Guidestar has just released the results of a survey entitled "The Effect of the Economy on the Nonprofit Sector: A June 2010 Survey.”

Chuck McLean and Carol Brouwer wrote the report, the purposes of which were “to explore how charitable organizations fared during the first five months of 2010 and to try to gauge the effect of the downturn in the economy on the American nonprofit sector.”

Among the findings, some issues stand out among public charities and grantmaker subsectors.

On the Charity Side

Public charities were asked if total contributions to their organization increased, decreased, or stayed about the same between January 1, 2010, and May 31, 2010, compared to the same period a year earlier. Thirty percent experienced an increase in contributions, while 28 percent remained the same. Forty percent reported a net decrease. McLean and Brouwer then asked, “What factors caused total contributions to decrease?” Forty percent said private foundation grants were smaller and 22 percent said that private foundation grants were discontinued. This in the face of 63 percent of the respondents stating that demand for their organization’s services increased!

Takeaway: charitable organizations faced smaller or discontinued grants from foundations in a climate where demand for their services is up.

On the Grantmaking Side

Now let’s look for a moment at the grantmaking side of the house. Eleven hundred of the 6,508 respondents indicated their organization awards grants, with 580 identifying themselves as private foundation/grantmakers (thus, in the mix of grantmakers we probably have a mix of charitable re-granting organizations in addition to private foundations). Among these 1,100 organizations indicating they give grants, 68 percent indicated that their giving remained the same or increased in the five-month period of January-May 2010 compared to last year. Further, 65 percent indicated that they made no major changes in their grantmaking. A much smaller proportions reporting they either cut back on programs (12 percent) or cut back on payments (8 percent).

Takeaway: Grantmaking, from the perch of the grantmaker, has remained the same. Few grantmakers have cut back on programs or payments. This is interesting in light of the above finding that charities report significant declines in grant funding.

What are the implications of this? There are several, I’m sure. For the purposes of this post I’ll constrain my thoughts to issues of impact and evaluation.

What Could Be Going On?

If I’m leading a charity, I might think the following to myself. “If my grant funding is down, yet trends suggest that grant givers have not changed their overall behavior, who is getting funded, and why?”

Since I’m a strategy and impact guy, my mind tends to turn to thoughts of monitoring and evaluation. It may be the case that funders are paying more attention to charities that understand how to evaluate their day-to-day work in ways that demonstrate true impacts.

We see from the Guidestar report that demand for services is up among charities. This implies that organizations are going to have to be very savvy at bringing their services to scale while not diluting impact. This is challenging if an organization doesn’t know its place in the charity ecosystem, doesn’t have clear outcomes delineated that should result from their services, and lacks a systematic way to track successes and failures. This could explain some of the variance in why foundations and grantmakers don’t report a general dilution in their funding. Perhaps there’s been a shift in giving to organizations they trust to create promised, sought-after impacts.

It’s also possible that funding is shifting within intact programs from charities that are working on the ground to those that are further from the “shop floor” – such as charity service providers, think-tanks, and other capacity building organizations.

What else could be at play here?

The other week I sat down to read through a newly released Swedish regional development strategy. It described how, with a couple of inputs here and a few activities there, enhanced regional growth and competitiveness will occur in Sweden. It contained a SWOT analysis and plans for a mid-term and final summative evaluation. Weighing in at 83 pages, appendices and all, it was ambitious, elaborate and contained everything needed to describe the strategy in total.

One of the appendices included a series of logic models depicting how the ultimate goals would be achieved. For sure, logic models are becoming ever more common in plans like these. Nonetheless, Even one can’t help but be somewhat impressed that logic modeling has become a widely adopted graphical concept in a relatively short time.

“You’ve Got Your Shit Together!”

That’s what I overheard a program evaluator say at an annual meeting of the American Evaluation Association, as he set his gaze on an impressive logic model my colleague had on display in a poster session. And that’s probably what he would say if he saw the logic models in the regional strategy I’ve been reading. My colleague’s diagram at the AEA conference, and the diagrams in the regional strategic plan undeniably leave an impression of control, mental activity and ambition.

Would that gentleman have been right? Do you have your “shit together” when you can depict something visually? Not necessarily. There is a big difference between visual productions and visual thinking, or what I would call design thinking.

