Fine On Funding

Supporting people in addition to institutions is only the beginning of ways that foundations can help bring about social change in the Connected Age.

Foundations need to invest in training and support to enable people to become “network-ready”— fluent in the use of current social-media tools, curious enough to learn about new tools, and excellent in connecting skills like openness and listening.

Activists spend more time and energy doing, thinking about, and worrying about fundraising than any other task. As a community, it is critically important to our success and long-term sustainability that we come to a more natural place for both givers and receivers of funds.

Activists need to ask themselves hard questions about their own fundraising: What do I need to do versus what can others in the network do? How much can I raise from my community and how much needs to be supplemented by foundations and other grant makers? Where and how can I involve people in building my base of support?

Donors also need to become increasingly transparent and forthright about what they will and will not fund. Like a good baseball coach, we’re not asking for perfection, just consistency.

As we have discussed, the catalyst for significant social change in the Connected Age will continue to be individual activists. Foundation grants are a perfect vehicle for seeding, supporting, and encouraging these efforts.

Think of Joshua Rosen of justvote.org. Joshua created an enormously successful website for voter registration but found that his fundraising road was blocked unless he found a tax-exempt organization willing to sponsor him. Individual donors are highly unlikely to give to an unincorporated individual effort, not only because of their unease about the stability of the effort but also because there is no tax reward for doing so. Foundations, however, already benefited from their tax-exempt status when their endowment was created and have no restrictions on providing individuals with grants such as individual scholarships or fellowships.

Foundations are the best source of seed funding for individual efforts that can have big results in short time periods, like justvote.org’s many registered voters. It also costs a lot less than supporting institutions, which have offices and significant overhead expenses. The only downside to supporting individuals is that the effort can disappear overnight, but funders can make their expectations that some institutional memory will be stored somewhere clear in their funding agreement.

Echoing Green provides seed grants to social entrepreneurs (known as fellows), a significant percentage of whom do not have an institutional home at the time of the grant. They do need a great plan to become a fellow, but the rest is left to their ingenuity and entrepreneurial flair. According to its website, the results are impressive: Echoing Green fellows raise three times their Echoing Green grant by the second year of their fellowship. Since inception, Echoing Green organizations have raised approximately $930 million against a $21 million initial investment.

We have clearly seen that networks that use social media ignite social change. These networks will attract a variety of people and organizations with various kinds of expertise and their own connections. The basic infrastructure of these networks needs to be funded to keep them functioning smoothly. The good news is that funding the facilitating mechanisms that make networks work is much less expensive than funding a single entity that does all the heavy lifting alone.

For instance, increasing civic participation in Hispanic neighborhoods requires more than funding voter-registration drives. People with many struggles in their lives need more support than simply registering to vote. People need civic education, voter protection, and access to working voting machines. A foundation does not have to fund each of these groups individually; it can instead fund the networking infrastructure, like a website with an online organizer to facilitate conversations and post information relevant to the network in order to reach the overall goal of civic engagement.

When foundations move from a sun-centric view to a network-centric view, they will realize that they can make contributions in addition to their grants; these donations can be part of a whole series of resources that activist networks need to be successful. Money fuels the network, but so does information and connections. Foundations can help to foster the connections needed to keep networks vibrant and growing by recruiting other funders, researchers, and public officials into the network.

Funders can also become creative about how to fund networks that self-organize. One of the difficulties that activists in a crisis campaign face is getting funding fast enough to fill the immediate need. Foundations can create special funds, ideally pooling their resources with other funders that can be triggered and activated for specific self-organizing needs. For instance, a natural-disaster fund available to feeding or housing networks could be triggered by a declared state of emergency.

Foundations should aid not hinder activists on the road to self-determination. They need to become learning partners not punitive overlords. Proposals are guesses as to what is going to happen in the future. They can be educated guesses or pieces of fluff depending on what foundations make clear they want. The hardest question for foundations to answer is what their reaction will be when results are not what they hoped for or expected. Will they automatically cut grantees off or help them to understand what happened?

