Tactical Philanthropy: Changing the Face of the Nonprofit World

Tuesday, May 26, at 12 noon, U.S. Eastern time

Sean Stannard-Stockton is a Chronicle columnist, author of the blog Tactical Philanthropy, and a principal at Ensemble Capital Management, an investment-management company in Burlingame, Calif.

A transcript of the chat follows.

Peter Panepento (Moderator):
    Hello and welcome to today's live discussion with our special guest, Sean Stannard-Stockton.

Peter Panepento (Moderator):
    Mr. Stannard-Stockton is the author of the popular blog Tactical Philanthropy, where he raises some interesting questions about the future of philanthropy in a connected age. He'll be available over the next hour to take your questions about the state of philanthropy, the practices of foundations, and the future of the nonprofit world. It promises to be an interesting discussion.

Peter Panepento (Moderator):
    I encourage our participants to ask questions or post comments at any time during this discussion. To do so, simply click on the "ask a question" link on this page and then type in your query. This is a text-based discussion, so there is no audio and no need to call in.

Peter Panepento (Moderator):
    Ok, let's get started.

Question from Ian Wilhelm, Chronicle of Philanthropy:
    Hi Sean, as you know, last week we had a flurry of speculation about what was discussed during a recent closed meeting between Bill Gates, Oprah Winfrey, and other super-wealthy folks.

I wonder: If you had 15 minutes to make a presentation to that elite crowd about philanthropy what would you say?

Sean Stannard-Stockton:
    I'd tell them that the $72.5-billion that they've given to charity since 1996 is a drop in the bucket. For them to achieve real change, they need to harness the vast ability they have to influence other philanthropists (large and small) as well as government spending. This group's real power is in their ability to help shape the meaning of philanthropy.

Bill Gates and Warren Buffett inspired a number of other very wealthy people to begin "giving while living". If this group embraced a high impact approach to philanthropy and helped others to understand the need for "growth capital" within our sector, they could transform philanthropy.

Peter Panepento (Moderator):
    For those who haven't seen it, our readers have been offering a wide range of suggestions to the philanthropists who gathered for that closed-door meeting. You can find that discussion here: http://philanthropy.com/giveandtake/article/1042/what-would-you-tell-the-worlds-top-philanthropists

Question from Edith Asibey, Asibey Consulting | Communication and Advocacy Strategies:
    The Obama administration is making important efforts to increase govt transparency and engage in a dialogue with the American people. Do you believe that foundations should be doing the same?

Sean Stannard-Stockton:
    I do. I think that foundations' efforts to educate the public about the good work they do is misguided. A much better strategy would be to become far more transparent. However, for the most part I do not see foundation transparency as an accountability issue. I see it as the most effective strategy for foundation to achieve impact. Through transparency, foundations can begin to influence the charitable dollars given by the general public, which any way you measure it simply dwarfs foundation giving.

I'd also add an important qualification. I think the government has an obligation act transparently. But I think *private* foundations are best able to achieve impact when they have the option to operate in a very closed fashion (subject to obeying the limited level of transparency imposed by the law). Foundations are private institutions and this privacy gives them the freedom to take on challenges that a public reporting institution might stay away from.

Question from Scott Bechtler-Levin, IdeaEncore Network:
    How can we (client serving nonprofits and funders) encourage sharing of lessons (positive and negative) and tools/templates to magnify the impact of philanthropic investments?

Sean Stannard-Stockton:
    Be the first to jump in the pool! The biggest reason funders and nonprofits do not share negative lessons is because no one else does. Have you ever been to an event where the speaker finishes and asks for questions? For a minute no one asks anything. Then one person does and suddenly a flood of questions come out. Humans are driven by a desire to be part of a community and to behave as others do. When almost no ones shares negative information about themselves, there is a huge barrier to others doing so. But as more brave organizations step up to share their knowledge with others, the community norm will switch and suddenly people will feel uncomfortable NOT sharing their knowledge.

We see this dynamic at work in the scientific community where scientists share both "failed" and successful experiments because doing so helps inform the community knowledge base. "Failed" experiments are not viewed negatively.

Question from JD, a small historical society:
    Mr. Stannard-Stockton,

Thank you for taking my question. We have a small historical society whose membership is dwindling. In large part to the fact that our population is aging, and many people are moving away who used to be very connected to the county we serve.

How do you think we could effectively steward the internet to bring in more donors? What suggestions would you have in attracting younger donors and stewarding them?

Thanks, J.D.

Sean Stannard-Stockton:
    The internet offers you an effective way to stay in touch with people as they move away. The internet is redefining "community" to be less about geography and more about shared interests. It seems to me that if you think of your historical society as being less about a geographic county and more about a shared heritage, that you may be able to build an online community for those people who have moved away but still want to stay connected to their history.

