Foundations need to act smarter

By Todd Cohen

Charitable foundations are missing a great opportunity to help nonprofits do a better job.

Foundations face little regulatory oversight, are free to do pretty much what they like, and lack any market incentive to adapt to nonprofits’ actual needs.

Foundations account for only 13 percent of $307 billion in annual charitable giving in the U.S.

And private foundations each are not required to pay out in grants and overhead combined more than five percent of their assets each year.

It is no wonder many foundations remain isolated from the day-to-day realities nonprofit face.

For their part, nonprofits enable foundations’ lack of connectedness.

Needing operating capital, many nonprofits take the role of supplicants and treat foundations officials like philosopher kings and queens.

So nonprofits will jump through hoops to try to meet foundation grant guidelines that can be arbitrary and unrealistic.

A new report sheds light on the parallel universe many foundations inhabit.

While many of them mean well, genuinely wanting to help nonprofits more effectively address the symptoms and causes of social and global problems, foundations also can be blind, failing to see nonprofits’ real-world needs.

Foundations also can be in denial about the gap between what they expect and demand of nonprofits and operating challenges nonprofits actually face.

With the recession placing enormous financial and operating pressure on nonprofits, foundation funding could be making a much greater impact on nonprofits.

“On the Money,” a new report from Grantmakers for Effective Organizations, or GEO, says grantmakers are partly to blame for nonprofits’ continuing financial stress.

“The size of many grants and the strings attached to them often don’t align with the results grantmakers are asking of their grantees,” says Kathleen Enright, president and CEO of GEO. “Many of the ways grantmakers provide financial support to grantees are actually counterproductive and can detract from nonprofits’ ability to have an impact.”

Rather than helping nonprofits cover their operating costs, for example, grantmakers “overwhelmingly” prefer to make grants that support direct delivery of services, GEO says.

It also says foundations place “enormous burdens” on nonprofits through grantmaking practices such as “duplicative” grant applications and demands for “arbitrary impact indicators.”

And foundations’ “lack of knowledge about the true costs of running a nonprofit often leads to ineffective grants and financially-challenged” nonprofits, GEO says.

Foundations can be a great resource for nonprofits by providing funds they need to strengthen their organizations and deliver services more effectively.

To do that, foundations should work to better understand and address nonprofits’ actual needs and challenges.

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Connecting, part 4: Authenticity key for charity stories

By Todd Cohen

In the charitable world, now more than ever, stories matter.

Charities face unprecedented financial stress and competition for resources in the worst economic crisis since the Great Depression.

Charities also need to rebuild public trust that has been damaged by scandals in the corporate, government, media and charitable sectors.

Stories capture the indispensable role that nonprofits and charitable giving play in our communities.

Stories can teach, inspire and engage.

Stories can stimulate greater and more effective participation in the giving sector.

To do that, stories need to be authentic, true.

They also need to steer clear of overstatement, jargon, and the vague and philanthropically-correct blather than many nonprofits seem to believe they must use to avoid saying what they actually do or talking about the serious social problems and operating challenges they actually face.

Nonprofits should tell stories to help people understand their impact, the way they work, their need for resources, and the investment that people and institutions make in their organization.

To be effective, those stories should be direct, using words that are simple and clear, offering illustrations that are graphic and insightful, and getting directly to what matters.

A nonprofit should be able to tell its story quickly, whether to a potential donor, volunteer or board member, to a news reporter, editor or producers, to readers of the organization’s newsletter or website, or to a stranger on the checkout line at a store.

Charities matter because they take on the symptoms and causes of the critical problems in our communities.

To be effective, charities need the support of individuals and organizations willing to give their time, money, know-how, connections and passion to the organization.

Securing that support requires that charities excel at telling the story of the social or global problems they address, the difference they make and the operating challenges they face.

By telling stories that are clear and genuine, charities can connect with the givers and giving organizations whose support they need to help make our communities better places to live and work.

Connecting, part 3: Media relations critical for nonprofits

By Todd Cohen

Love them or hate them, the news media reach a lot of people and can help the giving sector tell its story.

So charities should be smart about working with the news media.

Many charities act as if their stories should get ink, air time and digital space simply because their cause is worthy.

But news organizations compete fiercely for readers, viewers, listeners and visitors to their publications, broadcasts and websites, and they typically feature stories they believe will generate the most interest among their target audiences.

And those stories tend to be about crime, violence, natural disasters, scandal and celebrity.

So charities have a lot of work to do to figure out how to cut through all that information clutter and noise to get their stories told through the news media.

Before the rise of the Internet and the collapse of newspapers, many charities relied on writing news releases and sending them to news organizations.

But in today’s fragmented media world, filled with too much information, charities need to be more strategic in working with the media.

