When Nonprofit Finance Fund’s fourth annual State of the Sector Survey of nonprofit financial health came out a few weeks ago, I tried to convince a journalist about the urgency of covering the results. My pitch didn’t work.

“So you’re saying that nonprofits are facing a financial crisis. Well, that’s not news. They’re always complaining about not having enough money. What’s new?”

To be fair to the skeptical journalist, the results do seem to show that nonprofits in the US have returned to a pre-crisis level of crisis. Half report they felt financially stable in 2011. And while disappointing, perhaps it is not news that three-quarters of government-funding recipients report that their funding does not fully cover their costs. Or that payments are coming later and later while the bills keep piling up. We’ve come to expect nonprofits to find ways to keep their doors open despite seemingly-permanent financial stress.

So why our concern? After all, our society has become accustomed to expecting nonprofit organizations to survive rather than thrive. But put some of these survey findings alongside an understanding of likely economic and political trends in the next few years and it becomes clear that something quite different, and alarming, is happening.

We are seeing a structural shift in the burden being placed on nonprofit organizations. For the fourth year in a row, our survey reported rising demand for most organizations, with nine out of 10 “lifeline” services organizations reporting increased demand and as many anticipating even further increases in 2012.

Unfortunately most organizations are ill-prepared to handle this increased burden. Funding is not keeping up with increased demand. Federal stimulus money flowing through states in 2011 helped mask social service spending cuts that are going to bite in 2012 and likely get worse in ensuing years. Fewer than half the organizations surveyed report having more than three months of cash on hand to cover costs.

As funding gets cut and delayed, nonprofits are finding all sorts of ways to cope with continued economic pressure. They are making tough choices—to cut services, dip into cash reserves, delay payments to vendors. And they are acting in inspiring ways— drawing more on volunteers, working longer hours for the same pay, etc.

But these stopgap measures are as unsustainable as they are inspiring. They are not an adequate response to the bigger forces at play: decreasing government support and the unwillingness of many private foundations to evolve funding practices. If we want to ensure that critical services are delivered while we work toward securing a just and vibrant future for more people, we must rethink the way we fund solutions to our most pressing social problems.

Private funders are not going to be able to fill the entire gap left behind by retreating government commitments. But they could play a core role in strengthening many crucial organizations by offering the right type of flexible funding in a timely way. Following three simple principles could transform the contribution private funders make:

1. Put the “profit” in nonprofit: Assuming that nonprofits should make do with breakeven operations earned on the backs of overworked staff is a miserly strategy in the best of times and a dangerous one in a period of long-term cut-backs. Funders need to encourage nonprofits to run structural surpluses to create cash reserves against future risks, rather than treating the presence of profit as evidence of mission drift. Nonprofits can only create surpluses if they get to run budgets that more than cover their costs. Funders should reward nonprofits that execute projects efficiently by letting them keep their profits to create operating reserves.
2. Overcome the overhead ratio: Funders need to know how effectively an organization converts funding into outputs (and ultimately outcomes). But focusing on overhead ratios as the only proxy for efficiency has validated behavior that is making the sector more frail than it needs to be. Spending on people, infrastructure, systems, and information is not necessarily wasteful “overhead” but investment without which any organization will ultimately fail.
3. Know yourself: Are you a “build” funder looking to help grantees build healthy organizations or a “buy” funder looking just to procure project outputs at the cheapest price? If you are a build funder then provide the type of flexible capital an organization needs to build a sustainable business model. At NFF we call this “philanthropic equity” or “change capital”—it’s not general operating support (that pays off structural deficits) but money an organization can invest in people, systems, or innovation that will ultimately allow it to cover its costs sustainably.

Yet funders are only part of the equation. Our Survey revealed that only one in five nonprofits feels comfortable discussing with their funders their basic financial conditions, such as operating reserves or facility finance plans. Contrast that with the 54% percent who feel comfortable talking about expanding programs.

This discomfort discussing basic financial health likely arises from two problems:

1. too few nonprofits managers and foundation program officers have the skills and tools to understand and communicate an organization’s financial condition; and
2. even when financial needs are clear, the power dynamics in the funder/grantee relationship prevent honest discussions about crucial financial needs.

In April, NFF partnered with GuideStar to tackle the first problem with the launch of Financial SCAN. This online platform allows anyone to quickly generate a report on the financial health of more than 240,000 US nonprofits, including charts of financial trends with descriptions of financial metrics that matter and a guide to interpreting them (all in layman’s English!). Financial SCAN gives funders and nonprofits a common language to discuss finances beyond project budgets.

User-friendly tools are a start. But funders have a particular obligation to lead discussions with grantees about their financial health, as power dynamics make it difficult for grantees to initiate these open discussions themselves. These conversations may force all of us out of our comfort zones, but falling back on business-as-usual assumptions and practices is only going to lead to the even more uncomfortable realities of what will happen as we stretch the social sector beyond the breaking point.

(Still skeptical like my journalist friend? Well, check it out for yourself. This year we built a user-friendly web interface to share our Survey results. You can easily filter the 4,607 responses by sub-sector, geography, or annual expense size by visiting NFF’s Survey Analyzer.)

Antony Bugg-Levine is CEO of Nonprofit Finance Fund. You can find him on Twitter @ABLImpact.

