About Tony Macklin

Philanthropoid working at intersection of meaningful giving and community results. Excited when everyday people lead community and education improvement, and when everyday people are recognized for their generosity.

Signals from the Future? (part 1)

Signals from the future pulp rectangleOver the summer, I read a number of reports and articles that tracked trends in philanthropy. These “signals from the future” are the basis for a small series of blog posts.

In June, the Monitor Institute released the What’s Next for Community Philanthropy toolkit for community foundations and their peers. The toolkit kicks off with a report that all types of grantmakers and grantseekers should find valuable, Shift Happens: Understanding How the World is Changing.

Shift Happens summarizes data and other analyses around six categories of global trends that will alter local communities in the next decade:

  1. Changing faces – the new majority in the U.S., immigration, Millennials, and Baby Boomers
  2. Emerging technologies – growing connectedness, big data, information access and sharing
  3. Divided communities – economic inequality, social capital, political polarization, race and ethnicity
  4. Future economy – knowledge economy, globalization, localism, innovation and entrepreneurship
  5. Environmental uncertainty – climate change, disaster efforts, sustainability
  6. Changing philanthropy – donor choice, power of the crowd, responsible business, impact investing, government devolution

To be sure, not all trends will reach all communities in the same way or same timeframe. But, the report would serve as a great discussion item for staff and board meetings and as a useful backdrop for strategic planning efforts. The report’s sections can be downloaded separately and the toolkit provides examples of nonprofits and foundations leaning into these changes.

I was particularly interested in the changing philanthropy section and its graphic of donors’ choices for effecting social change:

Donor choices

The graphic complements those used by Lucy Bernholz in her writing and consulting on the social economy. And, donors’ use of a wider range of social giving tools rings true for me, both in my own giving and in that of friends and colleagues in Pittsburgh and other cities.

Every few years, Monitor has released a report or toolkit helping donors and foundations look ahead. Before the new toolkit, it released What’s Next for Philanthropy: Acting Bigger and Adapting Better in a Networked World in 2010. Foundations and donor families that I knew largely ignored the report. Perhaps my set of relationships wasn’t a good gauge of the larger universe of grantmakers. Or perhaps the report was the right information at the wrong time, with most foundations, nonprofits, and communities in retrench mode as they dealt with the recession. Unfortunately, they lost the opportunity that crisis presents to significantly rethink an organization’s operations, mission, and processes.

It is too easy for grantmakers to ignore documents such as Shift Happens. Some will feel “too small to care” – their values-based giving, passion for existing grantees, and/or internal family dynamics taking priority over any external trends. Many will feel “too big to fail” – using their large endowments and history to bypass or actively work against trends. And others will feel “too shocked to shift” – becoming overwhelmed with the scale of the trends and unable to discern how their grantmaking can react.

Then again, maybe I shouldn’t worry about institutionalized philanthropy paying attention to Shift Happens. Institutionalized philanthropy – endowed foundations, corporate foundations, and government grantmakers – may not be built for accommodating those shifts. As former foundation CEO Gara Lamarche wrote in his recent Democracy and the Donor Class article:

Courageous risk-taking is not what most people associate with foundations, whose boards and senior leadership are often dominated by establishment types.

The current and future generations of donors are more diverse and likely more collaborative than their predecessors. Hopefully, they’ll lead the way in more nimble, creative responses to the signals from the future in Shift Happens.

Aside

I attended Grassroots Grantmakers’ “On the Ground” event in Cleveland this past week. The Cleveland Foundation’s Neighborhood Connections program served as a terrific case study for engaging everyday people in community improvement. Its approach draws heavily from the community engagement and network leadership practices developed by Bill Traynor and Frankie Blackburn of Trusted Space Partners. Both were at the event coaching participants on new practices in community building.

The sessions reminded me that early in my blogging, I’d attempted to use Traynor’s practices to the question “What if donors had really cool, trusted places to learn and gather?” Over four posts, I created a hypothetical Community Giving Center that paid attention to: human environment and value exchange, open architecture and easy affiliation, weaving and mobilizing resources, and meaningful giving. At the core, the idea of the Center was about flexibly helping people get their generous stuff done, however they define that along the way.

