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

By Jonathan Peizer
on June 16, 2010
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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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Technology Turnabout – The Nonprofit Haves and Philanthropic Have Nots

By Jonathan Peizer
on February 1, 2010
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A funny thing happened on the way to implementing 21st century technology in the nonprofit sector. Nonprofits pulled well ahead of their philanthropic underwriters in the innovative use of technology to support their missions. In April 2010, the Nonprofit Technology Network (NTEN) will be hosting another of its ever expanding, content -rich conferences on nonprofit�s use of technology. The event is typically under-attended by foundation folks, although the original intent of the founders was that NTEN would spur technology innovation for philanthropies as well. By all accounts, the NTEN conference is a dynamic, inspiring and educational annual event. In sharp contrast, I was part of an effort some years ago by a variety of philanthropic personnel using technology in their respective program areas to spur more innovation in that space. The group was called the Innovation Funders Network (IFN). Having failed to get philanthropies on the NTEN bandwagon, the thinking was that more insular foundations needed a sandbox of their own in order to share ideas and develop technology innovation. IFN lasted only about three to four years (and two conferences) before disbanding for lack of interest and financial resources.

In fairness to the philanthropic sector, there is an extremely competent TAG group affiliated with the Council on Foundations whose membership primarily includes the administrative IT staff of medium and large foundations. The Council on Foundations undertook an effort last year to identify the priority issues facing philanthropy in the 21st century on a broader programmatic scope � an effort I was also a part of as a consultant. A paper was produced and is now being actively promoted to its membership, and more broadly to make philanthropies aware of the priority issues. What will come of the effort implementation-wise is a work in progress. However, it�s telling that the number one identified priority was the simple application of standard data fields and taxonomies to the grant application and reporting process. It�s a process similar to most foundations requesting input from grantees, but made highly unique and over-complicated because philanthropies in aggregate still spend millions if not tens of millions of dollars to develop their own unique grant tracking systems and processes.

Despite the downturn, many philanthropic institutions still have the money to spend on technology, and many are using it to benefit their back office processing. Too much money is not always a good thing however, when it spurs development of unique, traditional, one off solutions. There are a number of additional reasons to explain the dichotomy of resource-poor nonprofits making the most of cutting edge technologies to effectively support their program missions while philanthropies lag in this area:

� Ironically, an issue that has always been a challenge to nonprofits � high turnover and low salaries � is now an advantage in the area of technological innovation. Young people at the start of their careers continue to populate the nonprofit workspace. The difference now is that they were weaned on social networking technologies and ubiquitous, affordable consumer devices and it is a part of their communication DNA. By comparison, philanthropic staff tend to be one to three generations older and not as familiar/comfortable with the new technologies or their application.

� Behaviorally, the new technologies work for the nonprofit and against the traditional philanthropic organizational culture. It�s the nature of nonprofits to reach out, engage and network with their constituents and the current set of online technology tools are specifically designed for this purpose. By contrast, traditional philanthropy creates a firewall between itself and its grantee, limiting outreach and social networking with constituents.

� The affordability of current technology cannot be overemphasized. The historic barrier to nonprofit access of these tools was financial, both in terms of the tools and the trained personnel to use them. There now exists a ubiquity of useful web applications, from surveys to online solicitations � including specialty applications for nonprofits like advocacy and human rights. Nonprofits and philanthropies both like to think of themselves as unique, but the former has been far more inclined to use standardized affordable technology than its philanthropic counterparts who still have the resources and inclination to build unique solutions.

It is both inspiring and a healthy evolution of the sector that nonprofits now have the access, impetus and personnel to apply the new technology tools. What is distressing is that their philanthropic counterparts still lag behind in their understanding and use of these same tools. Philanthropy in the 21st century is being reshaped by online networked technologies and new types of philanthropic initiatives. witness the Iranian post-election crisis and Haiti relief. It�s incumbent for traditional philanthropy to get ahead of the technology curve if it doesn�t want to become a historic artifact of the 20th century.

