Relying Primarily on Fund Raising? The Numbers STILL Don’t Add Up

on March 18, 2013
in Blog

Note: This is an update from the original 2010 article as new data has presented itself.

I continue to be astounded by the high number of fundraisers being sought on nonprofit job boards. Many nonprofits still think that fundraising for subsidy support as their main source of income is the appropriate strategy. Once a upon a time there were a few high net worth donors and a few grade “A” organizations in each major issue area (health, education, youth, etc..) to give it to. Organizations could count on long term subsidies that supported their capacity because they were the only kids on the block…

As the statistics clearly show, those days are long gone…

According to the Urban League National Center for Charitable Statistics (NCCS) as of 2013 there are:

* 1,551,705 tax-exempt organizations, including:
– 963,255 public charities
– 97,941 private foundations
– 490,509 other types of nonprofit organizations, including chambers of commerce, fraternal organizations and civic leagues

In addition there are 317,751 congregations in the United States. This is relevant because In 2011, according to the National Philanthropic Trust the majority of charitable dollars went first to religion (32%) and then to education (13%), human services (12%), and grant making foundations (9%).

That equals about 1.54 million nonprofits of one sort or another competing for the same diminished pot of total funding. I say diminished because the share of the total giving pie in the US peaked in 2007 at approximately 306+ Billion dollars. Since the recession started in 2007, total giving has been consistently under $300 billion and in 2011 was $298 Billion. Assuming those 317,751 congregations are collecting 32% of $298 billion charitable dollars, that leaves $202.64 billion to be divided among 1.54 organizations or put another way and average of $131,840 per organization. Of course the money is not given equally. The statistics note that education and human services get a larger share of the pie. Moreover, the largest most visible charities will necessarily get more from the general public as will those with established institutional donor relationships. These are interesting statistics to consider when analyzing the annual cost to employ a fundraiser versus the average amount of the total giving pie available to each nonprofit.

While total giving has diminished the number of new nonprofits competing for dollars continues to grow….

According to the Urban Institute’s nonprofit section, the nonprofit sector has been growing steadily in size for more than a decade. Between 2001 and 2011, the number of nonprofits increased 25%; from 1,259,764 million to 1,574,674 million today. The growth rate of the nonprofit sector has surpassed the rate of both the business and government sectors. That means an average of 32,000 new nonprofits were created every year. The annual numbers were higher until the recession, over 40,000 per year, but there has been a decrease of about 30% new nonprofits created partly due to the recession and partly due to an IRS rule change.

Giver Profiles:

According to the National Philanthropic Trust, in 2011, the largest source of charitable giving came from individuals at $217.79 billion, or 73% of total giving; followed by foundations ($41.67 billion/14%), bequests ($24.41 billion/8%), and corporations ($14.55 billion/5%).

Individuals who make up the largest portion of giving, typically give in small amounts. “But wait! You say, what about high net worth Individuals?”. Well, they typically give larger amounts to their specific pet causes, and if you’re lucky enough to be one of them that’s great. Only 50 people were responsible for $7.4 billion dollars of total giving in 2012 According to the Chronicle of Philanthropy. BTW that doesn’t count another half billion provided by the Gates’ as part of an earlier 2004 pledge to their foundation. Which brings us to our second largest class of private givers, foundations. Often, really high net worth individuals, companies, etc. set up these institutions to provide funding for the organizations they wish to support; fire walling their donor from their other activities into a neat institutional package the IRS can deal with and that has specific tax treatment rules of its own.

According to the National Philanthropic Trust, the number of foundations increased dramatically (242%) since 1980, but that increase has slowed significantly, 33.6% since 2000; and 6% since 2005. More importantly, according to the NCCS data most foundations are quiet small.

  • 60,000 of 98,000 active foundations have assets under $1 million
  • Another 30,000 have assets between $1-$10 million
  • Only approximately 3,000 have assets between $10-$25 million
  • Only approximately 2,500 assets above $25 million

These organization also operate on the IRS 5% rule — e.g. they are required to give at least 5% [but not necessarily more], of their total assets out annually. And that’s what most do. According to a Foundation center report. The majority stick to that minimum. Between 2007-2009 over 2/3 of the largest 979 foundations surveyed provided only between 4% and 6.9% of their total assets in any given year, with the vast majority (446) paying out between 5%-5.9%. Of the approximately 98,000 foundations the top 50 alone were responsible for about $14.5 billion of 2010 giving according to a Foundation Center Report — That represents 35% of the total foundation giving pie!

According to NPTrust Donor advised funds [typically pooled funding from higher net worth donors who do not create their own foundations] have become more popular. There were 161,873 donor-advised fund accounts in 2010 holding nearly $30 billion in assets. Annual contributions into donor-advised funds were $7.77 billion in 2010 and Donors recommended grants from donor-advised funds totaling $6.18 billion to charities in 2010. However, the average donor-advised fund account size is also quite small relative to NGO need: only $185,087 in 2010.

Do the Math:

Given the statistical increase in nonprofits and corresponding decrease in overall giving, relying on subsidy funding or grants as an NGO’s primary source of revenue is unsustainable over the long term; which may be why the number of nonprofits is finally decreasing. While there were still new entities applying, 2011 saw an almost 16% decrease in overall nonprofits.

More importantly, its why many nonprofits opt for a different alternative to primary dependence on subsidy support. In 2010, the NCCS reported that:

  • 73% of public charity revenue came from program service revenues, which include government fees and contracts.
  • 22% of public charity revenue came from contributions, gifts and government grants.
  • 5% of public charity revenue came from “other” sources including dues, rental income, special event income, and gains or losses from goods sold.