Question from David Krumlauf, Pierce Family Charitable Foundation:
    Are you seeing foundations giving more, less or about the same given the "economic downturn"?

Sean Stannard-Stockton:
    Foundations are frequently continuing to fund their current grantees but limiting the number of new grantees. Since foundations give out of their assets (which have declined), they are stuck between the increasing need for philanthropy and their decreasing funds.

My sense is that foundation giving will go down, but by less than their assets have declined. In other words their payout ratio will increase.

Question from Tony, Pittsburgh nonprofits:
    What are Sean's thoughts on the future of social venture philanthropy coming out of this economy? More or less of it? An evolution or different direction?

Sean Stannard-Stockton:
    Social Venture Partners has launched new chapters in both Santa Barbara and Sacramento in recent months. During the fallout of the dot-com bust SVP saw similar increasing interest. I think that "engaged" philanthropy becomes more interesting to people in tough times. There is a urge to help, but there may be less financial resources to do so. Engaging with grantees can be a way for people to help them through the crisis even in the face of less financial resources.

I think we'll see more engaged individual donors and more engage institutional funders. Hopefully, though, funders will recognize that they need to be sure that their non-financial help is needed and wanted. A recent Center for Effective Philanthropy report showed that the majority of non-financial help was... not very helpful!

Question from Melissa, Small Non-Profit:
    as a non-profit professional, what changes can I expect to experience as part of the new philanthropic trends taking shape? In other words, how do we both thrive and survive in the current philanthropic climate? Thank you.

Sean Stannard-Stockton:
    The new philanthropic trends that I write about are longer term in nature than the current financial crisis. Those trends are going to lead to the increasing importance of individual donors who are going to want both emotional satisfaction from their giving as well as a belief that their giving is making a tangible difference.

I would strive to build your major donor community and understand that you need to connect with them on both an emotional level as well as on a logical/rational level where you'll need to convinced them that your organization is not only trying to do good but actually accomplishing it.

Question from Tony Macklin, foundation consultant:
    Large foundations potentially have great experience and insights to provide to donors and their advisors. I know it is tough to generalize, but do the donors and advisors really see the large foundations as resources? Or are the foundations' work seen as too complex, too costly, too top-down? What are the best ways to connect the dots on this?

Sean Stannard-Stockton:
    I do not think that donors and their advisors see large foundations as resources today. Large foundations have not embraced this role. However, I think it is obvious that large foundations and their professional staffs represent a huge base of philanthropic knowledge. Figuring out how to unleash that knowledge and make it available to individual donors is probably the biggest opportunity in philanthropy today.

I think that the best way to connect the dots is to realize that at first it will be about connecting individuals via their existing relationships rather than connecting institutions. Individuals have more flexibility and can move faster.

Question from Peter Panepento, moderator:
    We hear often about the challenges created by the recession for nonprofit groups and foundations. What do you see as some opportunities that are being created by these trying economic times?

Sean Stannard-Stockton:
    When resources dwindle, the strong survive and set up the foundation on which to thrive when resources return. The big opportunity today is for organizations that entered the downturn in good shape to demonstrate to their donors that they are effective, well run and can be counted on to perform when things get tough. These organizations will exit the downturn in position to sprint ahead as funding dollars become less scarce.

Question from James Walker, PR Prescriptions:
    Hi Sean, A couple weeks back the Chronicle did a piece on a what may be trend in philanthropy, anonymous giving. In the article, they posed a question about what this means for the future and if it's going to make it that much harder for foundations to raise funds. I think it will mean stepping away for the traditional donors and outreach methods; it will mean broadening the net to include a larger audience. What are your thoughts?

Sean Stannard-Stockton:
    I think the rise in anonymous giving is a function of the recession. Big giving is similar in some ways to big spending in that it indicates the level of the donor's wealth. I would suspect that as the economy stabilizes and wealth stops being stigmatized, that anonymous giving will recede to normal levels.

Anonymous giving taken to the extreme would mean the breakdown in communication between funders and I think would be a terrible trend.

(Of course there are plenty of good reasons for donors to make anonymous grants. I've made them. I just don't think they should be a large trend.)

Peter Panepento (Moderator):
    Hi everyone. Here's a link to the story on our reporting about anonymous giving: http://philanthropy.com/news/updates/8063/anonymous-giving
-gains-in-popularity-as-the-recession-deepens

Peter Panepento (Moderator):
    As we reach the halfway point in today's discussion, I'd like to remind everyone that we still have plenty of time for your questions. To ask a question, simply click on the "ask a question" link on this page and type in your query. You're also encouraged to offer your own opinions about what you're reading by using the same tool. Thanks.