For a list of nonprofit actors spurring technology use among nonprofits see:
eRiders.net – Mission Driven Technology Support for Non Governmental Organizations.
Idealware.org – For the latest review of said tools.
Netsquared.org challenges website sponsored by Techsoup featuring the latest cutting edge applications for the social sector and other similar challenges.
NTEN.org � Nonprofit Technology Conference and website.
Socialsourcecommon.org – A social network of nonprofit software tool users sharing their favorites.
TechSoup.org – The largest International distributor of software to the nonprofit 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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Social Networking Across Generations and its impact on the NGO Sector�s Work

By Jonathan Peizer
on June 19, 2009
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Once again the importance of social networking has been underscored by what�s happening in Iran with its predominately youthful population. In crisis mode, turning to these tools seems far more democratic across generational lines than it does under normal circumstances. I�ve been grappling with this issue as I hear from fellow [middle] aged peers about their personal use of social networking tools. Even technologists of my generation using these Web 2.0 tools often make limited or extremely focused use of them to meet specific objectives. They are typically not using them as a principal means of interacting with their peers in the same way their twenty-something colleagues do.

One can make the argument that individual generations are defined by their emerging technologies — the ones that separate them from their fuddy-duddy parents. However, while Web 2.0 may define the millennial generation, different generations inevitably use the same tools differently based on formative experiences with technologies of their own generation.

The millennial generation has defined its social interactions around interactive Web 2.0 technologies like Twitter and Facebook � and they also accomplish specific objectives with these tools like electing progressive leaders of the free world and contesting elections in repressive regimes. By contrast, my generation, who currently occupy strategic management positions in many nonprofits and philanthropies, were raised on broadcast technologies like MTV that informed our socialization. We read newspapers and watched content on at pre-existing times on TV, (not 24/7 on mobile devices). We were amazed at how transformative e-mail was and it remains our core technology. Privacy seems a useful if not quaint notion to this generation as long it doesn�t interfere with their online social interactions. By contrast, my generation winces in horror at sharing personal information online. Do one billion Internet users and potential employers really need to see images of us being stupid at a Christmas party, we ask?

So it�s not surprising that my generation often perceives the utility, but not the necessity of incorporating these Web 2.0 tools as indispensable components of our core social interactions. Why should we? We actually grew up without them and by some miracle maintained close ties with friends and family � all without a single tweet!

Personally I “tweet”, but not because I want anyone knowing what I am doing 24/7 (god forbid). Nor do I want to know the whereabouts of a few hundred of my closest friends. I tweet a message a day on news topics of relevance to strengthen my ability to present complex arguments or concepts in 140 characters or less � to really interact electronically I use e-mail and occasionally instant messaging. Sometimes I even use a phone — with real wires attached.

What does this say about older technologists and nonprofit managers, new technologies, and the future of their successful deployment in foundations and non-profits? We�re all cognizant of the mad dash to apply these tools to every form of philanthropic and nonprofit endeavor. To stay pertinent, CNN has become a continuous advertisement and guilt trip for the use of social networking tools, (their unspoken motto: �We tweet therefore we are� relevant�). In the process they have unfortunately conflated staying perpetually informed and socially networked as one in the same concept. If you are not following this or that anchor on Twitter, you must be a flawed or damaged human being. Most �older folks� over thirty-five or forty, have real issues with this. I readily acknowledge some in the over thirty-five crowd completely hip to social networking who live and die by this or that tool. For the rest, I say �Relax, you�re not completely out of it, you�re not flawed in some way and most importantly, you�re not alone. You are simply part of a different generation�. Accept it.�

With acceptance comes healing� While you may not use the technology the same way, or appreciate why sending virtual seeds and cookies through Facebook is at all relevant to your existence; it is still incumbent on you to appreciate how these tools are used effectively. Listen to those young whippersnappers and then apply your wisdom of experience to adapt it to the strategies and objectives of your organization. Defer to younger colleagues with really interesting and intuitive suggestions for applying social networking in ways you would never even consider� You don�t have all the answers because you didn�t grow up with these tools. Don�t be intimidated by someone half your age who knows better about using and applying these tools to their generation than you do. If you learned a second language in your 40�s and came across a twenty-something that speaking same far more fluently and without accent, would you be surprised? Same difference. You don�t have to use or understand the tools in the same way as younger colleagues. You do have to be open to their adoption and new ways of operating with them, utilizing the talent and experience of those younger colleagues.

