So here are my thoughts on the matter of whether higher compensation should be used to attract people to the nonprofit sector.  Rant on:

If I have a terrible accident, I don’t care whether my doctor got into his line of work because he wanted a six-figure income or because he felt a calling to heal the sick. All I care about is whether he is the most qualified to help me get better. If Dr. Feelgood is going to fix me up and get me in a wheelchair and Dr. Moneybags can get me into a cutting-edge program and help me walk again, I’m going to go with Dr. Moneybags. I don’t care how much of a cut either of them are taking from what I’m paying; I’m paying for the outcome, not the process. I also don’t care how much the doctor is making vs. the nurses or physical therapists or administrative staff or janitors.

In fact, let’s take this medical analogy a step further: I don’t care whether the hospital each doctor works at is for-profit or nonprofit. There are only two things I care about:

1) What is the outcome I can expect?
2) How much is it going to cost me?

I don’t care whether there are shareholders taking a percentage of my bill. I don’t care whether I learned about the hospital from billboards paid for by a large marketing budget or whether I learned about it from an unpaid listing in a service provider directory. I don’t care whether the people working at the hospital are well-paid or underpaid, as long as it doesn’t impact the quality of my service.

Sure, all things being equal, I’d rather patronize a hospital where margins subsidize services for the poor rather than lining shareholders pockets, where the marketing budget is small because word-of-mouth referrals are strong, and where all staff are compensated fairly and are working in vocations they feel “called” to do.  But when it’s my life on the line, those all go under the “nice to have” column. I’m going to go wherever my dollars are most likely to help me survive and have the highest quality of life in the future.  I’m sure you would do the same.

So why is it that we apply different standards when other people’s lives are on the line? Why do we ask whether executives are paid “too much,” whether marketing and overhead expenses are “too high,” and whether the employees who work there do so for the “right” reasons? Why, as a donor, do I care about anything other than:

1) What is the outcome I can expect?
2) How much is it going to cost me?

Sure, outcomes measurement is a pain in the ass and I may have to sift through many different stats and marketing spins to try to understand which organization does the best job at delivering the outcomes I want at the lowest cost.  And I will have to make my donation decision with less than perfect information, just as I can’t possibly know everything about a hospital before I choose it.  But all those other questions about compensation and overhead and employee motivation are, quite frankly, bullshit.  They’re questions we ask because it’s not our lives on the line and we have the privilege of being able to get all self-righteous and care about them.

Neither Ken nor Dan can definitively prove their assertions about whether or not current compensation levels within the nonprofit sector are ideal, because charities lack both legal and popular permission to experiment and find out what kind of outcome:cost ratio they can produce if they deviate from “acceptable” levels of compensation relative to current norms. So let’s give nonprofits and their boards room to tinker around and do things a bit differently without having everyone jump down their throats.  And if the outcomes they produce with each dollar are qualitatively or quantitatively better or worse than their peers, we can all hop on the bandwagon or pile on the blame.

Until then, let’s focus our energies on doing the best we can to save lives and make things better for those who aren’t fortunate enough to be able to care about this silliness.

Rant over.

(Photo by José Goulão)

The gang studied by Venkatesh has a more symbiotic relationship with the wider community than one might assume. For a community which is starved of outside investment the gang plays a dual role of public predator and social benefactor. The gang is active in local philanthropy, donating significant sums of money to non-profits who are otherwise left to raise funds from an impoverished donor base.

A gang that is active in donating to churches and Boys and Girls Clubs might seem perplexing, but I would argue it is no more jarring than the corporate double speak of British Petroleum’s engagement with several environmental organizations in the lead up to the worst oil spill in history. A piece in the Economist early last month rightly pointed out that “the scrutiny of these ties to BP is intensifying the perennial debate about how long a spoon NGOs should use when supping with corporate devils.”

The Economist goes on to quote Walter Massey, the chair of McDonald’s corporate social responsibility program, who

…has also been on the board of BP, which he believes benefited from its work with NGOs after a deadly accident at a refinery in Texas in 2002. “The company’s reservoir of goodwill, built up over years of committed corporate stewardship, was of critical aid in helping us to weather the storm,” he said in March. The latest crisis suggests that the reservoir is not bottomless, however.

