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Intervention by Denise Caruso Read Intervention by Denise Caruso, Executive Director of the Hybrid Vigor Silver Award Winner, 2007 Independent Publisher Book Awards; Best Business Books 2007, Strategy+Business Magazine

METRICS RUN AMOK
ARE KILLING NONPROFITS

by Denise Caruso ~ January 7, 2008.
Permalink | Filed under: Hybrid Vigor.

Yesterday, my New York Times “Re:framing” column was about the lack of working capital available to nonprofits for their most basic operating needs, and its tragic effects.

It was called, “Can Foundations Take the Long View Again?,” and you should read it just to see the brilliant illustration that ran with it, if nothing else. (You can hit the link to the left, or paste this into your browser - free subscription required - http://www.nytimes.com/2008/01/06/business/06frame.html?_r=1&oref=slogin.)

The theme was that as private wealth has migrated into the philanthropic world over the past 30 years, private industry’s methods for gauging the success of any given investment migrated along with it.

To wit: foundation directors, trustees and advisers from corporate America decided that the return on charitable dollars should be tangible and measurable, and should drive capital flow in much the same way that earnings figures do in commerce.

This started the push into project-focused giving, with strictly limited amounts of dollars going to support nonprofits’ operations or overhead costs. Ostensibly this was because it was easier to gauge the “efficiency” of charitable dollars spent if the funding was for some discrete project, like giving away mosquito nets or removing creosote from playgrounds.


9 Responses to METRICS RUN AMOK
ARE KILLING NONPROFITS

  1. BeenThereDoneThat

    I don’t quite know where to begin! The ‘Wire’ mention is perfect - it was like watching my city unroll itself, or at least the part that lies just beneath the executive spin.

    But that’s not what I wanted to say.

    We have come to jokingly (and not so jokingly) use the phrase “funding prostitution” to describe how our small NPO’s are forced to behave in order to survive. There is seldom operating funds, it’s all programming with the content and agenda decided by the funders, so you wind up doing a half-assed job on their project so you can squeeze a few extra hours of organizer or youth leader or whatever time into doing the work that really needs to be done.

    Some of the funder/fundee issues you identify also spill over into the area of large and small NPO relationships in coalitions. A friend of mine and I did a workshop for a large progressive funder in a neighboring larger city on this topic and it got a lot of rich discussion going - some of the things we heard were echoed in your NYT essay.

    I’ve been following Adam Rich’s line of thinking - it was picked up in (I think) In These Times. Makes you wonder if the liberal foundation approach is just as deliberate only they’re trying to apply the brakes rather than encourage change…

    Finally, a few of us have gotten copies of “The Revolution Will Not Be Funded.” I’ve dipped into it, but it’s strong (and a little didactic) and sometimes cuts a little too close to the guilt bone. Those who I’ve talked to about it, have the same reaction - “Every time I pick it up, it seems right on the mark and very scary and overwhelming and I put it back down.”

    Anyway, this has been a long way of saying I hope you start a dialog on all these topics (or are they all the same topic?).

  2. Denise Caruso

    Yes, they kind of are all the same topic, aren’t they?

    As for Andy Rich’s work — the way I’ve heard him talk about it is not that foundations want to apply the brakes. It’s more that they have a belief in data and evidence uber alles.

    Which would be okay, but it’s data and evidence by their own definition, or a definition that is sold to them or that they prefer to believe, one that appeals to their existing experience.

    In most cases that I’ve read or known personally, their data would not correlate with any scientific measure of effectiveness that would pass muster with a social scientist who knows how to ask the right/real questions.

    Also on a broader stage, liberals in general tend to believe that the facts will set you free — that if you simply make the best and most rational case for your argument, people will follow.

    But people aren’t rational, and they don’t make decisions based on rationality. People go with their instincts — even really smart people — and if someone presents an argument that appeals to those instincts (fear, loathing, self protection, etc.), then they’ll take the hook no matter what the data says. And it’s almost impossible to get them to change their minds once they’ve latched onto whatever it is.

    This is what all the decision science research tells us, and yet as Andy Rich has detailed, most progressive funders are still unwilling to support these more effective approaches under almost any circumstances.

  3. Joe Beckmann

    You’re wrong. Not completely, since quite clearly there are some excellent examples of general operating (capacity building) and other less accountable funding. Yet pretty much wrong, most of the time.

    To take one nagging string and unravel lots more, the EMC Foundation went through a remarkable transformation in the past ten years - a friend was on the Board at the beginning, and so I’ve tracked the change in both friendly and less than friendly fashion. When they settled on three demonstration programs for virtually all their youth money - the Harlem Children’s Zone, Citizens Schools, and ROCA - they pretty much demonstrated your premise that good people, with high skills, are more trustworthy with philanthropic mission than the philanthropies themselves.

