The end of the year is a popular time for predictions. In the past few weeks, I have read articles predicting 2008’s top performing stocks, workplace trends, fashion influences, World Series winner, election results and celebrity divorces--just to name a few.
Never one to be left out, I am providing my top 5 predictions for trends in philanthropy in 2008.
1. Ever-increasing focus on accountability and transparency
Donors want to know how their money is being spent and what it is accomplishing. The most successful not-for-profits will continue to create new ways to share information, document success and measure their effectiveness. As a result, donors to these organizations will be more committed and engaged, and the organizations themselves will gain the resources to expand.
2. Application of business management principles
Donors who derive their wealth (and ability to donate) from business success expect the organizations they support to adhere to certain basic business principles. Charities that adapt these principles to their operations will thrive. These organizations will learn to effectively hire and retain strong staff members, while letting go of those who cannot perform. They will become more focused, create long term plans and better understand their markets. While not-for-profits are meant to address pressing societal issues, they still need to be budget conscious—“dollars in” must be greater than or equal to “dollars out.”
3. Increased partnerships
With more than 1.4 million charities competing for the market share, not-for-profit partnerships make sense. An increase in this practice will allow organizations to focus on their core competences while providing more services to their target audiences. Partnerships will also allow for increased reach without duplication of overhead. It works for business; it can work for philanthropy as well.
4. “Hands-on” philanthropy
The days of a donor writing a blank check are long gone. Today’s philanthropists are far more sophisticated. They not only feel passion for an organization’s mission, but they also want to be involved in shaping it and contributing to its successful execution. The most effective charities will learn how to leverage this trend to meet the needs of their supporters without sacrificing overall focus.
5. Shortage of quality professionals
Each of the many new not-for-profits being founded every month requires quality management to successfully translate vision into reality. At the same time, experienced leadership in established organizations is aging toward retirement. The shortage of high quality not-for-profit leaders will continue in the short term. Organizations should plan ahead—retain strong employees, continue to cultivate and train from within, and don’t be afraid to think outside of the box when it comes to hiring new staff. People with diverse career experience can bring a new set of talent to the fund-raising profession.
Friday, December 21, 2007
Thursday, December 20, 2007
Who’s Watching the Watchers?
There has been a recent surge in the number of organizations and individuals providing services designed to help potential philanthropists evaluate charities. A recent article in the New York Times discusses the new GiveWell site, which is already generating controversy for its detailed evaluation and criticism of existing charity rating methodologies.
First of all, I applaud anyone who decides to dedicate their life to helping other people. Whether it’s the guys who started GiveWell or more established organizations like Charity Navigator, any sincere attempt to improve the way society takes care of its most vulnerable citizens is important and impactful.
That said, any attempt to create a universal ranking system for the approximately 1.4million 501c3 organizations operating in the United States is destined to fall short. A quick review of general statistics such as the ratio of program spending to fundraising expenses, the percentage of repeat donors, or the number of people served can’t even begin to tell the whole story of an individual charity’s impact. On the other hand, providing specific details and complex analysis can detract from organizational effectiveness, particularly for smaller charities, by diverting staff time and resources away from programs.
The answer, of course, lies somewhere in between. Top level analysis is important, but does not paint the clearest picture. Smart donors will need to ask more specific questions about documented results, long term planning and management focus. Getting advice and analysis from a third party is not a bad idea, but donors need to understand how the methodology and ratings used pertain to a specific charity. Getting the highest rating may mean that an organization excels at achieving its mission—-or it may mean that it excels at being rated.
First of all, I applaud anyone who decides to dedicate their life to helping other people. Whether it’s the guys who started GiveWell or more established organizations like Charity Navigator, any sincere attempt to improve the way society takes care of its most vulnerable citizens is important and impactful.
That said, any attempt to create a universal ranking system for the approximately 1.4million 501c3 organizations operating in the United States is destined to fall short. A quick review of general statistics such as the ratio of program spending to fundraising expenses, the percentage of repeat donors, or the number of people served can’t even begin to tell the whole story of an individual charity’s impact. On the other hand, providing specific details and complex analysis can detract from organizational effectiveness, particularly for smaller charities, by diverting staff time and resources away from programs.
