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Illustration by Frank Chimero

Fast Company

Foundations' Four Biggest Faux Pas

An open letter from Nancy Lublin to her powerful "friends" at foundations.

DEAR FOUNDATION PEOPLE:

We've been "friends" for a long time. We call. You return our call a few weeks later. We hang on to your every word. You seem to like us too, because you send us checks, though they're always smaller than we'd hoped. We send thank-you notes, or give you a piece of Lucite at our next dinner.

But the truth is, we don't really talk. We in the not-for-profit world depend on you, your foundations, and your beautifully typed checks with a tycoon's name on them; by one recent count, you have $628 billion that you could dole out to us. Still, let's be honest: Our relationship is fraught. Most of us don't tell you how we truly feel about you. We don't say when we think you've made a bad decision, because in the hoity-toity world of big money (yours) and little not-for-profits (us), that would be impolite -- and, on my part, stupid. We fear losing your money.

If we're really in this do-gooder business to do good, though -- and if we're ever truly going to be partners -- then we're going to need a little more honesty. So here are some things we wish you'd stop doing -- along with one pledge I'll make -- which would vastly improve our relationship.

1. Stop thinking you know everything. Don't assume that your PhD diploma -- which I see on the wall every time I visit -- means that you understand the challenges of executing and implementing some of the good plans you fund. You've got lots of ideas, and you may write smart white papers about combating youth depression and suicide. But you probably still don't know as much about it as the folks at To Write Love on Her Arms or the Trevor Project, who work with suffering people every day.

2. Stop mistaking marketing for overhead -- and stop hating on overhead. We're all running businesses, and we've all got more expenses than we want. But your constant refrain about us spending too much on communications staff, graphic design, and public relations is misguided. "Scaling up" means that people need to know about us. It also means that we'll have to spend money on expenses that you label with the most unfairly pejorative word in our business: overhead.

3. Stop funding redundancy. There is a ridiculous amount of repetition in our sector -- much of it encouraged by the way we ask for funding, but also spurred by the way you fund. Does it make sense to bankroll three different organizations claiming to be the umbrella coalition for New York not-for-profits -- or could we just get behind one? Be less like Santa Claus, who visits the home of every good boy and girl, and more like Warren Buffett, who picks targets that make long-term sense and pulls in smart investors with him.

4. Stop thinking that newer is better. We all love shiny new toys. Over and over, you tell us, "Bring us something new." We just wish you'd get behind programs with proven track records so that we could focus on making them better, rather than coming up with a new gimmick to catch your eye. We know that much of what we do isn't sexy, but it is important; think about funding the not-for-profit Ugly Bettys too.

On my end, I promise to stop calling "for advice" or "just to check in" when that's never the point of the conversation. We both know what I really want: your check.

Fondly,
Nancy

Illustration by Frank Chimero

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18 Comments

  • Dee Fife

    Let’s get real people, non-profits like every other business on the planet hinge on their successes, achievements and progress (and of course, their missed targets aka failures). Non-profits must do business like it is real business -- recognizing that foundation grants are not handouts, they represent a partnership. Does doing business this way affect the impact of your cause, your efforts, etc? Not if you’re doing your job right. It all circles back to how you value your stakeholders.

    Nancy provides non-nonsense advice that I routinely share with fellow board members on an international non-profit board. I espouse that many of these advice points echo true in our corporate worlds. Our board members represent a diverse group from leading US public corporations to innovative software firms, each espouses the need to value stakeholders.
    Nancy, once again you made it clear: valuing stakeholders is critical to moving forward.

    Keep it up, Nancy!

  • Dee Fife

    Let’s get real people, non-profits like every other business on the planet hinge on their successes, achievements and progress (and of course, their missed targets aka failures). Non-profits must do business like it is real business -- recognizing that foundation grants are not handouts, they represent a partnership. Does doing business this way affect the impact of your cause, your efforts, etc? Not if you’re doing your job right. It all circles back to how you value your stakeholders.

    Nancy provides non-nonsense advice that I routinely share with fellow board members on an international non-profit board. I espouse that many of these advice points echo true in our corporate worlds. Our board members represent a diverse group from leading US public corporations to innovative software firms, each espouses the need to value stakeholders.

    Nancy, once again you made it clear: valuing stakeholders is critical to moving forward.

