Good governance requires investment

Self-regulation is the new religion for philanthropic power brokers.

Funded by big foundations and driven by Independent Sector, an aggressive campaign by the Panel on the Nonprofit Sector to fight moves in Congress to strengthen regulation and policing of nonprofits now has culminated in a new testament to the promise of an unbridled charitable marketplace.

Like the innate goodness of motherhood and apple pie, the panel’s newly-released “Principles for Good Governance and Ethical Practice” is filled with wholesome ideas and common sense: Nonprofits, of course, can and should govern themselves more effectively and ethically.

But there’s a rub: The minimal rules and policing that are the logical outcome of the panel’s push for self-regulation simply will create a regulatory vacuum in which the very nonprofit power brokers that are pushing for an unregulated charitable marketplace can expand their power and influence, both of which already are often unearned and out of whack.

What’s more, while they are quick to preach that nonprofits should and will regulate themselves, big foundations and the nonprofit trade groups that do their bidding are slow to invest the significant resources nonprofits need to operate and regulate themselves more effectively.

Nonprofits, expected to do far too much with far too little to fix what is wrong in our society, already must bow and scrape for mere scraps of support from big foundations.

Controlling wealth they typically did not create, and often acting as if the influence flowing from that wealth invests them with wisdom denied to mere mortals, the staffs of many big foundations exercise disproportionate control over nonprofit supplicants quick to defer to the foundation staffs’ inflated sense of their own smarts.

So the new religion of self-regulation preached by big foundations and nonprofit trade groups is little more than an exercise in hypocrisy and self-interest.

In the less-than-brave new world they seek, these power brokers will have even freer rein to amass even more power and influence without having to increase by so much as a dime the share of their assets they pay out in grants.

And despite their righteous words about the ability and willingness of nonprofits to regulate themselves, big foundations invest precious little in making themselves more accountable or in helping nonprofits simply cover their existing operating costs.

Helping nonprofits gear up so they can govern themselves more effectively and ethically will require a lot more operating and capacity-building support than foundations have given any indication they are willing to invest, or that trade groups like Independent Sector have had the courage to champion.

The charitable marketplace needs more effective regulation to help ensure that the exchange of philanthropic supply and nonprofit demand is fair and even-handed, providing equal treatment of nonprofits, foundations and individual givers.

Any nonprofit or foundation can and should improve itself by adopting the innately commendable self-regulation principles proposed by the Panel on the Nonprofit Sector.

Foundations and trade groups also should practice what they preach, and increase their commitment to investing more in building the operations and capacity of nonprofits.

But without tougher regulation to ensure fair play, the charitable marketplace will continue to be skewed in favor of the philanthropic power brokers, true believers in their own entitlement who are leading the charge for self-regulation.

Inspiring workers to volunteer a challenge

Volunteers are the lifeblood of nonprofits, and nonprofits and companies need to work harder to keep the pool of volunteers flowing.

According to a new study by researchers at the Rotman School of Management at the University of Toronto and the Stanford Graduate School of Business, workers paid by the hour are less likely to volunteer than are salaried workers because the way they are paid conditions them to think about their time in terms of money.

Workers in the U.S. who are paid by the hour volunteered 36 percent less time than workers on salary.

And even salaried workers were less willing to volunteer after calculating their hourly pay.

So the way employers pay their staff can influence employees’ activities outside the workplace, the study says.

The implications for nonprofits and companies are equally challenging.

As many of them already do with their bigger donors, nonprofits need to pay more careful attention to the needs of all their givers, including volunteers and smaller donors.

That means engaging and cultivating their givers, understanding their interests and matching them with the needs of the organization, keeping them involved in the life of the organization and informed about its progress, and thanking them in personal and meaningful ways.

And companies that care about being socially responsible need to find creative ways to move beyond treating wage-earners as replaceable parts and create a corporate culture that celebrates and encourages the value employees add to the company and the community by giving back.

Nonprofits, philanthropy are big business, officially

The nonprofit sector and philanthropy are starting to get some respect, at least from official agencies that track economic data.

Now if only political and business leaders actually would treat nonprofits and givers as the important players they can be in developing and delivering solutions to our most difficult social problems.

According to a new report by Johns Hopkins University, data from official statistical agencies in eight countries show the civil-society sector contributes roughly as much to gross domestic product in some countries as do the construction and finance industries, and twice as much as the utilities industry.

The eight countries whose official statistical agencies generated the data are the first to put into effect new guidelines from the United Nations Handbook on Nonprofit Institutions that the United Nations Statistical Division issued in 2003.

The data show the civil-society sector accounts on average for 5 percent of gross domestic product in the eight countries, and over 7 percent in some countries, including Canada and the U.S.

The utilities industry, including gas, water and electricity, accounts on average for only 2.3 percent of GDP, in comparison, while the construction industry accounts for 5.1 percent and the financial “intermediation” industry, including banks, insurance companies and financial-services firms, accounts for 5.6 percent.