The answer, of course, lies somewhere in between. Top level analysis is important, but does not paint the clearest picture. Smart donors will need to ask more specific questions about documented results, long term planning and management focus. Getting advice and analysis from a third party is not a bad idea, but donors need to understand how the methodology and ratings used pertain to a specific charity. Getting the highest rating may mean that an organization excels at achieving its mission—-or it may mean that it excels at being rated.
Tuesday, November 13, 2007
Quantity vs. Quality
Neal Sandler's article "The Crisis in Israel's Classrooms" in the November 19 issue of Business Week addresses the ongoing decline of Israel's education system, a crisis that has been brewing for decades. However, like many others, Mr. Sandler is quick to erroneously blame budget cuts for the "breakdown in [the] financially strapped school system." While there have been cuts, Israel's current level of education spending at 8.3% of GDP is far greater as a percentage than that of countries like Japan, South Korea, Finland and Sweden that continuously rank at the top of international education surveys, including the one referenced in this article.
As any good Businessweek reader knows, it is not what you spend, but how you spend it. And throwing more money at a broken system isn’t a solution. For decades, Israel's education system has been managed poorly—if at all—and as a result, many of the country's citizens are woefully undereducated with few tools to help them compete in a knowledge-driven, global economy. The societal impact of this crisis has been felt for years, but perhaps now that a financial motivating factor has brought it to the world's attention, Israel will give its education system the overhaul it needs and its citizens deserve.
In the meantime, not-for-profit organizations, like the one I run, must continue working from the outside to improve the system. Until Israel is willing and able to undertake major educational reform, the work of external, well-managed entities is a critical supplement to the meager offerings of the country’s own system.
As any good Businessweek reader knows, it is not what you spend, but how you spend it. And throwing more money at a broken system isn’t a solution. For decades, Israel's education system has been managed poorly—if at all—and as a result, many of the country's citizens are woefully undereducated with few tools to help them compete in a knowledge-driven, global economy. The societal impact of this crisis has been felt for years, but perhaps now that a financial motivating factor has brought it to the world's attention, Israel will give its education system the overhaul it needs and its citizens deserve.
In the meantime, not-for-profit organizations, like the one I run, must continue working from the outside to improve the system. Until Israel is willing and able to undertake major educational reform, the work of external, well-managed entities is a critical supplement to the meager offerings of the country’s own system.
Wednesday, October 31, 2007
School's Out Forever?
Secondary school teachers—junior high and high school—have been on strike in Israel for 18 days. For 18 days, students have not attended classes. Buildings may remain open, but there is no compelling reason for students to enter them.
Strikes are common in Israel across many industries. However, most strikes are resolved within a day or two. Parties are driven to the bargaining table, and to compromise, by the outcry from those parts of the country impacted by a lack of airport baggage handlers, garbage collectors, utility repair people, social security staff, etc.
As someone observing from the United States, I am struck by the lack of public condemnation of the strike and the inability of both parties to come to an agreement. News of the strike is often buried on Israeli news Web sites, and I have read little of parent protests or demands that both sides meet to get the children back in school and provide them with the education they need and deserve. It begs the question of whether getting one’s luggage within an hour of landing is more important than educating a country’s future leaders?
Today I was speaking about the strike with a colleague at a US based foundation that also funds supplemental education in Israel. She mentioned how troubled she was by the lack of organized response from the many NGOs that spend hundreds of millions of dollars each year to supplement the inadequate Israeli education system. Each day children are out of school, our job becomes that much more critical and difficult. We need the support of the schools, the teachers, the government and the parents. How can we help a system that can not muster the energy or excitement to help itself?
She also told me something even more troubling. Many of the children in disadvantaged communities have used this time off to find jobs that will help supplement their household income. Getting these kids back into school now that their families depend on the extra income may be difficult once the strike is over.
I don’t know enough about Israeli politics and unions to say who is right or wrong in this case, and while those in charge continue to debate the issue, I would encourage them to focus on the real matter at hand—that no matter what the final agreement reached may be, the children are the ones who have been coming in last.
