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Frumkin On Philanthropy
Peter Frumkin, professor at the University of Texas at Austin and author of Strategic Giving (The Art and Science of Philanthropy), writes about "The Five Meanings of Scale."
2007-04-10
Conclusions
The achievement of scale remains an elusive goal and one that raises a number of questions
The achievement of scale thus remains an elusive goal and one that raises a number of questions:
• When and why should any of these five different scale strategies be applied?
• Why does scale sometimes fail?
• Does the ideal of scale fit better in the business sector than in the nonprofit sector?
• Can commitments to scale and equity be embraced simultaneously?
• Are the less successful attempts at scale simply examples of domains in which public policy should be allowed to operate?
Most of these questions remain unanswered even though scale has become a major target of organized philanthropy. Rather than engage these difficult question, it is far easier to simply fall back on arguments about spreading the benefits more broadly and achieving efficiencies.
The fundamental problem with the concept of scale, as understood in the philanthropy field, is it assumes that the scope of public impact achieved through philanthropy correlates with the public value created. Scale seems an obviously desirable objective by virtue of the simple math seeming to lie behind it, namely that assisting 10,000 clients, all things being equal, is better than assisting 1,000. This assumption is particularly hard to defeat in the context of philanthropy because it is difficult to measure the quality of nonprofit programs.
With all the obstacles preventing precise measurements of effectiveness and program quality in the nonprofit sector, it is very easy to use size as a proxy for impact and to embrace the idea that programs serving large numbers of people are contributing more to public welfare than those targeting smaller populations. In this sense, scale is much easier to measure than effectiveness and it represents an appealing way to change the conversation.
But the danger of such a move lies, of course, in the fact that scale is not a particularly good proxy for effectiveness and that many large programs do not deserve the support they receive, while many smaller programs deserve greater acclaim. Scale is not the problem in the nonprofit sector, nor is it the answer.
Strategic giving requires a nuanced and guarded stance with regard to scale, one that is grounded in a clear understanding of the many meanings – and limits -- of scale.
2007-03-27
Scale as Accepted Doctrine
The fifth dimension of scale focuses on the power of creating a new and accepted doctrine within a given field.
Creating a new doctrine is different from other forms of scale because it seeks to infiltrate broadly by changing the conceptual and intellectual frame surrounding a particular field, be it early childhood education or drug treatment. A successful effort at doctrine building will lead to a wholesale reevaluation of a field’s standard operating procedures and operational assumptions. While an operational model may be associated with a new doctrine, new ideas can and do triumph in the absence of clear applications.
Pursuing scale through doctrinal shifts is appealing to funders for a number of reasons. Unlike other modes of going to scale, this approach is not limited to the boundaries of the organizations receiving funding. It is possible to propagate an idea or theory and to change service delivery models without spending money on implementation, but one should be able to point to at least one concrete application of the doctrine.
One key to successful paradigm building involves to be the penetration of small networks of policy elites and nonprofit leaders. Once an idea or concept is embraced by opinion leaders, it can filter throughout a field quickly. Influential doctrines have emerged from think tanks and university researchers and from practitioners who can articulate a clear theory supporting their work.
One significant shortcoming to this approach to scale is that the outcomes of such efforts are very hard to predict. Sometimes ideas and frameworks emerge as powerful tools for transforming practice, but ultimately find no audience or willing adopters. Other times, second rate ideas spread like wildfire within fields and are broadly adopted. The process of spreading a doctrine is not amenable to a great deal of control.
2007-03-20
Scale as Replication
Replication is one way to achieve scale, a technique that has been tried and tested in the business sector over a long period of time.
Replication can proceed in two quite different ways:
- (1) within the organization through a set of more or less closely linked chapters or through a franchise system linking independent organizations; or
- (2) outside the organization through independent efforts to create similar programs.
The chapter or affiliate way of replicating services has proved critical to the expansion of many of the older and more established service organizations and civic associations. Opening chapters in cities around the country enables an organization to achieve scale quickly yet maintain some degree of control through centralization. Often, chapters are established in a hub and spoke arrangement, in which funds and resources flow back and forth between the center and the periphery.
