A core value in my consulting work with corporations is that CSR will only be effective and sustainable if it is aligned with the company’s business mission. So it’s exciting to see an innovative iteration of that principle where a company develops a new investment vehicle that could potentially drive entrepreneurship and facilitate wealth accumulation in developing countries.
“If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up. Four billion poor can be the engine of the next round of global trade and prosperity.” C.K. Prahalad, The Fortune at the Bottom of the Pyramid. When I learned about microinsurance, I immediately thought of Prahalad’s 2006 book, and how his prophesies and prescriptions are coming to pass.
Andrew Kuper, President and Founder of LeapFrog Investments figured out how to make money for his investors, while providing microinsurance to low-income people in developing countries. The launch of Kuper’s investment fund was announced at the Clinton Global Initiative (CGI) in 2008. By CGI 2009, President Clinton hailed Kuper as the global leader in microinsurance. President Clinton also compared Kuper to Muhammad Yunus, who was part of Kuper’s inspiration when he met Yunus via Ashoka.
In a private interview, Kuper explained to me the origins of the vision for LeapFrog. His idea took shape while he was working with social entrepreneurs at Ashoka. Kuper, and the team of investment and insurance professionals who soon joined him, saw that among the world’s poorest people, it took only one adverse event to devastate a family that had been working hard for years. They envisioned microinsurance as a way to end the cycle of poverty--to provide the safety net that families needed. Kuper also saw that if people had insurance, they would be more likely to invest in expanding their crops, establishing businesses, or sending their children to school, without fear of losing their little and only cash if something were to happen.
While Kuper had a social purpose in mind, he also believed that the solution was to create an investment vehicle--a for-profit, commercial enterprise--to help the microinsurance business to take off. So he created LeapFrog to bring capital and expertise to microinsurance operations to enable portfolio companies to scale dramatically. Through these investments, LeapFrog's fund would help millions of people to access quality insurance, the safety net Kuper and his team envisioned. Microinsurance would cover health, life, property, healthcare, livestock, agriculture, and catastrophe.
LeapFrog’s plan to transform the industry was evidence-based. “The Landscape of Microinsurance in the World’s 100 Poorest Countries,” April 2007, reported that “microinsurance--insurance for the poor--which has the potential to significantly aid millions of poor people, has received limited attention.” Further, the report concluded that so few lives were covered by microinsurance, that “the potential market is…up to 30 times larger for all products.” Two of the authors of the report--Jim Roth and Dominic Liber, were so convinced of its findings that they joined and co-built LeapFrog.
Providing a new asset class for investors, LeapFrog has already raised $47 million towards its goal of $100 million. Public and private investors include SCOR, European Investment Bank, Omidyar Network, FMO, Triodos-Doen, Hivos-Triodos Fund, ACCION International, Calvert Large Cap Growth Fund, and wealth manager Felipe Medina.
The evidence supporting investments in microinsurance continues to mount. “The potential market for insurance in developing countries is estimated to be between 1.5 and 3 billion policies.” This is according to last month’s report by Lloyd’s Microinsurance Centre (MIC). The study estimates that microinsurance presently only covers around 5% of the potential market.
A brand new development in the LeapFrog story, announced just today, is that LeapFrog has invested six million dollars in AllLife, an innovative African HIV and diabetes insurer. AllLife covers 10,000 policyholders and dependents, and intends to use LeapFrog's capital to reach 250,000 such financially excluded people.
Boards of directors, comprised of volunteers, have the decision-making authority and power over the direction and finances of nonprofit organizations. Although there are boards that are disappointingly ineffective, I have seen many boards rise to the occasion to lead their organizations to success in service to the community.
The first nonprofit board that asked me to help them with a complete overhaul was a community based nonprofit that served a large immigrant population helping people with language skills, adults with job training and placement, children with after-school care and homework, and families with social services. That was in the 1990's. Since then, I have assisted dozens of nonprofits--regional as well as global--in building stronger boards and establishing the leadership they need to advance strategically and financially to serve the community.
