Sunday, January 9, 2011

Turning the Dials on an Outdated System

I think one of the hardest things for me to deal with in my professional life is that I am making a living off of the misfortune of others. Without the inequalities that exist in our society, the organization I work for would not have a purpose, and I would not have a job. I have a comparatively privileged lifestyle to those I am trying to help and I live comfortably while they do not. If their problems were solved, or didn't exist in the first place, I would not be able to do what I love, and get paid for it too.

Last week, Lenore Hanisch of the Quixote Foundation wrote a guest blog post on Tactical Philanthropy on its recent decision to spend down all of its endowment by 2017, which resonated with my struggle to be comfortable with my work. Hanisch commented on how the decision to spend all of the foundation's reserves will put her into some personally difficult situations:
Erik [her husband whose father started the foundation] and I have always been clear in our belief that the foundation and its assets exist for the purpose of progressive work—not to give us purpose. This field can be seductive: when you’re associated with a foundation you’re suddenly always funny and interesting, with people eager to hear your opinions. When the money is gone I’ll not only need a new job, I’ll also be left out of quite a few parties and someday, someone might even admit they don’t like me. In other words, spending everything puts us in a fairly normal situation as far as our jobs are concerned.
For those that work in the social sector, our goal should always to put ourselves out of a job, otherwise, we are just making money off of poor people. As I learn more about the field, I'm realizing that nonprofit funding is very donor-driven and subject to the whims of major donors and foundations. This creates a capital stream that is fragmented and variable, which doesn't help encourage organizations to focus on long-term solutions to society's problems. Instead, we get caught in a cycle of charity that aims to fill the needs of the underserved, rather than creating large shifts in systems and values. I benefit from this constant cycle, as I will be constantly employed.

I think the only way I can truly feel good about working the social sector (and, by extension, the whole social sector itself), is to create a shift away from donor-driven cycles of charity. These changes are happening all around with the rise of social entrepreneurship and venture philanthropy, but I feel like it is not enough. It is important for foundations to spend down their endowments and for organizations to work on accomplishing goals so they are no longer needed, but this is only one piece of what is needed. To make a true shift away from charity to solutions-driven change, we need to reshape the rules of the nonprofit sector.

Lucy Bernholz and Steve Goldberg recently had a fascinating exchange about the place of philanthropy in the long term. While discussing the different innovations going on in the nonprofit world (from those great social entrepreneurs and venture philanthropists), Lucy commented that:
[P]hilanthropy as an industry is "designed" by policies. It is a regulated industry. It is shaped by the rules. And the rules, currently, favor "donor centric, fragmented, etc"... The game itself doesn't change because there are new players - it needs new rules.
All of the changes to nonprofits that are currently going on, Lucy said, are mainly financial innovations, or business model innovations. Thinking about effective management or outcomes measurement for nonprofits is important and can create some lasting change, but those changes are just turning dials on an outdated system that can't respond effectively to the needs of the population. Instead, we should try to think about the assumptions that the nonprofit sector is built on and change those.

Developments on this level are the most exciting to me. The creation of L3C's, the growing market for impact investing, and reforming the tax-deductible donation are areas which seem to have the most potential to create some pretty profound systems-wide change. I think that if we can find a way to blend business and philanthropic capital effectively, we could create a capitalist economy that is based on solving society's problems, rather than creating profit. I'm not sure how to do this, but I'm excited to try to figure it out.

Disclaimer: The postings on this site are my own and do not represent the positions, strategies or opinions of Venture Philanthropy Partners


  1. The Quixote Foundation's decision troubles me; I'm worried that a desire to reach that warm-and-fuzzy internally consistent devotion to purpose and not to your own sense of purpose can cloud hard-nosed realities about delayed gratification over the long haul. Surely, if an opportunity comes along to make great strides toward your institution's ultimate goal, one should be open to spending down your endowment (or even spending it entirely, if the opportunity is promising enough). That said, deciding to spend down your endowment simply for the sake of spending it down strikes me as an ineffective use of funds.

    And, as always, I ditto the potential of for-profit/problem-solving ventures.

  2. Putting ourselves out of jobs is an interesting/important goal, but this requires that nonprofits are able to advocate for changing systemic inequalities that exist in governmental and economic policies. I'm not sure of the regulatory environment in the US, but in Canada, registered charities with an operating budget of over $200K are only allowed to put 10% max of their resources towards political/lobbying activities.

