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Outcome-Oriented Philanthropy

Outcome-Oriented PhilanthropyBy Carrie Blanding

Former Hewlett Foundation president Paul Brest defines outcome-oriented philanthropy as “philanthropy where donors seek to achieve clearly defined goals; where they and their grantees pursue evidence-based strategies for achieving those goals; and where both parties monitor progress toward outcomes and assess their success in achieving them in order to make appropriate course corrections.”

Mario Marino, co-founder of Venture Philanthropy Partners, puts it more succinctly: “It’s no longer good enough to make the case that we’re addressing real needs. We need to prove that we’re making a real difference.”

That’s from Marino’s (free!) 2011 ebook, Leap of Reason. In it, Marino advocates nothing less than a sector-wide revolution in which all nonprofits measure and manage their outcomes. He believes that soon funders “will migrate away from organizations with stirring stories alone, toward well-managed organizations that can also demonstrate meaningful, lasting impact.”

I see two main benefits to this trend:

  1. It encourages nonprofits to hold themselves accountable for the work they do. In a time of diminishing resources, it is morally right that we should meet a high standard of impact in order to be funded.
  2. It helps nonprofits develop language that translates better for the new generation of donors. Venture philanthropists and Silicon Valley entrepreneurs are important new players on the philanthropic scene. These are data-driven, results-oriented people, and we need to speak to them in terms they will understand.

Applying this to the arts can be challenging, though. Most of what I’ve read on the subject is geared toward education and social service nonprofits, where one can measure things like high school graduation rates, inmate recidivism, distribution of malaria nets.

But what are our outcomes in the arts and how do we measure them?

I had hoped to find some inspiration for this on the new website, Charting Impact. Launched in 2011, this site provides a free, standardized self-assessment tool for nonprofits to measure and communicate their effectiveness. However, it seems that almost none of the participants so far are in the arts and culture sector, and the few that

I was able to find fell a bit short of what I’d hoped to see.

Still, I think the idea behind Charting Impact is a good one. If anyone reading this finds an example of an arts group using it well (or is inspired to be the first!), I would love to hear about it.

Another point of entry into measuring artistic outcomes is the ongoing discussion about “intrinsic” versus “instrumental” impacts. A few years ago everyone seemed to be measuring the “instrumental impact” of the arts — the way in which the arts stimulate the local economy or improve student test scores, for example. However, in the last decade thought leaders like Adrien Ellis and the RAND Corporation have exposed the pitfalls of instrumental arguments for the arts, shifting the conversation instead toward their “intrinsic impacts” — the way that art makes audiences feel and enriches our lives.

Intrinsic impacts are tough to measure, though. It’s not obvious how to quantify a feeling and report on it to a funder! But the intrepid folks at Theatre Bay Area and WolfBrown have taken on the challenge. TBA’s 2012 publication Counting New Beans got the conversation started. Then WolfBrown carried the work even further, launching a whole website and line of services aimed at helping arts nonprofits learn to measure and evaluate their intrinsic impact. If you want to understand what it means to measure art’s intrinsic impact, those two resources are the place to start.

Regardless of how you choose to approach the issue, the ultimate goal is to find some meaningful way to evaluate your organization’s outcomes, and then use that information to make necessary course corrections and to communicate with donors.

At the organizational level that means asking ourselves: Is my organization having the impact that it ought to have? Are the things we’re doing actually achieving the outcomes we set out to achieve?

Furthermore, it means developing consistent methods for answering these questions, being brutally honest about the answers and, most important, making changes if at any point we fall short of achieving our goals.

Whether this trend serves the arts well when it comes to getting grant money will depend largely on how funders implement it. Hopefully they will follow the lead of Marino

Marino, who writes in Leap of Reason: “We’ve learned that we cannot impose our support for this type of change process, that we have to give our partners the time and space to do it their way, not our way.”

Amen!

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Don’t miss parts one (improved assessment tools) and two (building vs. buying) in Carrie’s series on trends in philanthropy!

About Carrie Blanding

Carrie Blanding is currently on a research sabbatical in which she gets to blissfully romp through the most interesting nonprofit literature every day. She is particularly fascinated by organizational sustainability, personal resilience, effective philanthropy, and management theory.

Previously, she has been executive director of the the San Francisco Contemporary Music Players, and co-founder/principal of Next Big Thing Children’s Theatre. She earned her bachelor’s degree, summa cum laude, in comparative literature from the University of California, Berkeley, and received the department award for academic achievement.