At the Council on Foundations (COF) conference in Los Angeles last week, I received a number of comments about my blog post on the career trajectory of those who become CEOs at the 100 largest foundations. Many were struck by the tendency of foundation boards to go outside the foundation world to find leaders.

Several people asked me about the gender breakdown of the leaders of the largest 100. The question seemed to come from a perception that there’s still a glass ceiling at the big foundations, and a worry that the net was being cast in such a way that strong women candidates were being missed.

So we decided to take a look. (Note: I was also asked about racial diversity, but that’s a tougher one for us to investigate just based on public data because it’s not always self-evident on websites and in bios.)

At first glance, the data looks a little sobering, but not awful. My CEP colleague An-Li Herring and I count 33 women among the CEOs of 94 of the largest 100 foundations for which we could identify the CEO – or 35 percent.

But, when we look closer, the picture gets starker. The bigger the foundations, the less likely we are to find women running them.

• Among the 48 of the top 50 foundations by asset size where we could identify the CEO, we see just 12 women CEOs – or 25 percent.
• Among the 24 of the top 25 where we could identify the CEO, only four of the CEOs are women – or 16 percent.

Why the decline in the proportion of women leaders as the foundations get larger?

I don’t have the answer, of course. It’s puzzling, especially given that the overwhelming majority of foundation staff are women, according to COF.

COF’s data also shows, as our look at the largest 100 did, that the proportion of women CEOs declines as the foundations get larger. (The same trend of fewer women CEOs at larger organizations exists at operating nonprofits, according to a Guidestar survey. That survey found that just 16 percent of nonprofit organizations with operating budgets of $50 million or more have female CEOs.)

How can boards of the largest foundations change this dynamic? Two ideas:

First, do a better job of cultivating leaders and internal successors within foundations. There are many benefits of doing so. As I wrote in my last post:

I’d … argue that foundation board members that have reason – and data – to believe their foundation is operating effectively should make the cultivation of potential internal successors a high priority. If your foundation has clear goals, coherent strategies, is implementing those strategies well (and operating smoothly), and possesses data that suggests its strategies are working, then boards should look carefully internally.

Second, look more at candidates currently running other, smaller foundations. Today very few CEOs come from other foundations – we identified just seven at the largest 100 who came from a role at another foundation. Yet this data (as well as COF’s data) suggests that there are a lot of women leaders at foundations once you get past the top 50.

If boards take these steps, I would hope this picture would look quite different a decade from now.

Phil Buchanan is President of CEP.

It’s hard to leave the Emerging Practitioners in Philanthropy (EPIP) National Conference not feeling energized. Both because of demographics and because of demeanor, attendees always bring an enthusiasm and excitement to EPIP that is often missing at other philanthropy events. Young people new to the field are thrust, often for the first time, into a setting with no immediate support from a manager and asked to represent their organizations, either through a presentation or just in conversation. It is an opportunity to explore our own professional personalities, reflect on the prospects and challenges we face at this stage in our career, and, hopefully, spark new ideas to take back to our respective jobs. As a member of the steering committee for the Boston Chapter of EPIP, I was pleased to see all of that on offer again this year.

One of the special pleasures of an EPIP conference is the opportunity for emerging practitioners to interact with some of the more seasoned leaders in our sector. Those in attendance as speakers this year shared an obvious appreciation for the energy in the room. Over the course of our three days in Los Angeles, we heard repeatedly about both their amazement and pleasure at how Generation Y has pushed them to reimagine the rules and roles of philanthropy. While not abandoning the collective wisdom of their own experience, the foundation leaders we heard from expressed an eagerness to include fresh perspectives and consider new approaches in order to increase the impact of the field.

“Leadership does not come from an org chart,” said Dr. Robert Ross, President & CEO of The California Endowment.

As an organization focused on that intergenerational exchange of ideas, EPIP is in a unique position to help push the philanthropic sector forward. The organization is committed to recruiting and retaining top-tier talent, as well as aiding the growth of those already in the field through a series of professional development programs. That monitoring and supporting of talent throughout the social sector speaks to both young and old practitioners about promoting internal proficiency. In espousing effectiveness as one of their key tenets, EPIP hopes to raise the level of expertise of all practitioners.

As Phil Buchanan explored in a recent blog post, there is no standard route to navigate a long-term career to the top of philanthropy; those who spend decades in the sector are the exception, not the rule. But striving to become a traditional foundation CEO is beside the point. Junior staff would do well to heed the advice of Dr. John Jackson, President and CEO of The Schott Foundation for Public Education: “People aren’t called to positions; they are called to passions.”

Emerging practitioners who commit themselves to cultivating their passion through a professional approach to their work in philanthropy will be on their way to demonstrating leadership. That in turn will help redefine what those foundation leadership roles look like in the future. Knowing that EPIP is out there supporting this work is a blessing for all of us who care about effectiveness in philanthropy. It’s an honor to be a part of such a network.

Stephen Sullivan is Senior Coordinator of Communications and Programming at the Center for Effective Philanthropy.

