Taking Small Risks, Then Taking the Leap

By Sara Beggs, Exponent Philanthropy

Before co-founding Arbor Brothers, which offers nonprofits 3-year unrestricted grants and extensive capacity building support, Sammy Politziner and Scott Thomas were living parallel lives: from University of Michigan to Teach for America to Wall Street. When they met up at a Michigan football game, both were questioning whether their Wall Street careers offered enough meaning.

Would they be more satisfied being part of the solution in a more direct way?

They knew several friends running nonprofits—friends with lots of passion but less know-how for managing an entire organization. Could these nonprofits benefit from learning and applying the finance and operations skills Sammy and Scott were using on Wall Street? Could Sammy and Scott translate this idea into a job?

Arbor Brothers co-founder Scott Thomas working with GirlTrek

Arbor Brothers co-founder Scott Thomas working with GirlTrek

Heading back to New York City, each agreed to plan weekly dinners with an individual who intersected with the nonprofit world. To ensure they would gather consistent information, they developed a set of questions to ask each dinner guest:

  • What do you do, so we understand the context of your responses?
  • From where you sit (e.g., academia, grantmaking, nonprofit consulting, nonprofit leadership), what do you think is missing in the industry?
  • What do you wish you had access to but don’t?
  • What would you (or the industry) need to improve nonprofit performance?
  • For two people who want to be helpful, what would you recommend we do?
  • Are there one or two other people you recommend we speak with? If so, do you think they would be open to an introduction, and would you be willing to make it?

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Listening In on a System

By Sara Beggs, Exponent Philanthropy, and Colleen O’Keefe, Sauer Children’s Renew Foundation

In 2014, Executive Director Colleen O’Keefe of the Sauer Children’s Renew Foundation in St. Paul, Minnesota, embarked on a listening tour to inform the foundation’s work on behalf of the state’s foster care children and youth. Colleen blogged about the tour in 2014, and, recently, our Senior Program Director Sara Beggs interviewed her to learn even more, including what happened afterward.

You’ve been funding in and around the child welfare system for a number of years. Why a listening tour at this point? 

First, I wanted an understanding of our grantees’ realities, not just a show they felt they had to put on for me. I wanted to come alongside them so I could make better decisions, to get around the typical grantor–grantee power dynamics and create authentic relationships.

Equally powerful was the desire to be on the ground, learning about the experiences of children who land in foster care—both what happens when they grow up in care and what happens when they age out of the system. I wanted to see the whole picture, from the inside, before we created our funding strategies.

And, maybe most important, I knew our current strategies weren’t changing children’s outcomes. I felt desperate to figure out how to be more effective, and I knew I didn’t have the answers.

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Five Barriers to Focus and Ways to Push Past Them

By Sara Beggs, Exponent Philanthropy

In our many conversations with funders, we hear that finding a focus—for all or part of your giving—is the most fundamental step you can take on a journey toward fulfilling philanthropy.

Focusing at least part of your giving is not only powerful, it’s critical. Our communities desperately need new solutions to social challenges. We need funders who are willing to dig deep into an issue, learn everything they can, ask good questions, and take smart risks. And nonprofits need partners to learn with them, tackle issues with them, and develop new ideas with them. Being this type of partner takes focus.

What is a foundation’s most compelling focus? We think it lies at the intersection of values and passions, community needs, and your unique dollar and non-dollar resources. And we think every funder can move toward it.

This past fall, we convened eight funders interested in focusing their giving. Over the course of our 7 months together, we named several rationalizations for not focusing. We share five below, accompanied by some ways to move past them.

Misconception: Good deeds and good intentions will lead to good results. We may convince ourselves that acts of kindness and altruistic desires allow us to operate outside life’s realities. Unfortunately, success in philanthropy requires the same effort as success in any other realm: concentrated energy, willpower, and resources. In short, good philanthropy takes discipline and hard work.

Solution: Ask your board members and staff to consider how real change occurs. Engage in a dialogue—led by a consultant or someone at your foundation—to challenge assumptions about success in philanthropy and inspire them to have a greater vision for what’s possible with focused effort. We are happy to connect you with fellow members who can make this case.