Unexpected results, being on a different road to perhaps the same end, should not be lumped by foundations into the same category as malfeasance or incompetence. Funders and activists must form a learning partnership in order to make social change sustainable. News is not good or bad until we label it as such. But activists are not exempt from accountability; there is an alternative to sweeping bad news under the rug. Without an emphasis on learning, good ideas can turn into bad proposals that end in a tangle of activities.

We have focused on how funding works, now we can focus on what is funded. Money talks, we all know that; but money is only part of the equation. Money needs good ideas and good people and good systems to be successful.

An enormous challenge for institutional funders in the Connected Age is that some of the results of integrating social media into efforts may become lost in the ether. Exactly how many e-mails were sent to encourage advertisers to pull their ads from Sinclair Broadcasting is unknown. We know the ultimate results, Sinclair’s stock price fell precipitously, but we will never know precisely how much activity occurred to make it happen, particularly because the effort focused on friends connecting with friends. Ironically, this is the opposite problem from the one we had with old-style organizing, when we knew exactly how many people were called or showed up for a rally but had difficulty connecting those activities to concrete results.

The fact that many activities in this new era are not traceable can be unsettling for funders accustomed to counting the results of their investment. Rather than funding a set number of activities, foundations in the Connected Age would be better served funding the process of connectivity for organizations and, more important, for networks. We may not be able to see and count everything that is going on, but we will be able to assess how it was done. We must invest in the increased ability of people and organizations to use social media with ease, to connect with their communities, to be open with information, and to become great listeners who are able to create winning campaigns in an instant. As our examples in Momentum have shown, investing in connectivity will lead to good results.

Change is already happening with younger donors. Our discussion of the Net-Gen in another chapter of my book describes how wary young people are of large institutions and the likelihood that they will be less institutionally loyal than their parents are.

These attributes are showing themselves in their philanthropy. For instance, DonorsChoose is a website that creates a marketplace for the specific project needs of teachers. A donor can choose a city or a grade level and a specific project and make a contribution to meet all or part of the project costs. Projects tend to be in the hundreds of dollars, not the thousands. Donors giving at least $100 receive a package of photos and thank you notes from the teacher and students.

We have seen that how we work, the process we use to get results, is just as important in the Connected Age as the results themselves. Foundations will find the Connected Age unfriendly to them unless their processes change to meet the expectations and opportunities of the times.

They need transparent decision making and short time frames. For instance, using letters of inquiry, as many foundations now do, is an efficient way to whittle potential grantees down to a manageable number for final decisions by trustees. If you can get your glasses fixed in an hour and send 100,000 protest e-mails to the governor by noon, then you do not want to wait six months for a foundation to make a funding decision.

Staffed foundations represent only a small fraction of the total number of foundations, but they control the lion’s share of philanthropic dollars. Increasing the number and size of staff discretionary grants will create a much more efficient and effective system than the present one. Program officers are on the ground and interacting with activists much more than trustees are, and presumably they have been hired in large part because of their good judgment.

Accountability still counts. If program officers are making ill-advised or disastrous grants with their discretionary funds, they will not be program officers for long.

We began Momentum with a discussion about the importance of being our best selves in order to take advantage of the values and rhythms of the Connected Age. For foundations being their best selves means sticking to seed funding and funding of short-term projects. If they do, grantees will be able to stop bemoaning the short-term nature of foundation funding because they will expect it. When the best selves of foundations become clear to both foundations and their grantees their relationships will be much more constructive and positive. Activist organizations will be able to at last put foundation funding into perspective. Grants should be project-focused and short-term. Activist organizations should build a broad base of individual donor support and earned income to be sustainable.

Given this orientation, the Connected Age can positively affect giving in a variety of ways. The growth of giving circles is a wonderful example of ways that donors can increase philanthropic giving through networks of friends and colleagues. Giving circles are groups of people who come together—some casually, others more formally—as networks of like-minded people, to pool their philanthropic dollars to give to causes. A study by New Ventures in Philanthropy in 2005 analyzed seventy-seven different giving circles, most of which had been started since 2000. They range from informal gatherings of friends sharing a potluck dinner and deciding where to donate their hundreds of dollars, to structured organizations like Social Venture Partners, legal entities with bylaws. Seventy percent of those surveyed conduct site visits to potential grantees. Giving circles are attractive to women donors who like the social-network opportunities as well as the increased clout of their giving. The circles create trusted networks of friends who talk and learn about activists and activism, a boon for women interested in philanthropy.