Ironically, nonprofit�s are in a far better position than philanthropies. For once the rapid turnover and often younger staff who populate them come to the job with social networking in their DNA. Philanthropic turnover is far lower and decision-makers are often 2-3 generations removed from the latest technologies. It is incumbent on these decision makers to listen to younger tech-savvy staff and nonprofits they fund for guidance. The relationship is symbiotic; nonprofits need philanthropic support for these initiatives. Philanthropies with questions that lack in-house expertise can turn to a variety of excellent third party non-profit technology support providers including Npower.org, Techsoup.org, Aspirationtech.org to name a few.

Finally, to my aging peers, take heart� Those twenty-somethings will be forty and fifty-somethings soon enough and they will deal with the same issues of a newer generation�s technologies. I�m hoping to retire before tech-implants become the rage�


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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20 Tips Every Strategic Grant Seeker Should Know Now Available

By Jonathan Peizer
on November 12, 2008
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This manual is written for every grant seeker wanting to do a better job of translating their passion into successful grants or who have walked away from donor interactions wondering what they were thinking. It explores the key issues from a grant maker’s perspective, providing grant seekers insight into the dynamics of the donor decision making process and the reasoning behind it. Most importantly, it lays out strategies to leverage these dynamics.

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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A Baby Boomer’s Ever So Slightly Cynical Take on Social Networking Tools

By Jonathan Peizer
on June 3, 2008
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I grew up with technology�. Well, sort of.

When I was in grade school the Texas instruments calculator was introduced. I played the video game pong in high school, and by the time I got to college I had an Atari 800 computer and was playing Pac Man. In those years, they were moving from punch cards to monitors on the college computer, and I got a summer job working on a state of the art IBM mini-computer, the latest rage. When I graduated university in the early 80�s they had managed to shrink computers yet farther from full sized refrigerators to those little port-a-fridges. That afforded me the opportunity to work on a groundbreaking �manual-process-to-PC�conversion project at the financial institution I was employed at using a state-of-the-art Apple III. I think I was one of four people that actually ever worked on this evolutionarily dead-end machine seemingly introduced as an afterthought as Apple was transitioning to the MAC. By the mid-80�s I had forgone weight training because lugging around my twenty pound �light� laptop made it unnecessary. And yes we had cell phones too, the problem was they were just as heavy as those laptops and airlines had weight limits after all� By the late 80�s I was working with networked PC�s and e-mail and by early 1995 my organization had its first fully blown web site. The point is I have worked with technology throughout my life and embraced it. What has surprised me as I get older and a totally new generation enters the workforce is the extent to which the current web 2.0/collaboration technology mirrors the characteristics of the generation it serves� and not my own.

I�d always thought technology to be a rather utilitarian and unbiased animal for those of us willing to embrace new gadgets and applications as they came along. My epiphany has been that rather than being the generic digital �hammer and screwdriver� I�d always imagined it to be, new technology adapts to the generation it serves. On the other hand older generations must adapt to the technology serving the new generations need�s. I�ve also learned you have to be a certain age to appreciate this truth.

My dirty little secret is that as a self -defined lifelong technologist, comfortable with testing the newest thing — I find myself either less interested in some of the new technologies. I also use them quite differently than younger colleagues because of the characteristics of my generation that are different from theirs. I imagine I am not the only one in my age group with a general comfort with technology who feels this way � I think most of us stay in the closet about it because it�s not cool to be less than euphoric about the latest Web 2.0/3.0 trend .