If an NGO’s revenue model is not similarly balanced, but instead heavily skewed to reliance on subsidy funding, then at best organizational development and growth will be a continuing challenge, at worst the organization may have to shutter its operations or merge with another more financially sound entity. What I always advised my grantees as a foundation program director, funder and consultant was to find a program-related income stream based on their mission that could support as much of their general operating expenses as possible. General operating expenses are typically underfunded by foundation support even in the best of circumstances, and individual member supported organizations are expected to keep these costs down as well. A nonprofit looking at long term strategic sustainability should be trying to cover its own operating costs to the largest extent it can while soliciting subsidy support for its ongoing and new programmatic work.

Finally, given the realities of donor support (which typically funds programs first, operations second) and the increased competition for less funding, most nonprofits should be looking to hire new business strategists rather than relying solely on fund raisers to seek subsidy supports. Nonprofits need more individuals that can effectively create and relate sustainable income streams to program missions. No, I am not advising that the answer is a Fortune 500 business specialist for every nonprofit, but rather someone with experience generating rather than simply soliciting revenue for a nonprofit. There is a genuine argument that both are necessary. However, the statistics skew towards insuring an organization can effectively generate revenue through its mission.

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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25 Tips for Evaluating (And Writing) Successful Technology Grant Proposals Now Available

on March 14, 2013
in Blog

This manual is written for grant evaluators in various issue areas trying to make sense of technology grant proposals they receive as well as non-profit grant writers trying to solicit support for their proposals. the ICT challenges and tips presented cut across issue areas and are valid for both the traditional ICT circumstance as well as the Web 2.0 world of social networking and mobile access. Having spent over a decade evaluating and supporting technical proposals as a Program Director and CIO at a large funder, I wrote this manual to share some tips and tricks I learned evaluating technology proposals and implementing ICT projects globally.

Find it and what others are saying about it, here

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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How to Incentivize Measuring Outcome and Supporting Nonprofit Capacity at the Same Time

on October 14, 2012
in Blog

I’ve been pondering a solution to the problem of incentivizing two behaviors in the nonprofit-donor relationship that each want from the other. Donors need program outcome measurements from nonprofits and nonprofits need capacity support from donors. Unfortunately, current sector dynamics don’t incentivize these behaviors and often do the opposite of de-incentivizing them. The real trick is to find a solution that works within the current system of donor-nonprofit support that is easy to implement and not too disruptive. Otherwise, it could not easily be adopted by the approximately 120,000 donors and the 1.5 million charitable organizations in the US alone.

The Problem

Related to the capacity issue, most donors prefer funding program objectives and have clear limitations as to how much nonprofit overhead capacity they will fund, often in the form of percentage ceilings in their grants. In our current system it�s also not in the donor�s interest to support a nonprofit�s organizational capacity over the many years it may need to develop when that nonprofit may only be a grantee for a couple of years. Thousands of new nonprofits literally sprout up each year to meet similar challenges and as a donor�s program criteria changes so do the nonprofits it supports to facilitate its objectives.

Related to the measurement issue, as the number of donors who�ve made their money from metrics-based endeavors like finance and technology has increased, nonprofits have come under increasing pressure to demonstrate measured outcomes and value for the investment made in them. Nonprofits have also been encouraged to manage themselves more like businesses. This is somewhat ironic because unlike businesses that can invest product and service revenue back into their own operations to grow and in turn better measure their progress, nonprofit mission support and back office operational investment are not so well aligned. That�s because nonprofit donors are first and foremost interested in the nonprofit�s ability to meet their funding criteria, not necessarily supporting the operational capacity that nonprofits rely on them for as well. It�s no wonder then, that many nonprofits see this focus on objective metrics as a donor-driven exercise and an increased and underfunded mandate on them. After all, the ability to measure impact is also related to an organization�s internal capacity to do so. If it relies on multiple donors for support a nonprofit potentially has the added burden of tracking and analyzing multiple and disparate measures based on individual donor need.

The Simple Solution

What if the standard grant was modified so that extra support (above and beyond the agreed upon program and operating budget) came at the end of a grant as long as a nonprofit produced credible outcome metrics that it had agreed upon with the donor? The metrics would not have to be positive in terms of program outcome, just honest, to receive the support. And this extra support would be for a nonprofit�s general operating expenses.

The donor could still decide to limit the extra support to a percentage of the grant. However, if all the donors a nonprofit relied upon provided this bonus support in return for these objective metrics, any percentage limitation would be less of a problem in aggregate. Overall the nonprofit�s capacity support might double if it received its standard operating support in a grant and produced credible metrics to meet the bonus funding requirements of each of its donors as well. This would incentivize the nonprofit to internalize metric reporting in order to increase its capacity support while also providing an incentive for the donor to increase capacity support in order to get the metrics it required � a win-win situation.

The nonprofit with increased capacity support would also be in a better position organizationally to provide these metrics — and much more. Another result of this �bonus� capacity funding support in return for broader nonprofit metric reporting might be a natural reduction in the overall funding pool available because of the extra funds provided. However with about 45K new nonprofits coming online each year and competing for limited resources in an already crowded field of 1.5 million would that be such a bad thing? Fewer nonprofits with the ability to provide accurate metrics would be more highly rewarded with an increase in their capacity support, while those nonprofits that could not provide such measurements would see their support diminish.

The result would be more objective reporting from healthier nonprofit institutions, more satisfied donors and potentially fewer nonprofits that were unable to report on their outcomes. And all this could be accomplished within the framework of current institutional giving practices by better aligning the incentives without significantly modifying the grant giving workflow process.

