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Preview: Comments on: Tactical Philanthropy Podcast: Phil Buchanan

Comments on: Tactical Philanthropy Podcast: Phil Buchanan

Last Build Date: Thu, 10 Sep 2015 16:59:32 +0000


By: Sean Stannard-Stockton

Thu, 24 Jan 2008 02:39:27 +0000

Stephanie, Glad you found this all interesting. It is great to see you and so many other foundation employees reading this blog and beginning to join the conversation. I look forward to hearing more from you over time. I know that we could all gain a lot from you sharing your knowledge with us. Phil, I should clarify a point I've made because I agree with you that overstating the case will undermine it. I think that information sharing is the best way to increase the social return on investment being produced by the Third Sector. However, I agree with you that in isolation, an individual donor may be able to achieve (or at least observe) more impact through a direct grant rather than through supporting a more efficient sector. The stock market returns about 8% a year. That is the return that accrues to investors. If companies took steps to be more efficient and effective, the return on the asset class might increase to 9% (for example). But the stock market is already pretty efficient. I think the Third Sector is facing an opportunity to double (or more) the social return being generated through building a more efficient market place. To me this potential dwarfs what any one funder might be able to achieve through a well placed grant. I'll see if I can get Bob or Art for a future podcast. Great idea. Just to be clear though, I don't think the problem (or the solution) lies in one or two organizations, we require a sea change in the way that our sector views the value of information.

By: Phil Buchanan

Sun, 20 Jan 2008 14:11:37 +0000

A few quick thoughts in response to some of the recent comments. First, foundations should absolutely share what they learn about the successes and failures of different strategies, so that the dollars can follow what works and not what doesn't. (I think we're seeing progress in this area -- not enough, but some.) Second, I think foundations should do more to support information infrastructure for the sector, but I don't think it's possible to prove that this is the surest way for foundations to maximize return on their grantmaking, Sean: I think if we overstate the case, we risk undermining it. Third, my understanding is that Guidestar is doing a lot to encourage nonprofits to provide supplemental information that goes way beyond 990 data. I continue to think that there are both promising new initiatives as well as a lot being contributed by those who've been at this a while. And we should try to engage both in the thinking about what the information infrastructure should look like. Bob Ottenhoff of Guidestar or Art Taylor of BBB Wise Giving would be interesting choices for future podcasts, Sean... Phil

By: Stephanie McAuliffe

Sat, 19 Jan 2008 22:59:07 +0000

I enjoyed the podcast and it is great to see the energy and fresh thinking re what is needed. Have a great weekend.

By: Sean Stannard-Stockton

Fri, 18 Jan 2008 00:18:01 +0000

Young Staffer, in response to your comment #9. I agree with you 100% that certain things are an easier sell to foundations. I'm trying to argue what they should do (in their own self interest), not what I think they can be convinced to do. The problem as I see it with them funding information aggregators like Guidestar is that the most important information is the information that foundations themselves possess. I find something like PubHub or GiveWell way more interesting than Guidestar because these two sites are providing really interesting, qualitative information. Guidestar and other information aggregators will never be very useful until really useful information is being distributed through them. What the for-profit markets tell us is that quantitative information is very critical, but the really important information is the qualitative information and the context it provides for analyzing quantitative data. I don't think there is a logical consistency to foundations funding information distribution projects while not public distributing the information they possess.