Nonprofits in Belgium, Canada, the Czech Republic, Japan and the U.S. have been growing at an average rate of 8.1 percent, nearly twice the 4.1 percent growth rate of GDP.

Philanthropy, including volunteering, generates up to one-third of nonprofit revenue, with the rest coming from government and fees.

Within philanthropy, volunteering outpaces gifts of cash by nearly two to one and accounts, on average, for roughly one-fourth of nonprofits’ economic contribution.

These data underscore the huge impact that nonprofits and philanthropy have on our economy.

Sadly, policymakers and leaders in government and business continue to treat nonprofits as marginal players in social change.

That is a big mistake, particularly because government, while it has the most resources to invest in social change, is sorely lacks the vision and will to make change happen.

And while a growing number of corporations pay lip service to the “triple bottom line” they can measure through their financial results and their social and environmental impact, the corporate world still has failed to embrace nonprofits as the important players they are and can be in delivering critical services and fixing social problems.

The official data show the charitable marketplace is big and growing quickly.

Now, government and business leaders need to learn how to build that marketplace into the way they do business.

Foundations face strategic ‘disconnect’

Despite believing it would make their work more effective, private foundations are not using strategy.

That finding from a new study by the Center for Effective Philanthropy underscores the gap between what big private foundations say and do.

Insulated by their endowments from the need to raise money or compete in the marketplace, foundations occupy a closed, clubby world in which they are accountable to no one and can delude themselves about their own importance, smarts and impact.

Their freedom, the Center for Effective Philanthropy says, arguably is private foundations’ greatest strength “because it allows them to take on issues that other societal actors cannot, or will not, address.”

But the Center also says critics see that freedom as foundations’ greatest weakness “because there are few checks on the decision-making of foundation leaders and no forces compelling foundations to be effective and strategic.”

And that’s the rub because, as the Center has found in its research in recent years, strategy is widely seen as key for foundations to “maximize their impact.”

And good strategies, the Center says, “are essential to foundation effectiveness.”

Yet its new study, based on interviews with CEOs and program officers at 21 of the biggest U.S. foundations, finds a “fundamental disconnect between what foundation CEOs and program officers believe about the importance of strategy and their use of it in their daily work.”

And that suggests foundations are “not reaching their full potential,” the study says. “The gap between what CEOs and program officers say they believe and what they actually do poses an important challenge for foundation leaders.”

As they increasingly demand more strategic planning from nonprofits that want their support, foundations should make sure they practice what they preach.

By working more strategically themselves, foundations can help ensure that their investment in nonprofits will help them be more effective and have a greater impact.

Nonprofits must embrace, share online civic space

Online social networking is hot, and nonprofits need to be cool about it and get with it.

Equipped with laptops, cell phones and a broad array of other digital and wireless devices, young people in particular have created a truly virtual world where they spend much of their time working, playing and socializing.

Smart companies that target younger audiences are plugging into their embrace of web-based community and its potential for social and charitable activism.

YouTube, for example, just announced a free channel and services for nonprofits, which will be able to collect donations with no processing costs using the newly launched Google Checkout for Non-Profits.

And as The New York Times reports, MTV is testing ThinkMTV.com, a social-networking site to spur young people to social activism.

But, as the Times also reports, some nonprofits that offer social-networking websites now are in a snit because four foundations have invested in MTV’s new project.

Instead of whining about the savvy moves by for-profit companies to tap the phenomenon of online social networking, and the smart investment by foundations in those companies, nonprofits should be rearranging their own mindset and thinking about how they can make more effective use of the web to promote social activism, advocate their cause, and find the volunteers and financial resources they need to do carry out their mission.

Nonprofits also need to accept the fact that the emergence of social networks has created new opportunities for them, while limiting their ability to control their message.

Consider Facebook, an extraordinary phenomenon reflecting the power of the web and its transformation of youth culture – a power and transformation not lost on tech behemoths Microsoft and Google: The Wall Street Journal reports that Microsoft is in talks to buy a stake in Facebook, and that Google also wants a piece.

And as young people migrate to Facebook, they are taking their charity with them.

Facebook users, for example, can promote their favorite charitable or social causes any way they want on their own Facebook pages and among their Facebook friends.

As the Philanthropy Journal reported recently, online-fundraising firm Firstgiving is taking advantage of a new Facebook feature that lets third parties write applications for Facebook users.

Using that feature, Firstgiving will let Facebook members with a Firstgiving fundraising page post elements of those pages on their personal pages, encouraging their friends to make contributions to the members’ favorite charities.

That particular application may sound a bit complicated technically, but online community is where our culture is moving, and nonprofits that want to survive and thrive need to learn how to participate in the online world and become active and productive citizens in it.

Instead of worrying about whether social networking is more properly the domain of nonprofit or for-profit enterprise, nonprofits simply should embrace it as common ground.

No one yet has cornered the market on doing what it is needed to fix what is wrong in the world.

So nonprofits should stop wasting time fretting over turf and work a lot harder to find the most effective strategies and partners they need to tap the value and fulfill the promise of social networking to help heal and repair our communities.