Question from Tanya Mazor-Posner, Milwaukee Jewish Federation:
    What is your opinion on Giving Circles and the future it plays in philanthropy?

Sean Stannard-Stockton:
    I think Giving Circles are very similar to the Investment Club trend that occurred in the early 1990's as the individual investor came to the forefront (in much the same way as I believe those same individuals are entering philanthropy today). So in that way I think Giving Circles are an important indicator of the changing nature of philanthropy today.

It is interesting to note that both Investment Clubs and Giving Circles are/were much more popular with women than with men. Since women tend to play a bigger role in their family's philanthropy than in their family's investment portfolio (as a demographic generalization), I think Giving Circles may prove to play a bigger role in philanthropy than they did in financial markets.

Question from Stacey Buck Morris, The Buck Family Foundation:
    Good afternoon, Mr. Stannard-Stockton. What is your take on the recent report from the National Committee for Responsive Philanthropy suggesting philanthropy "benchmarks"? How would you reconcile those benchmarks with small, private, family foundations and their activities?--and how would you go about encouraging greater transparency for those foundations?

Sean Stannard-Stockton:
    I think the NCRP report was deeply flawed. It was a fine set of recommendations, but I do not think that it was a widely applicable benchmark. Philanthropy is driven by the idiosyncratic interests of donors and that is a *good* thing. In our push for effectiveness, let's not return to the sort of effectiveness where everyone marches in lockstep, but let's instead empower each person to make their own choices in the most effective manner possible.

Re: encouraging transparency, I think the key is showing foundations that being transparent can help them leverage their financial resources of others. I'm convinced that the financial assets of large foundations are not nearly as valuable a resource as their knowledge is.

Peter Panepento (Moderator):
    For those who are interested in hearing more from Mr. Stannard-Stockton, here's a link to his blog, Tactical Philanthropy: http://tacticalphilanthropy.com/ He is also a regular columnist for the Chronicle.

Question from Christine Egger, Social Actions:
    On the topic of "demanding accountability," what trends and/or activity are you seeing that demonstrate this is something donors are increasing? If it is increasing, will this trend fundamentally change what nonprofits do, or is just a matter of providing more information?

Sean Stannard-Stockton:
    I think "accountability" is demanded by people who don't trust you. The trend of demanding accountability (as seen in more focus on nonprofit employee salaries, new interest in taxing nonprofits in various ways and other efforts to make nonprofits "prove" that they are doing a good job) is an outgrowth of a culture that does not trust that nonprofits are doing a good job.

My hope is not that nonprofits become super "accountable", but that they begin to demonstrate their effectiveness and build trust with their donors. If I think a nonprofits is super effective, I'm not going to be all that concerned about what they pay their executive director. But if I'm unsure of how effective they are, I'm going to want some reassurance that they are doing things the "right" way.

Transparency is one very important way to build trust. Studies show that when companies admit mistakes quickly and fully, consumer trust in the company brand goes *up*. More trust built on honest exchanges would be a great thing for the social sector.

Question from Andy Ho, Council on Foundations:
    Warren Buffett made ripples throughout philanthropy when he announced his $30-billion gift to the Bill and Melinda Gates Foundation. Do you envision a growing trend in donors combining resources to form a 'mega-foundation' to have more impact?

Sean Stannard-Stockton:
    Great question. I would guess we will see more of this, but I hope it does not become the norm. Philanthropy does not need to be dominated by gigantic, bureaucratic entities. The Gates Foundation is able to do some interesting things because of their size and I think that is a positive thing. But the real power of philanthropy is the wide range of pools of financial capital that are interested in different things and willing to take risks.

I'll tell you one thing that will happen that will shake things up. I'd guess that a very wealthy non-American donor will make a huge gift to a U.S. foundation as some point in the next few years. I think U.S. foundations may become an operating platform of sorts for global philanthropists.

Question from Angele Eikenberry, University of Nebraska at Omaha:
    Hi Sean! What suggestions do you have about the ways university professors teaching nonprofit- and philanthropy-related classes might better prepare students for the changing nature of philanthropy? What areas do you think we should we focus on more or less? Thanks!

Sean Stannard-Stockton:
    I think that online platforms such as Facebook Causes, Social Actions, Kiva, Donorschoose, etc. are THE entry point for making philanthropy relevant to college students. These students have a demographically higher level of interest in social engagement than the last generation and they are digital natives. You need to at least begin by speaking their language before you give them historical context.

The key thing they will need to learn to thrive in the philanthropy of their lifetime is an understanding of how to leverage online networks for gather the information they need make smart grants or run an effective nonprofit.