By: Sean Stannard-Stockton

Thu, 17 Jan 2008 23:59:37 +0000

Phil, in an efficient market, investing is a zero sum game. Maximum returns are generated globally so the only question is matching an investors risk/return preferences. In inefficient markets, higher returns accrue to more "effective/smarter" investors. In a public benefit market, since all returns accrue to everyone, investors should desire an efficient market within which they could align their social investments with their personal values/goals. The philanthropic capital markets are highly inefficient. Far more inefficient than any for-profit marketplace. Therefore it seems to me that making the philanthropic capital markets more efficient should be the number one priority of large funders who desire to be effective. Clearly, very few people (myself included) believe that precise calculation of social return on any action can be generate. I don't think this calculation is a prerequisite of efficient markets. Also, there are a LOT of projects in the work to distribute better information more efficiently. You name a few, recent comments on this blog from me and others have offered other examples. We are far from starting from scratch. What I would love to hear you say (if you agree of course!) is that you believe that the philanthropic capital markets would be far more efficient (and therefore generate far higher social benefits globally) if we had much better information available publicly about which nonprofits are effective and how to evaluate them. Since foundations possess a lot of this information (given their army of program and evaluation staff focused on this issue), they would make philanthropic capital markets far more efficient by making a serious effort to distribute this information publicly. Do you agree with that (long winded!) statement?

By: Sean Stannard-Stockton

Thu, 17 Jan 2008 19:29:45 +0000

Sorry I've lagged in responding. I'll take your posts one at a time. Young Staffer, You're right, my use of the protest analogy was a poor choice. I withdraw it and offer a direct explanation. In the for-profit markets, investors want to own a company and do not care if other investors participate. All the for-profit investor cares about is the return they achieve on their investment. They care about the company producing profits only to the extent that those earnings accrue to them as investors. Once they sell their share of the business, they do not care how the company performs. Compare this to a nonprofit investor. The returns accrue to the public at large and so a nonprofit investor should not care if their donation gets a return, just that the nonprofit produces a return for the social benefit. Even if they are not funding the nonprofit, they should still want the nonprofit to perform well because the social returns accrue to them even as non-funders (since they accrue to the public). My point is that attracting money to a cause is just as (or more) important as funding it directly. A foundation might be able to give $1 million to an education reform nonprofit. But by establishing themselves as experts on where to give in a focus area and then showing people why they should give to the nonprofits they pick, they can attract far more money to their chosen nonprofit. I'm not arguing that the public will make better decisions than the "experts". I'm saying that efficient markets will produce better outcomes than inefficient markets. In the for-profit world, inefficient markets are great for "expert" investors because they can exploit superior information to generate outperformance of investment returns. But these inefficient markets reduce the total returns in the market by preventing capital from flowing to the best performing investments. What I'm saying is that unlike in the for-profit market, "expert" philanthropist enjoy no advantage from superior information. The returns they generate accrue to the public, and so no "outperformance" is possible. Instead, they should be interested in the total market functioning at a higher level, since that is the only way to increase the social return on investment. I'll be back in a bit to respond to your second comment and Phil's comment.

By: young staffer

Thu, 17 Jan 2008 17:55:49 +0000

I don't disagree, Phil. I would LOVE to see that sector. For me, the logical extension of my other post is that those outside entities - like GuideStar, the Center for What Works, Great Nonprofits, etc. - are going to be easier to sell to foundations than trying to sell Sean's approach of "it's more strategic for you in x program area to make information available to donors." In the case of giving to these types of outside organizations, the foundation is giving to the sector. That's a different level of analysis altogether and one less likely to be controlled by a "how much impact" calculation because it's simply not possible to make a sound one. If you're thinking about the nonprofit sector's health, you've already moved from thinking about health of a species to the health of an ecosystem shaped by many, many factors. You have to believe, as I think Phil's early post noted, that less tangible, less direct impacts are still worth a large investment. We should encourage that kind of broad thinking, but lots of foundations will continue to have a strategic focus on an issue much smaller than the sector's health. I probably implied, more than I intended, that foundations aren't interested in that kind of learning one can do through evaluation and public sharing of information about an issue. Some are. But it's not obviously more strategic to empower individuals with the information to make better education reform decisions if your mission is education reform and you have strong opinions about the strategy that should be used. If you see yourself as having a lot of internal expertise and strong beliefs about where reform should head, then it is much more efficienct to persuade people that you're right on the basis of branding, marketing, and the influence of your dollars. It's harder (and riskier) to try to persuade people to your view on the basis of giving objective information. People might not use that information as you see best; their strategy might not be yours. That's a "status quo" force that all information and transparency initiatives are working against. The hopeful response is that as donors start to demand more than branding and foundations look for data about nonprofit effectivness, that it will become more strategic for foundations to invest in sharing objective information.

