How Big? How Great?

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October 2, 2011
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William Foster & Toby Rubin

Over the past decade, according to a recent survey report by Jumpstart, the Natan Fund, and The Samuel Bronfman Foundation, the Jewish innovation sector has created more than 600 new organizations that seek to effect change in the world through a Jewish lens. Toby Rubin interviews William Foster about the obligations of both entrepreneurs and philanthropists to increase the impact of those organizations and determine if and how to provide next-stage funding and a crack at sustainability.

Toby Rubin: What are three key trends in the philanthropic sector that inform our understanding of whether philanthropy in the social sector is positioned to step up? Please name them and discuss each in turn — ideally, with a “call to action” for philanthropists, social sector professionals, and/or social entrepreneurs.

William Foster: Toby, to start, my comments reflect a much deeper experience in the secular nonprofit world than with Jewish organizations. However, my sense is that the issues and dynamics are by and large the same. As in the Jewish community, visionary leaders are creating a tremendous number of new nonprofits that are connected to large philanthropy but are then having trouble getting to the next stage. I would probably guess that the Jewish nonprofit world in the United States is just like the secular sector but maybe more so: the density of new entrants, the high level engagement of the major philanthropic donors, the rising level of expectations, and a real scarcity of efforts that have actually achieved the desired scale or clear effectiveness.

Toby Rubin: What is the shift in expectations coming from the philanthropic sector?

William Foster: The most profound trend over the past ten or fifteen years in the nonprofit sector overall is a change in the focus of funders and nonprofit leaders from funding and starting nonprofits that “do good,” to nonprofits that “solve problems.” The expectations of what nonprofits can do, and what society needs them to do, have changed dramatically. This plays out in how nonprofits are getting funded, being judged, and even, at times, how funders collaborate. The ClimateWorks Foundation, is an extraordinarily ambitious effort to move the needle on climate change and represents a collaboration of many of the largest donors in that space to pool their resources. The Harlem Children’s Zone puts enormous attention and resources in a very concentrated way to change the lives of youth in one of the poorest neighborhoods in our country and is now being copied around the country. These organizations are working in areas that have been a focus of nonprofits for decades or centuries but represent a next stage in ambition and intentionality.

Rather than helping because helping is, in itself, good, the aim is to truly solve social problems. Two factors are at play: First, an increasing number of donors and nonprofit leaders entering the sector are coming from having achieved major success in business, often at a relatively young age. Much of the philanthropic money is from high-tech entrepreneurs and from financiers who have the same ambitions for their philanthropy as they did for their business endeavors. And many of the nonprofit leaders are bringing a similar ethos as well.

Unfortunately, other key drivers are frustration and a sense that government isn’t capable of achieving many of the things that our society needs. Today, even our government looks to the nonprofit sector as an avenue to solve social problems.

This puts a tremendous emphasis on issues of scaling. How do we take a good idea and get it to a relevant size where a problem can be solved? And issues of evidence: How do we know that something is actually working? What data do we have that shows that it works?

Toby Rubin: I want to look a little closer at your description of evidence-based decision-making. Nonprofit professionals need to change the way they’re thinking about creating impact — building a body of evidence so we know what to build on, what to cast off, and what to change. Then, we can make a case to potential donors that we’re a good investment vehicle for achieving their aims. How has that shift been happening in the secular world?

William Foster: Certainly, the most important use of data about effectiveness is for nonprofit leaders to learn and improve their programs and work in order to create greater levels of impact. Data collection needs to be ongoing, rather than just a trial that proves effectiveness once every ten or more years. While most funders — whether governmental or philanthropic — talk a lot about evidence, it’s not as though money generally flows to the highest evidence programs.

Toby Rubin: To scale up a program or organization requires significantly increasing the size or extent of operations that will be needed to achieve a desired impact. Scaling an organization can employ various approaches, including growing an organization’s own capacity, developing independent affiliates, or franchising — encouraging widespread adoption of the model by others. Is this a good working definition?

William Foster: I think that’s a great definition of increasing impact and it illustrates different ways to scale. But when I think about scale, the most powerful definition focuses on arriving at a particular point that achieves the nonprofit’s vision of success. If the vision of the organization is to reverse global climate change, that’s one level of scale. If the vision of an organization is to educate or help children in a certain small community, it may only require a small scale up to solve the problem. I would connect it back to that notion of solving problems: What scale do we need to be relevant and have a meaningful impact on the breadth of whatever it is that we’re talking about, and how far have we progressed to reaching that point? Viewed in this way, scale is not a catchy synonym for growth, but it really means something particular to the nonprofit’s mission.