    But it didn’t work - at least not in every case. Most surely the Children’s Zone is a remarkable case of powerful and effective philanthropy, that attracts the support of policy and program no less than money and influence. And it’s influence - in Harlem no less in other places looking to their leadership - is well deserved. So also Citizens Schools is at least an interesting intervention, much, much less than its billing, but still a powerful tool to engage community involvement in high risk education. I stress how much less it is since it is so remarkably expensive per student that the foundation sponsors might just as well ignore metrics altogether: Citizens Schools has a flawed design that swallows money faster than it inspires replication and local support. If EMC had merely funded someplace like YouthBuild or A Better Chance to match their foundation support, as they did for a very long time before, they’d have gotten lots more for lots less cash.

    Finally, ROCA. Outside of a core group of staff and clients, the agency has an extraordinary turnover of staff at all levels, and an amazingly toxic series of partnerships with other local agencies. Either their target of kids truly have nothing to do with anybody else, and have fallen through a crevasse which, after 15 years of operation ought to have at least some safety netting woven by ROCA’s own efforts, or, like too many other NPO’s, they invent new stuff just to hustle new money.

    THAT is the ultimate criticism of capacity building funds - whether from EMC, from DeWitt Wallace, or from anybody else. While it’s true that the current federal scheme of a 10% indirect cost rate is absolutely regressive, the real world of 50% to 75% indirect cost (at the Bush favorite private vendors) is just a waste of money. This is increasingly evident in the Supplemental Education Services tutoring providers, under NCLB, where players like Citizen Schools and Sylvan Learning suck up the limited Title I money from low income schools at rates between $50 and $75/hour.

    Your general conclusion that earmarked funding is regressive has many, many exceptions. So many that I - and lots of us involved in metrics, in funding, and in evaluation - would seriously question both your method and your result.

  4. Sean Stannard-Stockton

    Denise, I really liked your NYT article and highlighted it on my blog yesterday. I’m a principal of an investment management firm that serves philanthropic families so I understand both the private wealth world and philanthropy. I personally believe that philanthropy can learn a lot from the business/investment frame, but that (as with most trends) the pendulum has gone to far and many people now assume that everything that works in for-profit investing should be adopted by social investing.

    I’m working on a few projects in this area and am currently gather community input for a meeting I’m having with Google.org to give them my opinion on the information they provide about nonprofits in Google Finance (a new project at google). I’d love to have your input.

    http://tacticalphilanthropy.com/2008/01/what-to-measure-and-why-in-philanthropy

  5. John Esterle

    Denise,

    As a funder who believes strongly in the value of operating support/unrestricted funding, it was great to see your piece in the NYT, and then to see you elaborate in your post here. I think you raise a crucial point regarding how lack of operating support particularly hurts small to medium sized nonprofits.

    One thing I also observe is that even for those foundations who do provide operating support, many do so either as a “reward” of sorts for past performance or because they are willing to take “the risk” of giving unrestricted funding because an organization has an established track record. This is well and good and I’m all for looking at track records, but I also think unrestricted funding is crucial at the early stages of development, when you are basing your funding more on the people and ideas involved rather than what the organization has accomplished yet. I think this is some of the territory Andrew Rich explores: the importance of funding people and ideas and embracing a degree of uncertainty and risk in doing so.

  6. BeenThereDoneThat

    OK, I spent last evening at a funder’s event. Nice, well meaning $450/hr+ folk, awarding earnest underpaid non-profit folk enough to get them a little further through the year. And there was the obligatory politically uplifting and hopeful song performed by a gorgeously multi-cultural chorus of youngsters from one of the rewarded groups…recipients heading off into the subway, donors repairing to the venue’s high end restaurant.

    This may sound cynical and ungrateful, and maybe it is, but the final moment - the two groups diverging - started gnawing at me as soon as a colleague pointed it out this morning. This limited and ultimately unsatisfying relationship stands in contrast to another funding stream that my group has become involved with. One, interestingly enough, that originates in the health bureaucracy of the U.S. Government. Somewhere (and I should search out the origins of this concept), it registered on someone or someones working in the federal public health system that there was probably a lot more to be learned from the communities studied than just the data and (forgive me for this ridiculously uninformed history) came up with the idea of the Community Based Research Grant.

    The CBPR model forces the investigative body, usually a university, into direct working contact with health care and community groups. Although the academic partner (in my experience) maintains ultimate control, other than in matters concerning the scientific validity of whatever is being studied together (and ‘together’ is the operative word) the rest of the relationship is equal - often rewardingly rocky, but equal.