The impetus for change is often financial distress, especially in today's environment with cutbacks in government funding and philanthropy. But some boards and nonprofit executives seek to transform their boards simply because they are proactive. They recognize opportunities for fees for services, collaboration and alliances with other organizations, and innovation in addressing vital matters in education, healthcare, poverty, social justice, the environment, and others areas. They realize that the only way for an organization to advance is to build a strong board with excellent leadership.
How do boards drive change? Change always requires a few drivers, and it takes more than the chief executive of the nonprofit. It takes at least a couple of board members and possibly a funder or two for there to be enough traction to push for change. Then, together with a qualified board consultant, the change-agents can transform the board into a high functioning body.
What's an effective board look like? The board chair is working in partnership (see "the leadership partnership") with the nonprofit's chief executive to lead a group of passionate board members from diverse backgrounds and perspectives to
Affirm, and if necessary, update the mission to ensure that the organization is providing compelling value in service to the community
Create and help to achieve the revenue model for success--and for nonprofits, the revenue model is usually a patchwork of revenue sources, which might include government funds, philanthropic resources, as well as fees for services
Focus board agendas--and the work in between board meetings--in helping the organization to achieve strategic and financial success, including through oversight, and fundraising
Establish board member expectations and a system of accountability
Build the board with people who have the variety of experiences, skills, and networks to help advance the organization, including people with leadership potential
Establish a cadre of board leaders who have the diversity of backgrounds, the experience, and the qualities to lead, while also creating a pipeline of potential new leaders for the future
Provide opportunities for continuous board education on governance, fundraising, and matters of substance related to the work of the organization
The nonprofit sector is not an abstract concept; rather, it is the sum of nonprofit boards. The boards hold the power to make the world a better place. And, it's actually quite doable to help boards become more effective, one board at a time.
Having trained and placed many business executives on nonprofit boards for over 15 years, I've also helped board members decide when it's time to move on from one board to the next. What leads people to move off of one board and move onto a new one?
Ability to provide greater value: I find that most people are interested, and yes, even potentially passionate, about a number of issues. The major driving force in their interest in serving on one board over another is the opportunity to do something useful to help advance the mission. If you are just attending meetings and not able to make much of a difference, then explore with the board chair and the CEO of the organization how you might be more useful, whether that's in fundraising, board-building, financial investments, assisting with the audit committee, strategic planning, or some other way. If you and the board and organization's leadership don't find a good way for you to do something meaningful, then it's time to move on.
Learning about an issue of importance: Sometimes, people decide after several years on a board that they want to stretch themselves to learn about a new issue of importance, and new board experiences can provide such opportunities. I know a terrific board member who rotates boards every six years in order to develop her knowledge of regional and global issues; during her six years at each organization, she is a valued board member, serving in leadership positions--giving, fundraising, and board-building.
Being appreciated: Board members will gravitate to nonprofits where they and their friends, clients, and bosses will be appropriately thanked and recognized for their gifts of time and money. If you're not appreciated, move on.
Serving on a board is an opportunity to learn and grow while you are helping to advance a mission you truly believe in and thus serving the community. While it's meaningful and fulfilling, and you are adding value, keep going. Otherwise, there are plenty of boards that need people who are generous with their business talents and their funds.
Now more than ever, individuals, corporations, and foundations want to make informed choices when they make financial contributions to nonprofit organizations. And people want to volunteer where their time and talents will be put to good use. So how do you know which organizations to support?
A valuable print resource since 2003, the Catalogue for Philanthropy: Greater Washington went online tonight. "We offer a wide variety of giving options, including a gift registry and gift cards," according to Barbara Harman, President and Editor, CFP-DC, and Executive Director, Harman Family Foundation.