Question from Joseph Sinatra, Ashoka:
    Hey Sean,

As the "Googlization" of Philanthropy continues, what do you see as the most promising approaches to harness and organize the vast amounts of philanthropic data and analysis that's already out there?

In your view, does the proprietary nature of some of this data/analysis threaten this push for transparency?

How can we overcome this?

Thank you!

Sean Stannard-Stockton:
    I think SocialActions.com is a great application of the Googlization of Philanthropy. I think the thing holding back the trend is the lack of valuable information being made publicly available. Note that the many organizations that SocialActions is aggregating from, simply made their data usable by others and Social Actions did the rest.

While controlling valuable data is one of the key elements of for-profit success, getting more people to act on valuable social data is the key to philanthropic success. So "proprietary" data in the social sector is a value destroying proposition.

See the new Data.gov. It will be interesting to see how people mash up this government data source. I'd bet we learn some interesting lessons for philanthropy.

Comment from David Krumlauf, Pierce Family Charitable Foundation:
    Just a comment about nonprofit accountability - as a small family foundation, we've built very strong personal relationships with our grantees. We know they're doing the best they can and have enough trust in them that we don't ask for any reports.

Question from Lilly Zeller, Talking about Philanthropy (Hablando de Filantropia):
    Mr.Stannard- Stockton: Thanks for taking my question. How do you define the state of philanthropy worldwide, given the economic turmoil?

Sean Stannard-Stockton:
    It is a tough time, no doubt. But note that philanthropy has a long history of declining less than the economy does because individual donors often step up their giving in the face of greater need.

My hope is that this crisis is giving philanthropy an opportunity to rethink some of our cultural norms.

But in the end, this too will pass.

Question from Gina, recent college graduate:
    Hi, What recommendations do you have for recent college graduates who are passionate about philanthropy and looking for opportunities to enter the field? Thanks!

Sean Stannard-Stockton:
    I think that getting involved in some of the fascinating online projects is a great idea. Whether as a volunteer or on a full time basis. You may very well be best served by working for an innovative nonprofit or for-profit company before jumping straight into a foundation job.

You can bring a lot to the table at a foundation if you have expertise in how to using social media for social change. Good luck!

Question from Courtney Bourns, Grantmakers for Effective Organizations:
    Thank you Mr. Stannard-Stockton, for this topic. I am curious to hear more about how you see this sea change in the structure of philanthropy leading to "new approaches to solving social problems."

Sean Stannard-Stockton:
    I think what is happening is that individual donors are becoming the "marginal" donors, meaning that they are the ones operating at the edge and making the most change. Due to the higher level of philanthropic dollars they control, every shift they make as a group is seven times larger than foundations making the same shift.

The fact that individuals are willing to take more risk (they give as individuals rather than as boards with legal obligations) and are driven by idiosyncratic interests means that innovative approaches to solving social problems will have more access to financial capital in the future.

Peter Panepento (Moderator):
    We'll keep the discussion open a bit longer to accommodate some of the questions that are still unanswered. Thanks.

Question from Kyle Reis, Ford Foundation:
    Hi Sean. Thanks for your wonderful, forward-thinking blog. In a recent posting, you alluded to the philanthropic sector needing more rock stars. However, with a few notable exceptions, foundation leaders seem to prefer to remain in the background and let their grantees shine instead. How can foundation leaders assume a more prominent role in the public eye given this tension?

Sean Stannard-Stockton:
    Grantees are important and so are funders. You can't run a nonprofit without financial capital and without great nonprofits financial capital has nothing to do. We should celebrate nonprofit rock stars and philanthropic rock stars just as we celebrate great company leaders and great investors.

Peter Panepento (Moderator):
    We are now out of time. Thank you to everyone who joined us today and a special thank you to Sean Stannard-Stockton, who started his day on the West Coast taking your questions.

Sean Stannard-Stockton:
    Thanks everyone for your great questions! I've given my answers, but the fact is all of us are going to have to go out and create the future together!

Peter Panepento (Moderator):
    If you enjoyed today's discussion, I'd like to invite you to take part in our other upcoming live discussions.

We host these chats every Tuesday at noon Eastern time. You can learn more here: http://philanthropy.com/live.

We also have a pair of upcoming events in addition to our regular Tuesday discussions.

This Thursday, at noon Eastern time, we're playing host to a discussion with the Nonprofit Finance Fund in New York that is aimed at helping arts organizations weather the difficult economy.

Also, on June 10, at noon Eastern time, we've invited the authors of the upcoming Giving USA report to take your questions on the day that the report is released. You can join that discussion here: http://philanthropy.com/free/articles/v21/i16/recession.htm

We hope you will join us.