Connected philanthropy mirrors the trends and values of connected activism: agility, openness, and networks. Those who choose to change will find a large number of options for engaging their potential and current grantees.

Complaints and trends have encouraged foundations to provide long-term general operating support for grantees. For a long time, I was a member of this chorus, urgently insisting that foundations give longer, larger grants in order for activists to be successful. We were wrong.

Remember foundations operate by choice. They are required to do little by law, simply to give out 5 percent of their assets annually, averaged over three years, and that amount includes administrative expenses. How they give and who they give to are entirely up to them. Making fundamental shifts in the ways that foundations think and act is a tall order for entities that do not have to do anything in particular. If you were sitting with a pot of money that you could give to thousands of different groups, each of which would thank you profusely and honor you, would you give to the same ones over and over again, or would you want to spread it around? Most people are inclined to spread their wealth around.

Examples of artificial behavior, like keeping information proprietary and making distinctions between political activities and charitable activities because of the tax code, have been explored in my book, Momentum. Add to this list the unreasonable expectation that foundations should behave in a way that is counter to their best selves. Foundations do not often give long-term support, or they change their minds in the mid- term, causing tremendous disruption, because giving long-term is not natural for them.

Like a sprinter trying to become a marathon runner, funders giving long-term tend to run out of steam quickly.

It is expected that an estimated $17 trillion will be transferred by the mid-2010s from the World War II generation to the Baby Boomers; a significant portion of this amount will be used for charitable giving. At the same time, more giving is predicted to come from donors sending their checks directly to nonprofit activists without using grant-making institutions as philanthropic middlemen. Fancy proposal writers are in great demand today, but the faster, more chaotic donor marketplace of tomorrow will find them gone.

I believe that the era or large, eponymous foundations is coming to a close. Large, disproportionately influential private institutions dedicated to philanthropy are becoming an anachronism. Increased scrutiny by the media and Congress of how much foundations give and to whom and the desire of many new donors for faster, savvier ways of investing in social change are changing the face of philanthropy. The added burden of compliance with new regulations reduces the appeal of creating an eponymous private foundation. Like the first three television channels, large institutional donors may remain active players, but their influence is waning as others rise up all around them.

More and more wealthy donors may follow the lead of George Soros and use a private foundation for mainstream purposes and privately write checks for political activities. A new generation of donors–people like Pierre Omidyar and the Google guys, Sergey Brin and Larry Page–want increased flexibility and risk taking in their grant-making. The good news is that this new generation of major donors is looking for ways to take risks; the bad news is that like many people of their generation they will probably be less institutionally loyal and therefore we will see an increased turnover of grantees.

As soon as institutions are created and staff are hired, foundations tend to become slow moving and risk-averse. Consider that (1) the more regulations there are to comply with, the more foundations need staff, and (2) since the mid-1990s, foundation staff have been hired at an incredible rate. For the decade of the 1970s, 1,055 large foundations, defined by the Foundation Center as foundations with at least $1 million in assets or those making grants of $100,00 annually, were created. In the 1990s that number jumped to 8,046. Three quarters of these new foundations were likely to hire professional staff.

What do all of these professional funders do? They create grant-making guidelines, they go to meetings with applicants and make site visits to verify that the work is being done, and they meet with colleagues to design funding strategies. As a result we have more deliberate giving, but giving at a much slower pace. In addition, large staffed foundations tend to take fewer risks simply because more people are involved in funding decisions and staff have their own reputations to maintain and agendas to follow.

We can see how fundraising can have its own Excalibur Effect, where raising more happens by asking less, because of a company called ParishPay.

The Archdiocese of Chicago was facing a giving problem familiar to all churches: inconsistent giving, summertime slow-downs in attendance, and end-of-month drop-offs in contributions. A church has difficulty planning ahead if it does not know exactly when and how much the drop-off will be. In response, the Archdiocese contracted with ParishPay to automate church donations.