I still like the idea, but have yet to figure out a business plan to sustain it. Someday…

Meet the Normal Foundations

Foundation Source recently released its third annual report on the activities of private foundations. It is based on the transactions of 714 foundations that use Foundation Source’s administrative services. Its 2012 report showed that its foundation clients were a pretty good proxy for the larger field of foundations under $50 million in assets. Fundraisers should pay attention to these reports for these reasons:

  • These “small” foundations are the norm: 98% of U.S. private foundations have assets under $50 million – that’s about 84,000 foundations. More than half of private foundations are under $5 million in assets. The famed foundations coveted by your boards are the abnormally large and weird bunch.
  • They’re actively growing: on average, they added $89 in new funds for every $100 they spent in 2013, about the same as the previous two years.
  • They’re generous: their average distribution ratio – the amount they spend on charitable work compared to their assets – was 7.3%. About a third distributed more than 10%. This is higher than the IRS mandate of 5% and higher than the average for large foundations.
  • They support general operations: a little less than half of the grants by foundations under $10 million and about 28% of grants by foundations $10-$50 million were for general operating support. That compares to an industry average of about 10% if a National Committee for Responsive Philanthropy survey of all types of foundations was accurate.
  • Lastly, these are foundations started by people you know. They’re more likely to be local business owners and retired entrepreneurs, more likely to have been a part of local or regional civic groups, more likely to have gone to the same churches and groceries as one of your board members or existing donors. And, they’re more likely to have active, living donor families and groups attached – meaning they are more likely to give from their hearts and values.

Tired of being ignored by large foundations? Tired of strategic philanthropy and 15-step evaluation plans? Tired of endless questions from high-paid program officers? There are 84,000 other, more normal, choices.

Are Your Trustees Satisfied?

I’m always interested in why donors choose different means of formalizing their giving and the ever-expanding set of options they have to do so. Because of that, I read the Center for Effective Philanthropy’s recent report What Donors Value: How Community Foundations Can Increase Donor Satisfaction, Referrals, and Future Givingand related blog posts.

In a survey of more than 6,000 donors of 47 community foundations, the Center found that:

  • The strongest predictors of donor satisfaction are donors’ sense of the foundation’s level of responsiveness when they need assistance and their perceptions of the foundation’s impact on the community. (The first predictor isn’t new information and the second one confirms community foundation’s hunches and hopes.)
  • 1 in 4 donors were “moderately satisfied” or less with their community foundation. (Oddly, the report glossed over this second point. I don’t know what good business manager would be happy with that metric.)
  • A donor’s level of engagement wasn’t a driver of her or his satisfaction. (This shouldn’t be a surprise, but likely was to many community foundation staff).

I steward a multi-generation family foundation and am writing this while attending a symposium by the National Center for Family Philanthropy. Family foundations don’t have the pressures that community foundations create for themselves to grow assets, grow the number of donors with funds, and grow the number of donors who give to the community foundation’s initiatives. However, the report surfaced important questions for those of us in the family philanthropy business.

Shouldn’t family foundation staff worry about the satisfaction of our board members and/or trustees? For the most part, they choose to participate in these roles, even if that choice is coerced by other family members.

  • What would customer satisfaction metrics look like for family foundation board members? How would those metrics be different from those for other nonprofit boards?
  • What if 25% of your family foundation’s board members weren’t very satisfied with their experience with the foundation? How would that damage family dynamics behind the scenes and harm discussions at the foundation? How would that change their description of their experience to their friends and colleagues who sit on nonprofit boards?

And, shouldn’t family foundations pay attention to the report’s third point about engagement? Community foundations often set metrics for increasing the level of engagement of donors. Those metrics are often drawn from university fundraising models. The community foundations falsely presume that success means more donors moving up a ladder of participation in the community foundation’s activities, communications tools, and goals. As the Center’s report notes, donors can be satisfied even when they have, or desire, little or no involvement from the foundation in their giving decisions.

The majority of family foundations (and many donor-advised funds) are established as vehicles for families to give together and learn together about giving. Ideally, the foundations are safe places to learn and grow together. But it is easy for staff and founders to fall into the same trap as community foundations – that all board and family members desire to be fully engaged in the foundation’s work.

  • How do we ensure that our family foundations are safe places to learn and don’t force a one-size-fits-all approach for participation?
  • How do we design customer-centric experiences that meet our volunteers where they are? Can we allow them to flexibly dive in or dial back over time, perhaps learning from techniques of good network management models?
  • How do we blend the engagement expectations of founders or other family leaders with trends in how younger people choose to interact with organizations and choose to give of their time and skills? Especially for endowed foundations, how do we ensure that institutional culture doesn’t automatically turn people away?

Unfortunately, I have more questions than answers at this point and NCFP’s forum didn’t have sessions addressing the topics. I’ll be doing my own research on the issues and hope that you’ll feel free to send me good ideas and your own experiences.

