Stanford Social Innovation Review Opinion and Analysis

“He that is of the opinion money will do everything may well be suspected of doing everything for money”—Benjamin Franklin, 17th-century social entrepreneur and co-founder of the United States.

This, in a nutshell, is the apprehension driving many of the critics and critiques of Seattle-based Unitus, a nonprofit that on July 2, 2010, unexpectedly abandoned its microfinance work in favor of a yet-to-be-named new poverty alleviation mission.  The almost instant blowback came on July 9, 2010 in the Chronicle of Philanthropy with phrases like “decision to wind down its sole program shocked. … Is [there] a more sinister reason lurking behind the positive spin…? The announcement …came just before the long July 4th weekend which to some observers calls to mind a ‘bury the news’ ploy used frequently by for-profit corporations.”

By all accounts, Unitus will not be winning any PR awards for deftly handling the media relations rollout of its decision. But handling the media with the tin ear of a British Petroleum executive is not the same as fouling the Gulf Coast. Ineptitude in media relations does not constitute nonprofit malfeasance. If it did, most nonprofits would be in jail.

What truly matters is what can be learned from Unitus’s storied history as a leading microfinance institution and its recent change of mission. There is much to consider.  While this blog raises a number of policy concerns and even goads Unitus in places, in my view Unitus has earned the benefit of the doubt. The overarching story here is that microfinance increasingly finds itself on the sharp edge of making money by providing a public service. Like for-profit HMOs who finance healthcare, but make it hard to access the care; or for-profit energy companies who power our lives, but pollute them too; or for-profit automakers who build job-creating plants in local communities, but later close them down—microfinance will no longer operate in an unexamined vacuum.

Nonprofit leadership is, first and foremost, about trusteeship. A nonprofit board holds in trust the donor dollars received, the social capital of its brand, the human capital of its staff, and the unwavering responsibility to defend the mission to which all the organization’s stakeholders have committed themselves.

The concerns, broadly summarized, are that Unitus acted capriciously and without due care for the handling of charitable donations, that windfall profits from the recent SKS IPO are linked to the decision to fold, or that some ill-considered organizational behavior is being, if not covered up, then badly explained. But suspicion and rumor are not facts. No hard evidence substantiates any of these concerns. Moreover, without question, the Unitus leadership has historically been motivated by a public interest steadfastly devoted to poverty alleviation. That is my view.

This is why the World Bank’s Consultative Group to Assist the Poor, the State of Washington Attorney General, or some other external agency should review the circumstances surrounding the Unitus decision to terminate its 10-year commitment to microfinance. An independent agency with the skills to conduct a financial and legal audit will put to rest the untoward rumors, clear the air, and re-establish the Unitus brand.

Nonprofits and for-profit social enterprises alike put forward three fundamental and intertwined cases to garner financial support: One, the organization is working on a pressing problem that needs solving or improving, in this case poverty. Two, the organization has a theory of social change and problem solving, which works and even works uniquely. Three, the organization’s leadership team and staff are talented, imbued with integrity, dedicated to the mission, and effective. Let’s examine each in turn.

To examine these questions, read Jonathan Lewis’s full story on Unitus, which was first published as a blog in serial form at Social Edge.

Jonathan C. Lewis founded MicroCredit Enterprises in 2005 and serves today as its chair on a pro bono basis. He is also the founder and CEO of the Opportunity Collaboration, and a contributing blogger at the Huffington Post.

I’m a big fan of social media but I have to admit: I’m having a hard time getting into the habit of updating my whereabouts. Part of it is that my life just isn’t all that exciting: if there were a badge for Yet Another Before-Dawn Hour Spent Writing A Book or a badge for Marathon Blogging or Watching Rubicon, I would have long ago been anointed somebody’s Mayor—somewhere. At least once.  Dan Fletcher, writing in TIME recently, quipped that the idea of updating his whereabouts “is a bit too much like having a pint-size version of my mother in my pocket, constantly prodding me for updates.” Indeed, it’s kind of like that Twitteleh video that made the rounds last year spoofing Twitter, where the Jewish mother uses tweets to prod her son with endless queries asking, Where Are You Going? Who Are You With? Are You Wearing a Sweater? and, perhaps inevitably, Who’s the Girl?]

But a big part of it is that I don’t see the benefits yet—at least not in the social change space. Sure, some nonprofits are starting to experiment. Kudos to Earthjustice, a nonprofit public interest law firm in the Bay Area, has been asking BART riders this summer to “check in” with them on Foursquare. For every check-in, one of Earthjustice’s major donors is pledging $10 to help the nonprofit’s attorneys fight environmental pollution. So far, so good: Earthjustice’s marketing manager, Ray Wan, says his Foursquare campaign has so far raised over $10,000 for the cause, and has brought a crowd of people to the Earthjustice Web site that didn’t know about the group previously. “We’re getting some amazing buzz from this,” Wan told me last month. “It’s an easy way to get people involved in helping us to fight for the environment.”

But while promising, it’s still all about phoning it in—what people used to call “click-and-give” in the ancient days of the Desktop and what people have more recently described as Slacktivism, that portmanteau of the words “slacker” and “activism.” Even new media visionary Clay Shirky, speaking on this year’s conference circuit, cites what he sees as a stubborn gap between online chatter about social action and real social action offline—a sort-of “talk” and “walk” gap that has yet to be widely bridged.

