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How to Handle the Slow Death of Strategic Philanthropy

As the hip giving method of the early 2000s goes down in flames, what changes should nonprofits be ready for as they try to impress donors?

The Stanford Social Innovation Review recently published a thought-provoking symposium on strategic philanthropy. If you’re not familiar, “strategic philanthropy” is the movement that got obsessive about metrics, and tried to get children’s ballet studios to demonstrate their success with a bunch of complicated numbers. For a few nonprofits that hadn’t put any effort into finding out if they were actually doing any good, this was helpful. For most, it was immensely distracting and even damaging.

Now, top foundation leaders and consultants are ready to admit widespread failure on this project. Most of the writers in the SSIR symposium suggest that strategic philanthropy doesn’t adequately account for human nature, let alone the nature of humans in groups. The problems of human social networks, and their solutions, tend to be messy and organic, as conditions constantly change and even “root causes” are rarely possible to identify completely.

On top of this, as William Schambra pointed out a few weeks ago in an incisive treatment, the vast majority of nonprofit funding (73%) comes from individuals, not foundations…and after years and years of being told to be strategic philanthropists, 84% of Americans still aren’t. Most don’t pick which nonprofits to support based on objective performance metrics. That doesn’t mean they are irrational. It means they’re motivated to give by factors other than the ones that go into the metrics—personal experience, a relational connection with someone involved in the organization, geographical proximity, an emotional tug, etc.

Yet many of the nonprofits I see are putting a lot of work into keeping foundations happy, rather than tailoring their measurements and communications strategies to the majority of their donors. As some foundations are considering new ways to measure success (like the scary utilitarian “effective altruism” approach), many nonprofits will no doubt scramble to change their ways to match.

But what if they didn’t? The vast majority of nonprofit donors won’t turn into utilitarians any more than they turned into strategic philanthropists; they’ll continue to give based on influences from their personal and social experience. What if nonprofits built their primary communications (and reporting) strategies to impress and retain their primary donor base? What would it look like for them to demonstrate their value in a way that corresponds to how their donors actually think?

The real nonprofit donor base

First, some context for thinking about this: the next generation of nonprofits will be hubs of American civic activism, not specialized initiatives of experts who demand that the rabble fund “their” work.

I’ll say that again. The next generation of nonprofits will be hubs of American civic activism, not specialized initiatives of experts who demand that the rabble fund “their” work.

This is true partly because of social problems. Feelings of isolation and disenfranchisement are increasingly the norm rather than the exception. Social breakdown isn’t just a crucially central cause of the problems nonprofits exist to fund—it’s also a central reason for nonprofit donors’ involvement. For most nonprofit donors today, who often don’t even vote for president in person, nonprofit involvement is their primary civic activity—it gives a sense of meaning and connectedness in a way that almost nothing else these days can.

It’s true partly because of changes in the donor base. Baby Boomer donors (and even more so their children and grandchildren) want to feel a part of what’s going on. Unlike their parents, they don’t want to just write a check once a year. But retirement norms have changed; they also need to be involved in a way that can be juggled with a full-time job, kids, and other commitments—so current volunteer systems, which are built around retirees with World War II-era involvement habits, will need to be rethought.

But these changes only exacerbate a more fundamental reality: the “hub” claim above is true because of the way the human mind works, and has always worked. People get emotionally invested in things that have a personal impact on them (even if it’s a degree of separation or two away). Causes catch fire because people perceive them to be things “everybody is doing,” or everybody believes. And people stay invested in things when they can see practical value for them, and the social currency that comes with it. Total altruism is a myth. The complex organism that is human charity has benefits for everybody when it’s allowed to work naturally (when was the last time you felt bad for being nice to somebody?).

Far from being irrational or outdated, the human connectedness that makes effective, sustainable charity possible is top of the line moral and social psychology; taught in graduate and business schools, written about in bestselling books, and employed by the best-performing organizations out there. The social changes and the human nature behind them are real, and will only be more dominant as the Boomers move into their role as the primary donor base.

The next generation of nonprofits will be hubs of American civic activism for one reason: they have to. The expectations and desires of the people behind 73% of their budget dollars will dictate it.