ParishPay describes the drop-off in donations as reflexive giving. The choice to give and how much to give are impulsive actions that parishioners take on the spot, or reflexively, at church. Parishioners have to choose between the amount they have available in their wallet right now and their expenses for the rest of the day or week or month. The process of reflexive giving also assumes that parishioners have remembered to bring money to church and that they have a denomination they feel comfortable giving.

According to internal research commissioned by ParishPay, parishioners regularly say that they intend to give more than they actually do on Sundays. ParishPay moves people from spontaneous giving for the moment and planned giving for the year, from giving reflexively to giving reflectively. ParishPay is an automated online or credit-card paying system. It allows parishioners to set a constant giving amount that regularly comes out of their credit card or bank account. Parishioners using ParishPay can plan regular tithing. The church is also able to plan when it knows that large portions of its donations are guaranteed.

According to information on its website, churches using ParishPay increase their donations on average by 75 percent, an increase that confirms that parishioners do want to give more but need a mechanism for doing so. ParishPay illustrates that the Connected Age not only makes giving easier and faster but also can significantly change how much is given to a cause.

Good fundraising is like the food pyramid. A broad base of good foods, or steady donors, is at the bottom. The pyramid builds to a small confection on top, a chocolate-chip cookie or that one big grant that would magically make all our problems disappear. However, those confections at the top are mirages filled with empty calories. We either spend an inordinate amount of time trying to get that big grant, thereby ignoring our base, or we find that getting that big grant means spending too much time attending to the needs of a grantor who may be gone next year. Better to concentrate on the fruits and vegetables on the bottom for steady support.

When people are involved in authentic ways, they believe in what you are doing and contribute in many ways. As Kim Klein writes, “You need to see a broad base of individual donors not only as the one place where you can continue to raise money now, but also as a test of community support; a source of ideas, volunteers, and bigger and bigger donations; and a pool of ambassadors educating the public in the form of their friends and colleagues about the issues your organization addresses. A broad base of donors has intrinsic value and is something to pursue whatever the economy, the government, or foundations are doing.”

The Connected Age enables you to have genuine relationships with many more people than before. When you are powering the edges, you can have real conversations with your activists through a blog or a listserv or chat room. Participants can be invited to post their own photos of an event for others to comment on. Local meetups can be organized in communities across the country to discuss the issue of, say, sprawl.

Perhaps the best fundraising news is that when network participants are released from proprietary silos and are sharing the burden of social change by contributing various skills and services, expenses will be lower. It takes fewer staff to work in a networked world. Overhead costs are reduced when people in the network are working on communications or fundraising or research.

Too often the ultimate goal for activist organizations as they become larger is to become self-perpetuating. Their stated goal of helping people and strengthening communities begins to be drowned out by the need to feed the organization. Staffs, boards, funders, all naturally equate growth in the revenue and size of an organization with success. It’s one of many inappropriate habits that nonprofits have picked up from the for-profit sector.

Businesses in the for-profit sector need to grow continuously in order to increase profits—profit being the one undeniable measure of business success. Activists are not in the business of making money, yet we often use the same gauge of success, constant growth, as the commercial sector. Many board members are successful businesspeople. They bring their business lenses with them and assume that increasing the size of the staff and the budget is the same as improving an organization’s impact and effectiveness.

Add the quixotic and short attention span of many funders, who want to support only “new and innovative” programs, and the natural reaction is for activist organizations to push every year to increase the budget and to add new programs and staff. We must change our habits before our habits sink us.

Organizations need to ask themselves whether they should or need to or even want to grow in size. Not everything needs to be supersized, franchised, and replicated. Small can be beautiful. Some for-profit businesses can successfully grow while being closed and secretive because they have the capital to run many focus groups, which simulate real conversations. U.S. automobile companies have for decades been shifting their marketing into overdrive while the quality and desirability of their cars continue to decline. Underresourced activist organizations cannot grow and succeed this way. If for no other reason, the lack of capital available to activist organizations makes massive, ongoing marketing efforts unworkable.