What Does Your Community’s Social Economy Look Like?

What if you convened a group as diverse as codefest winners, giving circle donors, librarians, start-up leaders, and fundraisers? And what if you asked them to describe all the ways they spend time and money for the public good? 

We did just that in Pittsburgh a couple weeks ago. The Philanthropy Forum at GSPIA and Grantmakers of Western Pennsylvania had invited scholar Dr. Lucy Bernholz to a two-day whirlwind of meetings related to her work on the social economy and digital civil society. Lucy’s brief definitions for those terms are:

  • Social economy – all the ways we use private resources to create public benefits or public good
  • Digital civil society – how we use private digital resources to organize, create, distribute and fund public benefits or public good

On the second day, Lucy met with a group of about 36 people who mostly work outside of the traditional grantmaking world. Many met each other for the first time, and we missed the voices of about 50 more invitees who weren’t able to attend. Lucy’s slide deck from the conversation is at http://www.scribd.com/doc/212758822/Social-Economy-Digital-Civil-Society-Bernholz.

Lucy asked the attendees to list and post: 1) all of the actions they took for the public good, and 2) all of the groups through which they took those actions.

BernholzPgh1

Pgh Social Economy Group

I used Wordle to create a summary of their actions for the public good (bigger words indicate a greater number of that response):

Pgh Social Economy Wordle

A majority of the attendees listed volunteering for a nonprofit organization, many serving as board members. A majority listed donating financially to causes. Those traditions remain strong, even with the younger attendees.

But, only about half of the activities listed were in the nonprofit sector and the attendees used the word giving without regard for receipt of a charitable deduction. A larger picture of philanthropy (defined as “voluntary action for the common good”) emerged to include social enterprises, political activities, and the uses of crowdfunding sites. The group also made a clear connection between achieving the common good and taking such actions as: buying a farm share, using sharing services such as Lyft and Airbnb, participating in Meetups, and activating their social networks for causes. They described how those actions built stronger relationships, trust, and sense of community (translated for grantmakers – “community building and social capital outcomes”).

Of course, humans volunteered together for the common good long before tax laws defined charitable giving and charitable organizations. But, Lucy noted that today’s technology and digital environments allow people to more quickly return to those roots of collective action – of sharing in community well-being. The Grassroots Grantmakers team recently wrote about this activity in Citizen-to-Citizen: Funding, Sharing, and Generating Ideas. (Translated again for grantmakers – “this is great stuff that we’ll avoid because we don’t want to deal with expenditure responsibility rules and/or it doesn’t meet our definition of strategic philanthropy.”)

What Does This Mean for Pittsburgh (or your City)?

Admittedly, the group of attendees wasn’t a random sample of Pittsburghers. They were purposely invited to develop Pittsburgh’s first glimpse into its social economy and digital civil society beyond grantmakers and nonprofits. (If someone wants to develop a more complete picture, let’s talk!)

Since the conversations, I’ve been wondering about the intersections between foundations and the wider array of social economy activity. As we look ahead, how will we…

  • Act together? – Will traditional philanthropy associations such as Grantmakers of Western PA successfully include this broader set of social good doers? Or are those associations so dominated by large funders and “grants as the main tool” thinking that others won’t feel welcome? Will an alternate set of social good associations (or meetups and/or political action groups…) rise up around regional grantmaker groups?
  • Lead together? – Many of the attendees will likely become the next generation of community leaders. Could they become the next leaders of foundations and corporate giving programs? The legal structure of foundations has proven adaptable to forms of social good such as impact investing and grassroots grantmaking. But will the culture of professionalized philanthropy be ready for people who effortlessly deploy the full array of social good tools?
  • Grow together? – Groups of funders in Pittsburgh and many other cities have built capacity-building resources for 501(c)(3) public charities. Will they build similar resources to provide free and discounted management assistance, legal advice, tech support, and more to B-Corps, unincorporated groups, code for good groups, and more? And can funders build those resources in ways that don’t force those groups to follow the rules of 501(c)(3) land? Conversely, how will communities help nonprofits effectively adapt to the broader social economy and collaborate with these free agents on community problem-solving?
  • Know and learn together? – Lucy talked about the absence of a national conversation around the ethics, rules, and regulations of digital public goods – information produced and shared by charities, government agencies, and other social economy groups. The Brookings Institution has made the case that metropolitan areas, rather than nations, are now the main hubs of innovation and community problem-solving. Though digital information flows across borders, could or should communities such as Pittsburgh craft their own, shared codes of conduct around digital public goods?