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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Charity Is Not Perfume

on September 14, 2012
in Blog

I just finished reading the Essay by Dan Palotta in the Wall Street Journal entitled Why Can’t We Sell Charity Like We Sell Perfume?. The gist of the article is clear by the title. While I could argue each one of his specific points, the bottom line is that I think the article fails to recognize the unique dynamics of the three major sectors; private; nonprofit; and public (government) and just as importantly people�s expectations of them.

I think what the author is really asking is “Why doesn�t the nonprofit sector operate/behave more like the private sector?” The answer is that the currency each of these two sectors values is entirely different.

The Nonprofit currency – is the trusted source relationship
The For profit currency – is the bottom line

So when after 9/11, when the Red Cross made a completely logical BUSINESS decision to take some of its 9/11 donations and put them aside for the next crisis — it caused a scandal resulting in the removal of the ED and a reshuffling of its board.
WHY? Because the people donating didn�t value the bottom line business decision but rather THE TRUST they put into the Red Cross to use everything they gave for the 9/11 crisis — even if it wasn’t needed for that crisis.
The nonprofit sector is designed to satisfy the more ethical, spiritual, moral, selfless side of our lives and the trust we have in our fellow people.
The private sector satisfies our more tangible and selfish needs � for creature comforts to make our lives easier, more comfortable and subjectively satisfying.

Given the different objectives of the two sectors, it is reasonable to understand why they’d work differently. That doesn�t mean you can’t adapt certain strategies between sectors, but you have to first appreciate the different dynamics of the two to do this effectively. Otherwise you stumble into the Red Cross conundrum.

The author could have written another article asking why the government doesn�t operate as a business. The answer would be that the government’s responsibility is to protect/fulfill the needs of ALL ITS CITIZENS while a business is committed to meeting the far narrower desires of its consumers and bottom line requirements of its investors. In a perfect world the private sector and government should work complimentarily and not exactly like each other (just as the private and nonprofit sector do) – one is the engine of the economy and the other regulates and protects all our interests so the engine doesn�t overheat and explode in our collective faces.

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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Heisenberg and the Elusive Measure of SROI

on January 10, 2012
in Blog

I was having a recent discussion with Steven Wright, fellow traveler and Aspiration Board Member and the Director of Social Performance Management Center at Grameen Foundation. We were discussing metrics and Social Return on Investment (SROI) when he posited, “There is no such thing as a social return [on investment]. The specifics of that return are impossible to generalize in to ‘units of good’ — so the metaphor falls apart.” Recognizing the problem he was alluding to as valid I nevertheless had a slightly different take on the issue that I wanted to share.

I believe social returns actually do exist in the world of strategic philanthropy, social entrepreneurship, corporate giving or whatever incarnation of support is provided with the intention of concurrently creating economic and social value. Social returns only look elusive because of the way we seek to measure them, the tools we use to quantify them and the timeline we use to address them. In short, the �units of good� we attempt to describe are an incomplete measure of social return leading to the conclusion that they really don’t exist.

The problem is not unlike the Heisenberg Uncertainty Principle. This Principle states:
Certain pairs of physical properties, such as position and momentum, cannot be simultaneously known to arbitrarily high precision. The more precisely one property is measured, the less precisely the other can be measured.

Our situation differs from the Heisenberg Principle in that our two measured properties differ. One is physical and the other behavioral. However, by trying to measure both in a similar way using Return on Investment (ROI) metrics as a foundation for defining SROI, Steve’s “unit’s of good” issue rears its ugly head, and we end up imprecisely measuring social return.
As I said, Return on Investment (ROI) and bottom line consumerism deal with tangible transactions [the physical] whose benefits are measured at the time the transaction is made. On the other hand, Social return on investment (SROI) often deals with benefit derived from complex human reactions [the behavioral] that are less tangible and occur over significant lengths of time after the transaction. So let�s compare the two, ROI and SROI, with practical examples to understand the implications of both the physical transaction and associated behaviors related to both:

Return on Investment (ROI): The Short Term Transaction
In our ROI example, Mr. Jones buys a big house. He does so to maintain a standard which also displays his affluence and houses his growing family. As a result of this expensive purchase he makes specific career decisions; works harder into the night; competes harder for that promotion; competes to send his kid to a better school; participates in the community and at the PTA to better them, etc�. All this is completely beside the point however in our ROI example�..

We really don�t care what Mr. Jones does beyond his decision to purchase the house, the primary goal of measuring and reporting on return on investment (ROI) for his real estate agent happens at the time Jones closes on the home. The agent doesn’t even care about Jones� other associated transactions (the expensive furnishings, the Mercedes in the driveway) — unless he also happens to own a car and furniture dealership…

Social Return on Investment (SROI): The Long Term Behavior
As a Vietnam vet Mr. Smith has been having a tough time of it and is homeless, until the Housing for the Homeless Program puts him in subsidized housing. Having a roof over his head allows him to get a job he would otherwise not be able to have because he didn�t have an address. It also limits his exposure to illness which takes pressure off the health care system. Once gainfully employed Smith seeks help for his depression and relationship issues and wins back the return of his daughter from foster care. He can now pay his own rent for the home as well. The mission of the Housing for the Homeless program relates to all these goals: Lifting people out of poverty and making them net contributors to society by putting them in homes with all the supplementary benefits this accrues. The transaction involved in getting Mr. Smith in his home is only a tactic Housing for the Homeless uses to achieve these broader mission goals. Once participants like Mr. Smith get into homes they pay back the original investment in them either in small installments from their new paychecks or through community service.