    And many nonprofit subsectors - arts + culture, museums, education, health etc. - should not go out of business, unless the public is interested in a massive inflation of government, which I don't think is going to happen anytime in either of our countries.

    But the struggle you describe is very real for people in the sector. I like Dan Pallotta's take on this - we are professional peers to the rest of the economic engine. Our area of expertise and interest just happens to often be helping those facing barriers.

  3. Jeff, while I appreciate your goal of "putting yourself out of business", the underlying assumption is that if we work hard enough we can create a utopia where attempts to increase social welfare will not be needed.

    That ain't gonna happen.

    Working towards making progress is wonderful. But if you are ever lucky enough to actually end some aspect of the problems you are working to correct, you will be well positioned to tackle a new problem, not "go out of business".

  4. Thanks to everyone for their insightful comments. I'll respond in turn to each:

    Harry--I think you bring up a good point. While it is good to not act based on your own self interest within the social sector, it is equally not good to act without direction or purpose. A common question we ask ourselves around VPP about pretty much everything is "To what end?" I'm not sure exactly the motivations behind the Quixote Foundation's decision, I assume they have good reasons.

    Trina and Sean, you both make similar points that are well taken, and lead very nicely into my next planned post. I think that when the social sector reaches a point that is not reliant on cyclical funding streams, we will truly become an integrated part of society's economic engine. Then, the goal is not to go out of business, but to effectively solve and adapt to the problems that are inherent to any society as it progresses. Currently, I think we are too caught in a charitable mindset to take on that role in the economic machine. The examples I listed in the last paragraph are those initiatives that I think are pushing us beyond the rules that constrain us to have to put ourselves out of business.

    Thanks again for reading.

  5. I interpret both Jeff's and Quixote Foundation's comments as asking for willingness to look frankly at whether the system/structures/drivers in our sectors are really getting us to root goals and, if not, to make big changes accordingly, even if those changes affect our jobs and institutions. (I don't read "one solution fits all" in their essays). Jeff points out some deeply plaguing flaws in how much of philanthropy operates, and Trina's comment illustrates how the sector also has strengths. (In utopia, education, arts & culture would be valued enough to be self-sustaining but sadly I agree with Sean it's not likely to happen anytime soon.)

    Jeff describes "...a cycle of charity that aims to fill the needs of the underserved, rather than creating large shifts in systems and values." An October 11 New Yorker piece on the troublesome side of humanitarian aid ( provides graphic examples of the real dilemmas we face when we're willing to look bluntly at how a sector operates in its entire context. Sure, our brains can comprehend how the politics of sending prosthetics to amputee children actually might lead to more children losing limbs in the future but, when we go to Sierra Leone and meet those children, whether to help them walk now or to instead tackle the seemingly intractable larger system becomes an impossible question for anyone with a heart. In that light, nothing is clear except the underlying need for foundations, nonprofits and especially for-profits to stop creating more of the problems and injustices they set out to solve. I think Jeff and Quixote Foundation are saying that we have to set aside the assumed perpetuation of our jobs, institutions and structures in order to tackle these dilemmas and create lasting change effectively.

  6. Keneta, I couldn't agree with your assessment more. I would underscore the focus on institutions and structures, not necessarily on my (or your) job. I gave it a personal frame because I tend to like to put a little bit of myself into my posts, but, really, whether or not I work at a foundation doesn't really matter, nor does it matter if the Quixote Foudnation is around until 2017 or 2050. (No offense meant to either of us; it's just a reality that we all make small, but important, contributions to an overall system that we work in.) What's important is to look at structural changes needed to the assumptions we hold while working in this sector.

  7. Jeff, thanks for the thought-provoking post and all, for the comments. Quixote Foundation’s motivation for spending everything is just like Harry describes: we see opportunities to make great strides toward our ultimate goals. Trina does a great job of pointing out why it’s important for NGOs to work effectively not only with the for-profit sector (and adapt some *functional* parts of their models) but also with government and policy makers. A lot of U.S. foundations and NGOs are more timid than they need be in this arena, as there are quite a few avenues for legal, ethical advocacy. The Funders Committee for Civic Participation ( is a leading resource we use for learning how to assert a strong policy voice appropriately.