One obvious problem with this approach is that it can be difficult to achieve uniformity and consistency across chapters so that the message or mission is clear and consistent. Not surprisingly, one of the biggest questions that this approach raises is the amount of autonomy that should be granted to the chapters or affiliates. Some organizations have successfully implemented loose confederations, while others have long operated tightly controlled networks.
The competing franchise approach to replication is based on the simple assumption that once a model has been established, the real work involves copying and multiplying the model in as many places as possible. Franchising has become popular with younger social entrepreneurs who see this model as providing swift action. By licensing a “brand,” nonprofits can go to scale quickly. A key challenge of the franchise approach is locating skilled people who are capable of taking a model into a new city or community and implementing it. The brand name must be protected by some form of quality assurance. Achieving consistency and measuring quality are both difficult propositions in the nonprofit sector, however.
There are some clear difficulties to both chapter and franchise replication. Replication is not an approach that can easily be initiated or directed by funders. Although funders may be able to foster some replication through the use of grants and incentives, most externally directed replication efforts will struggle with the vast unruly and idiosyncratic tide of nonprofit organizations that resist imitation and convergence. While some innovations and ideas have been replicated, large numbers of projects are unable to find any takers, even when they have shown great promise. Replication may rest on the shaky assumption that nonprofits are amenable to cookie-cutter duplication.
Moreover, some funders who experimented with replication strategies discovered that some initiatives successful on a small and local scale defy replication when they are taken out of their initial contexts. This seems especially true when the nonprofit is working with disadvantaged populations, where trust and credibility are crucial.
Replication also ensues if the philanthropist creates a pilot or model program and then allows government or other funders to take the effort to scale. The philanthropist Eugene Lang, for example, had the novel idea of “adopting a class” of middle school students at the inner-city school he attended years ago. Lang promised all the students in one grade that if they worked hard and stayed in school, he would guarantee to pay for their college education. When the New York State got word of this offer, it did not take long before a scholarship program was devised for other disadvantaged students. This proved to be problematic. Critically missing from this public sector imitation was the direct personal involvement that was a central part of Lang’s innovative educational gift.
Thus while it is tempting to think that replication model involves the simple multiplication of existing programs and institutions, in reality, this process is more labor intensive. Embedded in many successful programs is the vision and commitment of an individual. When the program is replicated in other sites, this personal connection is often missing and the organizations may pass from being an expression of one person’s values and beliefs to a more instrumental attempt to produce certain public benefits.
2007-03-13
Scale as Comprehensiveness
The third meaning of scale refers to a set of programs that are closely linked together and that constitute a coherent set of resources for clients or communities.
Comprehensive community initiatives began in the twentieth century with the settlement houses. From Hull House to the modern community-focused initiatives launched by large private foundations, there does not seem to be any decrease in this type of initiative. The belief that comprehensiveness is the critical ingredient to scale emerged from years of experience with isolated project funding. Seeking to create synergies by funding integrated sets of services, many donors see scale as being closely linked to building a dominant local presence.
Viewing scale as comprehensiveness is thus embedded in the idea that program linkages are as important or more important than the creation of new programs. By focusing resources in one geographical community, some funders see bridge building as the best way to create a sizable presence and a more fundamental and lasting impact.
Achieving scale by weaving together disparate programs and efforts into a cohesive whole requires that four important problems be overcome:
• First, inter-agency collaboration requires that difficult governance issues be worked out so that all parties can work together productively.
• Second, this approach emphasizes the goals of inclusion and diversity, and those leading such an effort must show leadership in this area and be sensitive to the heterogeneity of many community groups, programs, and networks.
• Third, comprehensiveness depends on the effort gaining legitimacy and support from the grassroots, not only from community elites.
• Fourth, any focus on collaborative strategy must address the issue of sustainability and the development of new funding streams.
Inevitably, due to the size and ambition of many of these programs, government is often involved, which can be a source of support or frustration
2007-03-06
Scale as Program Expansion
The second meaning of scale refers to the breadth or scope of service, usually measured by the number of clients served.
There are a number of powerful forces propelling nonprofits and their funders toward program expansion:
• First, funding scale as expansion appears fair and equitable in that it rewards past performance. Funding decisions can be justified by the results that are actually achieved.
• Second, growing a program will allow it to achieve greater operational efficiency, as the marginal cost of administration decreases as the program expands.
• Third, this approach creates incentives for nonprofits to develop and deliver successful projects. If nonprofit managers know that funding to grow their programs is dependent on how well their programs work, they will work harder to make them succeed.