Lucy and the team at Stanford PACS are tackling some of these policy and practice issues on a national and global level. My own problem-solving orientation leans more local. I’d love to see Pittsburgh – and any other community – tackle them. Maybe one day we’ll even see regional Social Economy Leagues that parallel the power of regional economic development organizations and chambers of commerce. Or, perhaps communities will create Digital Public Good Trusts that parallel the collective donor power and asset preservation of community foundations. (For philanthropy history geeks, who will write the Dead Hand Harnessed for the 21st century?)

What would a picture of your community’s social economy look like, and how would you grow that economy?

The one where the philanthropy data geeks got it wrong

Belushi food fight

Philanthropy data geek ready for battle (speculative artist rendition)

I guess you have to commend philanthropy’s paper of record – the Chronicle of Philanthropy – for trying to make fundraising data exciting with its January 17 article, Group Estimates Philanthropy Rose 13% in 2013, Clashing With ‘Giving USA’.

The article pitted estimates of charitable giving from the relatively new Atlas of Giving against the results of the long-time resource Giving USA. Forbes’ philanthropic and social good contributor, Tom Watson, described the article as a “philanthropic food fight” – a creative headline that quickly spread across philanthropic and nonprofit social media.

The Chronicle’s article drew defensive explanations from the CEO of the Atlas of Giving and the leaders of Giving USA.* If you don’t want to read the details, the arguments boil down to differing methodologies for tracking contributions and competition around monetizing those methodologies. If you do want to be geeky, you can read more about the methods at Atlas of Giving, Giving USA, and for good measure, the Blackbaud Index.

Here’s the larger issue: all of the methods miss the forest for the trees the buffet for the appetizer tray.

Ultimately, these resources primarily focus on giving to incorporated charitable (501(c)(3)) organizations. They reinforce a narrow definition of the term “philanthropy,” imprisoning it within artificial tax and legal boundaries. It’s the same mistake made by the pundits worried about the Stubborn 2% Giving Rate – U.S. giving to charity being fairly level at 2% of GDP and 2% of disposable income.

A classic definition of philanthropy is “voluntary action for the common good.” It is the generosity you and I feel and express, and it spills far beyond tax and legal boundaries (see my previous post on this issue). This recent “food fight” over philanthropic data doesn’t fully include:

  • Giving to charitable organizations that isn’t reported to the IRS – e.g. giving by people who don’t itemize on their taxes; the cash we drop into jars at counters, buckets on street corners, and collection plates of congregations; text message giving; and some crowdfunded gifts.
  • Giving to organizations that aren’t 501(c)(3)s – gifts to advocacy organizations, civic organizations, and other non-charitable nonprofits. This giving may not be charitable by some people’s definitions, but it is definitely a legitimate tool for achieving a public or social result.
  • Supporting the common good through gifts to individuals, unincorporated groups, artists, social enterprises, and even businesses through cash, crowdfunding platforms, and grassroots groups such as the Awesome Foundation and Sunday Soup. As just one example, an annual report on crowdfunding platforms shows about $2.7 billion flowing raised in 2012, with 38% going to “social causes” and 25% going to arts and environment projects. The public version of the report doesn’t show the percentage going to traditional charities.
  • Support for people in need and families through remittances instead of charities (a World Bank report estimates worldwide remittances at $401 billions in 2012).

I’ll grant that Giving USA and others know that they don’t track those forms of philanthropy and that tracking those forms is much harder than tracking gifts to 501(c)(3) charitable organizations. However, I’m increasingly convinced that these data resources – and the media hits they generate:

  1. Can distort public perceptions about philanthropy, further separating the concept from a value and action connected to everyday people and maybe reinforcing philanthropy and its attending tax benefits as a privilege of “the 1%.”

  2. May display a lack of cultural competency, as the data collection methods undercount the giving patterns of the growing percentages of non-Caucasian populations and immigrants in America.

  3. Will become less accurate over time as Millennials, and perhaps other generations, increasingly express their financial commitment to the common good outside of the charitable sector and tax-advantaged giving.

What do you think? Are these data resources useful as-is, or do we need something more expansive?

* Full transparency: I was born, raised, and educated in Indiana. Shortly after we Hoosiers learn to walk and/or drink beer, the Indiana University’s School of Philanthropy pours fundraising knowledge and data into our heads. I count I.U. staff as mentors, colleagues, and occasional fellow beer drinkers in my philanthropic career.