Perhaps the best known social enterprise and nonprofit leader in the country right now is Geoff Canada, president and CEO of the Harlem Children’s Zone. In some sense, he has limited the scale of the agency’s impact while painting a picture of how to succeed. Over the last decade, they have been well known for saying, “We are going to solve the issue of the life trajectories of kids in Harlem.” But when they developed a detailed strategy in 2000, the first thing they did was get very tight around a certain number of square blocks — some 24 square blocks. As opposed to saying we’re going to solve poverty in the world or poverty in America or poverty in New York, they said, we’re going to solve the problems caused by poverty for these children in this neighborhood. In fact, we’re focusing our efforts on achieving results for the children, not the whole family, not the parents, not the grandparents — the children. Canada was very clear about the scale of what he was trying to achieve and realistic that it was going to cost a lot of money. He was honest and clear about the limits of what the nonprofit would attempt to do while painting a picture of a bridge to a solution. There’s a tension between painting the largest possible vision that we know, deep down, is not realistic but is attractive, and painting a vision that may be more limited but is extraordinarily compelling to donors who will feel and believe that you have a solution. In the past, the bigger the vision, the more dynamic was the story. Today, groups are limiting the scope of the vision but being extra clear about its achievability.

One more point: Nonprofit leaders in what some have called the “nonprofit wing of the nonprofit sector” often complain that the biggest gifts go to universities and hospitals but not to their own types of organizations. In part, donors know that a university or hospital can spend an enormous gift. But few are convinced that a smaller nonprofit could spend $10 million well. Adopting a vision with an achievable solution, creating clear plans, and building strong organizations can be major factors in inspiring donor confidence.

Toby Rubin: You’re suggesting that nonprofit leaders understand their work through a “problem-solving lens”; develop a practice that is evidence-based; ensure that the goals and benchmarks are compelling, inspiring, realistic, and achievable; and be clear about the organization’s stages of development — how it moves from a great idea to a scaled idea. Is this how to swim with the current right now, and is it a fair expectation?

William Foster: Though I wouldn’t suggest it because this is the way to swim with the current, I do think that focusing on solving problems is gradually bringing the sector to an entirely new place. However, this is an evolution, not a revolution, which means that one still needs the traditional elements of attracting donors to the work — the vision and compelling stories. The heart is still going to be the dominant driver of givers and the dominant driver of leaders wanting to come into the work. What will increasingly differentiate the organizations that succeed and grow most, though, is a solutions orientation with some type of data, learning agenda, and credibility that they can solve problems. My sense is that an organization like Taglit-Birthright Israel really embodies both sides of this coin. The mission pulls at the heartstrings and the stories are incredible, but Birthright is also very clear about what “scale” would achieve its ambitions, and what data it needs to track to ensure it achieves its results.

Toby Rubin: The Stanford Social Innovation Review recently published an essay by the Bridgespan Group, “The Nonprofit Starvation Cycle,” that highlights the lack of support by donors for infrastructure — as if programs happen magically without sufficient infrastructure to provide the human drivers and other support systems essential to achieving evidence-based impact.

William Foster: It’s much more exciting to have an idea of how to change the world and get a grant to prove it, than it is to think about what it takes to go from being in two cities to five cities, or what it takes to have the 500 meetings necessary to get a legislature to adopt a new policy. That sort of work is very hard but is equally important to effecting an impact. An idea, even one that’s proven, that lacks an effective method to spread the change is not high impact. Unfortunately, developing the skills or capabilities to spread ideas and programs is not as exciting. People generally don’t enter the sector to become experts in the replication of direct service organizations or state-level advocacy and policy change. These are what I call “methods of change.” But I think the nonprofit sector and the donor sector are realizing that both sides of the equation are equally important. The most effective philanthropists are creating a balance between funding ideas and giving support to build strong organizations.

One call to action: Be thoughtful about that balance. Many of the nonprofit sector’s leaders are incredibly knowledgeable and insightful about the issue area they’re working in, and they have brilliant ideas about how to create change. Many funders want to engage with nonprofit leaders on crafting this idea. However, if the philanthropic investor is too deep in the program idea, there’s some risk that the philanthropist can pull a nonprofit off course. But funders could have tremendous impact by helping create the machine needed to spread change. A recent Harvard Business Review article1 that I co-authored about this topic highlights a handful of donors who have really helped grantees by being expert in a “method of change” rather than just the issue area.