And it’s no wonder, perhaps. Josh Williams, the co-founder of Gowalla, says his company is thinking about how it can provide value beyond just the check-in, itself. “Sharing photographs, telling stories about a given location or whether someone’s had a romantic date there—that’s where things get really interesting,” Williams told Fletcher in TIME.

I, for one, am holding out for something more. While sitting in the lobby of Austin’s Driskill Hotel last spring, the real potential of this medium became clear. One minute, the Driskill’s lobby was filled with seated, lounging SXSW conference-goers and the next minute, everyone sprang to their feet simultaneously, as if heeding a digital dog whistle, moving to the exits en masse. The reason? They all got the “memo” via Foursquare, an update compelling them to move to the next After Party (and they did, like moths to flame).

I went, too. But I didn’t stay very long. What I’m waiting for is the day or hour or minute when I’ll get an update from someone that not only tells me where they are, but gets me involved in why I should be, too. Party? Sure, okay. But somebody, please, also make it an opportunity to do something different. Invite me to check in at the local homeless shelter to hand out a free meal to the homeless for an hour—or to check in at the local nursing home to read a newspaper to one of the residents, or bring them a box of their favorite cookies.  Sure, I could do this without you and without Foursquare. But if you invite me to do it via my smart phone, chances are I’ll make it. And while you’re at it, make it easy for me when I show up to start helping.

Go ahead. Just try making me the mayor of the the Greater Harlem Nursing Home or the Atlanta Union Mission.

I (and just a few thousand of my closest online friends—and their friends) will be waiting for your update.

Marcia Stepanek is Founding Editor-in-Chief of Contribute Media, a New York-based magazine, Web site, and conference series covering the new mass philanthropy movement. She also is publisher of Cause Global, an acclaimed new group blog about the use of digital media for social change, and teaches social media in advocacy at New York University. An award-winning journalist and author, Ms. Stepanek’s new book, Swarms, about the evolution of cause-wired groups, is due out early next year..

Jane Mayer’s excellent piece in this past week’s New Yorker about the brothers Koch, oil billionaires who’ve donated hundreds of millions to nonprofits promoting right-wing causes, finally clarified for the Nonprofiteer her unease at Bill Gates’s campaign to persuade billionaires to donate half their estates to charity.  It’s not a question of who has or hasn’t taken the pledge, though that’s an entertaining parlor game.  Nor is it the fact that the generosity of extremely wealthy people may not be what the rest of us have in mind when we hear the word “charity.”  (The Kochs’ “charity,” for instance, is a term of art encompassing donations to all kinds of institutions, predominantly think-tanks churning out rationales for the economic interests of wealthy people and front groups to make it appear that defending those economic interests is the political will of the non-wealthy majority.)

What’s troubling about the billionaires’ pledge remains so even when the receiving causes are unexceptionable.  Gates, for instance, has very generously underwritten substantial efforts by the Global Fund to Fight AIDS, Tuberculosis and Malaria.  Good for him, and for the world.

But…Even the best-intentioned best-directed private donations are a way for moneyed people to work their will on the public, while the rest of us have nothing but the vote.  And when the level of contributions is discussed in fractions of $1 billion, it’s no longer charity within a democracy: it’s benevolent dictatorship.

Maybe our country should be giving less to treat AIDS et al and more to eradicate infant and maternal mortality through the UN Population Fund; maybe not.  That’s a decision to be made by the people of the United States, through our government.  It’s really not a decision for a single person.

Why not?  Well, for starters, the “single person” in question is a billionaire, and thus always a man.  That means almost by definition that the highest levels of charitable giving will overlook women, though we constitute more than a majority of the population.  And if that’s the case—if society’s needs are met by individual whim, instead of collective decisions about the greatest good for the greatest number—then what, actually, is left of self-government?

Of course, billionaires have plenty of assistance in the task of allowing economic power to trump political will.  The Supreme Court’s decision in Citizens United, holding that corporations are “persons” with First Amendment rights violated by limits on their campaign spending, already put the nation quite a way down that road.  But somehow it’s worse when something that sounds so benign—”half my estate to charity, because I’ve been so fortunate”—actually translates as “I set the agenda for the future of this country, because I’ve been so fortunate.”

What we really want from billionaires is for them to pay a lot more in income taxes: say, the 87 percent of taxable income paid in 1954,  or even the 70 percent paid at the start of the 1980s.  And then we as a group can decide where our group’s money goes.  All contribute, all decide.

And what we really want from billionaires’ heirs is for them to pay the 77 percent estate tax rate in effect in 1941, or even the 70 percent estate tax rate in effect in 1976.  (And let’s not hear any nonsense about “death taxes.”  The dead aren’t the ones paying.)  Why shouldn’t people who get money by inheritance have to pay taxes on it, just like people who get it by working?

Merely to ask that question is to answer it: no democratic society decides that people who don’t work should be privileged over those who do.  Societies like that are called “aristocracies,” and all those so-called Constitutional Originalists running around hijacking elections by screaming about excessive taxation should take a moment to remember that our Constitution was designed precisely to interfere with the establishment of a government by inheritance.

