How would you like the philanthropic marketplace? Well-planned? Noisy and messy?

Nonprofit Marketplace

The William and Fora Hewlett Foundation has teamed up with McKinsey and Company to start a conversation about building a “stronger nonprofit marketplace.” The proposal is outlined in their report “The Nonprofit Marketplace: Bridging the Information Gap.” They would like to get your feedback.

The problem that many funders and donor advisors want to solve is how to steer philanthropic dollars to the “strongest and most effective nonprofits.” They’d like to see some intermediary that could measure nonprofits based on their social impact. They are concerned, and rightly so, that the reduction of nonprofit effectiveness to percent of revenues spent on programming used by sites like Charity Navigator do a disservice to both nonprofits and to donors.

In principal, I’d welcome attempts to shift philanthropic dollars out of the ivory towers and into the streets. We need to expose more individuals of wealth to the full range of nonprofits that need their help but will never afford giant development departments (or even medium sized ones, for that matter). I’m also pretty sure than many more organizations would get “stronger” pretty quickly if funders invested in building a serious fund development capacity in those organizations.

As you know, I am absolutely dedicated to steering nonprofits to a razor sharp focus on intensifying their societal impact. But I also know that on virtually any big issue, it is pretty unrealistic to expect that a single nonprofit will change the world by itself.

So, I get very nervous when someone comes along and decides that it’s necessary to restructure the sector and believe that they’ve got such a scoop on nonprofit effectiveness that they can set themselves up as the arbiters of donor giving. Here’s why:

  • Only a limited few organizations can directly show their impact on societal outcomes. Some schools perhaps. But how do we measure the creation of beauty or knowledge sufficient enough to pop into a rating system ? Or how about the prevention of harm? Developing meaningful measurement indicators of societal impact for these types of nonprofits have stumped evaluators for decades.
  • How many organizations can we say are solely responsible for some long-term outcome, independent of the other players in their system? Even the most polished policy shops I know give due credit to those noisy, rag tag activists from struggling grassroots nonprofits  who help to define the middle ground or even hit the home run themselves after years of stalled action. How does a rating system address collaboration, synergy and large networks, planned or not?
  • Most of these models are devoted to a goal of helping nonprofits “scale up.” The concept discounts the vital role of some of the most local nonprofit organizations. Any advocate worth their salt will tell you how essential it is to have people with legal standing in neighborhood organizations or local environmental groups who can oppose individual zoning changes or troublesome permits.
  • How does risk and failure fit into this model? Don’t we also need to fund noble experiments that may fail at first but perhaps succeed at a later time or in another place? (Think of all those business entrepreneurs who go bust two or three times before they launch the killer ap.)
  • And how do we avoid success based on hype, personal charisma or self-promotion, which I’ve personally seen sway even the smartest funders and researchers again and again?
  • If a recent Bridgespan report is an indicator, too many funders and other otherwise really smart people still don’t get that raising significant philanthropic dollars requires serious investment in fund development capacity over time, especially if you are not a founder who was born into the upper classes or can’t access government dollars to fuel your growth.

I happen to think that the real holes in this project deserve more than the box on page 56 of the report called “Unintended Consequences.” I suggest to the authors that they try modeling their system using those troubling “unintended consequences” and the others that I named above, rather than seeing them as exceptions to be dealt with later.

Having lived through the “planned philanthropy” of the historic United Way model that shut out environmental, advocacy, arts, civil liberties, human rights, reproductive justice and other organizations that I personally hold dear, I think I’d rather live with the messiness of the marketplace.

Read the report. Add your voices to the listserve.

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