Beyond making financial contributions, individuals can have the highest impact in helping to move nonprofits to higher levels of performance by joining the board of directors. And having trained and "matched" hundreds of business executives in finding the right boards of directors to serve on, I strongly advise any individual to go in with their eyes open before committing to join any board. The Catalogue for Philanthropy is the best resource I've seen for people to begin researching nonprofits that are doing valuable work in the community.
I've also assisted businesses in establishing productive, high impact CSR programs; one aspect of the process is identifying nonprofits that can be potential partners on the ground. The Catalogue is a uniquely useful resource for such purposes.
"The Catalogue features just over 300 nonprofits that have been carefully vetted by 90 expert reviewers from foundations large and small, corporate philanthropy programs, giving circles, DC government agencies, and individuals," explains Harman.
Kudos to Barbara Harman and Kathy Jankowski, Director of Partnerships and Business Development, CFP-DC, for their vision and execution. Your work is helping people and institutions seeking to engage in meaningful ways, as well as nonprofits that are doing important work.
I've always appreciated that Pablo Eisenberg has spoken his mind about philanthropy and the nonprofit sector, a refreshing voice of wisdom and candor in a sector rife with politics and back-scratching. Eisenberg's recent WSJ article, "What's Wrong With Charitable Giving, and How to Fix It" was as thoughtful and provocative as ever, as was Brian Reich's response here on Fast company.
I'm going to jump into the fray with my two cents as well.
My message to funders/investors:
There is a beautiful groundswell of donors of a variety of ages and from diverse backgrounds who are in many cases offering valuable expertise as well. At the same time, foundations are shifting their approaches to being more strategic, purposeful, and innovative.
Your challenge: There is no lack of superb causes, nonprofit enterprises, and social entrepreneurs who are doing important, productive work, as well as newer dreamers who have great ideas.
My strong advice: Ground your giving decisions in expertise and experience. If you want to advance missions that are making a difference in our communities--regional, national, or global--you will need to get your hands dirty, do some work to find the people and organizations that are effective, and figure out together with them how you can be most useful. Invest in people and organizations that are actually out there doing serious, hard work and who have begun to learn what works and doesn't work through trial and error; built relationships with communities they are serving; and having an impact.
My message to corporations:
Bravo to the leaders of companies who are finally integrating service and philanthropy, including nonprofit board service among your executives and professionals; this is a more powerful way to integrate and leverage your business's good will.
And bravo for aligning your corporate engagement with your company's mission; you have to be able to make the case to shareholders that your CSR initiatives are designed strategically to advance your business. Corporate philanthropy and service will only be sustainable and effective if designed to yield a win-win for companies and communities.
My message to nonprofits and their funders/investors:
Invest in strengthening nonprofit boards.
Nonprofits will never maximize their potential without highly effective nonprofit boards of directors. Boards are not only essential for oversight (and we have seen organizations fall because of board failures in oversight), but boards play an even greater role by working with the nonprofit's CEO to envision the organization's greater potential in serving the community, creating the revenue model to achieve success, and then playing their part in ensuring fulfillment.
Furthermore, in order for the board to be fully effective, the board needs to build itself with people with the mix of backgrounds and perspectives, and the skills, experiences, and expertise that is needed for that particular organization to soar.
By the way, when I say that the role of the board is to help a nonprofit to achieve its greater potential, that does not necessarily mean quadrupling in size; for example, it might mean merging with another nonprofit that provides complementary services in order to provide greater value to the community, or for greater efficiencies.
People and institutions who seek to invest in making the world a better place, through social justice, the environment, education, alleviating poverty, or other powerful causes will need to dig in and work with experts on the ground in order to really matter.
Answer: Bear Witness. Tell the Story. Take Action.
This has been my advice to board members whom I have trained and placed on nonprofit boards for many years, but it takes on greater importance in today's environment for two reasons: first, the tough economy which makes fundraising more challenging for nonprofits, and second, the increasing demand from funders for nonprofits to measure their impact in serving the community.