Applying the same transactional approach to metrics as in our ROI example — we can measure how many homeless were transacted into subsidized housing, and how many subsequently got jobs and paid back the initial investment in them. To what extent the burden was relieved from the health care system is a bit more difficult to quantify as is the success of counseling for many, but it is still possible� Even more difficult to measure is Smith’s increased self-confidence; the fact that Smith told his reunited daughter �you have a future too� and raised her differently; that his daughter subsequently decided to go to med school and 15 years later became a doctor serving her community instead of running away from her foster home and becoming homeless herself; that having his daughter back, Mr. Smith joined the PTA and helped develop a new after school program assisting youth in his community. These subsequent behaviors are not easily measured or tracked in terms of units. The benefits accrue over years � but they are still legitimate socially returned benefits of the program with quantifiable value.

So, in contrast to ROI, measuring real SROI is about the long term behaviors that result from the initial transaction and only partially about the actual transaction itself. Unfortunately, many SROI metrics measure real SROI as effectively as Twitter can relate the core points of a PhD Thesis. Too often, they convey immediate, one dimensional sound bites of an initiative.
The quality of one set of SROI measures over another is often more about how many objective statistics can be related to a specific initiative. For example, technical initiatives like getting kids online often just generate more good objective statistics than feeding hungry kids and trying to track changes in their educational proficiency over time. In the former example, you can not only track how many kids get online but invade their privacy to find out what they are doing with their new found access. Other SROI measurements distinguish themselves by clever assumptions that project rather than really measure impact over time.

So why do we try to quantify complex behaviors that occur over years by applying short term transactional metrics more suited to ROI? I would suggest it is to justify real time, short term, funding decisions that determine whether social initiatives are supported or not.

This raises a reasonable question: Are current approaches to SROI measurement really about proving actual social return on investment? Or are they more about justifying further investment in socially responsible programs by rationalizing decisions with metrics that entities investing their dollars are just more comfortable seeing — no matter how imperfect the measurements really are?
It is completely reasonable for program investors to want to measure something that objectively quantifies success, and for those who receive a program investment to quantify and show results. However, to make believe what is being measured in many cases is real SROI without addressing the limitations, realities and reasons for measurement is what I think causes the dissonance between the resourcers and the resourced in the continuing SROI debate.

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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The Politics Of Truthiness and the Internet

on March 14, 2011
in Blog

Truthiness is about having the right to one’s own opinions and facts. It becomes a problem when objective facts diverge from the opinions of supposedly trusted sources promoting their perspective as the truth.

When Stephen Colbert exercises truthiness (a term he takes credit for coining) he is doing so on Comedy Central and framing it as a caricature of the truth. He and John Stewart act in the tradition of court jesters speaking truth to power through comedy — And they make it clear that is the case.

Contrast this to a qualitatively different use of truthiness; when Glenn Beck makes truthy assertions on a news channel, relates much of what he doesn’t like about progressives to either national socialism or communism, and indicates in all seriousness on his radio show that he is channeling god. He is using truthiness to advance an agenda that he is serious about, on a channel that defines itself as news with the moniker “We Report, You Decide”?. I use Beck as the most egregious example rather than Keith Olbermann on The Left because Beck is helping to spur an actual political [Tea Party] movement while Olbermann just doesn’t have that impact. However, truthiness disguised as news on both the left and right is equally problematic. Unfortunately cable networks are in a ratings war and use infotainment to supplement news. Infotainment does not necessarily have to be truthy but if truthiness serves up better Nielsen numbers it’s used – In fact, this sentence could sadly be the mission statement for FOX or MSNBC.

Truthiness has both a dark and light side:

In the case of faulty conjecture on Intelligence data, it has cost thousands of lives in the last decade.

Truthiness can also be useful for serious issues if it acts to self-correct; That is, if it spurs objective inquiry to get to the truth. This occurred in the vaccination debate where perceived truth based on conjecture that vaccines caused autism led to further scientific research — which disproved the original conjectures and even led to a legal opinion against them in the so-called vaccine court.

Truthiness seems to be used more, and more effectively, on the conservative side of the debate to question objective science like global warming and evolution, as well as a range of other objective truths, (like Obama being born in Kenya, the so-called Clear Skies Act actually reducing air pollution controls, the mandated use of death panels in the Health Care Bill, WMD in Iraq being a slam dunk, etc.). It’s not that The Right is neccessarily better at truthiness, it’s that it is far better at its dissemination; effectively framing its message and forwarding its agenda. Thats because it tends to be more organized, is narrower in its range of disagreements and is better at subordinating individual viewpoints to achieve the group objective. By contrast, the definition of a liberal firing squad is a circle � gaining consensus is like herding cats. One would be hard pressed to argue that the Obama administration has used truthiness as an official tool either more or more effectively than the Bush administration. Another definition of truthiness is that it is the truth you feel. Bush famously worked from the gut while Obama works from the mind.

The viral nature of the Internet combined with emergent social networks offers a unique host to transmit truthiness — like a virus. It’s not that difficult to imagine an intelligently placed truthy rumor causing enough panic to become a security threat in its own right. It’s far easier to imagine truthy information masquerading as junk fact or science and echoed on page after page on the Internet (for example that vaccines cause Autism). Online social networks accelerate this trend by bringing like-minded people together in large numbers, allowing opinion promoted as fact to quickly become fact if repeated enough times and by enough people. There has never been a medium that’s had a more profound effect on mass group dynamics and interaction in 1) real time and 2) without regard to the limitations of geography.

