Because behavior changes like these are driven by face-to-face contacts and peer pressure, not our logical minds, according to Alex Pentland of MIT’s Human Dynamics Lab, interviewed on NPR’s Here and Now recently.

“We’re not really as rational as we think we are.” he told Here and Now host Robin Young. “If you want to change their behavior, giving people arguments is probably the wrong thing to do.”

Pentland studies human behavior using smart phones and other devices to track his subjects’ every movement and social interaction. He also uses phone polls to supplement the tracking data with subject reports on everything from their opinions to their weight. These “digital bread crumbs” give Pentland a huge amount of new and highly accurate data about what people really do all day (and night).

“What are the behaviors that lead to decisions?” Pentland asks. In study after study, he finds that it’s who we spend time with, not what we learn consciously, that predicts our decision-making. “Most of the decisions you make about behavior are ‘when in Rome do what the Romans do’ behaviors.”

In a study of students in an MIT dorm, Pentland discovered that face-to-face contacts led one-third of students to change their Presidential preference in the 2008 election. Similarly, he says, “Obesity is contagious.” If you eat with people who take a third slice of pizza, chances are you’ll have that extra slice, too.

In an article from American Scientist, To Signal Is Human, Pentland explains that what we call “common sense,” are really beliefs we base on “social signals,” the attitudes and actions of our peers and models, rather than logic and argument. Pentland says that this kind of social-intuitive decision-making really can be an effective and efficient way to make better decisions and adopt more productive or healthier habits, particularly for large groups.

“The most important thing is that people be exposed to lots of different ideas,” Pentland said. Unfortunately, many people inhabit “information ghettos,” at their workplaces and in their communities. These people don’t talk to many other people and have weak ties to the wider community.

A Bank of America call center deliberately created an information ghetto by scheduling worker breaks to prevent socializing among the staff. Pentland was able to show managers that their most productive employees were also their most sociable workers: the “chatterboxes.” When the call center reschedule breaks for informal group socialization, productivity shot up, employee turnover went down and Bankamerica made an estimated $15 million.

We always urge our strategic planning clients to schedule more open-ended, face-to-face conversations – with donors, with peers, with their beneficiaries and with staff. Pentland’s work suggests two major reasons to follow our advice.

First, by joining another person’s social circle, you influence them to believe and act like you. Second, by expanding your own circle, you expose yourself to more information and options to guide your own actions.

Fundraisers know that the big gifts come from personal, in-person requests from peers. Pentland’s work confirms that common sense and encourages strategies that create even more social contacts among your prospective and current givers.

For advocacy organizations, the findings point toward fewer formal briefings and rallies and more spontaneous gatherings of like-minded people. That’s the idea behind Drinking Liberally, a movement to bring people with shared political values together over beers instead of manifestos, that now has 228 chapters meeting every month.

This is the question for this month’s Nonprofit Blog Carnival, hosted by Nancy Schwartz.

It’s a tough one because there are so many books I could choose from over what is now a pretty long career.

But if I can only pick one, I’m going to pick Stewardship- choosing service over self-interest by Peter Block.

This book looks at leadership through the framework of stewardship, a word that I use frequently in my work with nonprofit organizations and appears as one of the three major board responsibilities I highlight in my board self-assessment book How are we Doing?

I was introduced to Block and Stewardship when I was working on my master’s degree in organization and management at Antioch University New England. I started the program at Antioch a few years after I went into consulting. It was a fabulous and challenging program that gave me a new lexicon for my work – and exactly what I needed to become a consultant after years working in the nonprofit sector. I particularly relished the extraordinary amount of self-reflection leading to self-knowledge the program demanded — so essential for any leader or change maker.

Reading Stewardship didn’t actually shift my values … instead, it was a bright illumination of my own thoughts about my role in life, about governance and management, about working in organizations and about serving my community. I’ve always been drawn to a life in the social change sector. Whether volunteering, working at a nonprofit, or serving nonprofits through my consulting practice, service has always been integrated into my life, never just an appendage to the other things that I do.