    Keep it up, Nancy!

  • PJ Breen

    Both the articles and the comments make for interesting reading.
    It does occur to me that if 'Foundation people' were to follow some of your advice they would be open to even more criticism from you.

    Your third suggestion is to stop funding redundancy because of the "ridiculous amount of repetition" in the non-profit sector - but if 'Foundation People' were to make the decision as to which of repetitive groups to weed out and stop funding, would you not then accuse them of greviously offending your first suggestion - to 'stop thinking you know everything'.

    The law allows practically anyone to set up a non-profit for almost any goal they choose. A grant making Foundations' role is to fund those non-profits that meet its funding specifications. The 'ridiculous amount of repetition' in the sector will most likely be lessened by the ongoing economic climate.

    Anyway, thanks for the thought stimulating article.

    www.non-profitplace.com

  • Anonymous

    I loved this article. Agree with almost everything you wrote. And especially appreciate the statement, "Be less like Santa Claus... and more like Warren Buffett, who picks targets that make long-term sense and pulls in smart investors with him."

    
I am a foundation Executive Director and also serve as current president of our local Grantmakers Forum. I've always believed that the "little here, a little there" approach to philanthropy was inefficient, and that individual and institutional donors' fixation on "overhead" was counterproductive and nonsensical.

    

I had the opportunity to meet Dan Pallotta, author of Uncharitable, this last fall, and I am sold on this notion that we all need to put much greater emphasis on proven programs and outcomes/ effectiveness... not just on how budget is allocated.

    

I could speak volumes on redundancy, but will reserve comment for now!



    Thanks for your insights and ideas. I'll be sharing your article with many of my colleagues and board members in the weeks ahead.


  • Pam McAllister

    Well, I know plenty of folks on both sides of this table who treat each other as caring human beings, rather than with the kind of objectification and manipulation Ms. Lublin describes.

    (I remember one foundation executive describing to me, with tears in her eyes, the weight of the responsibility she feels to do the right thing for her community. She sure didn't "know it all.")

    Stories of honest collaboration for the common good are all around us. Why not highlight them?

    Pam McAllister
    http://www.pammcallister.com

  • Alice Korngold

    Nancy, you have a unique sense of humor, but you are certainly not alone among nonprofit leaders with regard to your comments; I've heard them before. And you have certainly paid your dues, having founded the successful Dress for Success, and now leading Do Something--you are a highly successful social entrepreneur who has done a lot for many communities. I've never met you, but clearly, you are doing something very right! While I do believe that business people, board members, and various funders can and do offer a great deal of wisdom, I also think that nothing beats the experience and expertise of someone who has actually run a business or nonprofit--that is, "sweated payroll." As a result, I think it's particularly valuable to have at least a couple of board members who have built and run small and medium size enterprises. And I think that foundations should try to hire at least some grant officers who have headed up nonprofits--who have had personal experience building revenues and managing organizations, rather than only having abstract and academic perspectives.

  • Tracy Moavero

    I applaud the letter. I don't see it as an attack on foundations, but as some blunt talk about the dance donors and grantees do, one where foundations dance the lead. Or, as we might say in our reporting language, it's a critique of systems.

    The point that especially spoke to me was #4. There are certainly loyal donors who make long term commitments to organizations and issues, but we need more of them. Too many organizations know the pain of having been a foundation's flavor of the year (or two). If a donor is not pleased with a grantee's work, that's one thing, but when we hear "we're no longer funding X because we're more interested in Y" is deeply frustrating. We all know that complex problems require patience and longterm thinking. Making real change means we need your partnership for more than a dance or two - to torture my dance metaphor a little. And let me be clear, the foundations who stick with us are deeply appreciated.

    We also need more foundations who are willing to fund general operating costs. That may not be the most exiting part of our work, but it's fundamental to what gets termed "project" work. The distinction is actually rather artificial. We also need your help in correcting the public perception that overhead is bad, as if work happens by magic.

    Here's a short video I really like from Bridgespan Group about how donor requirements can inadvertently cost grantees. http://bit.ly/4sq42B

    And lastly, that Lucite joke cracked me up!

  • Bill Huddleston

    Sounds like a few readers have forgotten the truism told all people who go to work at a foundation, "From now on, all your jokes will be laughed it." I've heard that from multiple people have a career in the non-profit sector and have switched from the funded to the funder side. It's not an equal equation and I don't think Ms. Lublin's tongue in cheek letter was meant to offend, but rather to open some eyes.