What is also interesting about truthiness in democratic societies and online is that it is not forced by Church or State but democratically promoted by the group and to a more or lesser extent influenced by the celebrity of the truthiness-teller. Witness Sarah Palin’s Twitter and FaceBook following.

What interests me personally about truthiness is that I defined my career at OSI promoting Open Societies through the provision of access to information on the Internet. As the Internet has evolved however, I see the need for mediation that turns information into knowledge and limits the more damaging effects of junk information one receives along with useful information online. Truthiness in broadcast media lasts a news cycle or two and is then lost. Truthiness on the Internet has staying power, and gains new life with every search result. A good green tea metaphor for truthiness is that it flows through the Internet like a free-radical with the potential to cause cancer if not subjected to the antioxidant of objective facts.

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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Baby Boomers, J�accuse!

on March 8, 2011
in Blog

My late French grandmother is smiling down from heaven now that I have finally used her mother tongue, and for social commentary no less�

On Sunday night (March 07) 60 Minutes did an extremely disturbing heart-wrenching piece called Homeless children: the Hard Times Generation. It described 2 million more kids in the U.S. (about 16 million or 25%) now live below the poverty line. This is the largest number since the Great Depression. While pundits try to convince us that adjusting [their] tax rates back to Clinton-era levels is the equivalent of socialism and class warfare, that in this country formerly middle class kids are reduced to doing their homework in the dark with flashlights and candles because their parents can no longer afford to pay the electric bill. Such scenes are more typical of news reports from Afghanistan — or at least they used to be.

Listening to their stories, one realizes this Hard Times Generation is being taught to appreciate and empathize with the plight of others in ways the generation that placed them in their current predicament seems to have forgotten. I accuse my generation of Baby Boomers, brought up in post-war wealth, with the hard fought limitless possibilities presented to it, for the plight of this new Hard Luck Generation. We bare collective responsibility because of the decisions made on our watch when we were primarily at the helm. Every generation has a shot at running things, and the Swan Song of the Baby Boomers as we reach retirement is:

  • The Great Recession
  • Massive debt due to an unsustainable credit binge that everyone indulged in
  • Monumental economic disparity where the top 1% now account for 33% of the National Income
  • Loss of ground in health and education statistics vis-a-vie the rest of the world
  • Loss of standing in the rest of the world due to diminished wealth and perceived strength
  • An unsustainable energy policy that President Carter warned us about
  • Servitude to a military-industrial complex that President Eisenhower warned us about

Ok, we are the generation responsible for the PC, IPOD, the Internet, and incredible new advances in science and technology. Who knew dinosaurs had feathers, hobbits existed in Indonesia and that depression could be cured with a pill (if you were willing to accept suicidal tendencies as a mild side effect)? We are also the generation that reintroduced religion and the fuzzy separation of church and state back into our politics after such activism had receded many decades before. We are a generation that used religious dogma to politically divide our citizens while eschewing religious charity to help our fellow man or be good stewards of the earth.

We are also a generation that fought for civil rights and gender equity. That�s worth a gold star or two, right? Unfortunately, the equity balances we created for gender and race were frittered away creating new economic class inequity that threatens to undermine our society. According to Sam Pizzigati, associate fellow at the Institute for Policy Studies in Washington D.C. “Over the past 30 years, the income of the top 1 percent, adjusted for inflation, doubled. The top one-tenth of 1 percent tripled, and the top one-one-hundredth quadrupled. “Meanwhile, the average income of the bottom 90 percent has gone down slightly.” Wages for most Americans didn’t improve from 1979 to 1998, and the median male wage in 2000 was below the 1979 level, despite productivity increases of 44.5 percent. To make up for lost income, credit card debt soared 315 percent between 1989 and 2006, representing 138 percent of disposable income in 2007.

Our parent�s generation won the World War and the Cold War for us, and we repaid them by going on a personal and national spending binge, with money we didn�t have. We are now in hoc up to our eyeballs to a debt-holder with same the communist ideology they regarded for decades as the single greatest threat to our way of life. So how in only a few short decades did we move from the �Greatest Generation� characterized by self-sacrificing citizens to this more �Shameful Generation� of Baby Boomers characterized by self-indulgent consumers?

Back in the 60�s and 70�s our generation fought for its rights. Now it�s fighting just as hard for the right to keep all the tangible stuff it�s accumulated over the decades. The shift started as an SNL parody, Al Franken�s �Me Generation� in the 80�s, followed by a movie featuring Gordon Gecko and his famous creed �Greed is Good�. Outrageous stuff nobody could truly take seriously. However, Al Franken is now in the Senate and Wall Street took Gecko very seriously, and what started out as parody and entertainment is no longer funny. Our political and private sector leaders have let us down — and those leaders, fellow baby-boomers – are us�

Too many of us don�t vote, and too many of those that do are willing to vote against their and the country�s long term interests in the vague hope that the policies promoted will allow them to aspire to the top 1% — and screw the rest. We talk about the future debt burden to our children while we let the kids featured Sunday night on 60 Minutes fall through the cracks now. We expect the same level of services and fight any attempt to raise taxes or lower entitlements by throwing elected leaders with practical solutions out of office� Can anyone spell I-N-S-A-N-I-T-Y???

Some blame Ronald Reagan for the national shift. While he may have started the pendulum swinging in the �Right� direction it would be rather hard to reconcile his policies, politics and the way he interacted with the other party with his fellow Republicans today. His generation still believed in shared sacrifice and the shining city on the hill — for all Americans. Those who came after him and attempt to speak in his name think more in terms of gated-communities in the valley — for themselves.