Stewardship introduced me to other books by Block. Most consultants know his seminal work Flawless Consulting. I’m a VERY big fan of The Answer to How is Yes, which I require my students to read at Simmons College and which has become a norm and a mantra in my consulting.

What makes Stewardship so meaningful for me? In Block’s words:

• “Stewardship begins with the willingness to be accountable for some larger body than ourselves.”

• “Genuine service requires us to act on our own account. We cannot be stewards of an institution and expect someone else to take care of us.”

• “Stewardship is the choice for service. We serve best through partnership, not patriarchy. Dependency is the antithesis of stewardship and so empowerment becomes essential.”

• Stewardship is “accountability without control.”

Block looks at leadership, management, governance, staffing, financial management… most aspects of organizational life… through the lens of stewardship. When I first read the book, it wasn’t a cakewalk for me, raising questions if this was just another framework for employers to shirk any obligations to their employees. But Block comes to that question from a different place: he digs deeper into the relationship of employee to boss in The Answer to How is Yes.

Now that I’ve pulled the book off the shelf and shared it with you, time to read it through once again. I hope you will too and that you’ll share your thoughts with me.

Yet three decades later, PRIs remain rare. According to Doing Good With Foundation Assets, a 2010 Foundation Center study, only 173 out of 75,000 U.S. foundations made any PRIs at all over the two-year study period of 2006 and 2007. In dollar terms, PRIs accounted for just $734 million out of $91.9 billion in program disbursements over the two years.

What’s the problem?

“The limits really are our own core capacities,” says Owen Heleen, Vice President for Grant Programs at The Rhode Island Foundation. The Rhode Island Foundation has been making PRIs since 2002 and was listed by the Foundation Center as the 14th largest provider of PRIs in 2006 and 2007, with investments of nearly $12 million in those two years. Despite their above-average experience, each new PRI brings fresh challenges to the Foundation’s program officers.

“When you’ve  seen one PRI, you’ve seen one PRI,” Owen tells me. “Each one has been unique.” The knowledge and skills needed for due diligence, financial workouts and regulatory review change depending on the project, the sector, the number and type of partners and the financial tools used. That’s one reason why the Foundation doesn’t aggressively solicit PRIs.

“The best ones come to us.” says Owen.

Many in the social enterprise movement believe a new business form, the L3C, can help unleash those PRI dollars. First authorized by Vermont in 2008, eleven states now permit L3C , or Low-Profit Limited Liability Companies. L3C adds a “Low-profit” L to the traditional LLC, or Limited Liability Corporation, a flexible business form favored by partnerships. More states, including my state of Rhode Island, may follow suit. According to proponents, by forming an L3C, the principals certify that they meet the requirements that foundations must meet to count an investment as “program related.” They say that should simplify the foundation’s PRI-related burdens.

However, foundations cannot rely on the L3C status alone as proof that a potential PRI complies with federal requirements.  And, L3Cs don’t address the most frequently cited barriers to more PRIs: complexity and capacity.

“The L3C by itself doesn’t open up new doors for us,” says Owen Heleen at the Rhode Island Foundation. “But it may for others.”

The Robert Wood Johnson Foundation identifies a core obstacle to more PRIs on its web site. “Foundations are not generally set up to operate as banks, but PRIs put them in the position of acting as bankers. PRIs also raise ethical issues…” RWJF says in a look back at its $30 million of program-reated investments in healthcare infrastructure over 20 years.

The Foundation Center’s study identifies the limited experience and expertise among both nonprofit leaders and foundation staff as major barriers to increased use of PRIs. The steep learning curve and high transaction costs have constrained a wider use of PRIs since the 1960s.

Still, the tide may be changing, says the study’s author, Steven Lawrence. He writes that the 20 percent hit on assets taken by foundations since 2007 “have provided the best incentive yet” for foundations to take another look at PRIs. With more discussion of PRIs and new resources like the PRI Network available, program related investments will probably become more common in the years ahead.

Still, the most experienced practitioners tell us that PRIs have a steep learning curve and high transaction costs as well as potentially transformative impact. Explosive growth just doesn’t look possible.