    I think that the real problem is that our accounting system which is counter productive to producing true value in the 21st century. As long as people who provide services are considered "an expense" and not an asset, (despite the typical "Our people are our most important asset" true value will always be obscured.

    Here's an additional aspect of this from my blog at www.cfctreasures.wordpress.com:

    Give While You Live & Give Without Strings
    Posted on November 12, 2009.
    Filed under: Combined Federal Campaign - CFC, Fundraising, Leadership, Non-profits |

    Non-profits Are Not Businesses, Part II: Program vs Operating Costs
    Give While You Live and Give Without Strings

    In part I, I said that:

    The non-profit sector has done a spectacularly lousy job of explaining what it does and how it does it, and has spent fifty years convincing the American public that “administrative expenses” are bad and that “program costs” are good and now complains about how hard it is to get unrestricted funds.

    Let me elaborate on this point, because I do think it is “chicken and egg question” – which came first, did the donors request to know the percentage of administrative costs, or did the non-profit in an attempt to compete for funds, say “Our administrative costs are lower than the other guy’s.” What a dumb thing to say. Only in the non-profit world do we push the “how” of a service or good as the means of convincing donors or grant-making organizations to fund us.

    Think about it for a minute, when you go to get your car repaired, you presumably go through these steps:
    1. You take it to a garage or dealer that you either have direct experience with, or was recommended by a friend, or you looked it up on the web.
    2. You describe the problem with the car (your need).
    3. Their mechanic diagnoses it, and calls you back with the recommended solution and estimated cost.

    At this point you make your decision, and there are only 3 possible choices:
    1. You have them fix it.
    2. You decide their price is too high and you might be able to get it fixed somewhere else cheaper.
    3. You decide that the problem is not as critical as you thought and you can live with it for some amount of time, whether the ultimate solution is to get a new car, or to have it fixed later.

    Notice, nowhere in this decision process did you ask these questions:
    1. How much are you paying your mechanics?
    (I only want the cheapest mechanics possible to work on my car.)

    2. What brand of tools and diagnostic equipment are you using?
    (I don’t want to pay for the use of modern tools and computer equipment, my grandfather was a mechanic and he didn’t need any new-fangled gear to fix cars).

    You can substitute almost any service or good you want and you can have a similar sequence: Dentist – I only want the old drills used (you know the slow, loud, painful ones from your childhood). Coffee server: What brand of coffee roaster/maker are you using, I’m only going to pay for one that’s cheap.

    What the non-profit sector does not do well, is to make the case as the difference between “What & Why” versus “How.” “What & Why” should matter a lot to the potential donor, that is why you are talking to them, and why they are considering giving you some of their money. Your mission resonates with them in some way, whether because they or a family member or someone they know has had direct experience with your organization, or they just have heard about you and care about what your organization does.

    The things that truly matter to donors are “What does your organization do?” and “Why do you do it?” If you answer those two questions, and you can certainly say, “Ten dollars a month helps us do ________ for the _________ in our community, or overseas, or in ________ this part of the country.

    In a rush to compete against other non-profits, many non-profits then also answer the “How question” – even if it hasn’t been asked. What’s said is “We keep our overhead costs low so more of your money goes to program.”
    What’s not said is this, even if it is true:
    “Keeping our “overhead low” means that we pay our staff a barely living wage, and have 30% turnover because as soon as someone has any outside needs (home, family, etc.) they can’t afford to stay here.” The fact that 30% turnover keeps the program from ever being as successful as it might be, is never mentioned.

    In the 21st century, the distinction between “overhead” and “program” costs is meaningless. Ask the potential donor or funder if they use the telephone, e-mail and the computer in order to do their job, and if they work in an office do they sit on a chair and work at a desk, because given the emphasis on “low overhead” all those things are bad. Then ask them to keep track for 3 days of how they spend their time: are they using the phone and computer for personal, work, or civic functions, and that they need to submit the detailed timesheet with this to their supervisor.

    The fact that in our modern society we still use accounting methods that were developed 7000 years ago to count crops and cattle is a subject for a different article, but it’s worth mentioning. All marketing experts will tell you that your customers (donors) can be educated as to what’s important and why they should choose you and your product or service. Just because it’s for a non-profit and the direct benefit to the donor is harder to describe, it doesn’t mean that it’s not real.