For further commentary on the situation, I offer the links below:
Ha'aretz: Story of a 12th Grade Student
Jerusalem Post: Government Not Taking the Strike Seriously
Ha'aretz: One Teacher's Story
Strikes are common in Israel across many industries. However, most strikes are resolved within a day or two. Parties are driven to the bargaining table, and to compromise, by the outcry from those parts of the country impacted by a lack of airport baggage handlers, garbage collectors, utility repair people, social security staff, etc.
As someone observing from the United States, I am struck by the lack of public condemnation of the strike and the inability of both parties to come to an agreement. News of the strike is often buried on Israeli news Web sites, and I have read little of parent protests or demands that both sides meet to get the children back in school and provide them with the education they need and deserve. It begs the question of whether getting one’s luggage within an hour of landing is more important than educating a country’s future leaders?
Today I was speaking about the strike with a colleague at a US based foundation that also funds supplemental education in Israel. She mentioned how troubled she was by the lack of organized response from the many NGOs that spend hundreds of millions of dollars each year to supplement the inadequate Israeli education system. Each day children are out of school, our job becomes that much more critical and difficult. We need the support of the schools, the teachers, the government and the parents. How can we help a system that can not muster the energy or excitement to help itself?
She also told me something even more troubling. Many of the children in disadvantaged communities have used this time off to find jobs that will help supplement their household income. Getting these kids back into school now that their families depend on the extra income may be difficult once the strike is over.
I don’t know enough about Israeli politics and unions to say who is right or wrong in this case, and while those in charge continue to debate the issue, I would encourage them to focus on the real matter at hand—that no matter what the final agreement reached may be, the children are the ones who have been coming in last.
For further commentary on the situation, I offer the links below:
Ha'aretz: Story of a 12th Grade Student
Jerusalem Post: Government Not Taking the Strike Seriously
Ha'aretz: One Teacher's Story
Monday, October 29, 2007
How Big is Your Pond?
The call came just the other night. It was 8:15 and I had just finished putting my kids to bed. “Hello, is Karen there?” “This is she.” “Hi, Karen, my name is Jane Smith and I am a student at Harvard College. I am calling you about the Harvard College Fund.”
Ah, the Harvard College Fund. In August of 2007, the Harvard endowment was reported to have reached $34.9 billion. If it only earned 5% simple interest per year--which, given the salaries of those running the endowment seems like a low figure--that would still provide $1.7 billion a year of interest income. There are at least 6 countries just in Africa with GDPs lower than that number. And while Harvard’s endowment is huge, it is not alone; there are many other universities and organizations with bank account balances over a hundred million dollars.
People often ask me why they should donate to such an organization when the amount they can afford to give will have relatively no impact. Why be a small fish in an enormous pond when you can be a huge fish--or even a whale--in a small pond by donating the same amount? A gift that may seem insignificant to a mega-charity can literally change the world for a smaller organization.
Donating to a large organization to which you feel a connection or whose mission you support is essential. Even if your donation is small, you are signaling that you are part of the community and are taking responsibility for and ownership of the organization’s actions. This is an important message.
However, in a small organization you can have a greater impact and help shape and determine the future of the charity. If you want to get involved and become a leader at an organization, the price of entry is likely much less at a small charity that at a big one.
While being a big fish has its advantages, being the biggest can have its drawbacks. Some small organizations are not equipped to handle one donation that is significantly larger than any other. The organization might not be prepared to scale up operations or have a plan to efficiently deploy additional resources. Additionally, an organization should never become too dependent on a single donor, nor does the donor want to feel too much responsibility for an organization’s ongoing success.
That said, don’t be afraid of being that first whale! Work with the organization to develop a plan to get others to reach the same level. Make your gift a “challenge” grant and set an example for others. If you can take this kind of leadership position, then you can help your favorite charity grow and expand programming, which is ultimately the goal of any donation.