Both new enterprises got key early funding from “program-related investments” (PRIs) by the Ford Foundation.  Both used familiar financial tools in creative ways to benefit people who were otherwise unable to access financial services. In both cases, that seed funding, given as loans, helped attract many millions more in public and private investments.

Grameen launched a new and profitable global financial services industry serving very low-income people. Mohammad Yunus won the Nobel Prize in 2006 for this achievement. LISC played a pivotal role in creating a powerful national network of local community development corporations (CDCs) in the United States. The CDC movement has transformed devastated and endangered neighborhoods in the United States by restoring millions of homes as well as commercial centers and public amenities.

Program-related investments (PRIs) by charitable foundations, have been around since the Tax Reform Act of 1969. The Act allows foundations to include loans, equity investments or financial guaranties for mission-related purposes (program related investments) to be counted toward their asset disbursement requirements just as they would count a grant.

PRIs can launch revolutionary innovations in meeting social needs and they have clear financial benefits for foundations. Yet, only 173 out of 75,000 U.S. foundations made PRIs in 2006 or 2007, according to Doing Good with Foundation Assets, a 2010 study from the Foundation Center. Why are they so rare?  I’ll take a look in my next post.

But most of all, I think we love LADO because through LADO, we get to see the real American Dream unfolding before us, and the chance to play our small part in making sure that dream never dies.

This year, LADO awarded eighteen $1,000 scholarships to Latino college students from Rhode Island. It’s not a lot of money – unless you need a stethoscope for your nursing classes, like Marissa Laghana, who spoke at last night’s dinner. Or money for books or for travel home. It makes a difference – often it makes the vital difference between staying or leaving.

Marissa’s parents came to Rhode Island from Guatemala. Marissa was her family’s first high school graduate – and she’ll be their first college graduate, too. She knows what her parents struggled through to give her this chance and now she’s going to make their sacrifices worthwhile.

These 18 young men and women are talented, determined, directed. From this point onward they travel their separate paths to destinies they may only guess at today. For most, that future will include reaching back to help those coming along behind.

What strikes me now is the shared road they’ve traveled with their families to arrive at this night. For the families of our LADO scholars, that road starts somewhere in Latin America and travels through Pawtucket, Providence, Central Falls or Woonsocket, Rhode Island, but it’s a road Americans have traveled from every corner of the earth. For Gayle’s grandparents, that journey began in Portugal’s Azores Islands and led through the textile mills of New Bedford. My grandfather left Quebec before he was 13 years old to work in mills in Maine.

And for nearly every LADO scholar, as for our families, that path includes an education in the public schools that prepares them for college. We all know what’s very wrong with public schools, or think we do. But you only have to meet a LADO scholar to realize that there are some very good things – things essential to our democracy – happening in public schools, too. Maybe we should figure out what that is and bottle it.

And now the road approaches its reward – the completed destiny of the first child to graduate from college. The first child who will become not what they must be, but what they can dream of becoming – a teacher, an artist, a doctor – maybe the President of the United States. If this is a cliché, we need more clichés.

After a LADO dinner I’m farther than ever from understanding America’s anti-immigrant, anti-urban, anti-education anger. America needs these young men and women. We can’t afford for them not to realize their dreams – our dreams – the American Dream.

P.S. for Maritza Gomez, “our” Cause & Effect LADO scholar. We’re sorry your studies took you back to the University of Rochester before we could meet you. Best of luck with your studies and your ambition to help bilingual students.

You can find out more about LADO – and make a donation – at their website.

The PBN article quotes the visitors to BatchHaus, many of whom work alone, expressing their appreciation for the opportunity to meet similar techies and make connections. Some of those connections have led to business leads, but overall, the camaraderie helps to create a stronger tech community, which is important to these new entrepreneurs. I was intrigued by the idea.

Then, the very next day, I was at a meeting with colleagues. I reported on the progress of multi-stakeholder learning teams I was using to do the environment scan for a strategic plan for a colleague. (for a future blog).

The colleague I had recruited to facilitate one of the learning teams mentioned that a number of the stakeholders had never visited each others’ facilities, even though they often referred clients to each other. So site visits were put on the agenda.