Setting aside our prejudice against street gangs, on face, one might argue that although gangs terrorize the communities they are in, their philanthropic pursuits might exonerate them as socially responsible. Of course, a socially responsible street gang is oxymoronic, or perhaps just plainly moronic. While a gang might be responsible for propping up youth and anti-gang violence non-profit organizations in a poor area, it is the gang that creates the social harms the non-profits are intended to combat. It is the equivalent of a virus donating to a hospital, or Pepsi promoting healthy lifestyles.

Years ago the federal government cracked down on tobacco agencies incessant advertising of chronic smokers as fit, healthy people. The government was right to intercede. Carcinogens cause cancer. Excess amounts of sugar causes diabetes. And leaking oil in the ocean destroys eco-systems.

Whereas unethical corporations once worked solely with savvy marketing executives to manipulate public opinion regarding the harms their goods cause, today those same corporations turn to non-profit organizations who have their hands out and eyes closed, all too eager to blanket the sins of business thugs in the Trojan Horse of corporate social responsibility.

I am not arguing that non-profit organizations should not have relationships with corporations. However, we need to be clear headed about such partnerships, recognizing not only what is to be gained for our own organizations, but what the potential costs are, and where our corporate partners’ true ambitions lie. The short-term capital infusions of ill-conceived partnerships are not worth the longer-term harm to our sector’s reputation and the causes we care deeply about.

Like street gangs that use philanthropic donations to make communities reliant on their continuance and therefore tolerant of their deviance, corporate social responsibility, in the absence of actual responsibility, is nothing more than a cynical marketing gimmick better understood as socially responsible thuggery.

(Photo by LU5H.bunny)

The first step in becoming better consumers of visual media in the social sector is to create a framework for sorting out types of stories. Was this story or this video created for fundraising or social marketing purposes? Is it designed to mobilize a constituency to action? Is it part of a body of systematic qualitative research? At the end of last month, we hosted a conference, inVision 2010, using these three topical strands to organize presenters’ sessions. Within the “visual media as research and evaluation” track, here are some of the key questions that social sector practitioners should keep in mind when presented with visual stories as evidence of change:

• The Anecdote Test: Is this story representative of outcomes frequently and reliably attained by the intervention, or is it an outlier? For example, if it’s the story of one individual whose life is better because of a program (a very common visual storytelling arc), what information, if any, is also available about other people in the program? How sustainable is the change depicted? Is this one positive moment in a longer story of ups and downs? What is the context surrounding this story of change?

• The Special Sauce Test: Does the visual story simply document one or a few examples of positive outcomes, and/or does it also delve into how that change was created? Documenting the existence of positive outcomes at a meaningful scale is usually accomplished more efficiently through counting – either through surveys or interviews – than visual storytelling. However, uncovering the best practices or special sauce of an initiative or program model – or the reasons why it did not create outcomes – is very effectively done by capturing stories directly from participants and having them explain the change in their own words.

• The Theory of Change Test: How was the storyboard for this piece of visual media created? Visual stories don’t come out of nowhere; they are carefully produced. Who authored the storyboard? What decision-making process was employed to select this story for telling? What other stories were available, but not selected, and why? Was the storyboarding process guided by a theory of change for the overall program or initiative? Does this story support or challenge that theory of change? Does it explore the theory of change fully enough? What other stories also need to be told?

There is both art and science involved in good storytelling in the social sector. I have no doubt about the ability of talented media makers to create compelling audiovisual art, nor about our capacity as human beings to be moved by powerful stories. We should welcome and celebrate those capacities in the social sector – emotion and empathy are valid drivers of our work. But I urge us all to get better at our “story science” as we journey toward social impact. Metrics alone are not enough.

(Photo by Carbon Arc)

We tell stories because historically – ancestrally – this is how we learned. Stories were passed from generation to generation and tribe to tribe to teach about how to stay safe, how to find food and shelter, and how to care for one another. Stories emanated from and were received in a blanket of trust. As a result, our brains are wired for narrative.