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6 Ways Self-Dealing Can Creep Into a Foundation’s Work

By Sara Beggs, Exponent Philanthropy, with legal review by Ingrid Mittermaier, Adler & Colvin

The self-dealing rules for private foundations can—and do—trip up even the most seasoned and well-intentioned funders. Do you make it a point to review the self-dealing rules each year and seek out expert advice?

The general rule is this: Certain insiders known as “disqualified persons” are prohibited from engaging in a specific list of transactions with a private foundation, unless there exists a stated exception. If you are a board member, officer, or substantial contributor to a private foundation, you, your family members, and entities controlled by you must be cautious about any financial transactions with the foundation—even if they seem like a good deal for the foundation.

We asked attorneys at Adler & Colvin what self-dealing scenarios they encounter most, and we added additional ones based on the calls we field from our member foundations. The six examples that follow highlight specific self-dealing issues and suggest how to resolve them. Other self-dealing issues can be triggered in these scenarios that are not addressed here.

See additional examples in the full article (Exponent Philanthropy members only)

Get our 50-page primer “How to Avoid Self-Dealing”

  1. A trustee encourages the foundation to move its assets to the trustee’s high-performing personal money manager. When the foundation transfers its assets, the trustee’s personal management fees are cut in half, due to the increase in total assets under management. 

Why self-dealing? Foundations cannot make their income or assets available for the benefit or use of a disqualified person.

How to avoid self-dealing? Ensure the money manager understands the foundation’s assets are separate and that any fee reduction must be given to the private foundation, not the trustee. 

  1. A foundation hosts a board retreat in Florida where two board members live. The foundation pays all travel expenses for board members, including two additional hotel nights for those who want to extend their stay. 

Why self-dealing? Foundations cannot make their income or assets available for the benefit or use of a disqualified person.

How to avoid self-dealing? Ensure the foundation pays only for room nights necessary to attend the board retreat. All other expenses should be paid by the disqualified person directly to the hotel rather than reimbursing the foundation, which would necessitate a loan to a disqualified person.

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Three Avenues to Impact—and All Are About Investing in Leaders

By Sara Beggs, Exponent Philanthropy 

It’s well understood that high-performing businesses have high-performing leaders. But what about the social sector? Significantly less data has been collected on the nonprofit sector, but it wouldn’t be a far stretch to assume the same holds true.

To gain greater understanding about leadership in the U.S. nonprofit sector, McKinsey surveyed nearly 200 social sector CEOs and other top managers leading nonprofit organizations, foundations, social enterprises, and impact investing funds. Across the board, survey respondents found themselves and their peers to be deficient in critical leadership attributes, and, not surprisingly, rated their performance accordingly.

“The findings suggest that chronic underinvestment in leadership development within the US social sector, accompanied by 25 percent growth in the number of nonprofit organizations in the past decade, has opened a gap between demands on leaders and their ability to meet those needs.”

As funders are increasingly concerned about the impact of their grants, investing in leadership may indeed be one of the greatest ways to ensure impact. McKinsey identified three key ways to strengthen nonprofit leaders:

  1. Commit more funds to leadership development.
  2. Ask leaders what they need and then fund it.
  3. Facilitate mentoring and coaching from the private sector.

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If Only We Are Intentional

By Sara Beggs, Exponent Philanthropy 

Philanthropy is changing for a host of reasons, but perhaps most of all because funders are demanding more from it. The expectation that funders will be able to achieve impact, and see that impact, changes everything. No longer are donors satisfied with the mere act of writing checks. They want to see results.

Add to this “results orientation” several other realities of today’s philanthropic landscape:

  • Philanthropy is more critical, being called to fill in for government cuts.
  • Philanthropy is more complex, tackling not only the symptoms but underlying systems.
  • Philanthropy is more confusing, with really smart people sharing opposite views of “effective giving”: head versus heart, data versus intuition, proactive versus responsive.

Put these realities together, and the good work of philanthropy can quickly become more intimidating than fulfilling. It’s even tempting to throw up your hands and hope your giving will magically produce great results.

But what I’ve seen in my work with hundreds of funders over the past 14 years is that fulfillment and impact can be achieved—if only we are intentional. But what is intentionality?