The Constitution prohibits not once but twice the granting of any title of nobility; but the Framers didn’t rest there.  They fought to cripple and ultimately abolish entail and primogeniture, the primary devices by which English law kept family fortunes together.  Why?  Because they realized that, if you’re founding a republic, it’s really not a good idea to let money keep piling up generation after generation in the same few pairs of hands.

Self-governing societies can’t operate on noblesse oblige, and societies that do aren’t truly self-governing.  As Dr. Franklin said, “A republic—if you can keep it.”

Kelly Kleiman, who blogs as The Nonprofiteer, is principal of NFP Consulting, which provides strategic planning, Board development and fundraising advice to charities and philanthropies. She is also a lawyer and freelance journalist whose reportage and essays about the arts, philanthropy and women’s issues have appeared in The Wall Street Journal, Washington Post, Christian Science Monitor and other dailies; in magazines including In These Times and Chicago Philanthropy; and on websites including Aislesay.com and Artscope.net.

We had fun with our Nonprofit Management Institute page last week where we solicited haikus about nonprofits.  The poems posted ranged from symbolic to quirky and we found ourselves checking back frequently to see what new people were writing.

Realizing that we are neither haiku poets nor literary professionals, the task of choosing just five to feature became too difficult.  So below, we have listed one from every Facebook user who posted to our page.  Thank you all for taking the time to pen a few syllables about what makes nonprofits great!

Fabio Lotteri:
Haiku of unexpected – Reflection 3
As growing tree feeding my roots on communities help
In human being innovation and understanding Spirit is
Dreams come true leaving the ego in the Global Village dawn as Sakura snowfall first time child eyes surprising imagination
*Sakura = cherry tree, Hanami = observing, admiring the flower blossoming

Christelle Aroule:
Numerous causes
And limited resources
But lasting changes

Susan Rasfeld Yackley:
No profit motive,
So, use heart and hands to help,
Hope everlasting!

Kim Kuulei Birnie:
Data justifies
Smarts and passion make it work
Funding always helps!

Lily Price: Challenging, forging ahead
Never giving up your hopes
You are a light house.

Forest Book:
catastrophe commands
our being hearted
complete presence able

Geri Stengel:
Calling Nonprofits:
Social Media Survey
Helps All. Pass On – Shared.

Navneet Singh Narula:
The World’s a Chaos
Just Lend Me Volunteers
Hope and Peace Prevails

Crystal C. Yan:
Change over profit
Success measured in smiles
Different dividends

Evangelina Guerra:
Autumn kisses wisdom.
Beautiful playful plans.
The earth profit.

Jen Whalen:
It is tough out there
The world is different now
Signing up to learn!

Tamara Straus:
It’s sure not easy
Running NGOs today
So sign up, don’t wait

Check out our Facebook page for a few more haikus and other great information about the Nonprofit Management Institute.  October 5th and 6th nonprofit leaders will be coming together at Stanford Business School and sharing more than just a few lines about their experiences.

Rachel Heredia is an undergraduate at Stanford University majoring in Urban Studies and an editorial intern at the Stanford Social Innovation Review.

Count me among the believers that the present era of growing transparency and access to data is one of the most transformative trends of our time. But as always, the trend may not be as positive as it might seem.

Don’t get me wrong, more access to data is better than less access to data. But what matters most is what we do with the data. With more and more data available, increasingly one of the things we are doing is data visualization, just to make sense of the numbers.

Visualizations are incredibly useful because for most humans comprehending the meaning of large sets of numbers is quite difficult, and comprehension based on data is a key tool for change. But because people have a hard time comprehending data and an easier time comprehending visualizations, it becomes incredibly important that we use data visualization well.

Let me give you a few examples. First, consider the “runaway” Toyota stories that dominated the news this spring. Data visualizations, like this one (Figure 1), appeared in many media reports offering what seems to be compelling evidence that indeed something was wrong with Toyotas.

But now take a look at Figures 2 and 3. Figure 2 shows complaints of sudden acceleration per 100,000 vehicles on the road. While Toyota is still well above the norm, the brand with the highest percentage of complaints is in fact Volvo—not a brand that many people seemed to be concerned about in terms of safety. But Figure 3 is even more telling. It shows that the vast majority of complaints of sudden acceleration were made by either new drivers or elderly drivers, the groups most likely to inadvertently press the wrong pedal. Suddenly there is good reason to question whether there was something wrong with Toyotas after all. The on-going NHTSA investigation bears this out. The data visualization accompanying the Toyota news coverage led huge numbers of people to a false conclusion.

Here’s another example that is at the top of the agenda right now: unemployment in the US. You may have seen this data visualization in various places recently (Figure 4) illustrating the huge gap between the unemployment rate of college graduates and non-college graduates in the economy today. College grads unemployment rate is less than half that of the national average. That seems to reinforce the importance of getting young people, especially underrepresented minorities graduating from college.