Pictures – whether we take them with a camera, draw them, or carve them on walls – are actually our oldest system of checks and balances, reflecting the value we place on truth. As much as we’ve relied on storytelling and storytellers, they did always seem to be the ones hanging out around the most peyote, so perhaps some of our other ancestors sought a little independent confirmation of events. We value pictures because we hold that seeing is believing.

But is it? Fast forward to today – the world of Flip cameras, picture mail, digital storytelling, You Tube, and user-generated everything. We have the capability to see more than ever before, and visual media is everywhere around us. Do we still believe it? I would argue that we do… And we don’t.

The power of a compelling image is undeniable. Regardless of our left brain attempts to rationalize or make sense of what we’re seeing, we usually feel the effects of visual media first. And most scholars of human behavior will tell us that our decisions and actions are very much determined by how we feel. Images move us, whether we “believe” them or not.

But we are also skeptical of emotional manipulation, and these days, technological manipulation. And we are INUNDATED with images, in a way that we have never quite been before. We have become skeptics about the value and veracity of images because we have to have a way to sort them. Doubt is a defense mechanism in an ultra-connected world.

In the social sector, we sit squarely on the horns of this dilemma – belief and doubt – when presented with a visual story about a social change effort.

Don’t Throw The Baby Out With The Bathwater

For a long time, much mainstream philanthropy in this country was – many would say still is – motivated by emotional appeals, often including an image of someone less fortunate than the target audience. Donors and nonprofit leaders alike did their work in part for the satisfaction of changing the story implied in that sad image.

Indeed, much individual giving in this country, and even that of organized philanthropy, still follows this basic pattern: Image. Story. Emotion. Action. This causal chain is seared into our DNA. It is a force to be reckoned with.

But the social sector is growing more sophisticated, analytical, and strategic everyday. As much as we live in a world of images, we also live in a world of metrics and measurement, and that is a good thing. We need to know more than we have historically known about the results of our social investments. The stakes are too high, the opportunity cost too precious to tolerate waste or inefficiency. We don’t believe stories alone anymore. We seek more data, more evidence that change is needed, or that change is happening.

But synaptic pathways die hard. In Hope Consulting’s just-released Money for Good study, over 60% of high net worth families – potential impact investors – reported that they do not use any data to guide their charitable giving. Image – story – emotion – is still the most common pathway to philanthropic “action.” Instead of fighting human nature, how can the metrics movement better leverage it to promote strategic philanthropy? If we train ourselves away from acting on our emotions, do we miss critical opportunities to act? Like all great investors, we need to be as good at using our intuition as we are at reading the numbers. The ability to utilize well-told and credible stories is one of our most powerful capacities, and we need to train up. In my next post, I’ll offer a framework for sorting and understanding visual media in the social sector.

(Photo by !borghetti)

I wonder however if the same logic doesn’t extend to the social sector. I work with non-profits big and small, all who claim they offer critical services. They make these claims to solicit donations, but in the aftermath of Too Big to Fail, the idea that certain social sector institutions are absolutely essential might be more unsettling than moving.

In the social sector we defend agencies’ rights to create monopolies, veiled in an avoidance of duplication of services. Social sector agencies argue that there are limited funds to produce social value with. Therefore, in order to maximize social output we should avoid situations where one agency’s service offering overlaps with another. The result is regional monopolies whereby a few organizations are granted full control over a range of social services, thus manufacturing an environment where agencies can claim to be critical backbones of the social sector.

Their claims of being too big, too critical to society, to fail, are legitimated by the dogmatic adherence to avoiding duplication of services. All the praise heaped on these organizations amazingly echoes the same complaints we now have about unwieldy financial institutions. Anti-competitive social sector collusion is the backdrop for the social sector version of Too Big to Fail.

The idea of social sector organizations being too big to fail is even more disturbing considering we don’t have much reason to believe they are effective, even though their entire hegemonic reign is predicated on the assumption of maximum social impact.

Organizations that successfully convince the public they provide essential services might very well be producing more marketing miracles than Hallmark moments. In fact, I have serious doubts about most organizations’ capacities to measure changes in client indicators period, let alone asses the extent to which those changes are the result of program activities.