Although our research shows that foundation CEOs and program officers overwhelmingly believe that strategy is important for achieving impact, and most possess something they call a “strategy,” we have also learned that many are not using strategy as we define it. In our research, we classify foundation leaders as “more strategic” and “less strategic” based upon the extent to which they embody two defining elements: 1) an external orientation to their decision-making and 2) a hypothesized causal connection between the use of foundation resources and goal achievement.

When we conducted our Essentials of Foundation Strategy study, we sought to identify characteristics that differentiate the more strategic leaders from those who are less strategic. We gathered data from 102 CEOs and 89 program staff at private foundations with $100 million or more in assets. One of the differences we uncovered between more strategic and less strategic leaders was their practice in publicly communicating their strategy.

Of more strategic leaders, 81 percent report publishing their strategies on the foundation’s website, compared to 53 percent of less strategic leaders. Furthermore, almost 40 percent of the less strategic leaders reported not publicly communicating their “strategies” at all.

For those who are less strategic, this may not bode well for the perceptions of their grantees. In our analyses of tens of thousands of nonprofit grantees of foundations, we find that clear communication of foundation goals and strategies is a key element of funders being able to form strong relationships with their grantees.

* * * * * * * *

What separates more strategic foundation leaders from less strategic ones? To read CEP research that explores the state of strategy at private foundations and identifies behaviors and practices common to more strategic leaders, see the report Essentials of Foundation Strategy.

Ellie Buteau is Vice President – Research at the Center for Effective Philanthropy.

The annual Council on Foundations (COF) conference, which will kick off this weekend in Los Angeles, features an interesting new track for “aspiring” foundation CEOs. The sessions are designed, according to the COF website, for “those with more than five years of senior management experience who expect to be foundation CEOs in the next three to five years.”

I think it’s terrific that COF is seeking to cultivate future leaders in philanthropy – and taking on the issue so directly. I can think of few things more potentially significant for organized philanthropy than ensuring that the crop of future foundation CEOs is as strong as possible. Independent Sector has brought the issue of “next generation” leadership into the spotlight in recent years with its NGen Fellowship and related programming, while other organizations, such as GEO, have also focused on the issue. This spotlight on future leadership talent is welcome to anyone who cares about effectiveness.

But I wondered: Will anyone sign up, knowing that doing so signals to their colleagues their ambition to run the place? And, another question: Is cultivating the dreams of foundation staff to move to the corner office realistic or cruel – given that foundation boards often look outside their walls, and outside philanthropy, to fill the top job?

On my first question, we’ll see whether conference attendees show up for the “aspiring CEO” sessions (note: I learned yesterday that, in fact, a number have signed up) and whether, if they do, they sneak in through the side door to avoid being spotted by their colleagues. On the second question, I thought it was worth exploring the career trajectories of the current crop of CEOs of the 100 largest foundations – the very juiciest of the plum philanthropy jobs.

So I asked a CEP research analyst, An-Li Herring, to check it out. She reviewed the websites of the 100 largest foundations in the US, as listed by Foundation Center, and reviewed the biographies of CEOs for every foundation that provides one. She categorized CEOs on the basis of their immediate past position and here’s what she found:

• The majority – 60 of the 100 CEOs – came from outside foundations.
• Twenty-one were promoted internally – that is, their previous position was as an executive at the same foundation where they now work as CEO.
• Seven came from another foundation – although, of those, four were CEOs of the foundations they came from (and three of those four had come to their first foundation CEO gig from outside philanthropy).
• Four had past experience that could only be categorized as “other” from the available data.
• Eight were unable to be categorized at all due to insufficient biographic information or lack of clarity regarding who serves as CEO.

So where did the 60 CEOs from outside the foundation world come from?

• Twenty-seven had experience in the nonprofit sector broadly defined:

1. Those who ran operating nonprofits (not including institutions of higher education) number 14.
2. Those whose experience was in higher education, typically as a college president or dean, number 13.

• Seventeen came directly from a role in business.
• The remaining 16 CEOs who came from outside the world of organized philanthropy had positions in government, law, or other domains.

What does this all mean? I think it’s possible to draw a few conclusions from the data.

First, internal promotion to the CEO job at foundations is not that common … but it does happen. More programming like the COF sessions is a positive step, in that it can help those who might be thinking they aspire to the top job figure out how to develop in ways that will make them stronger candidates. But the data suggests that attendees at the COF sessions should keep their ambitions grounded in the reality that making it to the corner office is a long shot.

Second, foundation boards don’t much value experience at other foundations. Again, perhaps a focus on leadership development within philanthropy will change that, but moving from being a Vice President at Foundation A to CEO of Foundation B happens only very rarely (at least at the largest 100).

Third, experience as a grantee, if you exclude colleges and universities (which I’d argue are a different animal) isn’t much valued by most foundation boards when they’re searching for a CEO. It’s striking that there are more foundation CEOs who came to the position from a job in the corporate world than a job running a nonprofit (again, excluding colleges and universities).

The decision of who to hire is arguably the most important one a foundation board makes. For any given foundation, the right person might bring any of a wide range of relevant backgrounds to the role. Moreover, it probably serves foundations and the nonprofit sector to have CEOs of the largest foundations represent a diversity of experience. Just as some have raised alarms about too many foundation CEOs who are college presidents, or business types, I doubt anyone would want all the CEOs of the big foundations to be internal promotions – or even to come from the nonprofit sector.