And yet another visualization (Figure 5) of the underlying data shows a very different picture: there is a huge gap between the unemployment rate of white and black college grads with black college grads unemployment rate not much different than the national average. Furthermore, the unemployment rate for people under 29 is over 15 percent, or 50 percent higher than the national average. Combine that statistic with the huge rise in college costs and college debt and you have a very different picture of the problem and what the right solutions might be.

As these examples indicate, data visualizations are powerful and potentially dangerous because they tend to make people believe that they understand the situation far more than if presented with a bank of numbers. For some reason, people are more cautious with numbers than they are with visualizations of numbers, rapidly forming strong opinions based on charts. Facts are stubborn things, as John Adams said, but they are not as stubborn as opinions. If we misuse the power of data access and data visualization to mislead, whether inadvertently or not, the transformation of our society of data and data visualization will not be positive.

For nonprofits working on social change, data and data visualization are going to be key levers. But to use those levers effectively—to drive actual change not just convince people we’re right—we need people at nonprofits and foundations who understand data and data visualization.

People with good data visualization skills are rare and precious commodities. To quote from Spiderman, “With great power comes great responsibility.” Let’s make sure some of those with great power are exercising great responsibility in the social sector.

Tim Ogden is Executive Partner at Sona Partners, a thought leadership communications firm. He has edited 4 books on the intersection of business strategy and technology published by Harvard Business School Press and co-authored or ghostwritten several articles for Harvard Business Review. He is frequently quoted in the Wall Street Journal, New York Times, and Financial Times.  You can follow him on Twitter: @philaction or @timothyogden.

Last week in Kenya, I had a glimpse into the future. It is a space that integrates outsourcing demands, IT skills, entrepreneurship, and the formal economy with employment opportunities for the poor, particularly women and youth. 

Welcome to the world of micro-work.  I was visiting a Samasource training center in Nairobi.  Samasource is a social enterprise with a mission to provide productive and dignified computer-based work to women, youth, and refugees living in poverty.

Its model works like this: Samasource acts as an outsourcing agent that focuses on data services such as image tagging and audio or video transcription. Upon receiving a work order from a client, Samasource breaks down the project into micro tasks and then directs these tasks electronically to partners in countries such as Kenya, Haiti and Pakistan where poverty levels are high. There, trained workers complete these tasks. Samasource provides quality assurance before the final product is delivered to the client. 

Samasource screens its partners—local non-profits or small companies—who employ marginalized women and youth.  Partners must fulfill social impact criteria such as paying workers a living wage. They also need to reinvest profits in their businesses, demonstrate the capacity to run a computer lab, and ensure quality work.  Samasource also trains workers at partner sites to ensure proficiency in key skills. 

This model seeks to tap into the global outsourcing market, now estimated to be over $500 billion.  Services such as data entry take up approximately $40 billion of this market annually.  As the world digitizes content and as the Internet expands daily, millions of bits of information need to be reviewed, checked, and archived to ensure accuracy and quality.  Basic tasks such as verifying business listings, video captioning, and translation must be completed.

Micro-work is changing the face of global outsourcing.  Work can be distributed anywhere in the world and completed any time. What is needed is a skilled workforce, an internet connection and a low-cost computing device.  Technology and web applications have become sophisticated enough to break down work into micro-units and facilitate the outsourcing to a dispersed labor force. Such virtual or digital work could have significant opportunities for job creation for young people as well as for integrating them into the formal economy.

This is especially promising in countries like Kenya and Rwanda that are positioning themselves as regional outsourcing hubs, and where youth unemployment is typically three times that of adult unemployment rates.

We need new ideas and models in digital work that can be scaled to meet global outsourcing demands. And, that can reach the vast pool of talented youth in developing countries who are searching for employment opportunities. 

Reeta Roy is president and CEO of The MasterCard Foundation, a private, independent foundation based in Toronto. Its global mandate is to enable people living in poverty, particularly youth, to improve their lives and the lives of their families and communities by expanding their access to microfinance and education.

In the spring of 2008, Shirley Sagawa wrote an article for the Journal of Democracy outlining how the nonprofit sector needed a Small Business Administration for itself.  In the article, Sagawa states,

“The Internal Revenue Service focuses on tax compliance, and the Corporation for National and Community Service supports volunteer programs. No agency, however, counts nonprofit health or capacity as central to its mission. Nor does the private sector fill this gap. Foundations provide minimal support, and over the last five years almost all of the leading funders have either cut programs or decreased their size significantly. A federal response is the answer; the General Accounting Office has recommended that ‘providing assistance to improve [nonprofit] capacity may be one area where the federal government could employ a more strategic approach.’ What is needed, specifically, is an SBA for nonprofits–a government agency that can provide both funding and guidance to the nonprofit sector.”