• Fourth, it allows funders and recipients to work together over longer periods of time than they otherwise might under typical project funding.
Nonprofit organizations are especially comfortable with the idea of scale as program expansion. It represents a natural way to evolve a nonprofit from a small community organization to one that has a broader presence and impact. For nonprofit managers, aiming toward scale as program expansion is important. Because general support funding is scarce in some fields, program growth is essential to achieving some level of financial stability. Growing programs is seen as equivalent to professional success and can be a key to advancement. Moreover, the financial incentives in the sector provide a strong correlation between budget size and salary, with managers earning more depending on the scale of the program they oversee. As both a signal of success and as a tool for advancement, scale as program expansion is thus attractive to many nonprofit organizations.
From the perspective of the funder, allowing an organization with a proven track record to expand its operations represents both a high return activity and a relatively low-risk proposition. After all, the nonprofit has already demonstrated its ability to implement a given program. All they are seeking is funds for program expansion so that they can do more of one particular activity. This is a proposition that can be considerably less risky than the design and creation of a new initiative.
2007-02-27
Scale as Financial Strength
The first meaning of scale is related to organizational strength and sustainability.
In principle, there are very few obstacles to taking any single organization to scale. Though philanthropic resources are limited, if concentrated on a small number of institutions, funds are now available to create a new cadre of very large and durable institutions. In practice, many of the organizations that have achieved financial scale have been and continue to be supported by individuals or family foundations with living donors. Many recipients of this sustained largesse, such as private colleges and cultural institutions, are the beneficiaries of support from elites and provide benefits to them in return. Interestingly, in the case of private educational and cultural institutions, it is often the visibility, prestige, and competition with other donors that encourages supporters to give, and give more, year after year.
Large private foundations do not seem to embrace this notion of scale as readily as individuals, though there are some notable exceptions to this. Picking any single nonprofit organization as the one that will be taken to scale may appear unfair and capricious. It implies that a single donor should be able to disturb the competitive landscape and decide who wins and loses in the nonprofit arena. While this may be precisely what an individual would like to achieve, few foundations want to be perceived as inequitable and heavy-handed. As a consequence, they shy away from tipping the scales completely in favor of one organization over another. Moreover, foundations may be less likely to bring an organization to scale because their interests are not in the organizations they fund per se, but in the specific programs and outcomes which these organizations deliver. The foundations have priorities that overlap somewhat with the agendas of nonprofit organizations. When these priorities change, funders can and do find new organizations.
Another reason that individual nonprofits are not often brought to scale through the infusion of large amounts of money may be connected to efficiency concerns. While giving a nonprofit the ability to withstand the vicissitude of the nonprofit marketplace sounds reasonable, it may not be the most efficient way to use philanthropic resources. Endowments are often established with a projected 4 or 5 percent draw rate. Funding a large programmatic agenda from an endowment therefore becomes an expensive proposition. There is also the concern that taking a single organization to scale will eliminate the leverage that funders have over nonprofits, because the funds will free the organization from the usual relationships of dependence.
After all, if a nonprofit has enough money to conduct its programs without the continuous input of new contributions, an important performance incentive may be removed.
2007-02-20
The Five Meanings of Scale
Introduction
Being effective means more than just carrying out an initiative well and meeting the needs of a small group of people. Effectiveness also involves reaching many people and taking the social leverage that an intervention creates and amplifying it even more broadly.
Given the interest in having a real impact, donors speak variously of taking program to scale, going to scale, and scaling up.
What exactly is meant by scale?
At its core, the idea of scale is focused on creating a lasting and significant impact. Beyond the broad idea of more or larger impact, the idea of scale becomes more enigmatic when it is subject to sustained scrutiny.
Scale has at least five overlapping meanings in philanthropy, which are often collapsed in practice. Scale can refer to:
• (1) financial strength
• (2) program expansion
• (3) comprehensiveness
• (4) multi-site replication
• (5) accepted doctrine.
2007-02-02
Engagement and Scale
He is now starting a new series on "The Five Meanings of Scale" (above this post).