All that said, I’d still argue that boards might want to prize operating nonprofit experience more highly than they apparently do. Leaders who have experienced the pressure to meet payroll with no endowment to fall back on, and have felt what it’s like to be on the other side of the table from foundations, bring something important. They come to the role with a hard-earned understanding of the challenges of doing the on-the-ground work foundations fund – and of what nonprofits really need from their funders.

I’d also argue that foundation board members that have reason – and data – to believe their foundation is operating effectively should make the cultivation of potential internal successors a high priority. If your foundation has clear goals, coherent strategies, is implementing those strategies well (and operating smoothly), and possesses data that suggests its strategies are working, then boards should look carefully internally.

Current CEOs can help, by making it their focus, too. After all, if they believe in the effectiveness of what they’re doing, and that belief is informed by hard data, then cultivating a successor to carry on the work is the right thing to do from an impact perspective.

A first step might be encouraging their eligible staff to attend the COF track for “aspiring CEOs” – or even paying for disguises so they can go incognito.

Phil Buchanan is President of CEP. Thanks to An-Li Herring for the research highlighted in this post.

About four and a half years ago, I got off a plane and checked voicemail on my cell phone to find a message from Fay Twersky, then Director of Impact Planning and Improvement at the Bill & Melinda Gates Foundation (now Senior Fellow at the William and Flora Hewlett Foundation). Fay had been talking with me about the potential for CEP to help bring the voices of intended beneficiaries – those whose lives a foundation and its grantees seek to touch – more to the fore. The gist of her message was, “let’s try it” – and her idea was to focus on education and student voice.

The concept, as it evolved, was to create a mechanism for schools, districts, charter management organizations, and funders to hear from high school students in a way that was rigorous, comparative, and authentic. We would use student surveys to heighten decision-makers’ understanding of what students thought was working – and what needed improvement.

CEP’s Board of Directors asked the tough questions – the right questions – about whether this made sense for CEP, but ultimately decided, unanimously, to take this project on as a “proof of concept” that beneficiary voice could really matter.

The argument for doing it was pretty simple, based on answers in the affirmative to these questions:

• If we believe that the voice of grantees, declined applicants, and other stakeholders – all the populations we at CEP had been surveying for funders over the years – matter, how about the people who should matter most of all?
• How about the people whose lives funders aim to improve?
• Do we think funders and grantees can learn from this perspective in ways that will lead to better, more effective strategies?
• Aren’t we then obliged to try this?

So we went out looking for someone to lead this effort and, after an exhaustive search, found Valerie Threlfall, who signed on for a role that was about as ambiguous as it gets. She would explore the landscape and see what was out there. If – and only if – we saw an opportunity to contribute, we would then pilot something in a small way. And then if – and only if – that worked, we would expand it.

Four years later, YouthTruth, a CEP initiative that also has its own very clear and separate identity, exists as the largest and most successful undertaking I am aware of to bring beneficiary voice front and center to both funders and grantees. Nearly 100,000 students from 215 schools in 28 districts and networks have been surveyed and, this year, YouthTruth has expanded from school-level feedback about topics such as academic rigor and school culture to teacher-level feedback as well. Through a partnership with The New Teacher Project, we are surveying an additional 60,000 students to gather their perspectives on hundreds of teachers.

The Bill & Melinda Gates Foundation provided significant early funding. New grant funders are now signing on to support YouthTruth (more on this in a future post) and we are beginning to see districts paying for the survey as well as regional funders supporting districts’ participation.

What is most meaningful is that schools are making changes on the basis of what they are learning.

Valerie has made YouthTruth a reality, working with an excellent team of CEP staff (which currently includes Caredwen Foley, Whitney Ivie, Mike Nguyen, and Jen Vorse Wilka, and whose past members included Joe Lee and Rachel Niederman) and with the support of funders, advisors (an active advisory board played a crucial role, especially in the first year), and CEP board members. Many other CEP colleagues have also contributed in major ways, especially Kevin Bolduc, Ellie Buteau, Alyse d’Amico, and Paul Heggarty.

But YouthTruth is what it is because of Valerie. Now, after much careful consideration, she has elected to transition into a different, half-time role at CEP and YouthTruth following her maternity leave in mid-May.

As a result, we are actively searching for a new leader for YouthTruth as we enter a crucial next phase. Earlier this year, we embarked on a comprehensive sustainability planning effort for YouthTruth – outlining how we would reduce the per-school costs of the project and decrease its reliance on general philanthropic support. It is, therefore, a key moment in the project’s development and an exciting time for us to transition the leadership to someone who can build on Valerie’s amazing work and take the project to the next level. It’s a terrific opportunity.

If YouthTruth succeeds in the way I believe it can, it will have a transformative effect. It will bring students’ voices to school leaders and funders across the country in a credible way that will lead to better decisions, just as has happened at the schools where YouthTruth has already been implemented.

I believe, and research increasingly shows, that there is a link between student perceptions and student outcomes. Really, how could there not be? Yet it’s amazing how often the talk of education reform occurs in rooms of adults, without any real data about students’ experiences from their perspective.

YouthTruth can change that.