To Fund With Intentionality

Being intentional in philanthropy involves the following steps:

  • Identify and articulate what you want to achieve. No other step is as critical for fulfillment and impact in your philanthropy. It is just a fact that we can only do a few things well. Focusing your giving helps you prioritize not only your grants, but your time, your energy, and everything else you bring to the table. It also makes it easier to know where to look for impact. 
  • Learn enough about your area of interest to make educated decisions. Just as successful businesses assess strengths, weaknesses, opportunities, and threats, successful funders understand the context in which they operate. It is critical to grasp key players, field dynamics, funding sources, effective strategies, gaps, and more so you can make educated decisions.

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Protect Your Foundation From Identity Theft This Tax Season

By Sara Beggs, Exponent Philanthropy 

The following was adapted with permission from “Tax Scams: IRS Suggestions That Could Help Protect Your Foundation,” in O’Connor Davies’ February 2014 Private Foundation Newsletter.

Unfortunately, foundations, like individuals, can be the target of identity theft. And what better way to get financial information from your foundation than by posing as the Internal Revenue Service (IRS) at tax time. Due to the increase in tax filing at this time of year, the IRS reports a direct increase in the number of scams using its name.

Because tax scams can take many forms, filers should be vigilant about any communication that is purportedly from the IRS. Perpetrators use various methods of communication, such as email, traditional postage mail, and even phone impersonators.

The IRS offers the following suggestions to help protect your organization against identify theft and other scams:
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The Power to Change Philanthropy’s Bad Habits

By Sara Beggs, Exponent Philanthropy

I recently attended GEO’s 2014 National Conference and heard Charles Duhigg, award-winning New York Times business reporter who has spent more than a decade studying habits. His book The Power of Habit: Why We Do What We Do in Life and Business explores the science behind habits and how to change them. Not only were many of us thinking about our failed attempts to keep to our New Year’s resolutions, we were pushed to think about how habits affect the organizations we support and the field of philanthropy.

Duhigg made the case that understanding habits is critical to transforming organizations and communities. Based on recent discoveries in brain science, it has become clear that for bad habits to change and good habits to start, there must be appropriate cues and rewards in place.

The process of changing habits might look something like this flowchart from The Power of Habit (shared here with permission):

Remarkably, after a habit is formed, the reward might not even be needed. And even more thrilling is this: A good habit in one area (e.g., increased discipline in eating right) is likely to spill over into areas (e.g., increased discipline in sticking to a budget).

But how does all this relate to philanthropy? In so many ways.

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Throw Off the Shackles – You Do Have Enough

By Sara Beggs, ASF

In a world in which philanthropy battles some of society’s greatest ills, we’re tempted to adopt a scarcity mindset—not enough money, not enough time, not enough staff. And the corollary: there are certainly not enough resources for learning and evaluation!

It’s time to throw off the shackles of this mindset and instead think of what you can do.

Do your best to learn, and be satisfied even if your approach is small and piecemeal. John Bare of the Arthur M. Blank Foundation and formerly a Knight Foundation evaluation staffer once told me: “No one does textbook evaluation. Just do what you can with the resources you have.” Funders with few or no staff rarely have the resources to take on exhaustive evaluation efforts, but that doesn’t mean learning has to go by the wayside.

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Q & A With an Experienced Collaborator

By Sara Beggs, Exponent Philanthropy

Whether across sectors or among funders, collaboration is increasingly touted as a way to achieve impact. But what makes a collaboration successful? Is it a practical strategy for funders with few or no staff?

For insights, I talked with Exponent Philanthropy member Liz Sak, executive director of The Cricket Island Foundation. Liz initiated and participates in several funder collaboratives and uses nonprofit collaboration as a key strategy to affect change in the field of youth development.

What are the ways you use collaboration to achieve your mission?

Liz: We use it to learn about youth development, influence other funders with regard to practices and grantees, and build opportunities for nonprofits to collaborate together.

What were your first steps in creating a funder collaborative? 

Liz: We first invited individual organizations and groups of organizations to the foundation to educate us about the field of youth development. We also met with funders and other key stakeholders, relying on each connection to lead to another. The meetings were about listening and being open, and the collaboration developed organically out of these conversations.

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