2006-10-31
Conclusions
Finding a level of engagement that both satisfies the donor and that adds value to the recipient organization is not always easy. Sometimes there will be a misalignment between a donor that wants a lot of publicity and a cause or organization that simply cannot mobilize the attention that is sought. Other times, donors will want a relatively low level of engagement, but end up funding an organization that continuously seeks to draw the donor into the organization’s governance.
Engagement levels are thus like many other elements of the strategic puzzle in philanthropy: They are variable and contextually defined by the interplay of public purposes and private values.
Engagement is something that must neither be declared by donor fiat, nor postulated by a recipient. Instead, engagement needs to emerge from communication between the two parties and should aim toward finding a level of fit and alignment that will satisfy both sides of the philanthropic exchange.
Notes:
Christine W. Letts and William P. Ryan (2003: 26) focus on high engagement philanthropy, which they define as “a performance-centered strategy where alignment, reliable money and strategy coaching are used together to convert a grant-making relationship into an accountability relationship that uses power to improve performance.”
On the trend toward disintermediation in philanthropy and higher donor engagement, see Frumkin (2000).
Careful selection of grantees can reduce the need for heavy engagement later on. For a short list of what grantmakers need to consider before making a grant, see Lurie (1988).
Reading and interpreting financial statements requires practice and skill. For an introductory guide, see Stevens (1989).
For a landscape of philanthropic support of the arts, see Wyszomirski (1999).
Engagement is often constrained by institutional identity. A discussion of the way leaders and boards negotiate roles can be found in Center for Effective Philanthropy (2004). See also McFarlan (1999).
2006-10-24
Corporate Philanthropy: Low Engagement Level
Companies that give are reluctant to get too closely connected to the organizations they support for a range of reasons. Chief among them is the fear of exposure to negative publicity should charitable programs backfire or fail. While executive may want to see their employees involved in community volunteer projects that aim to rehabilitate buildings or clean up beaches, they may not want to get too deeply involved in designing a community program aimed at tackling a tough problem such as crime or drug abuse.
Moreover, the focus on the arts funding that is often present in corporate philanthropy makes engagement more difficult, because there are few real opportunities for company executives to help design an exhibition or design a theater production—although there are ample opportunities at each to fly the corporate banner.
The engagement level of corporate donors is generally lower compared to other donors for another reason: Few company foundations have large enough staffs to really do more than process requests and focus on making sound grant decisions.
Real engagement requires a substantial commitment of time, resources, and people that are not always available in the context of corporate philanthropy. Many corporate giving programs are more set up to negotiate and structure issues related to profile and recognition than they are to rigorously intervene in the work of nonprofits.
2006-10-17
Large gifts and low level of involvement
One of the largest gifts ever recorded fits this description and it turned out to be also one of the most controversial. Media mogul Ted Turner shocked many when he announced that he was giving $1 billion to the United Nations over ten years. The gift provoked both admiration for its size and scope and ridicule for focusing on an agency that some argued had a reputation for bureaucratization and inefficiency. Still, for Turner, the gift represented a fulfillment of his commitment to international cooperation. For years, he had flown the UN flag above the offices of CNN and had sponsored the Goodwill Games at a time when international tensions were running high.
After its initial announcement, Turner’s gift went through a number of changes. First, Turner created the nonprofit UN Foundation to receive some of the shares of TimeWarner stock he acquired following the sale of the TBS broadcast company. The UN Foundation was not a foundation, but rather a public charity that would solicit outside funds to help support its activities. The gift was not limited only to the United Nations but was also directed at “UN causes,” which include the UN Commission on Human Rights, a range of nonprofit environmental and advocacy organizations. The exact amount of the gift would also depend on the performance of TimeWarner stock and would be capped at $1 billion, or less if the stock performed poorly.
Regardless of these changes, the gift sent a major shot across the bow of philanthropy by virtue of its size and ambition. To run the UN Foundation, Turner chose former U.S. Senator Timothy Wirth, an experienced actor in international politics. Interestingly, Turner pondered a different use of his philanthropic funds before settling on the UN Foundation: He inquired into paying off the UN membership dues of the United States which were in arrears, but decided against it.
At the other extreme of engagement approaches are donors that do little other than monitor progress, review financial statements, and ensure that the terms of the grant agreement are fulfilled. Depending on how closely values are aligned, this can produce a respectful contractual relationship or a more tense auditing relationship. These auditing models often arise in smaller foundations, where large numbers of small grants are made. Unable to do more than a cursory monitoring of grantees, these under-resourced foundations are led to simply set a group of procedural hurdles in place designed to maintain some semblance of accountability. Nonprofits must submit to these periodic audits and remain in compliance.