If it does, it will be because of the people who are working on it in the future. But it will also be because of Fay Twersky’s initial vision (and ongoing support – she continues as an advisor to the project still) and Valerie Threlfall’s leadership in making it a reality, without which YouthTruth would not exist today.

What Val has accomplished is a testament to her leadership ability, her management skill, her powers of persuasion, her passion and commitment, and her incredibly hard work. I am grateful for all she has done.

Phil Buchanan is President of CEP.

Prior to joining CEP, I spent several years working with Global 1000 companies to implement employee engagement surveys, and I’ve always been fascinated by the fact that almost every crucial organizational outcome (profit, customer satisfaction, etc.) is tied to the engagement and commitment of individual workers.

Research done across the past several years has shown us that the extent to which staff believe in and derive value from their work, feel connected to their organization’s goals, and are empowered to do their best work every day affects the outcomes an organization seeks to achieve.

Harvard Business Review recently published a series of articles in its January – February 2012 issue about the importance of employee engagement and satisfaction. The research presented in these articles, as well as from a variety of other sources (e.g., Gallup, Mercer), overwhelmingly demonstrate that employees who “thrive”:

• Deliver higher quality work at a more productive rate,
• Stay with their organizations longer, and
• Attract others who are just as committed to the job.

This concept goes by many names – satisfaction, engagement, empowerment – but the outcomes of increased productivity and high-quality work remain the same regardless.

What about foundations?

For funders, I would argue that employee satisfaction and engagement are critical to the organization’s ability to accomplish its mission and create social impact. Staff are a funder’s primary link to grantees, which in turn are the organizations working on the ground to catalyze change. We know from CEP’s research in Luck of the Draw that individual foundation staff members often play a larger role in grantees’ experience than do the foundations for which they work. In many cases, there’s actually more variation in grantee perceptions of individual staff members at a single foundation than among different funders.

So, at a time when growing turnover at foundations may be causing instability for some grantees, it’s more important than ever to address issues of staff disengagement. The HBR articles suggest a few overarching tactics to better engage staff:

1. Communicate and clarify how employees’ daily work connects to the Foundation’s overall mission and impact.
2. Provide opportunities for employees to develop and continue their professional growth, which includes the support of their direct manager or supervisor.
3. Offer constructive and timely (i.e., not just once per year) feedback on employees’ performance.

But how do we know if staff are engaged, or if investments to create a thriving work environment are worth it? I have been surprised by how many major foundations, with larger staffs, don’t regularly take the pulse of their employees in a way that provides meaningful insights.

CEP has developed a staff survey process that is confidential and anonymous so staff can be completely candid. It is also grounded in the context of comparative data, so funders can understand how their results compare to those of peer institutions.

As with all of our other assessment tools, CEP’s Staff Perception Report uses a customizable survey specific to philanthropic funders to provide feedback within a comparative context, which allows funders to better understand their distinctive strengths and opportunities for improvement. While CEP has worked with over 200 philanthropic funders to survey their grantees, only three dozen of those funders have asked us to survey their staff. CEP’s research team is working on a report on what we’ve learned across those funders, which will be released later this year. As we develop a larger data set, we will also look at the connections between grantee perception results and staff perception results, and I am betting we’ll see one.

Leaders of foundations need to know what the staff really thinks, across all the various dimensions of both job satisfaction and perceptions of foundation effectiveness. It’s easy for leaders to believe they know this already – that people are completely candid with them about how it’s going – but our experience suggests that this is often not the case.

I hope more funders will join those who have already participated in CEP’s Staff Perception Report process.

Austin Long is a Manager at the Center for Effective Philanthropy.

As my colleague Kevin Bolduc and I discussed in a previous post, CEP sought to understand the degree to which funders and their grantees are communicating about racial diversity. Between spring 2010 and fall 2011, we collected data about this topic from more than 10,000 grantees of 70 US funders. Here is what we’ve found.

Is communication happening about racial diversity as it relates to foundations’ programmatic work?

Thirty-eight percent of grantees report that their foundation funder communicated with them about racial diversity in relation to the foundation’s programmatic work. Just over a quarter said communication about this topic did not take place, but that it also wasn’t relevant. Fifteen percent of grantees said the foundation didn’t have this communication with them but should have. (See Figure 1)

Is communication happening about racial diversity as it relates to the work associated with the grant received?

Thirty-eight percent of grantees report that their funder communicated with them about racial diversity as it relates to the work associated with the grant they received. Few grantees – 11 percent – think that their funder should’ve communicated with them about this topic but hadn’t. Almost a third – thirty-one percent – said such communication didn’t happen, and wasn’t relevant. (See Figure 1)

Figure 1:

Seventy-five percent of the grantees reporting that they and their funder communicated about racial diversity as it relates to the funder’s programmatic work also report that communication on this topic took place regarding the work associated with the grant received.

To what extent did this communication have a positive or negative impact?

Grantees reporting that their funder communicated with them about racial diversity in relation to the work funded were asked to what extent that communication had a positive or negative impact on the work. Hardly any grantees report that these communications had negative consequences, but there is certainly room for these communications to have more beneficial results. Forty percent indicate that the communications had neither a positive nor negative effect. Less than a quarter of grantees – 23 percent – gave the highest possible impact rating for these communications. (See Figure 2)

It is important to note that we do see some foundations faring better than others on this question. There are a few foundations for which the majority of their grantees give them the highest rating possible on this item.

