Philanthropy. Doing Good. Better

By Marjorie Ringrose, Executive Director, Social Venture Partners Boston

Whether you are beginning to think about giving back or you are looking to sharpen your giving, you may be asking: How can I, one person, make a difference with my giving? The simple answers — select wisely and give wisely — are often easier said than done.

Here is the story of an entrepreneur, building a multi-million dollar company with a growth rate of 40% and 100+ employees and, at the same time, seeking to give in a truly impactful way. It is the story of Patricia Hinchey, a Social Venture Partner.

“For many years, I wasn’t engaged in the world around me or my community. I wanted to be, but with my business and my family, I didn’t know how or where to engage or how to find the time. My first approach was to find and support a cause that resonated with me. I found a good cause, answered the annual appeals, and went to galas. But I couldn’t measure the impact of my philanthropic investments. My giving was too passive.

So, I went for a more hands-on approach. I joined nonprofit Boards, hoping to put my business skills to use. But, I felt like a fish out of water, trying to apply for-profit business practices within a nonprofit’s mission-driven framework. And I saw, first hand, the challenges facing the nonprofit sector. Generally, there are too many nonprofits, too few resources, and too little focus on future sustainability and growth.

But as we often see in the for-profit space, challenge breeds innovation. After years of observing the nonprofit sector and in the wake of the recession, I am now seeing a new generation of nonprofit leaders. These are leaders who embrace for-profit business practices to strengthen their operations, allowing them to thrive and attack some of Boston’s most difficult social challenges in increasingly efficient and effective ways.

These leaders are developing solid strategic and business plans; branding and marketing their organization; building solid employee performance management systems; measuring their effectiveness. Some are even developing successful revenue-generating businesses!

I am an entrepreneur. These nonprofit leaders are social entrepreneurs. And I look for these social entrepreneurs to assure truly impactful giving.”

If you found a bit of yourself in Patricia’s story, you may be asking: How do I find these great nonprofits and social entrepreneurs? (After all, there are 37,000 nonprofits in Massachusetts alone.) And once I find them, how do I best support them?

Patricia turned to Social Venture Partners Boston for some answers. SVP Boston (www.svpboston.org) is a diverse community of 50+ highly skilled, senior professionals who invest money and consulting time in innovative local nonprofits. Through a rigorous investment approach and collective giving, SVP Partners have an impact that is far greater than any one of us would have on our own. Here is some of the guidance Patricia received.

Selecting great nonprofits
Conduct your own due diligence.

• Narrow down the field. The Catalogue for Philanthropy’s interactive database lets you search for nonprofits by populations served, geography, size, and so on.
• Research and analyze. For signs of fiscal health, look to Form 990s (tax returns) and financial reports. Both are often posted on nonprofits’ websites. If not, search the Guidestar website. Look to market analysts: Charity Navigator, Philanthropedia, Root Cause. (A word of caution. Analysts often assign ratings to nonprofits based on metrics, a heavily weighted one being “administrative overhead”. Typically, organizations with the lowest administrative overhead are given the highest ratings. While sound financial management is a must, such ratings tend to reward under-investment in operating capacity. As you might expect, some of Boston’s best social enterprises have relatively high “administrative overhead” – they are investing in their organizations to ensure long-term health and impact.)

Look to others.

• Giving circles, donor advised fund managers, and community foundations are skilled at vetting nonprofits. Watch their investments, but understand that each giving organization has a mission of its own and assesses nonprofits through a unique lens.

Your due diligence may suggest several organizations to chose among – and each of them will be doing great, meaningful work. A decision-making framework, perhaps similar to SVP Boston’s below, can help you select among them.

1. Service model. Is the nonprofit meeting a timely and critical need, with an innovative, cost-effective, potentially scalable solution?
2. Leadership. Does the nonprofit have a leadership team (Executive Director, Board) with the experience, skills, and networks required?
3. Growth/development. Does the organization have a vision for future impact and a reasonable plan for getting there? Does this plan place enough emphasis and investment on building internal operations to achieve that vision?
4. Fit. Does the nonprofit’s mission resonate with your passions? Does it need what you have to offer?

Giving wisely
Once you’ve selected a nonprofit, how do you support it most effectively while also maximizing the impact of your philanthropy?

Give money and consider the following.

• Give funds for general operating support. Over 80% of funds that nonprofits raise are “restricted”. That typically means that the donor requires that the funds be used for a specific project or program. These restricted funds could not be used to support or build the internal operations of the nonprofit organization itself. Restricted giving tends to starve nonprofits of the resources they need to sustain and grow their operations and, ultimately, their impact.
• Concentrate your giving. There is currently no mechanism that efficiently allocates capital in the nonprofit space. One of the results: the costs of raising funds are very high, both in terms of real costs and opportunity costs. Fewer, larger contributions lessen the inefficiencies.
• Give multi-year funding. The vast majority of funders – individuals, corporate, foundation – award funds on a single year basis. Imagine running your business with a one-year time horizon. That’s exactly what nonprofit leaders are forced to do.

Give your time and skills and consider the following. If you:

• Have limited time and seek tactical opportunities, go directly to a nonprofit. Many of them post volunteer opportunities on their websites. Or seek out volunteer aggregators, such as Boston Cares or Building Impact, who specialize in offering well-scoped, well-managed, tactical volunteer opportunities.
• Have more time to give, wish to contribute your business skills on a project or two, and are part of a corporate volunteer program, look to organizations such as Common Impact or Experience Service Corp.
• Are seeking a deeper, long-term relationship and to truly impact the strategic direction of a nonprofit, consider Board service with a social enterprise.

An alternative to each of these valuable means of giving is to seek collective impact – leverage your gifts by the gifts of others. Join a giving circle or open a donor advised fund through a money manager or community foundation. Or, look to engaged (venture) philanthropy for a highly leveraged model.

Social Venture Partners practices a model of engaged philanthropy, where our 50+ members (entrepreneurs, corporate executives, nonprofit and philanthropic leaders) each make financial gifts that are collectively invested in rigorously selected nonprofits in education, workforce development, and financial literacy. Each Partner’s financial gift is leveraged up by the financial gifts of all the others.

SVP’s three-year financial gifts are even further leveraged by strategic engagement. Many SVP partners work hand-in-hand with Boston’s best nonprofit leaders on well-scoped, well-managed projects. Partners bring their business skills in strategic planning, marketing, HR, and so on to these social entrepreneurs as they build, strengthen, and grow their organizations.

Ultimately, for every $1 in cash that SVP invests in a nonprofit, that nonprofit receives an additional $9 in value from our strategic counsel. Interestingly, the impact is not only on the nonprofits we support, but also on our own philanthropy. By volunteering, attending educational programs, and networking with one another, we sharpen our individual philanthropy and learn what it means to truly have an impact.