I recently read a report about program measurement released by the Gates Foundation titled A Guide to Actionable Measurement (non-profit consultant Gayle Gifford has a nice write up about the report on her blog). While the report provides a comprehensive evaluation strategy, I was struck by the simple advice the report offers to not always focus on measuring social impact by relating program outputs to client outcomes.

I often drink the social outcomes measurement Koolaid, but this Gates report got me thinking that  simply understanding whether clients who receive a particular service are better off or not is a logical evaluative starting point. However, the extent of our evaluation woes is so deep that even such a simple, summary data type assessment of client indicators is more elusive than it ought to be, a problem that is compounded by a social sector culture that favors non-profit monopolies.

Through monopolization a handful of organizations, rightly or wrongly, are allowed to claim credit for a community’s status quo. The anti-competitive nature of the social sector creates an atmosphere whereby every organization can claim that reduced funding or closure of their programs will lead to social disarray.

I view the problems of anti-competitiveness and poor evaluation in the social sector to be linked. Anti-competitiveness, and adherence to avoiding duplication of services, supersedes the need for serious evaluation. Evaluation is not only a tool for evaluating client progress, it is a lens through which comparison between interventions, and agencies, can be drawn.

So long as the social sector continues to espouse anti-competitiveness cloaked in the flag of collaboration, we will continue to have a sector that is not necessarily too big to fail, but is certainly too small-minded to succeed.

(Photo by jeffisageek)

At their core, Pallotta’s arguments in Uncharitable come down to the idea that the activities of nonprofit organizations have been governed by social norms tracing back to the Puritans that hinder the ability of charitable groups to effectively address the problems they are tasked to solve. The antidote to these damaging social constructs is rational application of market norms to our expectations of charitable organizations, allowing groups and individuals free reign within these broader confines to take the most expedient approaches to achieving their missions. Not allowing such groups access to these tools is irrational.

While I agree with the logic behind almost all of Pallotta’s individual recommendations, I’ve come to recognize that most people who aren’t social sector professionals aren’t willing to make the effort to intellectually understand how philanthropy “should” work. Even among professionals within the sector, there is little consensus over what constitutes good philanthropy and whether Pallotta’s ideas are a step in the right direction. How can we expect those who are not living and breathing this work to reach conclusions that go against their gut instincts about acceptable ways for charities to operate? It’s not that they don’t care about poverty and climate change and human trafficking; it’s that their lives don’t rotate around these issues. Although they want to help, they don’t have time or energy to dedicate to understanding why it’s a good thing that the charity they just gave $20 of their hard-earned money to is going to spend part of it to pay more competitive salaries for its staff, rent a billboard to raise awareness about its cause, or experiment with an unproven but potentially lucrative fundraising event. Their involvement in philanthropy is based around social norms, which are governed by our desire for community, altruism, and interactions without explicit expectations of reciprocity. It is difficult to reconcile that goals arising from a set of social norms may be best advanced by adopting practices that are based around costs and benefits, individual merit, and financial transactions.

What if we do succeed in creating a broad shift in public sentiment towards the acceptability of applying market norms and market thinking to aspects of philanthropy? At what point does our encouragement of donors and professionals within the sector to apply market norms begin to seep into other areas and overwhelm our social motivations? Market norms and social norms do not mix well together. In Predictably Irrational, behavioral economist Dan Ariely relates the story of how a few years ago, the AARP was rebuffed in their request for lawyers who would be willing to offer their services at reduced rates of around $30 an hour to retirees. But when the AARP went back and asked the lawyers to volunteer their time, they received an overwhelmingly positive response. In both cases, the AARP was attempting to appeal to the lawyers’ sense of social obligation, but the involvement of even a hint of a market transaction overwhelmed the social instincts to assist the elderly. This is a trend that shows up again and again in behavioral economics: when money or market norms are introduced, social norms tend to go out the window.

I don’t mean to suggest either that the approaches Pallotta advocates in Uncharitable exclude the role of social norms or that it is impossible to introduce aspects of market functioning into the social sector. Yet, the combination will not be easy, and those who attempt to navigate the grey area where social and market norms may overlap will have to be cognizant of the trade-offs involved. When investors (social or not) begin to question whether an organization may be shifting away from the “rules” that were implicitly or explicitly understood when their investment was first made, their willingness to make future investments is likely to diminish.