Since it is far easier to monitor financial matters than mission fulfillment, it is no surprise that much of the auditing that goes on in philanthropy is over the expenditure of funds and the accounting that accompanies this process. To really audit mission fulfillment or the production of public benefits, donors need to go to far greater lengths and expenses to collect information. Little surprise, therefore, that more attention is paid to getting budgets and expense reports filed than to meaningfully and creatively assessing the mission performance of grant recipient organizations.
2006-10-10
Modest financial scale but intense personal involvement
Rebecca Berman is a retired New York City schoolteacher living in Teaneck, New Jersey. Not wealthy but frugal, Berman has pursued her philanthropic passion of helping children and families in the poorest areas of Guatemala. A 69-year-old widow and three-time cancer survivor, Berman first went to Guatemala through an exchange program in 1992. Though she had always been committed to public service and philanthropy, the opportunity to make a difference in Guatemala was striking.
On her trip, she heard that $1,000 could build a school. Following the trip, she raised money from friends to build three schools in remote areas of the country. Her commitment, however, is about more than raising money and writing checks. Berman has visited Guatemala nearly every year since, bringing everything from basketballs to books as well as money raised for new schools and health care.
Back home in New Jersey, Berman convinces friends, stores, and hospitals to donate goods that she brings to Guatemala. She seeks out deals at yard sales, and takes goods that others might throw away. She has found or been given clothing, wheelchairs, and school supplies at little to no cost. In Guatemala, she is connected with the schools, clinics, and families, which allows her to target her efforts to the needs of the communities. Giving across national boundaries creates cultural challenges and requires more than check writing.
Berman’s small-scale approach to giving allows her to meet these challenges by engaging very directly and deeply with the schools she has founded and supported.
2006-10-03
The four types of philanthropic relationships
When these two dimensions are joined, four types of philanthropic relationships emerge (see figure below):
• contractual relationships in which donors and recipients simply give and get under narrowly circumscribed terms and then go their own way
• delegating relationships in which donors delegate responsibility freely to those doing the work
• auditing relationships in which trust is low and oversight is extensive so as to monitor the precise use of grant funds;
• collaborative relationships in which the two sides work together closely to achieve a set of mutually agreed upon goals.
Forms of Philanthropic Relationships
What do these different engagement strategies look like in practice? When writer James Michener came to Texas in the early 1980s to research the novel he was writing that would eventually bear the state’s name as its title, he was given tours of the biggest ranches, an office at the University of Texas, and special attention from the governor. Michener came to love the state and bought a house in Austin.
He volunteered, in his words, as a “teaching assistant” in the graduate fiction workshops at the university. Michener worked closely with students, commenting on their work, encouraging when necessary, and giving them career advice. In 1988, he gave $1 million to create an interdisciplinary master of fine arts degree at the university, which would provide students with training in fiction writing, poetry, playwriting, and screenwriting. The goal of the programs was to develop multi-dimensional graduates who could work across a range of writing professions.
Michener was not an absentee donor. Instead, he worked with the students and helped set the direction for the center. Within a couple of years, he made another gift of $3 million, followed by a $15 million contribution to fully fund the new Texas Center for Writers, including fellowships for writing students. Michener was very involved with the program until his death in 1997.
Collaborative relationships involve not only the gift of money but work together based on shared values and mutual interests.
2006-09-26
Two critical dimensions
As they become more and more comfortable with giving, donors come to define for themselves an engagement style that fits somewhere between totally hands off to deeply engaged. For nonprofits, these decisions about style can have significant consequences.
High levels of donor engagement may mean access to resources and talents of great value to the nonprofit. It may also entail a tremendous amount of extra work, as donors need to be handled and satisfied. For this reason, some nonprofits prefer to receive general operating support with as few strings attached as possible. Over time, however, almost all nonprofits learn to work with the different engagement approaches of their donors and understand that considerable variation is to be expected.
In thinking about the question of philanthropic engagement, two critical dimensions to any relationship between giver and recipient impose themselves. The first dimension is the one just described: the level of donor engagement, which can vary from very light oversight to heavy-handed control. The level of engagement will vary not only based on the style of the donor but also on the nature of the work being carried out by the recipient.