When Peter Frosch, read the article, he brought the notion to his boss, Congresswoman Betty McCollum and both engaged in months of research and dialogue on the relationship between the nonprofit sector and government.  When they approached the Congressional Research Service and asked for information regarding the nonprofit sector, the CRS told them that there was none and so they pushed for a CRS study on the sector, which was completed in late 2009.  Recently, Congresswoman McCollum’s office introduced the Nonprofit Sector and Community Solutions Act.  The bill, entitled H.R. 5533, will:

1. Create a U.S. Council on the Nonprofit Sector and Community Solutions to advise the President and Congress about how the federal government can work more effectively with nonprofits to “address national and community challenges and maximize community opportunities.”  The Council would study the relationship between nonprofits and government—including government contracting, the role of nonprofits in the U.S. economy, ways to eliminate barriers that inhibit nonprofits from bringing proven solutions to scale, as well as other issues.  The Council would be required to provide an annual report to Congress and the President.
2. Create an Interagency Working Group on Nonprofits and the Federal Government which would coordinate administrative policies regarding contracting with, supporting, and managing federal relationships with nonprofits.  The working group would include secretaries of each cabinet agency and directors of key agencies that interact with nonprofits such as the IRS Commissioner, the Director of the Census Bureau, and the Chairs of the NEH and the NEA.
3. Charge the Department of Commerce to gather data from other federal agencies on nonprofit employment, federal funding of nonprofits, nonprofit revenues, clients served by nonprofits, and the financial health of nonprofits.  The Bureau of Economic Analysis at the Department of Commerce would be charged with recommending a set of metrics for measuring the scope, size and economic impact of the nonprofit sector. 
4. Create a Nonprofit Research Fund to support a broad range of basic and applied research on issues of critical importance to the sector, such as training in nonprofit research and the dissemination of research findings to government officials and nonprofit leaders.

When looking at the three most recent major pieces of legislation passed, having over 3000 pages of legislation written, the nonprofit sector is scarcely mentioned.  The sector was barely consulted when the legislation was drafted.  As McCollum’s H.R. 5533 press release points out, the CRS estimates that nearly 10 percent of the domestic workforce is employed by the nonprofit sector, roughly the same number who works in manufacturing.  Where was the sector when these bills were being drafted and passed?

Nonprofits were probably fighting about SIF announcements and awards, or standing around watching while leaders have federal funds withheld for EARNING “high salaries” or getting pummeled by state and federal contracting requests while private businesses run without regulation.  While we fight for crumbs, we should look up and realize that there is no seat for us at the table, and we are missing the really important discussions.

H.R. 5533 is a chance for the sector to gain that seat.  McCollum’s legislation is currently being referred to three House committees: oversight and government reform, education and labor, and science technology.  According to OMB Watch, “Congresswoman McCollum should be applauded for taking leadership for this groundbreaking step in recognizing the contribution of the nonprofit sector and to develop systems of collaboration and data collection.”

Let’s put down our gloves, refocus our attention, and realize that we all have a chance to positively change the current relationship between government and the nonprofit sector.  As many of you reading this are activists or former activists, let’s dig in our heels and help move the sector forward by helping pass H.R. 5533.  I will beckon my inner Paul Wellstone and start hitting the pavement hard within the sector.  Count on your doors being knocked on soon.

To help in this effort, visit the National Council of Nonprofits.

John Brothers the Principal of Cuidiu Consulting, a Senior Fellow in executive leadership with the Support Center for Nonprofit Management, and an adjunct professor at New York University’s Wagner School for Public Service. He is also a Visiting Fellow at the Hauser Center for Nonprofit Organizations at Harvard.

“The charitable giving market is highly inefficient.” In the five years I’ve been writing about philanthropy I’ve used that phrase, or at least that sentiment, more times than I could possibly count. That’s not a blinding insight on my part by any means—it long predates me and is a view shared by many who are working to improve the sector.

The premise is that in well-functioning markets, capital moves to where it gets the best return. People or organizations who don’t generate a high enough return find it increasingly hard to raise funds, while those who produce high returns find it increasingly easier to find the funding they need. You don’t have to spend long looking to conclude that’s not the case in philanthropy. Nonprofits that aren’t very good at what they do can raise huge sums while highly effective programs struggle to get by.

I was a true believer of this perspective until a few months ago. While reviewing the work of a client, Hope Consulting, which had just completed one of the most comprehensive surveys of donor behavior and thinking for many years, it suddenly struck me: donors are getting exactly what they want from their charitable giving. In other words, the market is in fact efficient, even highly so.

That conclusion came from several data points from the Hope Consulting study, Money for Good. First, it showed how truly loyal donors are. Specifically, donors say that more than 80% of their giving is completely loyal—they will give to the same organizations year after year. If that sounds high, it is. In the consumer market, 80% loyalty is unheard of. A recent study of consumer brand loyalty found that the average brand lost a third of their most loyal customers every year.

The Hope Consulting study also asked donors about the overlap between what they viewed as important and how well nonprofits were performing. The only significant gap between the two measures was in frequency of solicitation. But donors thought that nonprofits were performing extremely well in terms of leadership quality and effectiveness.

When you contrast these responses with the well-documented falling public trust in nonprofits, it becomes clear that donors are living in Lake Wobegon. While they recognize there are ineffective and wasteful nonprofits, they believe that all of the nonprofits they support are above average. In other words, by and large donors are getting exactly what they want from the nonprofits they support—that’s an efficient market.

For those who think charitable giving could be accomplishing much more than it is, this is a sobering realization. It means the challenge isn’t getting donors better information so they can choose the charities that are more closely matched with what they want.

The challenge is changing what donors want.