Learning from their approach to fundraising, in which a key strategy is to cultivate potential donors before asking for a gift, charities should work to cultivate reporters, editors and producers working in the news media.

That means making cold calls and building relationships based on trust.

Rather than being pushy, nonprofits simply should let news representatives know they are available as resources for stories, and then should work gradually to show they are in fact useful and even indispensable resources.

If a big national issue like health care hits the headlines in a local newspaper, for example, groups involved in that issue should contact the news people with whom they have begun to cultivate a relationship, making the organization’s executive director or board chair available for interviews to help the reporter, editor or news producer give the national story a local angle.

And if the nonprofit does a good job developing that relationship over time, the news reporter, editor or producer will be more likely to pay attention when the nonprofit actually has news to announce.

Getting the media to report on nonprofit news likely will be an uphill battle, and nonprofits are not entitled to coverage just because their cause is worthy.

Just as they do with donors, nonprofits have to cultivate relationships with news people and lay the groundwork for making the ask.

Next: Connecting, part 4: Authenticity key for charity stories

Banker gave givers another way to give

By Todd Cohen

With the death on Aug. 29 of Lewis R. Holding, North Carolina lost not only a business leader who built his family’s bank into a solid business that puts today’s over-leveraged lenders to shame, but also a sure-eyed visionary who created a charitable foundation that has become a model for helping givers throughout the state grow charitable assets in their communities.

Known as “Snow,” a nickname he received in childhood because of his fair hair, Holding in 1988 created the North Carolina Community Foundation to help fill what he saw as a gap in local philanthropic resources, particularly in rural counties with less wealth than the state’s larger, more affluent metro areas.

Some philanthropic leaders in those larger metro areas initially saw the North Carolina Community Foundation, because of its statewide franchise, as a potential competitor for contributions from their own local donors. Some still hold that view.

But Holding, a political and business conservative who served for decades as chairman and CEO of Raleigh-based First Citizens Bank, believed competition was good for community philanthropy, and that offering givers more choices for investing their charitable dollars would make the charitable pie bigger.

“I don’t think competition has hurt anybody,” he told me in 1991 in a rare interview for The News & Observer in Raleigh. “It would be a breath of fresh air in this business.”

Today, through 59 local affiliates that serve 65 counties throughout the state, the Raleigh-based North Carolina Community Foundation manages over $100 million in charitable assets and makes annual grants totaling roughly $5 million.

Modeled on First Citizens, which the Holding family built in large part because it was willing to open branches in sparsely-populated counties, the North Carolina Community Foundation committed itself to develop those underserved markets.

“Snow was visionary,” Jim Black, a member of the foundation’s board of directors and senior vice president and director of client development for Wachovia, said in an interview.

“He wanted people in those communities to have an economical way to express their philanthropy in their communities, keep the money at home,” Black said, “and the community foundation’s vision was really to help promote that and make that possible.”

Unlike private foundations, which typically get most or all of their funds from a single donor like an individual, family or corporation, community foundations accept funds from anyone.

Community foundations, one of the fastest-growing sectors in the charitable marketplace, invest the funds and, with the advice of the donors, make grants to causes the donors care about.

Jennifer Tolle Whiteside, president of the North Carolina Community Foundation, said in an interview that Holding’s vision was to “ensure that philanthropy was extended to all walks of life across the state.”

His approach to growing philanthropy was “about being flexible,” she said, “It was about being inclusive with communities. It was about ensuring that rural North Carolina had a place at the table and that everyone could be a philanthropist.”

He also believed growing philanthropy required asking people to give.

“You have to ask people for money and you have to be clear about it and you have to not be ashamed of asking people for money,” Whiteside said. “He challenged our board, he challenged our affiliates, to make sure we were asking.”

With First Citizens often providing startup funds, the foundation recruited individuals in local counties to form local affiliates, contribute funds and set up local boards to help make grants to local charities.

Today, still modeling itself on the bank, the foundation provides centralized back-office services for its local affiliates.

It helps the affiliates market their philanthropic services, find new donors, invest their assets, make grants from funds the donors create, handle accounting, and file reports with the IRS.

And it tries to make philanthropy easy for donors, offering a charitable alternative to creating their own foundations by providing them with legal, tax, estate-planning and grantmaking services.

In the 1991 interview, Holding said his estate plan called for leaving at least part of his holdings, which at the time included First Citizens stock estimated then to be worth at least $48 million — to the foundation.

While Whiteside did not know any details about his estate plan, she said he had created several funds at the foundation to support his charitable interests and “was always extremely generous in his philanthropic work.”

Whether his estate leaves a gift to the North Carolina Community Foundation or not, the very existence of the foundation is a timeless gift that will continue making a difference for generations by asking North Carolinians in all walks of life in communities throughout the state to give.