There are many encouraging reports of the wonderful benefits to co-locating nonprofits. But you don’t have to jump all the way to permanent rental arrangements. Like the BatchHaus folks, hanging out together can be good for your organizational health.

A past employer of mine, Save The Bay, built a fabulous new facility a few years ago right on our urban waterfront, a place that most Rhode Islanders hadn’t visited and thought of as an industrial wasteland. Save The Bay rents their board and conference space to any community nonprofit to use for trainings, retreats and other activities (for a small fee).

The BayCenter is incredibly popular for its amazing view of Narragansett Bay and great training facility. (I was preparing for a training there one winter morning and was rewarded with the acrobatics of a rambunctious harbor seal).

Not only environmental groups use the space. I’ve facilitated or participated in workshops with disability rights activists to the local chapter of the Association of Fundraising Professionals. All who attend meetings there are amazed that the waterfront could be so gorgeous — a real win for Save The Bay which has not given up on restoring any part of the Bay, even its most impaired urban waterfront.

The buzz is all around about the need for more collaboration and joint ventures in our sector. But most successful collaborations require trust and good faith in addition to mutual benefit. Collaborations don’t jump all the way to trust, they build up to it. What better way to get to know each other than by coming together in unstructured, no pressure places to share ideas, see new things, make connections and maybe get some feedback from a colleague.

It’s time for more organizations to open their doors and treat their colleagues as friends they’d like to know better, rather than competitors. I’m convinced there are great opportunities in the making.

So how about inviting new people to your office to hang out with you for a while.

I finally pulled those weeds and planted the last of the veggies and annuals I’ve been staring at for the last week. I accomplished my first bike trek over 25 miles this spring on the East Bay Bike  Path — I finished 30 and even had a few more miles in me, really I did, but those two flat tires within minutes ended the trip for me. Thanks to instant service from Legend Bicycle,  a mere $11.60 for a new tube,  rim tape and installation and I’m back in the saddle.)

Throughout the weekend I’ve been using some of my leisure time to catch up on the stack of magazines and newsletters piling up at home and in the office. And in doing so I’ve been reminded why it is so critical to take time out from the work. What applicable gems of information I’ve been missing!

The Spring/Summer magazine, Land & People, of the Trust for Public Land led with a fascinating story about an innovative collaboration among five conservation groups inspired by two of their donors. The groups have come together as the Northern Sierra Partnership to share “strategy, leadership –  and most unusually donors and funding — to prioritize and execute conservation projects across a five-million-acre swath mountains.”

I’m always on the lookout for examples of great collaborations, with a special eye for fundraising partnerships.  These groups believe that by working together they will raise more money than any of them could on their own — in this case, $100 million to leverage $300 million additional dollars in public funding to protect 100 million acres. They seem to have overcome the inevitable question of how to distribute funds jointly raised by assigning value to each parcel and flowing funding to top priorities.

The newsletter also reminded me that TPL is masterful in developing funding strategies — giving me some new ideas for a business & funding plan I’m working on for one of our clients.

The June 2010 issue of Fast Company is just chock full of inspiration. It’s their Special Issue “The 100 Most Creative People.” I’ve been drooling over the list, and couldn’t help thinking that maybe I should have committed to more than 2 weeks as a math major back in college. (I wiped out 2nd semester of Calculus 2 freshman year. Geography called me instead. A great major, really, it’s where I learned systems thinking.)

I’ve been especially mulling over the implications for the way nonprofits do business from a quote from Drop.io’s 26 year-old Product Lead Soraya Darabi: “I get my information from my peers.” (By the way, after struggling for days to get Google Docs to share documents as promised with 149 conference goers, Jon suggested Drop.io which was a piece of cake to use.)

Juxtapose Ms Darabi’s insight on social media with the growing popularity of a crowd sourcing approach to charitable giving ( also discussed in this issue in the profile of Kimberly Davis, President of JPMorgan Chase Foundation), and I think we’ve all got some incredibly serious thinking to do about how we relate to and educate future donors about our charities.