Figure 2:

Do grantees believe that racial diversity was a relevant component of the work they were funded to do?

Sixty percent of grantees say that the work funded by their foundation grant was meant to address a topic for which they believe racial diversity was relevant. These grantees are more likely to report having communications with their funders about racial diversity as it relates to the funded work – yet only 55 percent of these grantees report that such communication happened. (See Figure 3)

Figure 3:

What Does It Mean?

From the data, it does not seem that grantees desire more communication with their funders about racial diversity. Few grantees that didn’t have such communication with their funder wish they had. This is true even among those grantees that explicitly told us in their survey responses that they believe racial diversity is a relevant component of the work they were funded to do.

When communication is happening, it doesn’t seem to be all that helpful to grantees. Grantees are not saying that it’s harmful, but few are saying that it had a very positive impact. From our data, it is not possible to know if, or how, these communications could have a more positive impact – or if grantees even desire to be influenced in any way by their funders on this topic.

There is much we cannot know from this data that is relevant to the communications that took place. For example, who initiated communication on this topic – the grantee or the funder? What were the circumstances of the communication? Were questions posed from one party to another or did an in-depth conversation take place?

Stepping away from interpreting the data and reflecting on our method, it is possible that we simply did not ask the right questions in our survey, or ask them in the way that would be most relevant to grantees’ experiences and preferences.

Perhaps just as interesting as the data is the way it has been used. The fact is, data from these items has not been of great interest to many of the foundations commissioning the GPR. As a result, as of spring 2012, we removed these items from our core survey and have made them optional for funders wishing to collect this information from their grantees. This does not mean that our efforts to further understand the role of diversity in effective philanthropy have ended, but we do not think that continuing to collect data from these particular survey items will result in more useful information than we have been able to gather to date.

I hope readers of the CEP Blog will weigh in with interpretations of – or reactions to – this data, or with research ideas that CEP could pursue to make a further contribution to the role of diversity, equity, and inclusion in effective philanthropy.

Ellie Buteau is CEP’s Vice President – Research.

In the past several years, discussions about foundations and diversity – in particular diversity as it relates to race – have surfaced more frequently in philanthropy. Perhaps one of the most widely known – if highly controversial – efforts came from The Greenlining Institute’s work on The Foundation Diversity and Transparency Act. Since then, a number of conversations and working groups have formed in the field, including the D5 Coalition. Last year, The National Committee for Responsive Philanthropy (an organization that has focused on diversity and inclusion for many years), launched Philanthropy’s Promise to encourage foundations to prioritize the needs of underserved populations.

We have been asked repeatedly by funders and others what we know about diversity in philanthropy from CEP’s data and research.

CEP’s work focuses on what foundations can do to be more effective in their work, through their governance, their staff, their operations, and their work with key stakeholders including grantees and beneficiaries. For us, then, focusing the conversation on the role that diversity, equity, and inclusion play in effective philanthropy is essential.

For years we have collected some basic demographic information about those who have participated in our research and assessment tool surveys. We want to share what we have learned from two of our efforts to analyze data from our Grantee Perception Report (GPR) surveys.

Who fills out our GPR survey?

When a foundation commissions a GPR in order to understand how its grantees perceive it, we send a survey to the grantee staff member whom the foundation tells us is its primary contact. Those survey respondents complete the grantee survey (sometimes with assistance from their colleagues) and have the option on the survey of indicating their race, which many do.

Are respondents of color having different experiences working with funders than white respondents?

Over time, we have examined our data to understand if respondents of color were having different experiences working with funders than white respondents – and if so, in what ways. Most recently, we conducted this analysis with data from the past five years (2007 through 2011) – from over 20,000 grantee survey respondents about their experiences working with one of 148 funders.

The answer, which remains unchanged from analyses we had run with data from 2004 through 2008, was surprising to some with whom we discussed our findings: The 21 percent of respondents who identified as people of color during the last five years on our survey don’t report having different experiences with funders than white respondents. While we have in a few instances seen concerning differences by grantee respondent race for individual foundations, we didn’t see such patterns across the grantees in our larger dataset.

Are foundations and their grantees communicating about issues of racial diversity?

In recent years, we have considered what else we could be doing on this issue. We sought advice widely from foundations and other organizations working in philanthropy and received a lot of conflicting advice and counsel. Individuals from these organizations told us:

• “Focus specifically on racial diversity because there are so many aspects of diversity and you need to choose one.”
• “Don’t focus just on racial diversity because by doing so you deny the importance of other kinds of diversity.”
• “Your survey tool could be useful in ‘counting’ – getting grantees to report on their diversity and the diversity of their beneficiaries. Focus on that.”

We researched what types of data had already been collected by Foundation Center and other organizations. (Foundation Center has a very broad bibliography of research related to diversity in philanthropy.) Much of the work that had been done focused either on the racial composition of foundations’ staffs, or the proportion of grants or grant dollars going to particular issues or populations, which is not easy to measure, as Foundation Center President Brad Smith discussed in a recent interview with Alliance magazine.