What We Tend to See

Within society development[1] and philanthropy, when we see logic models and other graphical depictions of program theory, what we’re seeing are examples of what I’d call visual productions. As a field, I believe we are still waiting for a breakthrough to visual thinking. Visual productions are created as add-ons to the regular operations and processes of an organization, and usually done after most planning is complete (planning which, by the way, generally occurs through a traditional linear process).

Many times a project plan is developed even before an optimal design can be created. As such, the beneficial forces of visual and design thinking are not capitalized upon, increasing the risk that weaknesses, problems or inconsistencies from the traditional linear and textual thinking will enter into to project plans. In using visual productions in such a way (as to merely repurpose and illustrate a linearly-derived plan) one merely creates a window dressing that makes the plan more appear explicit and look convincing. This visual makes it look like you have your “shit together.”

I would like to see a new position developed within nonprofit agencies and philanthropy: That of impact designer.

Impact Designers Would Be Visual Thinkers

An impact designer in the nonprofit or philanthropic sector would utilize all the skills and talents of their own disciplinary background and employ the best practices in visual and design thinking to develop better, more robust, more impactful programs. They would grasp onto early works, like Rudolf Arnheim’s “Visual Thinking” (from 1969), which talks about how “the visual medium is so enormously superior because it offers structural equivalents to all characteristics of objects, events, relations.” Arnheim argues that polydimensional space is perfect for theoretical reasoning. I’ve heard someone say that visual production is the tip of the iceberg while the rest is visual thinking. What a great way to put it.

I believe that three things are needed to achieve a breakthrough in the nonprofit and philanthropic sectors before visual and design thinking can become prevalent.

1. Role shift

2. Reframing of economic realities

3. Better tools

If I were to write a “help wanted” ad for an impact designer, this is what it would say:

IDEO founder, David Kelly, said in an interview (http://www.fastcompany.com/magazine/132/a-designer-takes-on-his-biggest-challenge-ever.html) that by applying the competence of design thinking, his group is able to come up with solutions that nobody has come up with before.

My hope is that we can do the same in our sector.

A little over four years ago we started to ask people what some of the root causes were to better organizational effectiveness in the foundation and nonprofit sectors within the United States. We talked with personnel at large and small nonprofits, and program staff from small family foundations to large private ones . We also consulted the literature on organizational effectiveness in the nonprofit world. Over time we captured what we heard into a poster size (3 feet x 2 feet) root cause “map” with over 65 boxes containing discrete assertions about the challenges foundations and nonprofits face in attaining organizational effectiveness. The diagram also contains scores of arrows that conceptually connect the assertions.

Early versions of the map were shown to our initial interview respondents from the foundation and nonprofit world (and to just about anyone who would look at it!). Over time we confirmed, disconfirmed, and refuted many issues, ever refining the map. It’s not perfect, but it does reveal an honesty and candor that underscores the passion of the people working in the third sector.

Because the concepts are ever evolving, our aim is to make transparent what we've learned and start a conversation on

• where the most viable opportunities for improvement are, and
• what we should address as a field.

In a series of posts we’ll report on what we’ve learned and ask for your reaction. Part One is about foundations. In Part Two we'll look at nonprofit organizations. We'll also publish the map in an upcoming post so anyone can have a copy of it and see the ecology of effectiveness, as we've captured it, for the sector.

Part One: Foundation Effectiveness

We began this thought experiment with the following assertion:

“We, as a social change community, not as effective as we could be.”

We then asked stakeholders in the field why that’s the case, particularly in foundations.

Four major clusters of root causes evolved from the above assertion. One cluster of reasons focused on the way in which the input from consultants, on which many foundations rely, doesn’t always translate into better overall effectiveness. Another cluster focused on how proposal vetting is not as effective as it could be. A third looked at how program evaluation is not leveraged in the best ways possible. And the fourth cluster, which I’ll discuss more in depth below, notes that foundations are not as strategic as they could be.

Why Aren’t Foundations As Strategic As They Could Be?

Three major areas developed in our analysis as to why foundations are not as strategic as they could be.

The first is no surprise. It's hard to stick to a strategy.