Some work, such as scientific research or the arts, makes it hard for donors to be engaged directly in the funded work because it simply requires a certain amount of independence. Other kinds of projects, such as youth programs and scholarship funds, are far more wide open to donor involvement and even reengineering. After all, everyone has an opinion on how to help young people, but few people know enough about genetic research to get deeply involved.
The second dimension is simpler and only describes the level of congruence or match between the values and intentions of the donor and the recipient. In some situations, donors and recipients think alike and share common aspirations, while in other cases, the two parties are very far apart, even if this is not apparent at the time of the grant. In either event, it is possible to view congruence, overlap, and coincidence in outlook and underlying values between donors and recipients as central to the formation of a strong working relationship.
2006-09-19
The balance between high and low engagement
Why would a donor seek a high level of engagement with a recipient organization, rather than simply maintain a more traditional and distanced philanthropic relationship?
The high engagement donor may want to get involved because they are reaching for the highest rung on Maimonides’ ladder: helping others to help themselves and gain independence. Or they may seek a high level of engagement simply because they believe that they know better than others how to manage a project, even if they lack the specialized training and experience of the leaders within the recipient organization.
This impulse to micromanage and meddle can be a product of years of managerial work in the business sector, which may have led to substantial wealth creation and success. It is often just a small—though sometimes unwise—leap to assume that these patterns will lead to success in philanthropy. It is also possible that the drive to engagement can be related to vanity, overblown self-confidence, or a desire to impose their will on others.
On the other extreme, an increasingly smaller number of donors are happy to withdraw from the grantmaking process and to let recipient organizations do their work as they see fit. Such deference may stem from a recognition that in many cases it is the nonprofit that truly understands the problem at hand. It can also be the painful result of experience in attempting to be highly engaged, leading only to the recognition that nonprofit managers prefer to have plenty of leeway in how they operate their programs.
There are other reasons to resist jumping too quickly into the philanthropic fray. Low engagement has been justified in the name of professional detachment and as a necessity for maintaining objectivity. It is also far easier and less time demanding to limit the scope of the giving relationship to pre and post grant evaluation, rather than to expect the donor to take partial responsibility for the execution of a program or for the recipient organization’s performance. In fact, the more engaged a donor is with a project the harder it may be to exit or terminate the relationship, if the facts so dictate.
Engagement can muddy the philanthropic waters by placing the donor into the program that is being funded, a position from which it is hard to render tough and objective judgments about quality and impact. For this reason, there are cases in which donors need to actively resist the temptation to throw themselves into the fray and get their hands dirty.
2006-09-12
Philanthropic disintermediation
In assembling a plan for giving including an engagement strategy, donors need to think carefully about the question of who will carry out their philanthropic work and how this work will proceed.
In some cases, donors will seek out the advice and counsel of family members, friends, lawyers, and consultants when executing their giving. These parties may be brought in to assist with planning or implementing a philanthropic agenda.
A trend toward philanthropic disintermediation has, however, emerged in recent years: Younger donors increasingly have decided to cut out all philanthropic middlemen, and instead look to themselves as the principal agents of their own philanthropy. This do-it-yourself turn is, of course, the simplest solution to the agency question in philanthropy, one that removes the threat of deviation from the donor’s intent that delegating responsibility can create.
Engagement styles range from very hands-off approaches, in which nonprofit autonomy and expertise are privileged, to a more deeply engaged approach, in which the donor and recipient work together on program development and problem solving. There are donors who are involved in all aspects of their giving and with the work of the organizations that receive their funds. Often stemming from a sense that philanthropy must be about more than check writing, involved or engaged donors want to feel a connection and offer advice and input above and beyond funds.
This may lead the donor to talk to and toil alongside the inner-city community activists as they weed out a plot in the community garden that has gone unattended so as to understand the community better. It may entail listening in on a board meeting of an organization that is attempting to overcome a challenge and offering some suggestions where appropriate. It may involve the regular introduction of independent evaluators into the program to advise both the organization and the donor on the strengths and weaknesses of the program design and implementation. There are many ways that donors can and do more than just send checks.
The important question is why do donors at times become engaged and how do they go about adding value through engagement?