By: Phil Buchanan

Thu, 17 Jan 2008 01:10:47 +0000

I wouldn’t frame the need for information solely in terms of individual donors, nor would I try to pretend we can calculate in some precise way the benefit of better information. But I believe the returns on a better information infrastructure would be significant. If every nonprofit and every foundation articulated succinctly its goals, strategies, and performance indicators – and if it was all easily accessible – better decisions would be made. Individual donors and foundations could steer money to those with goals that aligned with theirs, strategies that seemed compelling and implementable, and indicators that demonstrated impact – or the probability of impact. Nonprofits, the media, and public could judge foundations on their goals, strategies, and indicators. Board members at nonprofits and foundations could compare their organizations’ approaches easily to that of other, like organizations – and hold CEOs accountable. It stands to reason that, without ready access to this information, decision-making (at least by those who care about effectiveness) suffers and organizations get funding and recognition based on brand recognition or reputation, rather than evidence of results. But let’s remember, too, that organizations like BBB Wise Giving Alliance and GuideStar and others are aggregating some of this information already and others, such as Urban Institute and the Center for What Works (to name a few of many), are undertaking promising work on effectiveness measures in particular areas. (And many of these efforts have foundation backing.) We’re not staring from scratch, here.

By: young staffer

Thu, 17 Jan 2008 00:07:27 +0000

I think, Sean, you're wrong to frame this debate in terms of having a bigger social impact. It's not a particularly sound strategy for having a bigger social inpact unless foundation boards and staff members start thinking democracy leads to better decisions than they can make as experts. That's because the protest analogy is wrong. Large foundations don't ever equate to the protester in front of City Hall. They give a big campaign donation so they can walk through the door and have their voice heard. If American politics have taught us anything about this, it is that money is always the easier way to have an influence on an organization and a cause than trying to rally 10,000 people. Not necessarily the better or only way, but the easier way. It's only worth the expense, then, if you believe the 10,000 people will get a better result by having the information and the influence than you would have with that money by yourself. As a foundation, if you think you make good choices as a foundation with expertise in an issue area, then why encourage people to disagree with you? Why not just fund the nonprofits that you identify as doing the best reform work to hire a better development staff? Presumably, a better development staff can handle its own marketing just fine and recruit the 10,000 individuals to show up. They can "empower individual parents" to influence education reform. The foundation, then, can just keep buying influence and leave someone else to do the hard work. For a foundation to think its strategic for donors to have information, especially objective information, about nonprofits is to believe you can do better not just by getting pople to give more to the organizations you care about. You have to believe that you can learn something from what the donors do with the information that you don't already know. You have to think transparency and criticism (oh, yes, we're back there again) are effective. That runs counter to how almost every foundation operates (the Case Foundation is obviously experimenting with a different approach) in relying on issue experts to make recommendations rather than democratic votes.

By: Sean Stannard-Stockton

Wed, 16 Jan 2008 22:01:59 +0000

I understand that. My last comment made it sound like you and I disagreed because you were making the other side of the argument that neither of us agree with. I understand you're just explaining the current mindset. So given your role as a consultant to foundations who want to be more effective. How might you phrase the argument that there are very large social returns on investment to be had by foundations that fund information tools that help individual donors give better? Or do you think this is a fallacy? If I'm a multi billion dollar foundation interested in education, can I achieve bigger impact through funding education reform or through empowering individual parents to direct their time and money in ways that effect education reform? See this comment that I left of the Google Finance profile for the Hewlett Foundation for a little context.