As a not-yet-so-ossified Don Quixote tilting at my PC let me out myself. I was alive during the Kennedy assassination — the first one, although admittedly less conscious of my surroundings than I was my rattle. That makes me a late baby-boomer; Not quite ready for the old age home — or even old enough yet to paraphrase Bill Clinton�s line on his 50th birthday about seeing more yesterdays than he would tomorrows. This makes the fact that I am seeing this difference in generational use of technology in my early middle age all the more amazing and disconcerting to me.

It turns out that if one self-identifies with Al Franken�s �Me� generation — the one that didn�t trust anyone over 30, questioned everything, was far more privacy conscious than collaborative and more likely to define ourselves by the hierarchy we belonged to and what we did in it than what we liked to do as people � Well, then I am afraid, like me, you are far more likely to have difficulty embracing technology tools defined by a generation that loves to collaborate, dislikes hierarchical entities of any sort and seemingly is so trusting of others that it is willing to abandon any semblance of privacy for the benefit of bearing all online to friends, perfect strangers, potential employers, web-surfing maniacs, etc�

As one of the many failed presidents of my generation once said, �Let me make this perfectly clear�: I am not dissing the technology. It�s extremely useful to the generation it was defined for as well as for my own. The difference is we older technology users have a harder time adapting it to meet our needs because of the way we were nurtured. We tend to be far more utilitarian about deploying it to fill a niche need than we are integrating it as part of our lives like some sort of borg extension of our collaborative abilities.

Twitter: For those of us who grew up on the doctrine of �plausible deniability� the coolness of Twitter escapes me. Why would I abandon all pretense of privacy to let everyone know where I was for 24/7 excepting the occasional potty break escapes me, (fortunately at least there are now drugs that both ensure regularity and these few moments of privacy). Twitter innocently asks the question �What are you doing?� My instinctive answer is somewhere between �None of your business and who wants to know?� In my defense, its reciprocal � I also don�t want to know what everyone I know is doing either. Now it�s true you can filter twitter � but that creates the same problem that ATT encountered when it introduced the failed video phone in the early 60�s. It turns out that if you turn off you are being impolite, or worse, all too mysterious. �Why can�t he be twittered? Not burying bodies in the Jersey Marshes again is he? What a nut, no really, what a nut! And he knows my every move.�

When is twitter useful to my generation? As a targeted tracker for targeted people when logistically staying in touch for particular situations is an imperative. So help me though, nobody I know is ever going to know when I am visiting the mall�.

MySpace: Even the name is antithetical to how my generation operates. The last thing I would think of doing is putting MY space on public exhibit.

Blogging: At last they�ve married the intimacy and inanity of keeping a personal diary with the complete lack of privacy that being online affords. I have tried blogging numerous times and have never kept up with it consistently. While not often accused of humility I am equally as incapable of the narcissistic intensity required to share my stream of consciousness on an ongoing basis with anyone that will listen. Perhaps if I were boarded up for multiple years in an attic hiding from Nazis I could manage the strength of character to do it, but that�s about what it would take. On the plus side I see the benefit of the millions of dollars saved in Ritalin, and psychiatrist fees that venting online affords some. Prospective employers are also afforded the option of avoiding significant mental health insurance costs and hiring mistakes costs by screening out the next Charles Manson in their midst � although in MySpace�s defense, its richness of features is far better at holistically defining a well-rounded sociopath.

When is blogging useful to my generation? For occasional short posts about targeted issues and entities we want connected associated to know about �and- when collecting ones thoughts to craft a longer more thoughtful article that actually follows some rules of grammar and spelling is not an option� I will however keep what I thought, about what she though, about what he thought to myself�

RSS Feeds: Just when I thought spam mail did not distract enough of my attention comes RSS feeds. They allow me to dump even more information I will never possibly get to into my mailer or separate reader . And now I have the ability through del.icio.us and other similar vehicles to share the information I am not getting to with others – so they too can add to their distractions and feel guilty about the various biased viewpoints spilling into their feeder that they possibly don�t have the time to review either. RSS feeds taught me to understand the power of nurture and how we are taught to behave. I grew up on newspapers, so when they went digital it was somehow comforting to visit the New York Times, BBC and CNN sites and view their formats rather than simply sucking them dry through an RSS feed and dumping all that information into a nameless, generic reader as the new generation of Millennials is far more apt to do.