Self-determination will be a beacon not a repellant for funds. It is easy for someone to say that who doesn’t have to make payroll and pay rent. Being told that everything will be all right when your neck is on the line is particularly painful for activists working in communities with few resources or for organizations that may have few opportunities to create fee-based revenue streams. But the Connected Age is a double win for these activists because less money has to be raised, and raising money is less expensive.

Fundraising online doesn’t require sending out mailings or hosting special events. Smaller, broader, smarter—those are the fundraising mantras of the future. Throw away the direct-mail manual. You will be successful raising money online when you are building a broad base of networked participants.

In one Bugs Bunny cartoon Elmer Fudd looks at Daffy Duck and sees only a duck on a platter. Many activist organizations make donors feel like that duck waiting to be plucked. Activists too often practice fundraising as a transaction rather than a relationship. They generally only sporadically engage institutional and individual donors, mainly around a request for funds. They then forget donors for months with perhaps only a newsletter to break the silence. Activists caught up in a race for funds can easily forget that donors have much to offer: expertise, energy, connections, and, yes, money.

In January 2005 the leading trade publication for fundraisers, the Chronicle of Philanthropy, published an article in which the author stated that “a growing number of people in and out of the nonprofit world are asking whether too many groups are overlapping with one another and draining resources from those charities that do the best work.”

These concerns are not those of people receiving services. After all, I have never heard of a hungry person saying that there are too many food banks, or a homeless person commenting that there are too many affordable apartments. Rather, the uneasiness over the number of activist organizations reflects the cacophonous competition among social activists for funds.

The never-ending parade of organizations, all with different causes, fundraising appeals, and special events, overwhelms individual and institutional donors alike. Every month seems to be fundraising season, with dozens of requests coming in the mail or into in-boxes at work from organizations trying furiously to inspire us, persuade us, or simply hit us up for cash. As a result, funders and other supporters feel as though communities are being overserviced.

I am not suggesting that there isn’t a real need for money to support activist causes, but we can choose a different pathway that will help us raise more money over time than we are now.

I was sitting with a program director of an after-school program. With a great flurry the development director burst into the room and shouted, “We did it; we got a $50,000 grant from the community foundation for mentoring!” After the development director left, I asked the program director why she looked so dismayed. With tears in her eyes she whispered to me, “We don’t do mentoring.”

Funding worries hang over the activist sector like smog filling the sky over Los Angeles. We know fundraising is a problem, but we rarely talk about it, much less do anything about it. Our inaction is due in part to an assumption that there is nothing we can do about it. Many folks feel that the way people give money and the way organizations ask for funds are unchangeable; these activities are as natural to the order of the earth as gravity.

The Connected Age provides an opportunity to change fundraising as we have known it. We can use social media to rethink fundraising entirely and help people to become more involved, to give more, and to give in different ways than they have in the past. The importance of facing this issue now is intensified by the rising Net-Genners, who have different ideas about giving than their parents do. They are likely to be less loyal to institutions, but they may well become loyal to institutions that connect with them in meaningful ways. We have to broach the uncomfortable topic of changing how we raise funds, of shifting the interactions between givers and receivers of donations. This transformation has to occur or public confidence in the sector will continue to sink and our prospects for increased donations will inevitably be dampened.

Foundations and grantees often have relationships that are uncomfortable, exhausting, and unhappy. This strained relationship has many causes but just one result—ineffectiveness. The different cultures and perspectives of donors and activists have created a codependency that ends in dances of deception called fundraising proposals and appeals. Are activists to blame for overpromising, which leads to outsized expectations for results by funders? Or are funders to blame for flaunting their power and forcing activists to tell half-truths? The responsibility is shared equally.

If you put twenty activists in a room they will have fifty stories of ways that they have been capriciously, unfairly, and rudely treated by donors and foundations. There are oft-told tales of donors criticizing their office furniture; donors insisting on particular, inappropriate results; foundations keeping them waiting for a funding decision for months; and each funder having maddening, expensive, and customized reporting requirements. If you sit down with a roomful of donors, you will hear about their frustration with constant haranguing by money seekers, the runaround they get when asking about results, and the constant sycophantic behavior. (Well, one foundation officer told me that that is the part she likes the best!)

The truth is that both donors and money seekers need to change their behavior and relationship with one another to be successful in the future.