By: Phil Buchanan

Wed, 16 Jan 2008 21:46:45 +0000

Sean, I am just explaining what I think is going on -- not endorsing it. I am all for more foundations investing in infrastructure in a big way. I think the returns would be dramatic. Phil

By: Sean Stannard-Stockton

Wed, 16 Jan 2008 21:41:45 +0000

Phil, I can protest in front of City Hall or I can create an infrastructure that is capable of mobilizing 100,000 to protest in front of city hall. I may have trouble tracking the impact of all of that. But I'd rather have the 100,000 people on my side. Also, if there was a $500 million fund put together by various foundations that was available to support strong information tools, I promise you foundations would have a ton of promising organizations beating at their door. This is the kind of project that Prize Philanthropy is designed for!

By: Phil Buchanan

Wed, 16 Jan 2008 17:35:17 +0000

I think you're right, conceptually, Sean. But foundations, like individual donors, are looking to understand the connection between what they funded and what happened on the ground -- impact. It's very difficult to demonstrate conclusively that support of better information led to better decisions which in turn led to greater impact, even though we all get it conceptually. That's a lot to trace back. So that's part of it: donors want something more tangible. (We face this struggle at CEP in our fundraising efforts.) I think the other part is that it's difficult to figure out what the best model is -- which one deserves the big investment and could handle it. I expect that, within the next couple of years, we'll see the foundations that support the philanthropy infrastructure space starting to do less seed funding of various different approaches and more big bets on the ones they deem most promising. And I think that's a good thing, as long as they make good judgments, of course.

By: Sean Stannard-Stockton

Wed, 16 Jan 2008 16:44:34 +0000

Perla & Phil, my comment in the podcast was not suggesting that foundations have done nothing to support publicly available nonprofit information. I asked why foundations do not get together and plunk half a billion dollars into a project? The answer may very well be what Perla suggests; foundations do not face an information problem themselves. If these were the for-profit markets, that argument would make sense. The protection and use of superior information is one of the keys to profitability. However, in philanthropy, social returns accrue to the public at large. Therefore foundations can generate the exact same type of returns on their dollars when they enable other donor/investors to make better decisions. Since individual donors give so much more each year than foundations, it seems to me that foundations can achieve huge returns on their grant dollars by enabling the public to gain access to the same kinds of information that they themselves use. Phil, am I missing something here? Does not effective philanthropy require achieving the highest social returns regardless of whose dollars are invested? Are their any legitimate reasons for foundations to pursue the direct investment of their own grant dollars ahead of empowering individuals to give better if the social returns that accrue to a public information project exceed what foundations can do with their own directly given dollars?

By: Perla Ni

Wed, 16 Jan 2008 08:58:04 +0000

Thanks for the mention of GreatNonprofits, Phil! I wanted to add to Phil's point that there are a few foundations that do support initiatives to create better information about nonprofits. We're supported for instance, by the Kellogg foundation for which we're very grateful for both their money and their willingness to back something bold and new. And Hewlett has both mentioned us in their publications and followed our progress. In general though, you're right, Sean that there aren't a lot of foundations supporting nonprofit performance assessment. That's because, in my opinion, foundations don't feel the pain of insufficient information. They have access to reams of "hard" information - including strategy, theory of change and indicators - that nonprofits submit as a part of their grant application; as well as a lot of "soft" data points - they've had lengthy discussions with the CEO or ED of the nonprofit; they've typically done a site visit and perhaps talked to volunteers and program participants, they've talked to other funders and with other nonprofits in the sector. Because of the in person interactions they have, they also feel the sense of empathy that triggers giving. It is the individual donor who typically doesn't have the access to the data, time to do the research or time to walk around and talk face to face with the nonprofit. So correspondingly, we see in donor surveys that donors have low confidence that their money will be well spent by nonprofits. The majority of American, according the NYU research, thinks that most nonprofits are poorly managed. Greater information - in the form of the "hard" information as well as the "soft" information, such as the constituency reviews which GreatNonprofits focuses on - can boost individual donor confidence and also enable theme to make a strategic decision. I hope that more foundations will realize that initiatives that address the assessment question can have a huge payoff when they attract greater individual giving.