Most striking was the response from Karthik Krishnan, Vice President, Reed Business Interactive, and Board Member, East River Development Alliance (ERDA). With his business background and MBA, Krishnan certainly had a healthy appreciation of the value of hard numbers. But he also underscored that in fundraising among corporations, foundations, and his friends, his value as an advocate for ERDA is that he has walked through the public housing neighborhoods served by ERDA and met the families and children who have benefited from the ERDA programs. Krishnan has toured the community side by side with Bishop Mitchell Taylor, Founder and CEO, ERDA.
Numbers are metrics in service of a story. They don't replace the eyes, ears, and voices of board members.
"Want to know if the stimulus act will work or whether ethanol is the right choice for U.S. energy independence? Need advice on how to beat Wall Street?" So asked the Society of Industrial and Applied Mathematics (SIAM) at the annual Moody's Mega Math Challenge. For the past three years, Moody's has awarded college scholarships and summer internships to the high school students with the best answers to these questions. In 2010, Moody's is increasing to $100,000 of scholarships.
What drives a Wall Street firm to such generosity, especially now when every dollar they spend is accounted for to shareholders and the board? I have been working with corporate leaders for the past several years to help them shift their philanthropy and their service programs in order to advance the companies' own purposes while also benefiting the community. This is the only way that corporate social responsibility will actually be effective and sustainable.
And as I reported from the Clinton Global Initiative in 2008 and 2009 here in my posts, the tide has turned. "There is a business reason for every decision we make," explains Frances G. Laserson, President, The Moody's Foundation.
"Moody's wants to encourage students to study economics and finance and see the relevance of proficiency. To think about financial services as a career," elaborates Laserson. "This is a way to reach talented national students in junior and senior years. We bring the top teams to NYC to Moody's and they do presentations and Q & A in front of math Ph.D.s. Moody's sees these students directly." As with Moody's Kiva partnership, this SIAM relationship also provides service opportunities for Moody's people when the M3 student finalists come to Wall Street for the final round and later for internships.
Starting in the early 90's, I have encouraged and assisted companies in assessing the impact of their social investments. In today's environment, companies are much more inclined to do that. "We measure everything," says Laserson.
When people think about joining nonprofit boards, they often think in general terms: arts, education, healthcare, etc. In fact, the nonprofit sector has such a multitude of widely diverse and differentiated organizations. The key is finding the board that will meet your unique set of interests, so that you will be passionate and do a terrific job.
When Bonnie Weill was thinking about joining a board in New York City, she couldn't imagine that she'd find a nonprofit that specifically combined her interests and work and volunteer experiences in both the arts and environmental awareness and action.
In fact, there was an organization that was a perfect match. A nonprofit that supplies hundreds of public schools, senior centers, and arts organizations with discarded, but brand new, supplies donated by businesses. A nonprofit that puts hundreds of tons of would-be-waste into the hands of eager artists and educators.
The nonprofit that gathers, warehouses, and distributes these supplies is Materials for the Arts (MFTA). Not only does MFTA broker the supplies but they also provide art classes to show educators how to do creative projects. MFTA, headed by executive director Harriet Taub, is funded by the City of New York.
The organization also relies on significant, additional funding from the Friends of Materials for the Arts (FOMA). In 2006, Weill was invited and joined the board of FOMA. In 2008, Weill was asked to chair FOMA. Under Weill's leadership, FOMA's fundraising has been robust, enabling MFTA to expand and renovate its warehouse and classrooms.
Demonstrating the centrality of MFTA to New York's cultural community, last month, the New York Innovative Theater Awards awarded MFTA with the Stewardship Award for providing "free costumes, set pieces and other tidbits to needy companies for three decades" and "to recognize significant contributions to the Off-Off-Broadway community." According to the NYT, "the Stewardship announcement seemed to garner the loudest and longest applause of the night."
Weill found the perfect match. That's the key to your success on a board and the organization's success.