When is RSS useful to my generation? Seriously, it can be very useful if you cherry pick what you really want to follow and avoid the rest, rather than assuming, like the CIA, that if you simply collect everything that you are actually applying the appropriate thinking and analytics to actually make use of the information!


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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New Online Nonprofit Capacity Resource: Capaciteria.org Now Available

By Jonathan Peizer
on November 15, 2006
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Capaciteria is a FREE service designed to help nonprofits find the best resources to build their institutional capacity. Nonprofit capacity support is a critical issue, and like all mission-based issues nonprofits deal with, resolving the problem has two major components. One involves tangible resourcing. The other involves useful information to help nonprofits make better decisions just as they assist their own constituencies. Capaciteria addresses the information component of the nonprofit capacity support issue by providing useful resources.

Significant effort has been made in collecting the resources that are often most desirable and sought after: nonprofit jobs, donation and in-kind resources, philanthropy resources, advocacy resources, and volunteer resources in addition to the categories like financial management and accounting, evaluation, telecommunications, human resources and a variety of other categories of resources that were added.

You can find this resource here

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Nonprofit Capacity and Sustainability : Old Problems, New Solutions

By Jonathan Peizer
on September 11, 2006
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Despite many in the philanthropic sector promoting the need for nonprofits to function more professionally in terms of organization, management and accountability, few address the capacity issue strategically and in ways that help nonprofits upgrade their skills in these areas. The private sector appreciates that investing in organizational infrastructure and administrative expertise is fundamental to achieving bottom line objectives. A clear cycle of benefit exists as well. Organizational efficiencies are created, which reduce expenses and assist in generating more profit a percentage of which are recycled into further capacity investment and productivity gains. Unfortunately, this clear association of benefit to investment does not translate well in the co-dependent grantor-grantee relationship.

A philanthropy investing in its own organizational capacity will not necessarily affect grant outcomes of its nonprofit implementing partners. On the other hand, investing in the long term capacity of its nonprofit partners may not be in keeping with philanthropy’s mission objectives either when the mission focus is tackling various issue area needs it defines with short term (1-5 year) interventions working with multiple nonprofit partners. Completely separate from the philanthropic mission objective, the nonprofit implementer is focused on its constituent’s need and sustaining its operations with missions typically far broader than the narrow parameters of any individual donor grant.

In no area of the grantor-grantee relationship are the objectives more divergent, and the needs more urgent. How can a nonprofit ever hope to achieve its mission objectives effectively and efficiently without proper institutional investment What’s more, chronic underinvestment in nonprofit organizational capacity directly affects outcomes and insures that a certain percentage of philanthropic investment is wasted on inefficiency. Yet, the sheer number of nonprofits vying for support and the tens of thousands of new ones created each year all but insures this situation will not improve using traditional philanthropic approaches.

Why chronic underinvestment is is nonprofit capacity allowed to continue when it’s clear to all that it is required and that impedes operational efficiency?

The short answer is that the institutional dynamics of philanthropy are already geared to throwing money at problems to fix them rather than exercising more traditional and methodical organizational management approaches to avoid them. External factors and responsibility to constituents, and stakeholders that pressure other sectors to adhere to more orthodox and methodical approaches to organizational management don’t apply in the same way to philanthropies. They are not responsible to their grantee constituents in the same way the private sector answers to their stockholders and nonprofits to is stakeholders. A company that does poor customer service sees a bottom line impact. A foundation that doesn’t answers its proposers and grantee requests suffers very few consequences. The result is less pressure to employ orthodox operating principles to avoid problems both internally and externally, and both an institutional culture and more resources available to fix problems after they occur.