    The non-profit sector although it likes to although it likes to talk about the importance of collaboration, is often very close minded when it comes to fundraising. It views the world has having a “money pie” of a set size (charitable giving) and competes mainly against other non-profits for a slice of that pie. My experience is that it is possible to “grow the pie” by working in colloboration with other non-profits, and that the real competition for the donor’s dollar is not between two different non-profits, but it’s competing for attention among other discretionary spending, including sports, cable TV, $4 coffees, $200 shirts, toys, etc.

    A lot of the problems that the sector faces, and believe me, I know that this is a particularly tough economic time, would be helped if this attitude and direction were encouraged: “Give While You Live and Give Without Strings.” If you don’t trust our organization to do what we’ve been doing, and have been successful at, that’s fine – choose some other organization, but if our mission does resonate with you, don’t hamstring us, we appreciate your unrestricted gift and you are making a difference by helping us meet our mission.

    Regards,
    Bill Huddleston
    www.cfcfundraising.com
    P.S. I have finished updating my CFC Special report for 2010, please go to cfcfundraising and request it, it will be sent soon. Applications for local charities to apply to the CFC are usually between February and March.

    Thanks very much!

    P.S. In terms of actual giving, if the CFC were a foundation, it would be the 10th largest foundation in the USA. It is the largest source of unrestricted funding in the world.

  • Jeff Zalla

    Nancy, I loved the honesty and clarity of your open letter. I also appreciated the humor in your obviously tongue-in-cheek approach.

    Some other commenters, kind-hearted in their support of the good work of foundations, took offense, believing themselves to be 100% correct, and sought to set you straight. Unfortunately, they chose to hide behind pseudonyms. Wouldn't we all have an easier time getting to the "right" answers, and maintaining civility, if everyone were willing to stand up and be counted, as you were in this article?

    Thanks for giving us something provocative to think about. I look forward to more of your columns in the future.

    By the way, I also loved a brief video interview I saw of you at DoSomething.org regarding your inspiration and
    creation of Dress-for-Success; you are a great model to our country's young people. Keep up the good work.

  • R Smith

    Nancy while you may have some good points they’re all pretty much negated by the way you present them. you tell foundations they do important work and go on to belittle them. Not all PhDs are frumpy experts sitting around writing white papers just as not all not-for-profits workers are granola eating hippies...talk about a narrow world view. Come on, get it together, time to grow up and start presenting yourself like the leader you have the platform to be. Nobody likes to hear an walking inferiority complex with a megaphone and frankly, it’s much easier to write you off when you act like one.

  • John Smith

    Nancy. Thank you for writing this honest article. Clearly it has served its purpose... spark debate. Bravo on another great article!

    Let me explain why you are right:

    1)You are correct about marketing, it is NOT overhead. If your organization's program is to "activate" people. Then reaching those people is an essential aspect of the program. Thus, money spent reaching those people is a program cost not an ongoing operating cost. The other commenters with the "MBA" need to look back at their class notes. Accounting for marketing costs is not black and white.

    2) I have to respond to "Foundation Friend's" number 4. He says "you shouldn't have a problem repackaging a program to appear like something new." Really? Really? Nancy, you shouldn't have to do such "repackaging" in the fist place. Foundations do want to fund "new", the fact remains they should fund "impact" even if that comes in the form of something proven and "old".

    Nancy continue to speak your mind and spark debate. We in the non-profit and for-profit sectors alike read your columns for various reasons. I for one always find them insightful.

  • jaffer qamar

    I am surprised FAST company published your letter. Competition is good and monopolies are cheats. Marketing is overhead! Donors may not know everything but they know 100 times more than you and shame on you for lecturing us! Who appointed you as the grand poobah of charity? Find something else to do life -- this is not your calling in life.

  • Tigran Pogosyan

    3)Maybe we should appoint you to call on all of the local shelters, food banks, support groups, community organizations etc... You can deliver the message that they won't be getting any more "checks", because another like group beat them at their own game. I wonder what that would do for the amount of assistance needed and the spirit of service around the world? I'm trying to visualize a few largeТипография Москва , corporate-like non-profits that served EVERYONE and spared us all the pain of redundancy. Hmmmm.