An avid singer, Carrie has at times been a member of the San Francisco Symphony Chorus, a jazz vocalist, and a singer-songwriter pouring her heart out at your neighborhood bar.

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Learning the Difference between Building and Buying

Learning the Difference Between Building and BuyingThis is part two in a three-part series by Carrie Blanding on emerging trends in philanthropy.

If you haven’t yet read George Overholser’s seminal piece “Building Is Not Buying,” you should stop everything and do it now. The essay is only ten pages long, but it packs a punch!

In the piece, Overholser encourages nonprofits and their funders to distinguish between growth capital and revenue-like funding, and to track this income separately in their budgets.

Once you get the basic definitions down, tracking capital growth and revenue-like funding differently is a very simple idea, but the implications for philanthropy are huge.

Growth capital (“building” money) generally involves one-time grants in which the donor invests to help you get started but doesn’t intend to keep giving at the same level in future years. Think of this like start-up capital invested in a for-profit business.

Revenue-like funding (“buying” money) is income that could reliably be sustained or replaced as part of the organization’s regular operating budget. It buys a service or project, in the same way that customer purchases sustain a for-profit business.

This simple-yet-powerful distinction puts a whole new lens on donations and internal accounting. It teaches funders to be more realistic about their goals, time frame, and gift amounts. It teaches funded organizations to budget more effectively and to better plan new growth initiatives.

For example, an organization I used to work for once received a one-time, nonrenewable grant to overhaul its marketing department. It was meant to be an investment that would pay for itself when the grant period was over because our improved systems would bring in new income. But the grant amount was small and the time-frame short, relative to the task at hand.

Basically, it was a typical “building” style grant, but with “buying” level resources. Looking back, it’s not surprising that the results fell short of what we had envisioned. I dream of going back in time and giving everyone involved a copy of Overholser’s article (although I don’t think it had been written yet).

The article would have helped the funder to design the grant more realistically, and maybe we would have had more success in achieving our goals.

Fortunately, this knowledge is now available and it’s starting to spread. The Nonprofit Finance Fund has developed a whole set of services around Overholser’s notion of building versus buying, including a series of publications that specifically apply to the arts.

Thanks to the Doris Duke Foundation, arts organizations are leading the way when it comes to implementing these new ideas. Ten arts organizations were among the earliest beneficiaries of cutting-edge “change capital” grants aimed at building their organizations (and our knowledge) in a meaningful way. The lessons learned from these first grants were published just a few months ago.

Whether or not your funders are thinking in these terms yet, just learning the basic concepts in Overholser’s article will give you a powerful new perspective on fundraising, income, and budgeting.

Up next: An optimistic look at the challenges and benefits of outcome-oriented philanthropy. And don’t miss part one about improved assessment tools for donors.

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About Carrie Blanding

Carrie Blanding is currently on a research sabbatical in which she gets to blissfully romp through the most interesting nonprofit literature every day. She is particularly fascinated by organizational sustainability, personal resilience, effective philanthropy, and management theory.

Previously, she has been executive director of the the San Francisco Contemporary Music Players, and co-founder/principal of Next Big Thing Children’s Theatre. She earned her bachelor’s degree, summa cum laude, in comparative literature from the University of California, Berkeley, and received the department award for academic achievement.

An avid singer, Carrie has at times been a member of the San Francisco Symphony Chorus, a jazz vocalist, and a singer-songwriter pouring her heart out at your neighborhood bar.

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My Favorite New Trends in Philanthropy Part I

philanthropyBy Carrie Blanding

We’ve all been there: you’re at a conference, or a fund development meeting, or coffee with a colleague, and the conversation turns to What Is Wrong With The Current Funding System. We commiserate about the perils of chasing program funding. We lament the scarcity of general operating support. We share stories of insane reporting requirements. . . .

But lately when these conversations come up I find myself irresistibly bringing up the bright side. Why? Because for the past six months I’ve been reading a lot about philanthropy, and the beautiful truth is that I’m seeing some good ideas out there. Some of them are still just a twinkle in the eye of an academic, but others are starting to take hold and influence the way funding gets distributed.

So let’s take a little break from thinking about what’s not working, and focus on a few encouraging trends in the philanthropic sector. In this three-part series, I’ll write about a few of my favorites: improved assessment tools for donors, smarter thinking about capital, and outcome-oriented philanthropy.

