, please send us an email at eod@myphilanthropedia.org with your name, areas of expertise, contact details, bio, and photo.

You can find more information, including answers to frequently asked questions, at http://www.myphilanthropedia.org/eod or by emailing us at eod@myphilanthropedia.org.


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