Toby Rubin: Do you think that philanthropists are limited in what they can do to drive large scale change?

William Foster: Yes. At the beginning of any endeavor, it’s important to be realistic and clear about the scale that can be achieved, and then to bring in the expertise that will add value to the methods of change and the program ideas. Philanthropists, even of the highest net worth, don’t have the financial resources, for the most part, to solve problems on their own. One of the very interesting statistics we found in our research was that of all the funding for U.S. nonprofits, only about 3 percent comes from foundations and another 3 percent from the highest-net-worth individuals — people making $1 million a year or more. What we think of as philanthropists or the sector’s investors contribute only 6 percent of the monies to the nonprofit sector. That’s in total, not as individual people or foundations. Thus, it takes garnering the donations and passions of wide swaths of middle class individuals or influencing government to really create change. Since writing a check to solve the entire problem is generally not a possibility, the investor must think strategically with a nonprofit about both the vision — the end point that is in fact inspirational — and about the capacities and capabilities and skills that will be needed to help build up a nonprofit so that it can successfully address and solve the problem.

Toby Rubin: Many Jewish organizations are not able to access government money for what they’re doing because of faith-based limitations on availability of government money. And they don’t have access to the complete panoply of potential funders who, for example, would want to address climate change. So if only 6 percent of the funding generally in the philanthropic sector is available for a funding model, this would create a particularly tough challenge for Jewish organizations. One of our responses has been to lead UpStart and encourage others to develop earned revenue streams. There are at least three values in this approach: 1) It helps Jews learn that they can’t get for free in the Jewish community what they don’t get for free elsewhere; 2) It offers some level of autonomy from the vagaries of philanthropy: and 3) It provides very good, evidence-based information on whether or not the nonprofit is providing something relevant and valuable.

William Foster: Those are three important benefits. Two broader lessons from our work in the secular world may also be relevant. First, a nonprofit mission that requires continued growth in size or scale will find that, at some point, it has a chasm to jump. If the nonprofit is dependent on high-net-worth donors, it will need additional sources beyond the 6 percent. Second, it’s essential to consider carefully how to build the right team that will creatively and successfully access new resources. One final thought goes back to the beginning of our conversation on “scale.” “Scale” is the arrival point. But, there’s nothing to say that the arrival point has to be a massive organization. Some missions are focused on smaller communities, and that’s great. Other missions require small teams but great skill in areas such as advocacy or research. So, bigger isn’t always better, but being clear about how big you need to be and how to actually get there is important for everyone.

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William Foster has been with Bridgespan Group for close to ten years, as a partner, head of the Boston office, and leader of the firm’s work on nonprofit capital. His recent clients include the Harlem Children’s Zone, Youth Villages and Communities In Schools, the Edna McConnell Clark Foundation, and the AVI CHAI Foundation. Foster co-wrote three prominent articles on funding models: “Ten Nonprofit Funding Models” (Stanford Social Innovation Review, Spring 2009), “When You’ve Made Enough to Make a Difference” (Harvard Business Review, January 2011), and “Finding Your Funding Model” (Stanford Social Innovation Review, Fall 2011). He serves on several boards, including Congregation Or Atid in Wayland, Mass. Foster has just become the executive director of the Jacobson Family Foundation in Boston, where he will focus his energies on nonprofits working on issues related to the vitality of the Jewish community and the State of Israel.

Toby Rubin is founder and CEO of UpStart Bay Area, a San Francisco-based agency dedicated to inspiring and advancing innovative ideas that contribute to the combined growth and vitality of Jewish life. UpStart is involved in cultivating and nurturing emerging Jewish social entrepreneurs and pioneer Jewish organizations at work to strengthen Jewish life worldwide. An attorney, she served for two years on the staff of the Central Mississippi Legal Services, advocating in the educational arena on behalf of students with disabilities. She continued her civil rights work after moving to San Francisco in 1981, and she was involved in litigation that concluded with a victory in the U.S. Supreme Court. A Wexner Heritage Fellowship alumna, Rubin has served as president of the Jewish Community Center of San Francisco and as vice president of the Brandeis Hillel Day School. She currently serves on the executive committee of the Jewish Community Center Association.

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