If you’re committed to trying to get more money to the most effective nonprofits that means approaching the issue more like global warming than like consumer finance reform. In the latter case, the issue is incomplete and misleading information (if consumers got their hands on understandable, reliable information they wouldn’t choose mortgages that would force them into bankruptcy). Helping people do something about global warming, though, is about far more than information. It’s about changing fundamental attitudes, expectations and behavior patterns.

And that’s an even more daunting challenge than making the charitable giving market more efficient.

Tim Ogden is Executive Partner at Sona Partners, a thought leadership communications firm. He has edited 4 books on the intersection of business strategy and technology published by Harvard Business School Press and co-authored or ghostwritten several articles for Harvard Business Review. He is frequently quoted in the Wall Street Journal, New York Times, and Financial Times.  You can follow him on Twitter: @philaction or @timothyogden.

This is my third posting in a series on shared services alliances in the nonprofit sector. Too often when we talk about strategic restructuring we discuss only merger models; but there are a wide variety of partial integration models that are extremely creative and productive. These other models expand the mission of nonprofits but they rarely get discussed. I hope my series begins to address that imbalance.

This month I want to share the story of the David and Laura Merage Foundation, based in Colorado, and their efforts to strengthen the Early Care and Education (ECE) industry by creating an innovative shared service infrastructure called Early Learning Ventures Alliances. This community-based partnership model involves small ECE providers working together to share costs and deliver services efficiently.

I interviewed Sue Renner, Director of the Merage Foundations and of Early Learning Ventures in Colorado, the nonprofit which oversees the establishment of the new shared services alliances for the ECE sector. She told me that when David and Laura Merage began their philanthropic support of early childhood education, they were initially struck by how ECE businesses were struggling on the operations side. The foundation understood that they could fund training for staff, provide materials for the children, and support other program initiatives, but “if these businesses continued to have the ongoing failure rates and market challenges then their investment would be like pouring water through a colander; there would be no sustainability. That is why we focused from the beginning on strengthening operations. We wondered, is there a way to finance working capital where organizations could have more robust business platforms that are so critical, rather than funding essentially debt financing?”

Their answer became the Early Learning Venture Alliances, a group of geographically-based Alliances, each with up to 100 affiliated childcare businesses. Alliances formed a hub operation to provide a broad array of high-quality services to the affiliates in order to achieve economies of scale and increase the capacity of the affiliates. The affiliate members include family child care providers, faith-based centers, and other small providers. Early Learning Ventures provides the Alliances with customized technologies, business consultation, policy and finance reform advocacy, technical assistance, quality control, and collaborative fund development to optimize the delivery of shared services to the affiliates. The goal is to allow providers to maintain their independent identities and to focus on creating strong, high quality programs for the children and families they serve. To date, they have identified seven nonprofits that have agreed to act as the Alliance hub in their geographic region. Each is now writing a business plan, recruiting staff and affiliates, and preparing to launch the Alliance effort in the coming year in Colorado.

Nationally, the shared services movement for the early care and education sector is growing. Today there is a national foundation partnership, called Shared Services for the Early Care and Education Industry, for donors that have invested in this area, including the Merage Foundation, the Annie E. Casey Foundation, and the William Penn Foundation. A third annual national conference (by invitation only) of shared-services agencies and funders in the ECE sector will take place in September in Philadelphia. It will focus on sharing knowledge and experience. Good information about shared services—directed at early care and education, but I think it’s adaptable for other nonprofits – is available online and accessible to the public. Early Learning Ventures has developed a Shared Services Tool Kit which you can access here.

Sue noted that the ECE sector is quite mixed, with 70 percent of the services delivered in small, private businesses, often in home-settings, rather than in the public sector. Early Learning Ventures had a number of hurdles to overcome.  “It’s tricky trying to move the needle. The ultimate goal is school readiness, getting all children on an equal platform.  But trying to have a goal of that magnitude yet limiting philanthropic dollars to nonprofit ECE organizations, a small sliver of the market, and not doing it proactively—it’s difficult to get to those outcomes.”

The business realities for these providers are quite difficult. The average childcare center serves about 75 children and employs fewer than 20 people. Let’s face it, when it comes to spreading costs bigger is better. The Shared Service Alliance integrates the services where big matters—financial services, purchasing, human resource services, IT, facilities management, fundraising, marketing/communications, staff development, outcome evaluation, sharing support staff. But where big isn’t better—small classrooms, a low student: teacher ratio, then “small” is the operative word in this model. When it’s necessary to have ECE programs that are rooted in communities so that they allow parent involvement and represent cultural concerns, then local is the operative word. The Shared Service Alliance model allows for large leveraging as well as small size and local values.

Here is a picture of how an Alliance model operates:

Shared service alliances are real. This model of partial integration in order to strengthen early childhood education services is incredibly exciting and one foundation, investing less than $1 million annually, has made this all come to pass. It does not take buckets of money for new integration models to be created and this experience doesn’t apply to just the ECE sector. This Alliance model can be easily adapted to affordable housing, employment and training, mental health services, and so on. If you can make the shared service alliances business model work for micro-businesses like family-owned childcare centers, then you can make it work for any nonprofit consortium. All it takes is some ingenuity and hard work.  Congratulations to the David and Laura Merage Foundation for having the passion and vision to make this happen, and for putting their money where it can leverage the most good.  Click here if you’d like more information about Early Learning Ventures.