  • Tigran Pogosyan

    3)Maybe we should appoint you to call on all of the local shelters, food banks, support groups, community organizations etc... You can deliver the message that they won't be getting any more "checks", because another like group beat them at their own game. I wonder what that would do for the amount of assistance needed and the spirit of service around the world? I'm trying to visualize a few largeТипография Москва , corporate-like non-profits that served EVERYONE and spared us all the pain of redundancy. Hmmmm.

  • Tigran Pogosyan

    3)Maybe we should appoint you to call on all of the local shelters, food banks, support groups, community organizations etc... You can deliver the message that they won't be getting any more "checks", because another like group beat them at their own game. I wonder what that would do for the amount of assistance needed and the spirit of service around the world? I'm trying to visualize a few largeТипография Москва , corporate-like non-profits that served EVERYONE and spared us all the pain of redundancy. Hmmmm.

  • Diana Sieger

    While this article will ruffle some feathers, it will do so because we recognize that much of it rings true. I have written on this very topic and while the foundation I lead is not perfect, we do try to listen and not over-promise nor diminish good ideas. I realize that the article has an edge but frankly that is probably one of the reasons we read it.

    Several years ago I attended an Executive Education session at Stanford designed for foundation leaders and two nonprofit CEOs spoke to us with great passion about their experiences with foundations. It was a productive discussion and perhaps those kinds of conversations need to take place more often. And there are differences in types of foundations as well - private, community, corporate. Lumping all foundations together is not good but then frankly not everyone understands what we do as foundations.

    Nancy - I liked your last paragraph as well because the "calling for advice" and "just checking in" calls are exactly what you described - really seeking out needed funding.

    --
    Diana Sieger, President
    Grand Rapids Community Foundation

  • Diana Sieger

    While this article will ruffle some feathers, it will do so because we recognize that much of it rings true. I have written on this very topic and while the foundation I lead is not perfect, we do try to listen and not over-promise nor diminish good ideas. I realize that the article has an edge but frankly that is probably one of the reasons we read it.

    Several years ago I attended an Executive Education session at Stanford designed for foundation leaders and two nonprofit CEOs spoke to us with great passion about their experiences with foundations. It was a productive discussion and perhaps those kinds of conversations need to take place more often. There are differences in types of foundations as well - private, community, corporate. Lumping all foundations together is not good but then frankly not everyone understands what we do overall.

    Nancy - I liked your last paragraph as well because the "calling for advice" and "just checking in" calls are exactly what you described - really seeking out needed funding.

    --
    Diana Sieger, President
    Grand Rapids Community Foundation

  • Foundation Friend

    Nancy. Wow. Really? We DO need to talk.

    As both a non-profit board member and a corporate contributor, I'm astounded that you chose to speak for all non-profits in such a publicly sarcastic, ungrateful, whiny, rude, slefish ..... Oh, I have to stop.

    Let me help you get to a better place.

    1) Non-profits around the world not only lack funds, they lack talent. Some of those PhDs you mock, donate a lot of time and personal angst to serve as volunteers and often needed consultants to non-profits who can't afford to hire for critical roles.

    2)Marketing is overhead. I know; I'm a marketer with an MBA. Funders want to know that a non-profit is using it's resources well. As a funder, they are entitled to question what they are supporting and as a director ITS YOUR JOB to inform them.

    3)Maybe we should appoint you to call on all of the local shelters, food banks, support groups, community organizations etc... You can deliver the message that they won't be getting any more "checks", because another like group beat them at their own game. I wonder what that would do for the amount of assistance needed and the spirit of service around the world? I'm trying to visualize a few large, corporate-like non-profits that served EVERYONE and spared us all the pain of redundancy. Hmmmm.

    4)Loose the attitude and communicate better. With all the communications staff, graphic design and public relations spending you are advocating, you shouldn't have a problem repackaging a program to appear like something new or maybe write a convincing strategy that would promote the support you need.

    Nancy, if you're still reading, please refrain from speaking for all non-profits. There are a lot of organizations in dire need right now. I doubt your article here did much to help them or make funders want to dig deeper. I'm glad you don't "have my check" in the first place. If you did, I'd take it back until you stopped thinking like a teenager and started thinking like a leader.

    Fondly,
    A Friend