Ah, the Harvard College Fund. In August of 2007, the Harvard endowment was reported to have reached $34.9 billion. If it only earned 5% simple interest per year--which, given the salaries of those running the endowment seems like a low figure--that would still provide $1.7 billion a year of interest income. There are at least 6 countries just in Africa with GDPs lower than that number. And while Harvard’s endowment is huge, it is not alone; there are many other universities and organizations with bank account balances over a hundred million dollars.
People often ask me why they should donate to such an organization when the amount they can afford to give will have relatively no impact. Why be a small fish in an enormous pond when you can be a huge fish--or even a whale--in a small pond by donating the same amount? A gift that may seem insignificant to a mega-charity can literally change the world for a smaller organization.
Donating to a large organization to which you feel a connection or whose mission you support is essential. Even if your donation is small, you are signaling that you are part of the community and are taking responsibility for and ownership of the organization’s actions. This is an important message.
However, in a small organization you can have a greater impact and help shape and determine the future of the charity. If you want to get involved and become a leader at an organization, the price of entry is likely much less at a small charity that at a big one.
While being a big fish has its advantages, being the biggest can have its drawbacks. Some small organizations are not equipped to handle one donation that is significantly larger than any other. The organization might not be prepared to scale up operations or have a plan to efficiently deploy additional resources. Additionally, an organization should never become too dependent on a single donor, nor does the donor want to feel too much responsibility for an organization’s ongoing success.
That said, don’t be afraid of being that first whale! Work with the organization to develop a plan to get others to reach the same level. Make your gift a “challenge” grant and set an example for others. If you can take this kind of leadership position, then you can help your favorite charity grow and expand programming, which is ultimately the goal of any donation.
Tuesday, October 2, 2007
"If I would be in this business for business, I wouldn't be in this business." (Sol Hurok)
A recent article once again discussed the shortage of quality managers for not-for-profit organizations. In response to this growing market need, many leading MBA programs are developing specific programs to encourage and prepare students for such a career path.
Such programs can be a boon for the industry, not so much because of the skills they could teach, but because of the credibility they bring to the profession among MBA students who might have thought about philanthropy only as a hobby to be started post-IPO.
Business skills and acumen are needed in not-for-profit organizations. Not for profit leaders must be able to develop a strategic plan, prepare and manage a budget, and hire, motivate and retain employees. Donors recognize the importance of a highly-skilled manager and more and more are drawn to organizations with business savvy leadership. However, a successful manager must also believe in the cause, and be willing to give more of him or herself and, sometimes get a little less (salary, recognition, acknowledgement, credit) in return. As I tell others who are considering the transition from corporate America to not-for-profit, “it’s just like running a business but you are not running a business.”
Such programs can be a boon for the industry, not so much because of the skills they could teach, but because of the credibility they bring to the profession among MBA students who might have thought about philanthropy only as a hobby to be started post-IPO.
Business skills and acumen are needed in not-for-profit organizations. Not for profit leaders must be able to develop a strategic plan, prepare and manage a budget, and hire, motivate and retain employees. Donors recognize the importance of a highly-skilled manager and more and more are drawn to organizations with business savvy leadership. However, a successful manager must also believe in the cause, and be willing to give more of him or herself and, sometimes get a little less (salary, recognition, acknowledgement, credit) in return. As I tell others who are considering the transition from corporate America to not-for-profit, “it’s just like running a business but you are not running a business.”
Thursday, September 20, 2007
The Most Valuable Commodity is Information (Gordon Gecko, “Wall Street”)
In today’s world, the need for charity presents itself in various ways throughout daily life. The decision of whether or not to give should not be a difficult one and, thankfully, most Americans agree with me. According to a Wall Street Journal/Harris Interactive Survey, in 2006, nearly 83% of American adults contributed to a charity.
The harder decision is where to give. Many people spend more far more time evaluating the effectiveness of their new insulated lunch box than their philanthropic dollars. The lunch box will last only the school year, but the charity donation has the potential to change the world.
Do you really know the organizations to which you give? Do you know how much they spend on programs and services versus overhead and fundraising? (it should be 75 - 80% on programming for most organizations) How accountable are they for their activities? How do they report success and failure? What are the challenges they are facing and how will they meet them? The answers to all these questions should be communicated in an organization’s annual report or Web site. Knowing them will help you make sure you are getting the most impact for your dollars.