Yes, positioning the right person as the board chair is key. Because the chair has the greatest influence on how the board uses its time in meetings and in between meetings, who will be on the board, and who will be groomed for future leadership.
I have seen organizations rise or fall, depending on the board chair's effectiveness. Even the most extraordinary nonprofit CEO cannot achieve the enterprise's fullest potential without a good board chair.
Here's how an effective chair uses her time for the greatest benefit to the nonprofit:
Understands and communicates the mission to investors and key constituents, including making the case for support.
Works in partnership with the CEO to create board meeting agendas that are focused on key strategic issues, and engages board members in productive and meaningful discussions, and decision-making.
Identifies and develops board members for future leadership. Leadership succession planning is vital for the organization's longer term sustainability.
Works in collaboration with the Board Governance Committee and the CEO to identify and recruit new board members from diverse backgrounds and perspectives who have the experience and relationships to be valuable to the organization.
Is a lead financial contributor to the organization and asks other board members for their support.
Meets with each board member individually at least once a year to help each person to discover how they can be most useful.
My advice to board members, nonprofit CEOs, and funders: the most important thing you can do to help build stronger boards is to position the right people as board chairs, and then give them your fullest support. That's how to strengthen the nonprofit sector in serving our communities--regionally, nationally, and globally.
In training and placing business executives and professionals on nonprofit boards, I see which board environments motivate people to perform their best, and which environments crush the spirit right out of well-meaning, enthusiastic, and generous board members.
You see, nonprofit boards are revealing environments because people are there voluntarily. Board members don't have to be there nor do their best in order to earn a living. They are there primarily to serve their communities, to learn, for the psychic reward, and perhaps somewhat to build their professional networks.
The main point is that nonprofit board members are most likely to give generously of their time, expertise, and money, including opening doors to prospective donors, if the board environment is friendly, supportive, enthusiastic, and appreciative. That tone is set by the leadership--the board chair and CEO of the organization, and has everything to do with how people treat each other on the board.
Think of the ways that people signal their support for each other and the organization, or, on the other hand, squash the spirit. Here are a few recent stories I've heard:
Same situation, but different reactions on two different boards: An email went out to the board announcing that an esteemed civic leader had just agreed to attend the annual fundraiser as one board member's guest. On one board, members emailed back to each other with enthusiastic notes. "Amazing!" "Great!" Then others chimed in by inviting people of interest and cheering each other on. On the second board, similar situation, but the response to the initial email was silence. Dead silence. Which board would you want to be on?
On one board, the chair opens every meeting with thank you's to board members who have contributed in the past quarter, showing appreciation and also signaling the variety of ways that one can be helpful in advancing the organization's work. On a second board, the board chair rarely even makes it to board meetings, and no one at all acknowledges the few board members who use their business networks to raise money and other valuable services and assistance for the organization. On a third board, the board chair attends board meetings, but does his emails during board meetings from the head of the table. If you were on the second or third board in these examples, how motivated would you be to open up your most valuable contacts to invite them to do favors for the organization or to contribute generously?
On one board, the board chair made the lead financial contribution, both personally and from his company, and people from his company volunteer at the organization. On the second board, the board chair asked everyone on the board to contribute $3,000 to an event (some did and some didn't), and then, in the end, he himself contributed only $200, and nothing from his company, even though he is a successful businessman. On the second board, how much would you stretch your family budget to give to this organization or ask your boss to contribute from the company?
In order to give and raise money generously, boards need to have a clear understanding of the case for support, a good website to refer to (and perhaps printed materials), and staff support. But, even more importantly, board members need to feel that they are part of a team that is working together to advance the organization in serving the community. It should be fun. Exhilarating.
There are many great causes, and many boards that will appreciate generous, enthusiastic members. Board members have choices, and can easily move on to other organizations where they can do good and feel good too.
Businesses that seek to retain the most talented employees can learn from these volunteer experiences how to build teams that are inspired and motivated to give their best and their most. High performers thrive in work environments where they engage with others to achieve the greater potential.