Pallotta has established himself as a leading voice of reason within the social sector and I consider him to be one of the most consistently insightful writers in this space. That said, his views on how charitable goals can be met most effectively are still far from commonly accepted even within the social sector. I see a future where more widespread acceptance of the application of market norms to various aspects of social sector behaviors will result in more resources for the sector and better outcomes for the populations it seeks to serve.

At the same time, it is important that we do not discount how deeply embedded, powerful, and valid the presence of social norms is in the decisions of the people we hope to enlist to our causes. We need to find ways to tap into those “irrational” forces and direct them to more effectively create social impact. After all, these forces are responsible for countless hours of volunteering, in-kind contributions, and $300 billion in donations that flow into US charities each year.

The concepts of market and social norms and more broadly the study of how emotions and perception can trump logic in decision-making are the subject of an emerging field known as behavioral economics. A fantastic primer for those interested in behavioral economics and how to apply some of its core findings to social sector work can be found in the creatively titled, Homer Simpson for Nonprofits: The Truth About How People Really Think and What It Means for Promoting Your Cause, available as a free download from Network for Good.

The debate over nonprofit executive compensation has little to do with increasing social impact. Rather, such arguments underscore the antiquated view still held by some that charity is about personal sacrifice rather than public benefit. Moreover, the controversy surrounding appropriate levels of executive compensation cannot be satisfactorily resolved until we establish metrics that allow us to meaningfully measure executive output against the only standard that matters, social outcomes.

Until recently, charity has been almost exclusively viewed as a personal sacrafice, a gift to the public realized as an economic loss rather than an investment in the greater good. In this misconcieving of charity, charity workers themselves are also assumed to be in the social sector with an expectation of personal sacrifice, generally viewed as paid volunteers rather than seasoned, well trained professionals.

Charity as sacrifice is a deprecated concept for a reason, it is a model that yields no discernible social impact. In the new era of social investing, and professional social entrepreneurs, working in the social sector is not about self-sacrifice, it is about professionalizing and innovating on the ways we help hurting people.

Debating executive compensation, in and of itself, is a pointless exercise. Compensation in any sector should be commensurate with performance. The problem is that as a sector we lack any real ability to measure social progress. So long as we fail to measure social outcomes, we will lack the sole, bottom-line metric we need to evaluate executive compensation.

Outrage over executive compensation is simply an extension of the same line of illogic used in evaluating charities by their overhead ratios (in fact, executive compensation is an overhead expense). Like overhead ratios, the brouhaha over executive compensation in the social sector underscores our inability to measure social progress, recently illustrated in a post on the Chronicle of Philanthropy by non-profit consultant Rosetta Thurman.

Rosetta, commenting on a recent controversy over the total annual compensation package of the Boys and Girls Club Chief Executive Officer (about $900,000) writes

I absolutely believe that nonprofit CEO’s should earn good pay. But there’s a big difference between good pay and excessive pay. While an organization can use any number of formulas to set compensation, it’s clear that many a reasonable person would deem Ms. Spillett’s salary excessive. I’m certainly not saying that nonprofit CEO’s should take a vow of poverty but that it may be problematic to have leaders in our sector who could be deemed “rich.”

Indeed, if we sent the message to the general public that helping poor people as a career choice was not only morally righteous, but economically rewarding, where would we be? Perhaps we would have attracted the talent we need to establish proper outcomes metrics so we would not feel the need to assess executive compensation packages by the same standard the Supreme Court uses to differentiate art from porn.

Executive compensation should be based on social outcomes. Just as for-profit executives are evaluated on their performance relative to profits, and are compensated accordingly, so too should we in the social sector reward our executives based on their creation of social profit.

Until we establish better social outcomes metrics, and mechanisms for regularly, and rigorously, evaluating organizational output, we cannot have an honest discussion about executive compensation.

(Photo by Robert Couse-Baker)

And poverty is just one of many challenges humanity faces.

Philanthropy will never solve these challenges.