The America of today is the result of a cynical, selfish and entitled generation; a generation that turned its back on the same tenants that allowed our society to grow, flourish and provide prosperity to the greatest number of people in the post-war era � Ironically the same era that bred it. What are these values that we now eschew?

  • We no longer value �Made in America.
  • We no longer believe banks are in business to invest in the economy and not themselves.
  • We promote business schools that teach short term shareholder gains at the expense of long term national economic interest.
  • We no longer value limited disparity between rich and pure.
  • We think we value education even while we revile the educated.
  • We think we value science while we employ our political system to undermine it.
  • We aspire to ethical standards and a national ethos no higher than a typical episode of Survivor, and The Apprentice.

Societies don�t function stably for very long with the kind of disparities we now allow – with millions of people falling into poverty and unable to afford healthcare and a decent education. There are a lot of things we used to think would never happen in America. We should not be so naive to believe we will escape social unrest as a reaction to deepening economic disparities at some point in future if we don�t try to correct them. My dear grandmother comes to mind again recounting the history of our Russian branch of the family and the great-aunt who was never quite the same after her husband was killed and she was stoned by fed-up peasants in full revolt as she beat a hasty retreat from the Revolution in 1917.

I have greater hope that this new generation can right things. It knows economic despair, is by nurture more collaborative, and can empathize with its fellow citizens more than Baby Boomers seem to be able to anymore. And maybe if we leave them bankrupt, less educated, unable to afford healthcare and living in a devastated hell scape of extinct species, depleted energy and natural resources it will spur them to exceed even our �Greatest Generation� in turning things around. After all, we Baby-Boomers were left with just the opposite and look how we left things?

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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WikiLeaks /Amazon Threat to Internet Speech? NOT!

on December 3, 2010
in Blog

In her CNN commentary, Rebecca MacKinnon argues that the future of freedom in the internet age depends on holding companies that now act as arbiters of the public discourse accountable to the public interest. I�d argue that in an age of broadened media discourse and citizen journalism it might be useful to distinguish which ones have this responsibility and at what level.

I had the opportunity and pleasure to work with MacKinnon at the Open Society Institute when I was dealing with these issues of media censorship as Director of its Internet Program and then as CTO of its Information program. In this instance I must point to what I feel are a few flaws in her argument using Amazon caving into pressure to pull WikiLeaks in the larger context of our First Amendment rights being threatened in the US by online corporate control.

As her founding status in Global Voices Online and the Global Network Initiative indicate, MacKinnon has been at the forefront of the citizen journalism movement. This movement presumes, I think correctly, that the ability to participate in journalism has been democratized. The Internet has created more, not fewer spaces and opportunities to participate. Anyone can take part and in a variety of ways — in this case even a private company that hawks books and electronics as its core business, with a hosting business on the side.

It’s precisely because news dissemination is no longer the monopoly of traditional newspapers, radio and television that that Amazon situation should not be considered as the sky falling. Amazon made a decision to drop certain content it hosts during the Christmas rush to limit the bad press of being perceived as a national security risk in its own country. Presumably, it simply didn’t help its large screen TV sales… Today however, there are a variety of other citizen journalist sources, corporate and private, and about a gazillion other hosters online that can pick up the gauntlet without incurring the same legal risks Amazon decided it would not take — And any American with Internet access and the will can find them. To underscore this, in the comments section on MacKinnon’s commentary on CNN a commenter freely offered that while the WikiLeaks domain may have been killed it still had an active IP address that he provided. Placing that IP in my browser transferred me to yet another IP, and via the magic of the Internet, to the WikiLeaks site.

As MacKinnon correctly points out, “Speech within the kingdom of Amazonia is not protected in the same way that speech is constitutionally protected in America’s public spaces.” She also points out that the new virtual realm “is largely made up of virtual spaces that are created, owned and operated by the private sector” — maybe largely, but certainly not completely. The fact that public spaces continue to exist on a growing Internet is a net addition to sharing information that did not previously exist in the pre-Internet era when corporate monopolies largely controlled news dissemination.

MacKinnon has decided to draw a line in the sand about a company’s self-censoring a form of free speech that is near and dear to her heart. I haven’t heard her commenting as vociferously on the sexual content (also classified as free expression in our country) that these same companies regularly self-censor as part of their user agreements — and which could at least be argued to be less life or career threatening on a global scale than WikiLeaks data might turn out to be.

MacKinnon points a number of times to the Internet age responsibilities of “companies that are now the arbiters of public discourse” � but as opposed to what? The responsibilities of the pre-internet age media outlets that used to control the public discourse?

As the citizen journalist movement has broadened the discourse to include new players, I’d argue that we must be realistically aware of their limitations related to the public interest even as they participate in the public discourse. Anyone that has read an Assange interview or one about him could reasonably question his balance of public interest versus self-interest. Similarly, most companies exist to make a profit. The extent of their public interest is defined by their accountability to 1) their shareholders, 2) the demands of their customers and 3) regulation which define the legality of their operations. Amazon made a legitimate business and legal decision weighing the number of customers who would stop buying Wii’s because it censored certain speech versus those who would not purchase because it was labeled a threat to their national security. Assange made a similar calculation about his reputation in publishing the leaked and potentially illegal data.