Jean Butzen, Mission Plus Strategy consulting, specializes in mergers and alliances in the Chicago area.

While it’s not yet true that “Illinois Does A Few Adult Films To Make Ends Meet”, the state has begun to cast lascivious glances at its nonprofits.  Those property-tax exemptions look mighty comfortable.  Why don’t you push that cushion over to my side of the bed? And with most interactions taking place behind closed doors, don’t expect a warning before the moment of truth arrives—or to be kissed while you’re getting screwed.

Unlike other localities re-evaluating nonprofit tax exemptions, Illinois has bypassed the legislative process, allowing county assessors and the Department of Revenue to take the initiative.  And this spring the Illinois Supreme Court decided that the state’s constitutional provision exempting charities from property taxes applied not to all nonprofits but only to genuine charities. When the Court ruled that Provena Covenant Hospital didn’t merit a property tax exemption because it failed to provide adequate charity care, there was a brief frenzy of press speculation about the decision’s impact on hospitals—but hospitals only.  Rarely do the media connect the dots between the budget crises of state and local governments and their relationships with nonprofits, and then generally the focus is on the governments’ failure to pay nonprofits for contracts they’ve already performed.

But revocation of property tax exemptions poses an even bigger and longer-term threat than governments’ failure to pay.  And it’s a threat of which few nonprofit executives—let alone members of the public—are aware. Two cases of denied exemption, one in nearly-bankrupt Chicago and the other in one of its suburban counties, are now working their way through the Illinois courts.  Each concerns a luxury retirement community, and either could break new ground by clarifying what qualifies as “charity” and how much of it a nonprofit has to provide. The state legislature hasn’t specified a percentage of charitable services required to support continued property-tax exemption.  And though the Provena court ruled that the hospital’s practice of charging fees for nearly all patient care meant it could not be considered a charity, it too stopped short of prescribing when enough charity will be enough. “The property-tax assessors out there are going to be aggressive, because they need you back on their rolls,” said Elaine Waterhouse Wilson, a partner at the Quarles & Brady law firm. “They’re going to make you come in and prove” charitable work.  Ms. Wilson said the charities that may be at risk “include organizations that are supported primarily by fees . . . . It was very clear [under the ruling] that you had to be giving things away rather than providing general charitable benefits,” she said. 

It’s not a tragedy that people are asking whether Illinois nonprofits are worthy of favored tax treatment.  What would be a tragedy is if the challenge came as a complete shock, catching agencies unaware with the sudden need to prove their charitable nature.  Yet that’s what seems likely to happen. Executives at several Chicago-area nonprofits seemed incredulous at the idea that Provena would be applied to them.  “We provide human services and all our activities are nonprofit,” said Karen Singer, Executive Director of the Evanston/North Shore YWCA.  “So it’s not on my radar screen at the moment.  It probably should be, but there are only so many things I can think about.” 

William Ratner, Executive Director of Lawyers for the Creative Arts, and Alvin Katz of Mayer Brown LLP, the attorney for Victory Gardens Theater and the Chicago Architecture Foundation, both expressed confidence that the organizations they represent are secure in their exemptions.  “They’ll keep going after the hospitals because it’s easy, and because that’s where the money is,” Mr. Ratner said. But there’s also money in, or rather under, many other nonprofits.  The Chicago retirement development sits on prime Gold Coast real estate.  Can YMCAs in gentrifying neighborhoods withstand challenges to their exemptions when they look and feel—and charge—so much like for-profit health clubs?  Can settlement houses be considered charities if they get paid, by government or clients, for all the services they provide?  Can arts organizations be considered “charitable” just by offering art, or do they have to give out a certain number of free admissions?  (Churches and schools are immune from this calculus because the Illinois constitution separately exempts them; but the educational programs of arts groups aren’t considered “schools.”)

Perhaps the charities will organize and persuade the Illinois legislature to clarify the amount of “charity” necessary to retain tax exemption.  But Professor Phillip Hablutzel of IIT Chicago-Kent College of Law, co-author of the Illinois Not-for-Profit Corporation Act, doubts it.  Though he predicted Illinois nonprofits other than hospitals will soon find themselves battling efforts to withdraw their exemptions, “In the twenty years I’ve been involved, there hasn’t been a coherent front among charities in facing the legislature.  It’s hard to get these people to make common cause–the museum people don’t see what they have in common with the churches.” 

Nor, apparently, do many human services agencies or arts groups see what they have in common with the hospitals. If and when a Provena-style loss of exemption hits another nonprofit, the impact on its operation will be substantial.  “In the current economy,” said Professor Hablutzel, “it would be hard to do fundraising for another one-third of your budget so the taxes could be paid.” Maybe there’s something to be said for making adult films after all.

Kelly Kleiman, who blogs as The Nonprofiteer, is principal of NFP Consulting, which provides strategic planning, Board development and fundraising advice to charities and philanthropies. She is also a lawyer and freelance journalist whose reportage and essays about the arts, philanthropy and women’s issues have appeared in The Wall Street Journal, Washington Post, Christian Science Monitor and other dailies; in magazines including In These Times and Chicago Philanthropy; and on websites including Aislesay.com and Artscope.net.

