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Philanthropy Journal – Engaged donors – Innovation needed

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By Todd Cohen

Philanthropy is changing. The slumping economy — coupled with stiffer competition, greater professionalism and smarter technology — has made it tougher than ever for nonprofits to raise money.

The downturn also has cut into earnings for foundations accustomed to giving away more money every year because of healthy returns on assets.

The economic slide also has compounded the seemingly intractable ills that philanthropy works to address.

The prospect of shrinking resources might prompt nonprofits and donors alike to retreat, giving up hard-fought gains they have made in dealing with our most difficult social problems.

Rather than turn tail and run, however, philanthropy can transform its financial stress into an unprecedented chance to do better.

It was second-nature during the economic boom to engage in technological and entrepreneurial innovation. But it has become critical as the boom recedes to be even more focused on breaking out of the mold of business as usual.

Nowhere in the philanthropic world is the challenge greater than among funders.

While a growing number of foundations, corporate contributors and individual donors are pioneering innovative strategies such as venture philanthropy and social entrepreneurship, others have been reluctant to change.

With so much at stake, funders cannot afford not to take a hard look at themselves, decide what they want to accomplish, study the work of other funders and then move to retool themselves to be more effective.

A critical step will be to find ways in which funders can work together. Foundations, in particular, can be fiercely independent and reluctant to share resources or control with one another.

But stressed times demand revamping the way we work, and foundations need to borrow some ideas from innovators in the for-profit sector.

In North Carolina, for example, a small but growing number of foundations have begun talking about ways to join forces, ranging from teaming up on funding projects to forming some type of statewide group to boost communication and partnerships among funders.

That idea – being promoted by the Warner Foundation in Durham, the Z. Smith Reynolds Foundation in Winston-Salem and the Blumenthal Foundation in Charlotte, among others – needs to be debated and developed.

And regardless of the outcome of those talks, individual foundations, corporations and donors should move quickly to take stock, set goals and equip themselves to meet the needs of our hard-working and hard-pressed nonprofit sector.

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