2/20/14 update: Giving USA and Atlas of Giving are facing off in an online radio show on Feb. 21 that will be archived for download.

Those Darned DAFs

Donor-Advised Funds (DAFs) sure seemed prevalent in the press over the holidays.

The National Philanthropic Trust’s recent report on DAFs showed that, compared to 2011, in 2012: contributions to DAFs grew 34.6%, assets grew 18.9%, and grantmaking grew 6.7%. The growth in grantmaking exceeded the growth in grantmaking by private and corporate foundations over the same period, as reported by the Foundation Center. The rapid growth of DAFs likely continued in 2013, with three donor-advised fund managers reporting increases of more than 20% in giving in a December 13 Chronicle of Philanthropy article.

Community foundations and financial advisors, of course, published articles showcasing donor-advised funds as an easy, quick, and cheap means of taking care of year-end giving. Many highlighted the ease of donated appreciated stock and other assets. These articles and posts weren’t unexpected given the general increase of charitable giving advice and news in November and December.

Less expected was the amount of press generated by Professor Ray D. Madoff, of Boston College Law School. She is crusading for higher regulation of DAFs, calling them “warehouses of wealth” that are “taking over the charitable landscape” and starving “true charities” of resources. Her December 6 New York Times op-ed spawned additional coverage in the Boston Globe and Los Angeles Times. Other sources cited and commented on those articles. She rebutted the criticism she received by countering Five Myths About Payout Rules for Donor-Advised Funds.

Madoff had picked up on a thread of criticism of DAFs in the Chronicle of Philanthropy throughout 2012, including op-eds by nonprofit consultant Alan Cantor and comments by the National Center for Responsive Philanthropy’s Aaron Dorfman. Conservative commentator Scott Walter labeled the criticism Unphilanthropic Carping.

I don’t share the skepticism of Madoff, Cantor, Dorfman, and others – at least, not yet. Here are my quick takes on their concerns:

1) DAFs are primarily tools for financial advisors to make money from charitable giving.

Financial advisors, accountants, and attorneys also earn money from advising private and community foundations, other trusts, and even nonprofit endowments. The critics don’t seem worried about these sources of profit. In addition, there’s no data that the advisors are making more money, per philanthropic dollar advised, on donor-advised funds.

2) Fund advisors are likely granting little from their DAFs because there is no regulation forcing them to do (e.g. no equivalent to the 5% rule for private foundations).

There is no data about DAFs stockpiling charitable funds without making grants. The National Philanthropic Trust reported an average payout rate of 16% for DAF managers, far higher than the average for private foundations. In addition,advisors to the funds may have legitimate reasons for paying less in some years and more in others, including: the timing of large gifts to the funds, using funds to engage children and grandchildren in philanthropy, developing and implementing strategic giving plans, and holding payments back to incentivize matching gifts at a nonprofit.

3) Grants from DAFs can be anonymous. At minimum, this anonymity shields donors from nonprofit fundraising appeals and prospect researching. At its worst, the anonymity is suspected of being a cover for funding of controversial issues.

Donors seek anonymity for a variety of personal reasons, including religious beliefs and fear of discrimination or retaliation. Progressive critics appear suspicious of DAFs held by conservative donors, and I suspect the converse is true. I’m not willing to remove the option of anonymity for donors just because I might not like the charities they support. See my previous post Why Your Grant Proposal is Unwanted for other reasons donors to foundation or DAFs choose to be circumspect in their giving.

4) Because the overall rate of giving in the U.S. is fairly static over time, the rapid growth in giving to DAFs means other charities are receiving less money.

This argument – the shift in the use of a limited pie of charitable dollars – seems a reasonable hypothesis, but is darn tough to prove. There are too many other variables in the equation, including: timeshifting of funds (the same dollars that would have gone to non-DAF charities are distributed later); the amount of giving to DAFs that might not have gone to charity at all if not for the DAF; the increased competition from the growing numbers of nonprofits; and other trends impacting giving preferences of different generations.

Your thoughts?

If you’re a fundraiser or grant writer, I’d love to hear from you. How have donors’ use of donor-advised funds tangibly impacted your nonprofit for good or bad?

Addendum 2/14/14: Rick Cohen from the Nonprofit Quarterly – a thoughtful skeptic of organized philanthropy – posted an article today with additional rebuttals to the DAF critics. He ends the article with this sentence: “For charities interested in reaching individual donors, getting comfortable with donors who give through donor-advised funds has to be a top priority in the new world of fundraising.”