We felt that one key element missing from the existing work on diversity in philanthropy was the grantee perspective on their funders’ role – and efforts – on this issue. We decided that developing a better understanding of whether foundations and grantees are even communicating about racial diversity was an important place to start, and a topic we were well-positioned to contribute to through our ongoing work. From the spring of 2010 to the fall of 2011, we included the following questions in the standard GPR survey:

1. Has the Foundation communicated with you about racial diversity as it relates to:
• The Foundation itself (staff, board, etc.)
• The Foundation’s programmatic work (funding, mission, programs)
• Your organization (staff, board, etc.)
• The work associated with this grant in particular
2. If yes to your organization, to what extent did this communication have a positive or negative impact on your organization?
3. If yes to the work associated with this grant in particular, to what extent did this communication have a positive or negative impact on the work associated with this grant in particular?
4. Is the work funded by this grant meant to address topics for which you believe racial diversity is a relevant component?

In addition, we developed a module of optional questions that foundations subscribing to the GPR could choose to include in the survey we sent to their grantees.

To our surprise, given all the talk and requests for CEP to do more to collect data about this issue from foundations, very few foundations were interested in using the optional questions. A number of foundations even objected to the questions we added to our standard survey, arguing that we shouldn’t focus only on racial diversity, or that the questions just weren’t relevant to their work, or that the “diversity” wording we used did not fit how the foundation had been communicating with its grantees.

Nonetheless, we decided to proceed with collecting data on these standard survey questions from grantees of 70 foundations from spring of 2010 to fall 2011. In a forthcoming post, Ellie will share what we learned from that data and what new questions our findings raised.

Ellie Buteau is CEP’s Vice President – Research. Kevin Bolduc is CEP’s Vice President – Assessment Tools.

The title of this post is borrowed from a song in the musical 1776, in which George Washington repeatedly writes the Continental Congress, requesting badly needed assistance, only to be met with evasive responses. The lines were called to mind by the experience one of my colleagues had with approximately thirty foundations when he sought support for a project to explore the basic question: “What is Philanthropy?” The responses he received revealed foundations failing—sometimes miserably—at one of their most fundamental tasks: that of responding to proposals.

My colleague, Dr. Salvatore Alaimo, is an Assistant Professor in the School of Public, Nonprofit, and Health Administration at Grand Valley State University. Dr. Alaimo, who is affiliated with GVSU’s Dorothy A. Johnson Center for Philanthropy, teaches several undergraduate and graduate classes on nonprofit management. In the course of his teaching, he repeatedly encountered a paradox: although nonprofit organizations rise or fall on their philanthropic support, few people connected with them truly understand the mechanism of generosity. He decided to ask that most basic question—what is philanthropy?—and to seek answers through the creation of a documentary on the subject. Specifically, he hoped his film would enhance understanding of philanthropy as a concept, and illuminate the roles that philanthropy plays in American culture and society. His goal was to produce a documentary worthy of film festivals and public television broadcasts, and to use it in both K-12 and higher education classrooms to inspire young people to discuss, think critically, and to voluntarily engage in giving. I have read Dr. Alaimo’s draft documentary script and it truly is a thought-provoking exploration of the complex—and sometimes contradictory—roles that philanthropy plays in American society.

Dr. Alaimo recognized that he would need funding from foundations and corporations in order to produce “What is Philanthropy?” He was confident of success because he was proposing to examine the core business of foundations and corporate giving programs. Moreover, he knew how to go about seeking funds. Using Foundation Center resources, he identified a total of approximately thirty foundations and corporate giving programs that stated an interest in philanthropy, philanthropy education, issues related to social justice, and/or documentaries. Just as he advises his students, Dr. Alaimo made certain that each proposal he submitted was tailored to the specific interests of the foundation receiving it. He knew, of course, that he would receive many refusals, but he was sure that—win or lose—his proposals would receive a thorough and fair hearing. He was equally confident that a few of his proposals would be supported, hopefully enough to cover the costs of his film.

Reasonable though Dr. Alaimo’s expectations were, he was soon disabused of them. The problems began immediately, when he encountered the applications. Foundation application processes have now, almost universally, migrated online. He soon discovered that most online forms were created with projects other than documentaries in mind, so they featured categories and line items that were irrelevant (but nonetheless mandatory to fill in), and also failed to include applicable categories and line items. In such cases, Dr. Alaimo attempted to telephone the foundation and seek the advice of a program officer, but he soon discovered that this was pointless. Program officers were hardly ever available, and only rarely would one return his call. For the vast majority of the thirty foundations, there was simply no way to bridge the gulf between a distinctive proposal, and a generic application form, leaving no choice but to send in a form inappropriately filled out, which led, inevitably, to a letter of rejection.

Adding insult to injury, these letters were just as boilerplate as the forms that had precipitated them. They referred to Dr. Alaimo’s “initiative,” or “project,” or “program,” never to a documentary film. They declined interest because the subject of the documentary was outside of their focus areas, even though the proposal was sent only to those foundations that specifically listed philanthropy, philanthropy education, issues related to social justice, and/or documentaries as an area of interest. Clearly, the automated systems of application and response were designed specifically to build a firewall between applicants and program officers, to make certain that program officers would never have to perform the onerous tasks of reading proposals, writing personalized letters of rejection, or offering assistance to applicants.