As someone who never won a high school popularity contest, I feel the pain of the corner duster nonprofits doing vital but not so flashy work. But we ignore promotion in the digital landscape at our peril. Just a troll through these pages makes that perfectly clear.

And I haven’t even had a chance to crack open the latest Wired yet.

Maybe the innovation factor in US enterprises would increase dramatically if we had mandatory three-day weekends every week.

But a conversation yesterday brought back to me a dynamic that I’ve been observing for many years: the role of boards as conservators.

A little background.

Yesterday I made my bi-annual trek to life portfolio company New Directions to discuss life in the nonprofit sector with their clients. New Directions clients are accomplished people in business or the professions who are designing the next stage of their life journeys.

My portion of the conversation was “The rewarding and confounding world of the nonprofit sector,” which is partly nonprofit 101 and partly DEEP THOUGHTS.

A fellow “interpreter of the sector” was the Executive Director of a capacity building (smallish, $500K budget) nonprofit. He mentioned that for the last two years he had been a co-executive director, a leadership team that resulted from a merger. He mentioned that the other ED was winding up his term and he would soon be the sole ED. When I asked how the co-directorship worked for him, he shared he really liked the arrangement, but his Board just wasn’t comfortable with the shared leadership model.

Boards as Conservators

At first a bit surprised by this tale, it reminded me that many boards are naturally suited to their role as conservators.

Here I’m using conservator in its definition as someone who conserves or keeps safe. Like a custodian, guardian, or protector.

The words we use to describe board duties — like prudent, loyalty, care, fiduciary — imply moderation and caution. Another word I might use would be  “conservative.”

In my experience, most Boards of Directors are loathe, and rightfully so, to take big risks. In their conservator role, boards put the breaks on reckless spending. Because boards usually reflect the mindset of the communities they serve, they often restrain choices, decisions or actions that could put their organization ideologically too far in front of the constituencies and communities they serve. I’ve seen boards wisely put the kabosh on ill-conceived public policy actions that could threaten public good will.

When conservator = ill-conceived road block

Too frequently, however, the conservator role of boards holds back innovation.

Staff often find themselves far ahead of their part time leadership volunteers when it comes to mission implementation. As the professionals, they interact with their peers and seek out new research and best practices. They are immersed every day in the work, thinking what comes next, how can I do this better (or at least we hope they are).

But their board members aren’t. They have other lives, other jobs, other concerns that take precedence. Few, if any, are traveling in the same professional spaces. They only know what is, and may have no clue about what might be and why that is important. So when staff bring forward these big new concepts, it takes time for board members to digest them.

Many years ago I was Director of Development and Communications at Plan International USA. During my tenure, we launched a soul searching strategic planning process. For a number of reasons that included maintaining our standing among our peers and funders, a commitment to fostering better international understanding, and our need to deepen the global understanding and thus the retention of our donors, staff were interested in expanding our fledgling development education programming and making it an important, though always small, part of our program mix.

A small cadre of academic board members were extremely resistant to the idea that we could educate donors through such a populist (for lack of a better word) approach to development education. After many frustrating conversations, the Board chose to delete development education from the strategic plan, sending it back to committee for discussion and reconsideration at a later date. Needless to say, staff were extremely frustrated (angry?). Ultimately, after many more months of give and take, we finally found a compromise that enabled us to proceed forward, albeit in very tiny steps. (Outcome: Our new, grant-funded development education program was hugely successful and achieved the strategic objectives that underpinned our initial reasoning).

Now, more than ever, we need our boards to look forward with vision, radical rethinking, insatiable curiosity, and the judgment to know when conservatism is called for and when disruption is essential.

While more organizations are ripening to the idea of doing business somewhat differently, I’m still finding too many boards oblivious at best and resistant at worst to newer ideas — like  joint ventures with other nonprofits. While due caution is needed for big changes like mergers or subsidiary relationships, others –like outsourcing financial management or the case I described above of co-directors — seem to be resisted for no apparent reason.

Unfortunately, these dynamic and perilous times require us to reconsider all historic assumptions and brutally question every aspect of the way we do business. Now, more than ever, we need to maximize the energy and resources that go into serving our communities and constituents. We can no longer assume that something that worked well enough in the past has any hope of surviving the future.