How to capitalize on it

So, how to capitalize on the looming change? The vast majority of my consulting work involves helping nonprofits answer this question. Unlike Strategic Philanthropy, Effective Altruism, and other trendy solutions from Big Philanthropy, the answer is very different depending on the individual organization; the nature of its work, its location, its geographical rootedness, the nature of its connections with its existing donor base, and other questions. But here are some general questions to consider:

  1. How can you demonstrate value to a donor in a way that allows him/her to feel and see, rather than simply measure, it? Numbers can play a role here, but the closer you can get a donor to seeing what you see on the ground every day, the better. People aren’t computers; their brains are hard-wired for story and emotion. At a basic level, this is a question of content creation—telling your story effectively with stories, videos, etc. At a more advanced level, this can be done through events, in-person volunteer opportunities and other interactive ways to engage your work and its core issues, development of regional support for national nonprofits, and digital vehicles (like a Google Hangout) that can provide a partial approximation of in-person activity online.
  2. Why would a donor feel a part of your work? Simply accomplishing #1 above doesn’t cut it—even the best nonprofit communications are just faking #2 if they’re not supported by real opportunities to get involved; ways that work for young people and professionals, ways that capitalize on and build on relational reasons for involvement.
  3. How can you build infrastructure so that your development people are spending their time building relationships, not keeping up with paperwork? There are creative ways to streamline, outsource, or even crowdsource (with volunteers) administrative development work, especially if re-prioritizing around individual donors is the goal. Find those ways and use them. Then use all that extra spare time to connect with people, and to brainstorm ingenious ways to connect with more people! I’ve seen clients reduce their development director’s workload by 70-80%. Imagine what yours could do with that kind of time, if it were properly directed. Speaking of which…
  4. How can you make involvement social? It’s pretty easy to think about volunteer opportunities socially. But what about giving? What about first contact with your organization? Are you generating content that’s worth John Doe Donor’s time to share with his friends, even if they know nothing about your organization? (If so, then congratulations; John Doe just netted you a couple dozen introductions by sharing your link.) Are you thinking about ways to capitalize on website visitors and introduce them to your organization’s work through email marketing, personal contacts, etc.? Are you creating clever campaigns that give your existing donors incentives (and easy mechanisms) for tag-teaming their donations with friends, so that you’re capitalizing on social networks to grow your donor base, rather than feebly trying to find new people yourself?

Where to from here?

These questions are just a starting point. If you want more things to consider, or want to see more of the history and social science behind these changes, read “Enlisting the Amateurs.” You can also check out my website for a look at how my company can help improve your communications and free up your development director’s time—or contact me to talk about a strategic planning or training session to work through the big picture with your staff or board.

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When Data Doesn't Tell Your Story

You need to read Bill Schambra's piece on this.

Over at the Hudson Institute, Bill Schambra has a superb piece on modern philanthropy's faith in what he calls Big Data--the passion for metrics that on the plus side, can demonstrate that you're actually achieving your mission, and on the minus side...well, read on.

There's always a choice, when nonprofits try to demonstrate their value to donors, between data and stories. Stories can bring what you do to life, but a tough foundation or donor is always going to ask how representative that story really is. Data, which is by far the favored approach among institutional donors, can quantify it and try to answer that question, but it often falls short of conveying the truth.

Schambra writes:

In order to construct the elaborate edifice of Big Data, there simply must be, deep down at its very foundation, a clear, distinct separation of the sheep from the goats, an assignment of 1 (success) or 0 (failure). Just as the vast digital world is built on 0s and 1s, so is the empire of metrics. The most remote and abstract regression analysis depends on that initial, radical division—no hedging, no hemming or hawing, just putting it down on the scoring sheet as a 1 or an 0, leaving the rest to the evaluators at foundation headquarters or at the university.

But this grand divide isn’t as simple as it seems. Alicia Manning, program officer with the Bradley Foundation in Milwaukee, where I once worked, recently took me to meet George Bogdanovich, founder of that city’s Community Warehouse. Among many other things, the warehouse accepts donated surplus construction material, appliances, plumbing fixtures, and so forth, and sells them at reasonable prices to those who are rehabilitating houses and stores in the inner city. They’ve now begun using some of the materials to prefabricate doorframes and sink cabinets, which provides jobs while teaching entry-level carpentry skills. All Warehouse employees are just coming out of prison or off the streets.

As happens so often when I visit front-line nonprofits—okay, sometimes it happens because I raise the question—we started discussing the problem of measurement, the demand that nonprofits classify their efforts into either success or failure. This clearly is a problem that George wrestles with regularly, and without any prompting from impatient funders.

He brought up the example of Joe, a pimp and drug dealer who had been one of his first employees. Things had gone well for a while, but then there had been a couple of thefts. George chose to follow the advice dispensed by the director of the recovery community where Joe lived: “Fire his ass.” Even as we stood in the drafty warehouse talking the question over, though, George was awaiting the call he gets from Joe every year around Christmas. He always checks in, telling him how things are going, and thanking George once again for giving him the opportunity for his first job out of prison—even though George had, indeed, fired his ass.

“So,” George asked, probably more of himself than of us, “was my experience with Joe just a failure?”

No way you don’t count that a success,” Alicia immediately insisted.