Underinvestment in nonprofit capacity is therefore allowed to continue because foundations can afford the inefficiency. It’s still cheaper to have 20%-25% of a grant invested in a nonprofit implementing partner lost to inefficiency than it is to support its capacity investment requirements over a five to ten year period. Such an investment does not typically meet the philanthropy’s short term issue area objectives, and if opens it up to the same type of support requests from its multiple nonprofit implementing partners.
The other important point to consider is that chronic underinvestment in capacity often impacts nonprofit efficiency far more than is does efficacy. Many nonprofits are quite effective at meeting mission objectives for themselves and their philanthropic partners while operating inefficiently. Why? Nonprofit dynamics explain this dichotomy. They are often staffed with dedicated, mission-oriented folks that will work by candlelight with pencil and paper if no electricity and a computer exist to get the same job done. In the absence of capital businesses go bankrupt, but nonprofits often linger on with the most tenuous of resources because of the sheer will of individuals to continue the mission. Nonprofits are not based on the premise of generating financial resources to survive, and as a result, lack of them doesn’t necessarily stop them from operating. it just stops them from operating efficiently. Thus philanthropies can still report “mission complete” in the annual report working with their less than efficient, under-resourced nonprofit partners who may still be effective at their work. If efficacy was affected by said under-resourcing in the same way efficiency is, chronic nonprofit capacity issues would have been addressed long ago. Ironically however, like the chronically drunken employee who can still operate effectively enough to keep his job, the ability of capacity-poor nonprofits to still produce results while covering up their operating inefficiencies allows the problem to continue without having to address it strategically sector-wide.

This problem is even further exacerbated by the drive for nonprofits to demonstrate how low their overhead expenditures are as a percentage of program execution. The irony is that nonprofits are never invested in at the outset to the degree they need to hire expertise and implement the organizational management techniques and methodologies that would make them more efficient. Rather, operating in their inefficient forms they are asked to reduce their administrative costs as a percentage of program execution even further to demonstrate their efficiency!

To be fair, there are nonprofits that manage themselves well and take great care in developing appropriate infrastructure. There are also grant-makers that focus on supporting individual organizational capacity. However, this doesn’t change the fact that the institutional funding paradigm on the macro-level is not designed to efficiently handle capacity support to the vast majority of NGOs that need it. Capacity Support must somehow be delivered in the same way it is set up to effectively to support program activities.

The Revenue Solution

The private sector avoids chronic capacity underfunding by generating revenue to invest in its own capacity and grow its business. Nonprofits can do the same, within limits. Specifically, revenue generation is limited to generating related income to support nontaxable activities if a nonprofit wishes to legally maintain its nonprofit designation. This is a problem to a lesser or greater extent depending on the nonprofit and the issue area it is addressing. A nonprofit involved in health and education for example, has many opportunities, and a rich tradition of examples to draw upon to develop fee-based goods and services that fit its mission. Constituents are also used to paying for these services delivered by nonprofit hospitals, clinics, student exchanges, etc.. On the other hand, a human rights organization with a mission to disseminate information as broadly as possible might have a more difficult time monetizing its information if selling it undermined its mission by creating a roadblock of cost.

The human rights organization example touches upon an important philosophical point that some nonprofits use as an excuse to limit their opportunities for generating income. Just because some revenue-generating opportunities potentially compromise mission, doesn’t mean all do. Opportunities must be explored in the new reality that we live in. Depending on donations to cover 100% of operations may have worked historically. However, it’s getting more difficult in this new economy with so many more institutions competing for funder dollars, and greater pressure for nonprofits to show they operate both effectively and efficiently. I advise nonprofits to develop revenue solutions that cover as much of their overhead costs as possible so they can begin investing in themselves. Overhead is what individual and institutional donors alike typically don’t like to fund. Programmatic support is far easier to get, especially if a nonprofit can show it is viable even without the donor’s support over the long term – another benefit of self-generated revenue.

The current philanthropic-nonprofit grant relationship with nonprofits often needing to meet donor grant criteria to receive funding already operates like a subcontracting relationship in many cases. Nonprofits should analyze if some of the expertise they offer to philanthropies to implement programs might well be better packaged as legitimately sub-contracted services for a fee.