This mechanistic approach descended into low comedy when Dr. Alaimo applied for support to a large, national brand-name retailer. Once again, their online form was inappropriate to a request for a documentary, and once again, it proved impossible to contact a program officer, so it was necessary, once again, to send in a proposal that was not properly filled out. The retailer’s response rejected the funding “opportunity,” but wished Dr. Alaimo “success in securing support for your festival.” He wrote back, explaining that he had requested support for the production of a documentary, not for a film festival, and, in light of this fact, he requested a reconsideration of their decision. The retailer responded with the following “clarification”: “…it was suppose [sic] to say festivities. We wish you success in securing support for your festivities.” Dr. Alaimo patiently responded yet again, explaining that he was seeking support for a documentary film, not for unspecified “festivities.” Finally, the retailer sent a completely generic letter of decline, which did not mention “festival” or “festivities” but did not mention “documentary” or “film” either.

So, Dr. Alaimo—and countless others—are forced to apply on automatic systems that do not fit their proposals, are not allowed access to human assistance, and receive one-size-fits-all rejections that seem to be the closest thing to a relevant answer in the automated decline menu. In the case of the retailer, the “festival” response was probably chosen because Dr. Alaimo asked for assistance in making a film, and some films are presented in film festivals.

Any process has its fair share of nonsense, and over the years people grow inured to it, especially if, at the end of the nonsense, the system delivers all—or at least some—of what they have requested. For Dr. Alaimo, however, there was no such consolation. His thirty carefully crafted proposals, sent only to those funders that stated interest in the topic, yielded precisely zero grants. That seems somewhat strange in itself, and it raises a further question: if a professor of nonprofit studies who does everything right and asks for support for a documentary that fits thirty foundations’ stated guidelines gets shut out, just what chance do people with less training have in their applications?

After all of this discouragement, one might think that Dr. Alaimo would quit in frustration. Instead, he devised a novel strategy for raising funds for his documentary: he would ask program officers for personal contributions. He reasoned that program officers may well have been drawn to foundation work by an innate sense of generosity. Moreover, they are presumably committed to the well-being of the field in which they work; as such they may nurture a personal interest in a film exploring the meaning of philanthropy, and be willing to be personally supportive even if their foundation would not provide institutional support. So off went two thousand solicitations, addressed directly to the pertinent program officer, each clearly explaining that this was not a request to the foundation, but rather a personal solicitation of the program officer.

Nearly all of these requests elicited precisely the same robotic responses as had the earlier proposal, for the foundations obviously did not have an entry in their decline menu for responding to a personal request to a program officer. Only two program officers out of the two thousand actually read the request, understood that it was a personal solicitation, and sent a personal reply. One said “no” and demanded to be removed from Dr. Alaimo’s list. The other scolded him for having the temerity to ask a program officer for personal support. Approximately fifty of the two thousand apparently didn’t read the message carefully and responded as if it were an application to their foundation instead of to them personally.

What does Dr. Alaimo’s experience teach us about the state of the two thousand program officers in his sample? First, it seems safe to conclude that they are unaccustomed to being personally solicited, and therefore unable to respond appropriately to such a request. Second, the personal nature of the request did not elicit, excepting only two cases, a personal response. Third, while we don’t know how personally generous these two thousand program officers might be (for all we know, they may give thousands of dollars to their faith community, their alma mater, or other charitable organizations), we can say that they are professionally parsimonious, unwilling to make even a token investment in a project that would help the world to better understand what they do for a living.

Dr. Alaimo’s experience cannot, of course, be generalized across the entire foundation field. In my years of experience as a member of the Advisory Board of the Center for Effective Philanthropy (CEP), I have met many foundation executives and program officers who are passionate about improving their foundation’s processes and responsiveness. In The Grantmaking School, which I founded, I have encountered hundreds of program officers who hold themselves to high standards of professionalism, and who seek constant improvement in the performance of their responsibilities. I truly believe that the educational programs of CEP, The Grantmaking School, and other infrastructure organizations are, slowly but surely, making foundation philanthropy better.

Yet Dr. Alaimo’s experiences cannot be dismissed as merely bad luck in encountering outliers in the foundation field. Among the thirty foundations that he solicited for support, and the two thousand program officers from whom he requested personal contributions, large majorities were unresponsive, failed to thoroughly read the proposal, arbitrarily declined the proposal, and seemed only weakly connected to the field of grantmaking.

The late Joe Paterno was fond of saying “You are either getting better, or you are getting worse.” Dr. Alaimo’s experience suggests that, for all of the improvement wrought in the field by CEP, The Grantmaking School, and other organizations, some program officers are getting worse. This makes the case for redoubled support for educational and training programs, for people and fields do not get better by accident, but rather by deliberate and sustained efforts. I am confident that the thoughtful nucleus of the field will continue to expand, and excellence will become more common. But for now, the question with which this post began still applies to far too many foundations: “Is anybody there? Does anybody care?”

Joel Orosz, PhD, is the Distinguished Professor of Philanthropic Studies at The Dorothy A. Johnson Center for Philanthropy and Nonprofit Leadership at Grand Valley State University.