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Grantmakers prepare for change

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By Todd Cohen

Faced with big changes in the forces shaping the way they do business, grantmakers and nonprofits are confronting the future.

“There is a critical mass of people in and around philanthropy now that are taking up this challenge,” says Barbara Kibbe, director of organizational effectiveness and philanthropy at the David and Lucile Packard Foundation in Los Altos, Calif.

To survive and thrive, philanthropy experts agree, charities must equip themselves to be more effective, track the impact of that retooling and share what they learn about what works and what doesn’t.

Charities also must overcome growing mistrust and learn to work together, they say.

Those were among issues examined by more than 550 people at a Washington, D.C., conference in March sponsored by Grantmakers for Effective Organizations, or GEO, that opened with a plea to think hard about what’s ahead.

FUTURE THINKING

Just as the industrial economy gave birth in the early 1900s to the first U.S. private foundation, community foundation and United Way, the global knowledge-economy of the early 2000s is transforming philanthropy and the nonprofit world, says Katherine Fulton, a partner in the Global Business Network, a think-tank and consulting firm in Emeryville, Calif.

In a project funded by Packard and the W.K. Kellogg Foundation in Battle Creek, Mich., GBN has worked for a year to adapt for foundations and nonprofits its “scenario-planning” tools that corporate clients use to assess possible future challenges and develop strategies to meet them.

The key, says Fulton, is thinking about forces at work in philanthropy beyond one’s own organization.

Philanthropy, she says, is being transformed by technology and the Internet, a new breed of donors, the expected transfer of trillions of dollars between generations, growing need for social services, declining government funding and rapid development of support systems for nonprofits and funders.

To boost philanthropy, she says, a new “ecology” consisting of “networks of networks” is evolving, she says.

“The global network knowledge society is the context today for the birth of knowledge-age philanthropy,” she says.

And while more philanthropic dollars are flowing – GBN predicts, for example, that foundations will give away as much money in the next 10 years as they gave away in the last quarter-century – the system of “public problem-solving is much more complex,” requiring strategies rooted in collaboration and the sharing of knowledge, she says.

GBN also is working with foundations and nonprofits to develop a “theory of change for philanthropy itself” to speed the development of support networks in a sector slow to change because charitable organizations traditionally have not been driven market forces, Fulton says.

The challenge, she says, is figuring out how to spur individuals and organizations to team up to help philanthropy adapt itself to the future more quickly.

MEASURING IMPACT

A huge challenge – and GEO’s focus – is the job of gearing foundations and nonprofits to be more effective by boosting the “capacity,” or internal workings, of individual organizations and the sector as a whole, grantmakers and philanthropy experts say.

“We either improve the sector in terms of its performance and capacity, or we face a very dire future,” says Paul Light, director of the governmental studies program at the Brookings Institution in Washington, D.C., and author of Pathways to Nonprofit Excellence, a new study on the performance and effectiveness of nonprofits.

The nonprofit sector is “under siege” and faces increasing pressure to account for itself, Light says, “much of it driven by the sense that the sector is somehow not capable of being a wise steward of the resources it gets.”

The sector’s response to the Sept. 11 attacks represented an unprecedented opportunity to tell its story, he says, but was overshadowed by troubling questions about how the Red Cross and other agencies handled the outpouring of donations the tragedy generated.

“The nonprofit sector may have squandered one of the greatest opportunities to surge in trust in the last 25 years,” he says.

Light’s new study, based on surveys of 250 experts in nonprofit effectiveness and another 250 leaders of well-run nonprofits, found “no lack” of ideas for strengthening nonprofits.

“The problem is that no one knows which reforms worked, when, and why,” the study says. “The sector has been so busy adopting the reform of the day that it has underinvested in basic research to measure the impact of the reforms themselves.”

Most of those surveyed believe nonprofits are better managed today than five years ago, the study says.

But nonprofits are not investing enough in “human capital,” Light says. “It’s a workforce worth treasuring, but we’re not treasuring it, we’re not investing in it.”

High-performance in the nonprofit sector, he says, is possible, can result from a variety of strategies and “does not involve perfection.”

In working to boost nonprofit performance, he says, grantmakers should “prepare to persevere” and should understand that “sustaining excellence is just as important as achieving it.”

They also should know that dealing with “rescues” is much more expensive than “interventions” to strengthen organizations, he says, and that making a difference requires measuring the impact of grants designed to improve organizational effectiveness.

TEAMING UP

Other experts at the conference called for greater collaboration among funders and nonprofits, greater sharing of information about efforts to improve the effectiveness of grantmakers and nonprofits, and better education of donors and funders.

Philanthropy’s future is “very dark,” says Mario Morino, chairman of Venture Philanthropy Partners, a $35 million-asset venture philanthropy group in Reston, Va.

Donors, angry about the way the Red Cross and other charities handled contributions to assist victims of the Sept. 11 attacks, remain skeptical about giving, he says

He also chides venture philanthropists for having “acted prematurely” and been “too strident” in acting as if they knew more than traditional foundations and donors about how to practice philanthropy.

“New and old are much closer than we ever imagined,” he says

Bridging the gap between traditional foundations and newer venture philanthropies, and between grantmakers and nonprofits, will be critical if the nonprofit sector is to thrive, other experts say

“The barriers, the silos, that foundations and nonprofits live in, limit the potential of capacity-building,” says Sandra Mikush, assistant director of the Mary Reynolds Babcock Foundation, a gra
ntmaker in Winston-Salem, N.C., that focuses much of its funding on building the internal operations of nonprofits.

And Allison Fine, founder and executive director of Innovation Network, a nonprofit in Washington, D.C., that provides technical assistance to nonprofits, says educating prospective philanthropists about the nonprofit sector is a big challenge.

Lacking ties to particular organizations, she says, new donors ask tough questions that should prompt nonprofits to assess the impact of their work and share the results.

To help nonprofits think about the future, Packard also is funding GBN to adapt for nonprofits its scenario-planning workshop to help businesses anticipate the future.

The workshop and related tools might be available to nonprofits, to consultants and, with possible subsidy from Packard, to its own grantees.

“It’s not enough for us to help our grantees manage their organizations for the present,” says Kibbe, who adds she hopes scenario planning, like strategic planning, will become a basic tool used by nonprofits. “We need to help them prepare for the future.”

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