Ironically, a controversial case like WikiLeaks truly showcases the value-add of traditional media companies that do exist to serve the public interest. Unlike the larger group of participants that now engage in citizen journalism around the world, an entity like the New York Times has the investigative, analytical and legal wherewithal to put 250,000 raw emails into context for its readership and vociferously defend its constitutional right to publish them. In pursuing Amazon the erstwhile Senator Lieberman went after a rather soft target. He didn’t presume to mix it up with the New York Times.

I noticed as well that MacKinnon chose a traditional media outlet, CNN, to get her opinion out to a broad audience as did WikiLeaks in choosing traditional media outlets to share its data. So maybe this discourse is less about the new public interest responsibilities of citizen journalist participants both public and private, and more about valuing and protecting the institutions that have traditionally existed to serve those interests. Traditional media outlets do have an important place in this new era of citizen journalism and it would be a shame to view them as archaic and obsolete precisely because their public interest credentials are so clearly defined. They still present powerful public forums to make one�s case.

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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Closing the �Division in Vision� Divide: Reorienting the Philanthropic and Nonprofit Relationship

on June 16, 2010
in Blog

The recently released Disrupting Philanthropy Report explores the implications of networked technologies for philanthropy and provides excellent examples of the changing landscape. However, its most compelling observations may be that the best examples focus on reorienting the relationship between philanthropies and grantees and how they share information and collaborate. While much has been written about the need for nonprofits and philanthropies to change, it often focuses on one or the other as a distinct actor. This overlooks the symbiotic relationship that exists between them unique to the nonprofit sector.

In the traditional philanthropic relationship foundations act as resourcers and NGO�s as implementers. The two are dependent on each other to get the job done. Contrast this with a private or public center entity which resources and implements its own projects from its own revenue sources. The problem in the modern philanthropic resourcer-implementer relationship is that both have slightly different mission objectives — The NGO based on constituent demand and the foundation based on grant criteria which may or may not reflect local demand and is designed to filter the cornucopia of potential grantees. Consider the outcome when an architect (the grantor) and a builder/contractor (the nonprofit) both have a slightly different vision of the end product they support and neither can complete it without the other. A tangible example of this metaphor exists: The Twin Towers collapsed in New York almost a decade ago, and a gaping hole has existed in the ground for much of the decade since. Similarly, many of the problems funders and nonprofits tackle have existed for decades and grown even more complex.

What has caused this �division in vision� and how does it affect the way philanthropy operates?

At the start of the modern philanthropic movement a century ago institutional donors supported a handful of nonprofits addressing major social issues. Identifying �the right� nonprofit handling it best was easier, and philanthropic gate keeping criteria reflected this. The focus was on vetting institutions and supporting their missions. With fewer nonprofits meeting the need, selected charities could also rely on long term funding to support their operations. Fast forward a century with almost one million registered nonprofits, another half million identified charities and about 45,000 new nonprofits starting each year, according to the Urban Institute. Foundation gate keeping has gotten far more sophisticated, and in the process has changed the nature of the foundation-nonprofit relationship. Traditional philanthropy is still based on resourcing the right institutions to meet a mission objective. The difference is that identifying these institutions has become a full time job.

Many philanthropies now create their own complex set of program criteria to insure that a finite amount of resources are directed at deserving institutions. Criteria are sometimes determined by a funder before real demand in the field is even assessed. The result is that grantees are expected to meet the philanthropic institution�s mission objectives before receiving support rather than demonstrating why their mission goals warrant support as the main determinant.

The successful modern grant proposal is often a study in effectively subordinating the nonprofit�s mission objectives, and instead making the case for why its activities perfectly match the mission of whatever philanthropic institution it is requesting support from. The practical effect of meeting foundation missions first is that the nonprofit acts more like a subcontractor to the philanthropic grant giver than a gift recipient meeting its own needs. Moreover, funder initiatives often last only a few years before changing, and with so many grantees, few can expect long term support.

Unfortunately, the philanthropic relationship is still perceived by both sides to operate as it historically has. Much philanthropy still consider the grants they give with strings attached as outright gifts to support nonprofit missions rather than appreciating they are designed to meet their own mission criteria first. Many nonprofits also act as if the grants they receive are outright gifts. They eschew grantor requests for metrics as overly burdensome and wonder why these supposed gifts don�t support their real needs, which include administrative costs to allow for healthy operation and institutional growth. This gap between perception and reality causes much of the dysfunction in the relationship as the two missions compete for dominance. The unacknowledged subcontractor relationship has continued for many years because of what a funder colleague dubbed �the Dance of Deceit�. Here are its steps:

Differences in mission are purposefully underplayed when the nonprofit applies to meet the funder�s criteria and win a grant. Once the grant is won, the nonprofit applies the funds to meet its mission goals and constituent demand. When reporting back, it then retranslates actual use of the funds into satisfying the funder�s criteria. This process is an open secret and has allowed the subcontractor relationship to tacitly operate because philanthropies are typically less focused on how the nonprofit implements its grant and more on the processing required to initially win the grant. Grant selection is a full time bureaucratic process in many philanthropic institutions. A combination of grantees reporting back what grantors wish to hear and often self-serving grant evaluation processes allow grantors to declare mission success. However, the system has started to show strains over the last decade because the chorus to really demonstrate donor and nonprofit accountability and grant impact has grown, exposing the reality of the relationship and its limitations in trying to satisfy two institutional missions.

To address the problem systemically and pull philanthropy into the 21st century the issues cannot be addressed from either the funder or nonprofit side exclusively, but rather by changing the nature of the collaborative relationship between them. The best examples in the Disrupting Philanthropy report speak to addressing philanthropic issues through information sharing, collaboration, smarter investment and metrics that better measure outcome and impact� None of these are new, but they all speak to addressing the issues by focusing on constructive, open, and honest nontraditional relationships between philanthropic institutions and nonprofits. The new ingredient in all this is a highly networked world with technology that promotes collaboration and the ability to create solutions to address this relationship in new and effective ways.