New Models of External Capacity Support

Aside from nonprofits generating their own revenue to invest in themselves, the way in which nonprofit capacity support should be delivered and underwritten by donors must be fundamentally altered to make it more efficient. Defining the capacity support issue as a sector-wide problem, a few bold institutions and donors have addressed it using technology and other tools to meet the capacity needs of client nonprofits. Rather than supporting internal capacity of individual nonprofits, a model of external capacity support around aggregated demand has evolved. Nonprofits are buying into a high-quality capacity support service delivered at a reduced cost by other nonprofits.

The emergence in the last decade of Technology Capacity Support Organizations (TCSOs) has benefitted the sector and helped it better make use of technology and tools. These support NGOs are dedicated to providing a variety of ICT assistance specializations, from technical support to training to application development, hosting and sales of discounted software. NPower, TechSoup and Aspiration all fall into this category of NGO support organizations. These entities generally operate on sustainability paradigms that are a combination of revenue generation and donor subsidy. Overheads are kept low and deals are struck with for profit technology vendors so ICT services and products cost less to nonprofit recipients.

Support intermediaries for nonprofits are not limited to the technology discipline. Management Capacity Support Organizations (MCSOs) in fact predate them and have evolved to provide organizational, fiscal, evaluative and other necessary management and administrative support services to nonprofits. Innovation Network, Alliance for Non-Profit Governance, Bridgespan and Compasspoint fall into this category. NTAPs are therefore not simply a product the Internet revolution but rather an evolutionary trend that recognizes the traditional capacity support funding paradigm, technical or otherwise, is simply less effective than it used to be.

A third set of intermediary Advocacy Capacity Support Organizations (ACSOs) has evolved more recently. Organizations such as Media Rights, Greenmedia Toolshed and the Media Action Center all provide nonprofits with advocacy and promotional expertise to better craft and distribute their messages. These activities are often part of a mission driven program to affect a particular social ill so they suffer less from lack of administrative overhead support. Rather, lack of expertise in this area is often the result of nonprofits general cognitive dissonance to promoting and marketing their activities. In a sector where the currency of choice is the trusted source relationship, nonprofits rely on their work and not what they advertise about it to enhance their standing with peer organizations and grant-makers. As a result, promotional and advocacy skills are often underdeveloped, and become capacity issues.

The fact that all these nonprofit capacity service agents exist and have evolved over the last couple of decades on their own with little strategic guidance prove the compelling nature of the external NGO capacity support model.

Intermediary Capacity Support Organizations (ICSOs)

I classify the range of organizations operating to deliver these services as Capacity Support Intermediaries (ICSOs). The benefits of ICSOs providing high-quality services to nonprofits are numerous:

  • ICSOs allow for the introduction of standards of service/support delivery and sharing of best practices across institutional clients. Nonprofit clients typically compete for funding and are often pressed for training time. They don’t necessarily learn from each other or from grant-makers without a trusted source intermediary providing support and delivering best practices.
  • ICSOs provide pragmatic service at a lower entry cost to nonprofits than most of their private sector counterparts. In a sector where the currency of choice is the trusted source relationship, the CSI providers share a basic set of mission principles with the nonprofits they serve.
  • ICSOs collect significant and invaluable metadata on a statistically relevant number of nonprofit clients. This data can be used to identify strengths and deficiencies on a sector-wide basis. Objective data polled from nonprofit clients allows for developing more effective support strategies for the entire sector.

  • ICSOs provide a more efficient way to insure that all the nonprofits a grant-maker uses to meet its objectives operate at peak efficiency. Most grant-makers fund initiatives by vertical issue area (health, education, etc.). However, capacity issues cut horizontally across the entire portfolio of supported nonprofits. Grant-makers can opt to employ intermediaries to fill in the capacity gaps of their entire portfolio rather than individual institutions.