If you are a professional on the receiving end of these donations, you have the obligation to encourage this learning. Look around your organization. How is it spending the money donated by its supporters? Is information readily available to donors or are you and other managers afraid of donor scrutiny? Transparency is an operating imperative for today’s not-for-profit organizations. Your donors demand it from their financial investments; you should readily provide it for their philanthropic ones. Raising the standards for reporting and operating will help those organizations that are performing well continue to soar and encourage others to make the improvements needed have real impact.
The harder decision is where to give. Many people spend more far more time evaluating the effectiveness of their new insulated lunch box than their philanthropic dollars. The lunch box will last only the school year, but the charity donation has the potential to change the world.
Do you really know the organizations to which you give? Do you know how much they spend on programs and services versus overhead and fundraising? (it should be 75 - 80% on programming for most organizations) How accountable are they for their activities? How do they report success and failure? What are the challenges they are facing and how will they meet them? The answers to all these questions should be communicated in an organization’s annual report or Web site. Knowing them will help you make sure you are getting the most impact for your dollars.
If you are a professional on the receiving end of these donations, you have the obligation to encourage this learning. Look around your organization. How is it spending the money donated by its supporters? Is information readily available to donors or are you and other managers afraid of donor scrutiny? Transparency is an operating imperative for today’s not-for-profit organizations. Your donors demand it from their financial investments; you should readily provide it for their philanthropic ones. Raising the standards for reporting and operating will help those organizations that are performing well continue to soar and encourage others to make the improvements needed have real impact.
Wednesday, September 19, 2007
It's About Sense, Not Cents
“No Strings Attached,” an article in the September 20, 2007 Chronicle of Philanthropy discusses the emerging trend of large, unrestricted donations and the positive impact these donations have on organizations.
The article emphasizes importance of unrestricted gifts and their advantages over restricted gifts. I agree that unrestricted gifts do provide many benefits to an organization—they offer flexibility as priorities can shift and needs change over time. Additionally, an unrestricted gift enables the management of the organization, those most knowledgeable of the needs and programs, to drive the funding decisions, not the donor.
However, this article overlooks the upside that can come with a restricted donation. A restricted gift may allow an organization to start a new program without allocating funds away from existing successful ones. Restricted gifts can involve donors who are attracted to the overall mission and capability of the organization, but want to support only a specific program.
Organizations who feel constrained by a restricted donation may not have thought through the implications of accepting such a gift. Organizations should have a 3-5 year operating plan identifying areas that will need funding—whether it is a specific project or general operations. This plan should be shared with donors so that all parties can work in partnership to achieve the same goals. As the conversation between the donor and the organization unfolds, the donor should be educated as to the impact his or her leadership gift can have on the future success and sustainability of a program—and the entire organization. Such a process will ensure that there are no “surprises” and that both the philanthropist and the organization can maximize the benefits of the donation.
The article emphasizes importance of unrestricted gifts and their advantages over restricted gifts. I agree that unrestricted gifts do provide many benefits to an organization—they offer flexibility as priorities can shift and needs change over time. Additionally, an unrestricted gift enables the management of the organization, those most knowledgeable of the needs and programs, to drive the funding decisions, not the donor.
However, this article overlooks the upside that can come with a restricted donation. A restricted gift may allow an organization to start a new program without allocating funds away from existing successful ones. Restricted gifts can involve donors who are attracted to the overall mission and capability of the organization, but want to support only a specific program.
Organizations who feel constrained by a restricted donation may not have thought through the implications of accepting such a gift. Organizations should have a 3-5 year operating plan identifying areas that will need funding—whether it is a specific project or general operations. This plan should be shared with donors so that all parties can work in partnership to achieve the same goals. As the conversation between the donor and the organization unfolds, the donor should be educated as to the impact his or her leadership gift can have on the future success and sustainability of a program—and the entire organization. Such a process will ensure that there are no “surprises” and that both the philanthropist and the organization can maximize the benefits of the donation.
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