Schambra adds:

In moments of pridefulness, I refer to Alicia as my student, since twenty years ago I took her around on her first site visits among Milwaukee’s grassroots leaders. But the fact is that she has far surpassed whatever I had to offer her, and now navigates with ease among Bradley’s smallest inner city grantees. Her grant recommendations are based less on numbers than on the “local wisdom” which she gathers with her own eyes and ears and finely tuned BS-detector. She has no problem dealing with the inadequacy of “1s” and “0s,” and the ambiguity that Joe poses to classification. But how many other foundation program officers, academics, or evaluators can claim that hard-won skill?

I encourage you to read the whole piece here. It's a bit long, but it is filled with great stories that admirably demonstrate what this last paragraph does; that sometimes there is no substitute for local knowledge.

This is why I think a social approach to fundraising is so valuable. Individual donors, not foundations, are the lifeblood of most organizations' budgets. And the more intimately connected with your work a person is, the less he will need formal reports (data-driven or story-driven) to demonstrate value. Nonprofits that are the hub of a community that includes their donors have a distinct advantage over ones that are struggling to prove value to strangers.

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What’s wrong with traditional fundraising?

Nothing. But you're doing it wrong.

What’s wrong with traditional fundraising?

The real issue: you’re wondering whether I’m some hotshot kid who thinks old people are just old-fashioned, and wants you to ditch tried-and-true methods for a fleeting piece of technology you don’t even understand and might blow up on you when it goes out of fashion in two years.

Social fundraising IS traditional fundraising.

Those of you who have gone shopping for a men’s suit in the last decade will know what I mean when I mention a “traditional” suit. What is referred to in, say, Jos. A. Bank as a “traditional” suit is boxy, with fairly wide lapels, slacks that fit loosely, and a tie that’s at least three inches wide at its widest point.

But that’s not really traditional. That’s just what was in fashion in the 1990s, and the proportions involved are unflattering to the human body—they just worked well in a time when most men wearing them were overweight. By contrast, if you go back to the 1960s (think Mad Men or White Collar), you’ll see men who dress a heck of a lot better, in suits that today would be described as “tailored fit” or even hipster.

Social fundraising vs. “traditional” fundraising is a similar dynamic. What passes for traditional fundraising—mass mail prospecting, quarterly newsletters, and annual giving campaigns—is actually a fairly recent invention, as the 20th century’s fetish for mass everything hit the nonprofit sector. The same fad that brought you the DMV, unpronounceable food ingredients that make you develop weird disorders over time, and TV talking heads telling you how to think also produced a nonprofit model that has some really inhumane elements to it. For example:

  • Donors divorced from the people they’re trying to help, eliminating much of the psychological benefit of giving and creating extra pressure on you to prove your value to them
  • Way too few employees doing way too much work for way too little money
  • Professionalized mass philanthropy where a foundation makes you jump through a hundred hoops to get a chump-change grant to do something you would do better if they let you work freely
  • Nonprofits that are more or less divorced from the public and private sector advancements that could dramatically improve their work

By contrast, I firmly believe that social fundraising is a more humane way of doing business. I don’t call it “social” fundraising because of social media; I call it social fundraising because it’s social. It’s based on relational connections, building trust, and empowering people to solve problems together. That may sound a little warm and fuzzy, but the model is actually structured to work that way—the way people did business before we got so disconnected from each other that everything had to be impersonal. Social fundraising just takes advantage of some technological tools that allow us to go back—to some extent—to a better way of life.

That doesn’t mean we’ve learned nothing good in the last half-century. I’m not suggesting you abandon everything you currently do to raise money. I am suggesting that if you care about traditional fundraising, about long-term investments, about strategies that will stand the test of time and build donor bases that will still be with you for years to come, then you may want to think about raising money in more humane ways.

If that sounds vague, or you’re interested in understanding better, I recommend my “Enlisting the Amateurs” report—it’s a detailed look at American charitable activity, how it got off the rails, and how we can create organizations with very committed supporters.

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What are best practices for funding arts organizations?

Philanthropy Roundtable just published our "Major Achievements in Art Philanthropy" guide. The first entry in Philanthropy Roundtable’s Almanac of American Philanthropy is an encyclopedia-style look at the major achievements in American arts-and-culture philanthropy. I was engaged to write the section, as well as two forthcoming sections (on local philanthropy and nature philanthropy). The big picture was to provide a look at effective giving through American history, a look that would give today’s philanthropists insight into how to give their own money wisely.

A decision was ultimately made not to include introductory notes with each section; I had submitted some with mine but not all the authors had. I thought I would share them here and give readers a big-picture look at the trends I saw during my research.

Read the full article

View the list

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