• With the passage of time, leadership and staff attain new knowledge that influences how they view the future.
• The stakes for not sticking to a strategy are not readily evident in the day to day work of foundation staff.
• It's hard to make strategy visible and operational in every step of an organization's day.
• It's hard to deliberately re-focus a strategy.
• Board members may have personal interests that can influence grantmaking.
• The needs of a community change over time.

Another second reason why foundations are not as strategic as they could be is that program portfolios can become populated with projects that may not be mission-related. This can occur when foundations have vague, unattainable or unrealistic goals. There are several reasons why foundations would hold such goals:

• It can be more appealing for a foundation to make small contributions to a big problem rather than completely solving a delimited one
• Foundations and grantees are not necessarily centered on a culture of measurement. After all, with measurement comes responsibility; what one doesn't see one doesn't need to fix.
• Foundations want to leave their options open.
• A foundation's strategy may be illusive and confusing. The contributors to this include
  • An inherent ambivalence about power and control over grantees. Foundations can be reluctant to tell grantees what to do because
    
    • they wish to be detached and objective and not involved in funded projects
    • they don't have staff or resources to support funded projects
    • they have respect for the independence of grantees
  • A lack of a market that drives foundations to be more effective and outcome oriented.
  • A tendency to prefer being detached and objective and not involved in funded projects

A third area that contributes to foundations' difficulty in sticking to strategy is a lack of emphasis on results that lead to a change or impact. A reason offered for this is that the quality of grantee operations may be based on foundation's perception of a grantee's organizational efficiency rather than a grantee's social results.

Next Time: Evaluation, Proposal Vetting, and Consultants and Their Relationship to Foundation Effectiveness

The total amount Sweden spends on regional development is at least 100 times bigger than the biggest number that fits on the display of a regular calculator. We are talking about the Regional Growth Programs, the EU Structural Funds, The Rural Development Program, The European Fisheries Fund, The Regional Service Programs and others like them. Progress is most evident in initiatives that address bottlenecks and barriers blocking the way for improvements. In most initiatives I believe we would expect that fixing the problems is part of the strategy.

However, in a review we made recently of the regional strategies for the implementation of the Rural Development Program in the different regions in Sweden we discovered that problems and priorities in many cases do not match. The priorities set in a strategy do not reflect the conclusions in the SWOT analysis. In other words, it is not clear how the measures planned in a strategy will address challenges that exist in the area. Of course, this does not apply to all strategies. Some regions have a great strategy, but alas, they are way too few.

When we hold seminars and presentations at events and conferences involving public officials we frequently ask if anyone has ever experienced working in a program that, when completed, was unable to demonstrate tangible results. We get roars of laughter. We see nods of recognition from all directions in the room. People confirm they have seen large amounts paid out through programs that only had marginal impact, or less. Public benefit programs are not the only types of project that suffer this sort of fate.

We wonder why this is the case. Is it because we routinely think in terms of inputs rather than results? Perhaps this is not so strange after all. Any kind of grant system is about the distribution of money. And money is an input. The more money we spend the bigger the input, right? In reality, however, results do not only depend on the size of the sum alone. The best results are produced by adequate measures and performance. To get to that, we need to build on the analysis and understand what the problem is that needs to be fixed.

We are also noticing that more and more people are dedicated to ensuring we get more value from public spending. Do you have the same impression? I believe that today both directors and managers at our public agencies are striving for tangible progress. Surely, everyone wants to do a good job.

In this inspiring talk, Katherine Fulton talks about the future of philanthropy – a future where innovation is a key to success. For Fulton, the democratization of philanthropy is allowing citizens to be more empowered than ever act as social innovators of change. She suggests that individuals and organizations can work across and through organizations adn disciplines to find solutions to challenges heretofore unsolved.  Through a democratization of philanthropy, it’s possible for social innovation to occur even when money is scarce.

Katherine’s presentation makes me think how new trends in philanthropy could affect the structure and methods of nonprofit organizations. If innovation increasingly becomes a necessary driver for impact, then nonprofits will need to continually test ideas with their communities in the mode of searcher, as William Easterly puts it.  Moving to searcher mode means that foundations and nonprofits alike will step away from inflexible, long term action plans that focus on outputs and move toward entrepreneurial testbeds that evolve, iterate, and scale. And I'd love to see that.