    Ordinary research grants usually fund the academic partner with an outrageously large percentage of the grant and the community is passively (and often resentfully) studied. In CPBR, there is a strict, low, and equal overhead limit for all the partners so that funding goes into the academic study and, in equal amounts, into the community groups who are actively engaged in this new and very different study process. In fact, through this kind of partnership engagement communities themselves can become empowered to originate study ideas.

    In our case, an academic and civic public health working group with an eye on a particular CBPR grant approached our networking group and solicited our participation. We spent several weeks meeting together to explore their goals for a study and our needs for programming. There was also a lot of sniffings at each other and hard questions and discussions about trust and intent.

    Ultimately, we came up with three community projects, each hosted by one of the NPO’s participating in our network. Each project focused on performing community tasks and, at the same time, generating the kind of data that the RFP called for. The funding was substantial, supporting four years of program development and programming in the three agencies.

    There have been substantial unintended benefits for all the partners. In two cases, perceptions and data developed in the interactions between the community and the academy generated new information leading to new research avenues (and grants). These new lines of research could only have been identified under these unique circumstances.

    On a simpler, but equally important level, the community has been exposed to a very different view of the functioning and utility of science. As an example, two youth groups were engaged in the writing of a scientifically valid survey questionnaire. The strenuous and nit-picking IRB process was very frustrating to the immigrant adolescents and youth leaders in two of our groups. Our academic partner arranged for a viewing of Miss Evers Boys, a feature film about the Tuskegee Experiment, and the ensuing discussions were powerful, equal parts general science and civil rights and, for me, just about worth all the work it took to build this project. The community partners came away with a much clearer idea of the importance of a rigorous work process and a very different conception of both the risks and the powerful utility of science. The university partners came away with a much deeper respect for the willingness and capacity of the community to engage in a serious discussion and a much more sympathetic understanding of the obstacles communities have to overcome.

    There is an important lesson in this. When it works (and it doesn’t always) the CPBR process forces an equality of work engagement that can carry all the participants far beyond from where they started. This almost never happens in the traditional Lady Bountiful philanthropic model. There, it is almost always a one way wallet to tin cup path with occasional variations on the theme; smaller family foundations are more apt to be flexible within their particular niche and the larger foundations just suck all the air out of the room.

    Perhaps, it’s possible that we could develop a foundation/community process that more closely resembles the CPBR model or that funds this model by taking a role similar to that of the government?

    It would be a welcome change because, in the end, after you boil all of the good intentions away and are left with just the ‘essence of giving,’ it is always going to be just that - giving. Whether it’s operating funds or programming funds - giving with strings never equals empowerment.

  7. Denise Caruso

    I’m really appreciating all the comments posted here so far — thanks, everyone, for your candor.

    In the interest of full disclosure, I should note that Hybrid Vigor receives general operating support from the Whitman Institute in San Francisco, run by John Esterle, who posted here earlier.

    It was through Esterle, in fact, that I became aware that there was a controversy around the provision (or lack) of general operating support in the philanthropic community. He pointed me toward the GEO and CEP reports.

    I’ve been thinking about the issue since the column was published, and I’ve realized that the problem from 35K feet looks not unlike the problem that started me on the path to my book on biotech and risk, Intervention.

    The question that launched my research was, ‘How do we continue to benefit from scientific progress, but still protect the public from undue risk?’ The answer, for me, was in how we define risk. Some people question the safety of genetic engineering based on their perception of how much they don’t know about it. Geneticists are confident that it’s safe, based on their perception of how much they *do* know.

    In the same way here, the question is how do we adequately fund a healthy nonprofit sector, but protect philanthropists from ‘risking’ their charitable dollars? The answer is in how we collectively define and measure risk and benefit.

    Until we can square our definitions, we can’t have a real conversation about it — we’re just debating from our own limited perspectives.

    I got an email today from a nonprofit consultant who made a really good point that I’m going to quote here (and maybe she’ll come say it herself, too):

    She said, “I think one of the challenges here is that we don’t have an ‘economic’ system to which we all agree and in which we are all participating…in the absence of our own system, we selectively import financial and economic concepts from the for profit sector. Some of those concepts don’t work at all, but more importantly all of them must or should be modified to comport with the very different nature of the charitable sector in terms of value propositions, capital creation and financial return.”

    Collaboratively defining the factors that comprise a nonprofit economic system would be a real boon to the entire sector, and would at least start to eliminate the caste system and some of the trust issues around risk and benefit that seem to define many grantor-grantee relationships.