I don’t know if this is possible. Do you?

The term “social enterprise” has swept the non-profit world. Everyone from startups to the old dinosaurs of the public service world now claim to be “social entrepreneurs.” It’s a great style statement. Just tell me: what does it mean?

What’s the harm in a buzzword? For one, hoopla about “innovative, market-based models” gives business and government more cover for starving health care, education and other critical social investments of the real resources they need. Be that as it may, the SERI Summit knocked the chip off my shoulder with its energy, optimism, good will and some really smart solutions to problems described by featured panelists.

Who could be grumpy about Hippowater International, a cool low-tech solution to the huge burdens that fetching water imposes on women and girls around the world? Who would not admire Rajiv Kumar’s clever use of peer pressure to mass-market healthy exercise through Shape Up Rhode Island or the way his group’s leveraged the market value of the mission to underwrite national impact? What child of the Sixties wouldn’t be charmed by John Abram’s stories about South Mountain, the employee-owned design and construction company he founded?

What else I loved about this summit:

• Lots of stories, lots of ages, lots of perspectives.
• A big, lively crowd – 200? 300? More? – full of people I knew and didn’t know.
• Just enough slack in the schedule for random encounters.
• Lots of energy and curiosity and a refreshing lack of certainty.
• Mashups: new-tech/no-tech, for-profit/non, thinkers/doers.

The conference moderators frankly refused to define social enterprise. (Check here for Wikipedia’s definition, or this one, from the British government’s Office of the Third Sector).  Instead we heard a wide range of ideas and stories from people who put themselves under this big umbrella. Here are some common threads I captured:

• Problem-solving
• Profit-seeking
• Social mission
• Innovative, inventive, creative
• Values design
• High- and low-tech solutions
• Focus on cost reduction
• Bias for data
• No “conventional wisdom”

A list isn’t a definition and none of these are qualities are exclusive to “social enterprises.” Lots of the organizations that presented looked like regular old, resourceful, dedicated and professional nonprofits to me. But, there’s no denying that this was a different crowd with a different vibe than you’ll find at conferences called by the Association for Fundraising Professionals, the Rhode Island Foundation or the United Way, all still vital centers of learning and support for nonprofits

I still think that the lack of serious, well-directed investment capital, not a shortage of clever ideas, is the chief barrier to moving the national needle on education, among other critical needs. Social entrepreneurs won’t get the job done if they settle for praise and token funding. But I’m now more hopeful that a generation of  who speak a business dialect and live in an enterprise culture could really generate or attract that investment.

I have to say, I was pretty shocked at the findings. The paper was reporting a study by Mark Rank of Washington University and his Cornell University colleague Thomas Hirschl. It went on to say that “90% of black youngsters will be on food stamps at some point during childhood.”

Then I turned the page and read an editorial explaining why I shouldn’t be upset about huge compensation packages for Wall Street Traders. After all, “Wall Street professionals… lost a lot more money than Main Street did.”

Right.

Then a story came on the radio that the president of our local Ivy League University earned $800,000 last year. That put her below the over $1 million in compensation received by her peers at 23 other private colleges, as reported in the Chronicle of Higher Education.

The Chronicle of Higher Education also reported that over 58 private colleges now charge over $50,000 per year for tuition, room and board. For a family of four to be eligible for food stamps, their take home pay has to be less than $22,000 a year. according to that food stamp report.

For many, myself included, a college education was the path to a better income. But today, over two-thirds of college students graduate with debt averaging over $20,000.

Even in this recession, colleges continue to raise tuition and fees to their students – and that includes the public colleges of cash strapped states. The college graduation rate of black students nationwide is 43%, though much higher at those ivy leagues. But then again, I have  to wonder how that breaks out by income of students enrolled as many lower and middle class students can’t afford private colleges and 3/4 of all African American students are enrolled at state universities, according to a 2007 article in the Journal of Blacks in Higher Education.

“Income inequality is at an all time high.” Nonprofit income inequality is also shocking.

Education is touted as the solution.

I still ask: How much is enough? What do we owe each other?