  • ICSOs offer an opportunity to solicit grant-maker support for capacity using paradigms philanthropies are comfortable with. Grant-makers already support nonprofit programmatic goals. Supporting the programmatic mission of a nonprofit CSI delivering capacity services to other nonprofits is similar. Alternatively they can be subcontracted to service grantees.

  • ICSOs create a much cleaner cycle of benefit and reinvestment for all involved. After an initial donor investment, most CSIs are built on models of sustainability that cover their administrative costs through services rendered to the nonprofit community. Nonprofits buy into this more efficient capacity support at lower entry costs, improving their effectiveness and leaving money to spend on other necessary activities including self-investment.

  • ICSOs provide a far more cost effective model to solicit grant-maker support for a single institution whose mission is to service the capacity of a thousand nonprofits in a consistent manner than for one thousand institutions to solicit that same grant-maker for individual and different capacity needs.

Good, Better and Best Solutions

The natural evolution of ISOs to cover a variety of needs suggests that a revolution in nonprofit capacity support is taking place. This new paradigm however must be leveraged far more strategically by grant-makers and nonprofits. Issues that individual ICSOs address are all related, and reflect a problem suffered by NGOs globally. In defining the good, better and best of all possible worlds going forward:

Supporting discreet intermediary organizations for a particular sector, geography or problem area is good. The development of leading ICSOs to cover each area of capacity support is necessary and is happening. These models need to be adapted to different local circumstances (i.e., the developing world). International E-riding, which provides technology support to various sectors and geographies is an example of this.

Supporting a coalition of intermediary organizations dealing with capacity issues in a single problem area is better. The nonprofit Technology Enterprise Network (NTEN), a coalition of organizations focused on nonprofit technology support is an excellent example of this. Another more general example is Grant-maker’s for Effective Organizations (GEO) is a coalition of domestic US grant-makers focused on moving philanthropy forward and strengthening the capacity of supported grantee organizations.

Supporting ties between MCSOs, TCSOs and ACSOs is best. This is still a largely unaddressed strategic issue. The work of these entities is interrelated. Although developed external to NGOs and delivering services to them, they need to operate together more cooperatively.

This new model of capacity support will not help all nonprofits everywhere at once. However, it will assist far more nonprofits to address their capacity needs strategically than the current approach of funding bits and pieces of a single nonprofit’s capacity in shell game that allocates part of program grant to administrative overhead. As with most initiatives necessitating a paradigm shift, progressive grant-makers acting collaboratively will be necessary to underwrite the initial investments. However, this model of capacity support is built upon ICSO sustainability through aggregated demand over the long-term. There are already working models and empirical data that suggest this is a far more efficient approach than the traditional system of grant-maker support of capacity.


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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Book: The Dynamics of Technology for Social Change Now Available

By Jonathan Peizer
on December 15, 2005
in Blog
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Audience: The Dynamics of Technology for Social Change is written for practitioners trying to achieve social benefit using Information Technology and communications (ICT) in whatever context they operate. This includes nonprofits engaged in developing and implementing projects, philanthropies and social responsibility programs supporting these activities, researchers trying to understand the process, and the various government and private sector actors working with all the above to help deliver socially beneficial ICT to an end user population.

Focus: The book’s primary objective is to help people understand how to successfully design, implement, and evaluate ICT projects in a complicated landscape, by explaining the underlying principles that influence outcomes. The topics explored include organizational capacity, cross-sector partnerships, implementation, marketing, project evaluation, social return on investment and sustainability. Issues are addressed from the unique perspective of an implementer with both operational and programmatic experience rather than as a research scientist or academician. Although The Dynamics of Technology for Social Change is not written to prove how or if technology facilitates social benefit, examples abound from the author’s own experience that provide insight into how it does.

What makes the book unique is its focus on institutional as well as technology dynamics. It explains institutional behavior within and across sectors — and how it impacts the implementation objectives of any project. These dynamics, and the accompanying strategies to successfully negotiate them, are applicable to many initiatives meeting social objectives outside the realm of technology.

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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