  8. Joe Beckmann

    I spent a pleasant afternoon yesterday with a local high school student in clarifying how he might study “how local nonprofits help people?” Deriving an economic system from such a question is a lot more fulfilling - and useful - than deriving that question from an economic system. And it addresses the issues of risk a lot more concretely than from the desk of a CEO (or CFO or CIO, particularly when over 70% of all nonprofits are too small for either of those).

    In our discussion, the student and I looked at several career models, and derived “effectiveness” from what individual people did rather than from external metrics. We began to construct a profile of effectiveness - things like listening, adapting, changing - that contrasts rather markedly with profiles of efficiency and of other kinds of productivity. While not confirming that Mother Theresa is the only kind of effective nonprofit manager, we surely saw that the President of Harvard is considerably less effective in direct service to those with the greatest need.

    We also could see the real contrast between an Early Head Start program - which serves the poorest children, usually of poor young women themselves - and something like Mass General Hospital. Survival issues do trump strategic health concerns, but they only rarely - very rarely indeed, given big pharma - compete in the same circles.

    Finally, in the world of school-university-community collaboration - raised by “Beentheredonethat” - while there is much to be said about tracking funds to the ultimate delivery of services, there is even more to be said about engaging “clients” on their own behalf, and building universities (or hospitals, or any other top-of-the-chain philanthropic partner) into a listening mode and network of mutual accountability. It’s not all the money that counts, and a dollar one place will buy much less than $5000 elsewhere. It is the network which builds the tools for mobility (in health, education, or even economic development). Philanthropy tuned to building such networks has far more output, impact, and effect, in both short and longer terms, on both or all the partners involved.

  9. BeenThereDoneThat

    Whose ‘risk’ and whose ‘benefit?’

    Quoting Denise:
    “Collaboratively defining the factors that comprise a nonprofit economic system would be a real boon to the entire sector, and would at least start to eliminate the caste system and some of the trust issues around risk and benefit that seem to define many grantor-grantee relationships.”
    AND
    “In the same way here, the question is how do we adequately fund a healthy nonprofit sector, but protect philanthropists from ‘risking’ their charitable dollars? The answer is in how we collectively define and measure risk and benefit.”

    I agree that we’re still working our way in toward a common topic (and there seem to be several valuable variants here). I’d like to speak up for the risks faced by the recipients and the people they serve.

    One risk is that because the relationship to the large funder is inherently uneven and often carries with it the risk of losing touch with your core mission in order to accommodate the foundation’s flavor of the week (looking back over the past few cycles, we’ve had ‘empowerment,’ ‘accountability,’ and ‘collaboration.’ As Joe Beckman pointed out (correct me, if I misinterpreted Joe) even the distinction between program and operational support can lead to a particular and not necessarily beneficial slant to how a non-profit seeks funding.

    Another risk is a growing cynicism. Absent many foundations with Julius Rosenwald’s intense sense of mission and determination to spend it all out, we are left with huge self perpetuating lumps of cash and the attendant bureaucracies. We, at the far end of all this, are increasingly aware that the donor cash that is being protected from risk, actually has a history and, most often, not a pleasant one.

    I live and work in the shadow of Harvard University’s staggering thirty-five and counting billion dollar endowment. At the same time, I’m on the board of a non-profit that provides services to low income people, some of whom are custodial and security workers who have had to fight tooth and nail to get Harvard to pay a living wage! I’m also witness to the geographic displacement caused by Harvard’s seemingly insatiable desire to expand - it’s a little angrily self-indulgent, but every time a Harvard housed project produces a document on economic or racial injustice, I make a point of calling up or writing to ask them to please look out the window or spend a moment talking to the almost invisible person emptying their trash.

    Harvard is an easy target, but also a wonderfully out there example. For the first hundred and fifty plus years, Harvard was supported by the Commonwealth of Massachusetts. In the early years of the nineteenth century the fund raising process shifted away from a reliance on state support (at least partly because the rise of nativist and Jacksonian party politics called this into question). It was at this time that the burgeoning capitalist class in Boston was accumulating wealth and Harvard came to be a major recipient.

    And where did this wealth come from? Cheap, slave produced cotton and sweat shop child labor - the Lowell, Lawrence, Abbot Merrimack mill fortunes, and drug running (the lucrative Turkey/India leg of the Pacific triangle trade) - part of the Cabot and Forbes riches. Additional streams of income came in from the ship building that supported the slave trade, participation in the Atlantic triangle trade, and from other industries that had a less than benevolent concern for their workers.

    So, I’d argue that perhaps the risk is not just about misspent charitable dollars, but about the risks to everyone else involved in enabling the accumulation of those charitable dollars and in getting pulled into the somewhat morally insulated charitable mind set. When we consider the whole “nonprofit economic system,” perhaps we need to broaden the definition of “whole” to include a realistic assessment of where the money came from in the first place.

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