Clay Shirky, in the documentary Us Now, notes that social media “tools have lowered the cost of doing things for free to the point where our desire to engage with one another is enough to get things now to happen at a very large social scale, rather than just is a smaller family and friends scale.”  Innovation in philanthropy is beginning to mean that people, connected by a common cause, not a large fund, are getting together to create impact in ways never before possible.  Never before has the opportunity to break the silo mentality of philanthropy and nonprofits been greater.  

I believe Katherine is right about social innovation:  that new methods and tools to are needed to help us become more skilled at creating social change.

What are your thoughts and experiences regarding this? What kinds of collaborations should be forged within our sector to support this paradigm shift?

In Sweden, when government agencies kick off domestic development initiatives, we've become accustomed to a common routine: program guidelines are released, criteria for partnerships are set, desired outcomes are described, and an amount of special funds are allocated for the work.

Recently, the Swedish Consumer Agency, Konsumentverket, issued guidelines for an upcoming round of the societal development programs called Regional Service Programs (RSP). This particular RSP, subtitled “Service as Growth Factor in Countryside and Sparsely Populated Areas,” is an effort to increase access to commercial and public services for citizens, focusing on fuel, everyday commodities and increased access for persons with disabilities.

There's something notable in the new guidelines: there are no funds allocated for the programs. Program partnerships are expected to be developed and implemented and supported /within/ existing regular budgets. At first this sounds like a true challenge. How can new programs mandated by the government succeed without new funding? But in thinking about this one step further, a very interesting question that arises: Do we need funds attached to new programs or are we better off without them?

For instance, additional funds usually leads to added activities as a second layer on top of regular business. If the intention of the new program is to enhance performance of regular activities, perhaps more funding is not such a great idea. Besides, who said that better and more efficient work would cost more money?

I suppose the worst case scenario is that with no money, service programs have their hands tied behind their back because an unfunded mandate makes people unable to carry out the program activities that are needed. It is going to be very interesting to see how this develops. We're collaborating now with the RSP in Dalarna region. Their hope is to be able to demonstrate that they can create compelling early outcomes absent funding using existing resources and partnerships, acting on levers that are theorized to be effective but cost little.

I'm curious to know if any of you have had successful experiences making unfunded mandates work. My take on this is that we may have an opportunity for people to focus on improving society without the need for outside funding. Thoughts?

This book is a very interesting reflection on why so many well-intended aid efforts to do good still fall short. The author, William Easterly, is a development economist who has been involved in global poverty issues for his whole professional life. He is a professor of economics at New York University and amongst many positions around the world he has been a senior research economist at the World Bank for more than 16 years. The main question he raises (and tries to answer) is why, after more than fifty years and $2.3 trillion in aid to the "have nots", there is so shockingly little to show for it.
There are of course several explanations, but Easterly specifically points to one key reason. It is the simple difference between being a planner and a searcher. In brief, Easterly says that a planner thinks he already knows the answers; a planner thinks of poverty as a technical engineering problem that his answers will solve. A searcher admits he doesn’t know the answers in advance; he believes that poverty is a complicated tangle of political, social, historical, institutional and technological factors. A searcher hopes to find answers to individual problems only by trial and error experimentation.
This rhymes completely with our mission to provide mechanisms for reaching tangible outcomes in civil society and development efforts. The need for a new approach to solving poverty goes for most issues we address in development and philanthropic initiatives. To create any institutional or societal change we normally face a set of factors that are interrelated in such a way that is very unlikely to be successful with a one, or even two, effort hit. And even when one starts to finally understand some of the relations between inputs and outcomes, they often fluctuate and change over time. This begs the need for a strategic learning component – or trial and error experimentation as Easterly describes it. We usually say that to become the kind of searcher that Easterly would like to see more of, we need society developers, in both grantee and grant maker roles, to see themselves as innovators. We want to help society developers to become innovators and act accordingly: to set focus on the actual issue and not inputs, and learn more and more about that issue as milestones are gradually reached and tangible outcomes are achieved. This is not rocket science, but it does require a certain mindset and some simple, but powerful, tools.
If you are interested learning more about the quest for achieving tangible outcomes in complex global development initiatives, White Man's Burden is healthy, inspiring (and at times a bit grim) reading. It's helped our thinking on how to better support our partners.