Part 1: Improved Assessment Tools for Donors

Remember when organizational effectiveness was determined by how much a nonprofit spent on overhead? Well ring the bells, because that clumsy old metric is on its way out! The current trend is to look beyond simplistic ratios and empower donors with more well-rounded assessment tools.

The movement away from overhead ratios has been making headlines lately. By now we’ve all seen Dan Pallotta’s TED talk on the subject. Much more exciting, in my opinion, is this open letter denouncing the “overhead myth,” signed by the CEOs of Guidestar, Charity Navigator, and BBB Wisegiving Alliance.

In their words, the letter “marks the beginning of a campaign to correct the common misconception that [overhead] … is, on its own, an appropriate metric to evaluate when assessing a charity’s worthiness and efficiency.”

While the campaign is new, the idea is not. Various foundations, consultants, and information providers have been thinking hard about this issue for some time. That’s good news because it means that several new and improved online assessment tools have already been (or are being) developed.

Perhaps the most accessible of these is Philanthropedia. This site allows anyone to view free ratings of nonprofits based on peer assessments. Developed at the Stanford Graduate School of Business, launched in 2009 with funding from the Hewlett Foundation, and acquired by Guidestar in 2011, this young site is a testament to how the goal of improving donors’ access to information is supported across the philanthropic sector.

The arts are well represented on Philanthropedia, with twenty-one rankings of Bay Area arts nonprofits, and seventeen national rankings. The site only ranks its “top nonprofits,” refraining from singling out any groups as not worthy of support. It does, however, allow users to view the peer comments (both positive and negative) that it receives for non-ranked nonprofits.

Another new offering from Guidestar, with the Nonprofit Finance Fund, is Financial SCAN. Launched in 2012, this tool attempts to evaluate an organization’s financial health over the long term, in a more comprehensive way than ever before. Priced at $2,500 a year, Financial SCAN appears to be primarily intended for large foundations and financial advisers.

Charity Navigator, a ratings site available to the general public, is a bit behind the times but poised to catch up. Currently this site only rates nonprofits on financial health, accountability, and transparency, but they are working towards adding “results reporting” (basically impact measurement) to their evaluation criteria by 2016.

If you’re interested in getting a bigger-picture view of how this trend can improve the nonprofit world, check out this 2008 white paper from the Hewlett Foundation. In the report, the foundation describes its vision for a bustling nonprofit marketplace in which individual donors, empowered with better information, efficiently direct their resources to the best nonprofits. We’re not there yet, but we seem to be moving in the right direction.

Stay tuned for my next installment: an ode to growth capital!

C.Blanding_PhotoAbout Carrie Blanding

Carrie Blanding is currently on a research sabbatical in which she gets to blissfully romp through the most interesting nonprofit literature every day. She is particularly fascinated by organizational sustainability, personal resilience, effective philanthropy, and management theory.

Previously, she has been executive director of the the San Francisco Contemporary Music Players, and co-founder/principal of Next Big Thing Children’s Theatre. She earned her bachelor’s degree, summa cum laude, in comparative literature from the University of California, Berkeley, and received the department award for academic achievement.

An avid singer, Carrie has at times been a member of the San Francisco Symphony Chorus, a jazz vocalist, and a singer-songwriter pouring her heart out at your neighborhood bar.

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501 See (3) You Later?

501 See (3) You Later501 See (3) You Later?
Hub Berkeley
Thursday, April 18
6:30 p.m.

2150 Allston Way, Suite 400
Berkeley, CA 94704
(510) 649-7700

Is the 501(c)(3) model the only way to run an arts organization? Arts and culture organizations face greater challenges as traditional arts funding decreases and philanthropic needs shift rapidly. Join us to learn about new financial models including benefit corporations (B corps), low-profit limited liability corporations (L3Cs) , and the emerging economy of social enterprises and impact investing.

Experts from the field will teach you essential information on each of these new financial models while you mingle with arts, culture, and business workers from across the Bay Area region. We will conclude the evening with a fun arts prototyping activity giving you the opportunity to make a creative enterprise using one of the new financial models.

Get your ticket now on Eventbrite.

Moderator:

Mariko Chang (Former EAP Fellow & Masters Candidate at JFK University)

Panelists include:

Andy Fyfe (Community Developmment at B Lab)
Josh Furnas (Owner at Selfless)
Daniel Roberts (Attorney at K2 Law Group)