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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Gifts, Grants, Donations and Expectations

on April 14, 2010
in Blog

A philanthropist friend and I were recently discussing why nonprofits don�t �own� the success metrics donors attach to their grants. I argued a nonprofit focuses on its organizational mission and survival while a granter focuses on its program mission when providing support. The granter�s mission often differs somewhat from the nonprofit it employs through a grant to implement it. When the granter adds additional metric �hoops� to jump through to a grant, they reflect the donor�s needs and not the nonprofits, often hanging like a Sword of Damocles over it. Even more ironically, they force the nonprofit to meet extra performance criteria while the general capacity support it desperately needs to perform more efficiently is limited by the same grant imposing the metrics!
Contrast grants and their donor-imposed program criteria and limitations on overhead expenditure with pure donations given to nonprofits based on a request for support or a self-defined need. Donations are also intended for program use, but can satisfy general support and overhead needs as well. Metrics are not attached to donations as a prerequisite to receiving funds although a number of 3rd party entities like,, etc. measure and assess nonprofit efficacy and efficiency. The difference is the onus is on the nonprofit to use and report on donations it gets wisely after they have been received.

Grants and donations are technically both gifts but they have very different meanings and foster different perceptions and behaviors.
Websters online defines the noun donation as:

  • Making of a gift especially to a charity or public institution
  • A free contribution

It defines the noun grant as:

  • Something granted; especially: a gift (as of land or money) for a particular purpose.

So both are gifts, but by definition grants have strings attached, while donations don�t.
My philanthropist friend pointed out, �Donors typically use grants and gifts interchangeably�. I agree, and in my experience in the sector, nonprofits typically equate donations and gifts. The result is that when granting institutions and nonprofits use the word gift, they have different perceptions of what that term means. To a donor it�s perfectly reasonable to give a gift with strings attached that first must meet its goals (a grant). What the nonprofit expects is a gift with no strings attached to meet its goals (a donation). The interchangeable use of these two terms as gifts creates perceptual dissonance in the way nonprofits react to grant-imposed requirements like metrics. Nonprofits assume all gifts are designed to meet their mission and operational goals. Grants just seem to have those additional pesky requirements that must be satisfied or at least paid lip service to.
Granters perceive grants as they are defined; gifts for a particular purpose with requirements to meet � specifically their program goals and measurements. Many nonprofits actually have to massage their goals to meet granter criteria before they can receive their �gift�. My philanthropist friend pointed out that �Some donors attach strings to grants and others don�t�. If donors are giving gifts with no strings attached then these �free contributions� as Webster defines it, are actually donations and not grants. In these instances, both donors and nonprofits have the same understanding of a gift. Unfortunately, what is actually a donation is mislabeled a grant, because the lawyers say that�s how it must be structured.
More typically however, grants have one or more of these characteristics and reflect a donor�s perception of a gift but not a nonprofit�s:

� They must first meet donor program funding objectives before being provided
� They have prerequisite criteria attached to them before the nonprofit receives funding.
� They have strict expenditure requirements/limitations.

Nonprofits benefit from grants � through a symbiotic relationship that hopefully accomplishes their goals after meeting the granters. Granters might wince at this description because they try to do the right by gifting to nonprofits. However, if nonprofits must first modify their goals; meet granter criteria to receive funding; and are restricted from applying funds to meet their capacity needs; it�s fair to say they are meeting granter objectives before their own.

It�s the difference between giving your kid a toy you know he�ll love because it�s what he wanted and giving your kid a toy that you feel will suit him best based on your idea of an appropriate toy. Yes they are both gifts, but the intent differs, and in your generosity you are meeting your needs first � otherwise you�d just give the little darling what it wants. Meanwhile junior is happy he got a toy � but it�s not exactly what he wanted, and why is that [thinks junior] if you were already generously giving out toys?
My philanthropist friend referred to a �Dance of Deceit� that occurs when nonprofits and granters engage in negotiations that knowingly bend grant criteria rules. The steps involve granters finding loopholes around their criteria to satisfy real need and nonprofits reclassifying overhead costs as program expenditures so they can use funds as if they were unrestricted donations. The dance of deceit allows both sides to feel the granted gift functions more like a donated gift.

Unfortunately, to make grants feel like donations, both sides engage in variety of dysfunctional activities that are open secrets in the sector. How else can one rationally explain the �Dance of Deceit�; or focusing on a nonprofit meeting criteria during grant processing, but not following up to ensure it has during implementation; or nonprofits reporting back their expenditures in the right buckets by juggling a variety of income sources and using creative accounting to make the numbers work; and finally that old favorite, the self-serving evaluation that allows both granter and nonprofit to declare success whether real or imagined.

The sector would be better served if all parties acknowledged the difference between donations and grants and whom they are primarily designed to serve. Expectations would be more realistic on issues like capacity support and metrics. For example, we might ask, �Is the nonprofit sector better served by individual targeted program grants with prerequisites success metrics, and do they really foster broader efficiency and efficacy in a nonprofit; or are donations better at meeting these needs, with objective third party institutions applying general efficacy and efficiency metrics across the sector?�

Jonathan Peizer is the Principal of Internaut Consulting supporting foundations, nonprofits, governments and socially responsible private sector initiatives. He is the former CIO/CTO and Director of the Open Society Institute’s Global Internet Program.

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