You don’t often see the words “cool” and “annual report” in the same sentence. For the most part nonprofit annual reports are either “compliance documents” or highly polished brochures that donors flip through and then put in the recycling.

But a few nonprofits have been playing with new formats for annual reports that help donors better understand their organization. The key to an annual report being useful and compelling for a donor is that the report 1) be engaging, 2) tell the story of the organization and 3) explain the organization’s results and goals within the context of the organization’s story.

While a simple paper report can do all of the above, new technologies are helping some nonprofits up the engagement factor of their reports. One great example is the new annual report from VolunteerMatch.

The Big Picture - VolunteerMatch’s 2009 Annual Report on Prezi

[If the text is hard to read in the report or you are reading this in an email, click here to view a larger version]

The report is presented using the new, innovative presentation software called Prezi. In my public speaking, I’ve started using Prezi exclusively. One of the interesting elements about communication, is that how you present information is often as or more important that what you say. While this can of course be used to “spin” information, it can also be used to present information in ways that help the listener better understand what you are trying to say.

VolunteerMatch has a history of strong, donor centric communication. It isn’t enough for the social sector to move to a world where results are the focus. Results need to be given the same level of communication attention that fundraising is given.

Sean Stannard-Stockton is CEO of Tactical Philanthropy Advisors, a philanthropy advisory firm that serves individual and family philanthropists. Sean is the author of the Tactical Philanthropy blog and writes a monthly column for the Chronicle of Philanthropy. He is a member of the World Economic Forum’s Council on Philanthropy & Social Investing and has been quoted or referenced in The New York Times, Wall Street Journal, Washington Post, Financial Times and many other media outlets.

Last year I used the metaphor of “gardening vs landscaping” to outline some of the key attributes I believe make for successful community building, on or offline. The basic idea:

The Gardener creates an ecosystem open to change, available to new groups, and full of fresh opportunities to emerge naturally.  The approach is focused on organic collaboration and growth for the entire community.  The gardener is simply there to help, cultivate, and clear the weeds if/when they poke up.

The Landscaper creates an ecosystem that matches a preconceived design or pattern.  The approach is focused on executing a preconceived environment, regardless of how natural or organic it may be for the larger area.  The landscaper is there to ensure that everything stays just as planned.

Lately, I have had the opportunity to chat with various colleagues like Bonnie Koenig, Debra Askanase and others about the topic of cross-platform community building. The way I look at it, the issues and best practices are just as clearly linked to the idea of gardening as other community building approaches are in my previous post. Here’s what I mean:

Cross-Platform Community Building :: Tending to Multiple Flowerbeds

The internet is huge, there are literally countless platforms where people are forming community. Your organization, whether it has an organizational presence there or not, has people interested in your services, programs, mission or cause talking about it and everything else all over the social web - from mainstream networks like Facebook and Twitter to niche communities on Ning or even forums (some branded, some not).  As much as the temptation may be to want to call out to everyone interested to join you in your place, the best thing you can do is recognize that not everyone flourishes and thrives in the same place, with the same treatment, and even the same amount of visibility. We should approach our community building work with the intention to create thrivable community on and offline, and in order to do that successfully we need to take time to recognize which elements contribute to various groups and segments of our community thriving.

Let’s look at the way a gardener can tend to multiple flowerbeds in one big backyard and the way that translates to our work of building community across the web:

Analysis and evaluation: the garden is visiting all of the flowerbeds or cultivated areas of the yard (and all the ground in between!) so has the best view to continually evaluate and analyze what’s working and what it isn’t, where things are dry or over-watered, where the weeds are cropping up and where the birds and bugs are hanging out. The garden can make decisions based on all this data to keep the whole yard in a thrivable place, but also recognizes the need to give part of that evaluation opportunity to the plants themselves by giving them a chance without assuming one can only grow in certain conditions or prefers being near only certain others.

Cross-pollinating: just like a bee, as the gardener goes from each bed to the other, she is helping cross-pollinate the plants; in our case, this means sharing conversations, ideas, and insights across the greater network. Highlighting opportunities, events, or conversations of interest across various platforms to prevent groups operating in silos when they may be interested in discussing the same/similar issues - the difference is the preference for where online to talk, not necessarily what to talk about.

Transplanting: as part of the analysis and cross-pollination, the gardener is also taking steps to ensure that if a plant is really not thriving in it’s current location, that it can have the chance to try out another place in the garden - maybe one with more or less sunshine, fewer or maybe even more plants nearby, anything to give it a new opportunity to grow. In our use of community building, this can be seen simply in sharing the links between platforms when sharing content or stories from one to another, or by highlighting the needs of users or groups to the larger network.

What do you think? What would you add about cross-platform community building? What issues is your organization facing or examples can you share?

Want to keep talking about community building across platforms? Join me for a monthly online chat!

Amy Sample Ward’s passion for nonprofit technology has lead her to involvement with NTEN, NetSquared, and a host of other organizations. She shares many of her thoughts on nonprofit technology news and evolutions on her blog.