Let me clarify: Traditional philanthropy will never solve these challenges. Traditional philanthropy, composed solely of donating time and money to charitable causes, will never solve challenges of this magnitude in anything close to an acceptable time frame given the extent of human suffering they represent. As William Easterly argues in great detail in his book, White Man’s Burden, it’s unclear whether the billions of dollars poured into aid by governments and NGOs over the years have had any kind of sustainable positive impact on the lives of the people they were intended to benefit.

So, if traditional philanthropy isn’t the answer, what is?  Well, it probably isn’t too surprising that I’m going to suggest that we need to find ways to be more inclusive of business and government and find ways to leverage the strengths of those sectors, along with the nonprofit sector, to create social change.

Some might question whether the activities of business and government can really count as “philanthropy.”  But let’s look at the etymology of the word: it comes from the Greek philanthropos, a combination of philos, or “loving” in the sense of benefiting, caring for, nourishing; and anthropos — “humankind”, “humanity”, or “human-ness”.  So: “love for humanity.” Business and government may not always express a love for humanity, but they certainly can in some cases, so let’s take full advantage of that where we see an opportunity.

But it’s not enough to simply open our hearts and our minds to accepting a broader definition of philanthropy.  We need full-bore, pedal-to-the-metal commitment to finding what works and doing whatever it takes to make our vision of the world a reality.  We need people like Dan Pallotta, who started Pallotta Teamworks, a for-profit event management that produced multi-day fund raising events such as AIDSRides and Breast Cancer 3-Days, raising over half a billion dollars and netting over $300 million for those causes in nine years.  We need people like Kjerstin Erickson, Saul Garlick, and Jon Gosier, three young social entrepreneurs who have formed the Thrust Fund to offer up a percentage of their future earnings in exchange for the unrestricted capital investments they need to scale their ventures right now.  Basically, what we need are people who take a no-holds-barred, everything-is-on-the-table approach to philanthropy, where the two questions that matter are “Does it work?” and “Does it work better than whatever alternatives are available?”.  We need, as I like to think of it, Full Contact Philanthropy.

To quote Deng Xiaoping: “I don’t care if it’s a white cat or a black cat. It’s a good cat so long as it catches mice.”

Let’s all stop caring about the color of the cat and focus on how we can best identify and nurture the cats that demonstrate that they can (or someday will be able to) catch the most mice.  And if you’ve got a dog or a wombat that somehow manages to catch even more mice, heck, let’s find a way to nurture those too!

(Photo by sselbein2007)

To me, the answer to what makes an organization high achieving is clear.  The social service sector exists to reduce social ills like poverty, homelessness, and food insecurity.  Organizations that have a greater impact on improving the lives of their clients are better than those that have less.  Any evaluative framework that is not centered on measuring changes in client indicators is irrelevant. Despite this obvious point, I am dismayed by how celebrated efforts like the Alliance for Social Investing and Greatnonprofits.org fail to base their evaluative criterion on client outcomes.

There is a lot at stake in getting a rating system right (or wrong).  The potential harm a poor rating system can cause was illustrated last week in a partnership between Greatnonprofits.org and Guidestar.org.  These two rating organizations teamed up to compile a list of the “Top Ten Relief Organizations Working In Haiti.”  The list was compiled based on a handful of donor reviews, and as non-profit consultant Gayle Gifford pointed out, those organizations “that were listed in the Top 10, had ONLY 1 or 2 Reviews. That’s it.”

Greatnonprofits.org and Guidestar.org responded to Ms. Gifford’s criticism by dropping the top ten list all together.  While these rating organizations certainly did the right thing by retracting their list, it is amazing to me that two supposed evaluation leaders in our industry could have compiled such a hasty, pointless agency ranking in the first place. There is so much that is problematic here, least of all the paltry number of reviews the top ten list was based on.

If we are to ever develop a meaningful top ten list of the most effective social programs, we have to embrace the social scientific complexities of evaluating clients’ social outcomes.  This means taking the collection and analysis of client data, in its quantitative and qualitative forms, seriously. Simplistic rating systems that ask donors how they feel about a particular organization may seem seductive, but they could not be more beside the point in determining which organizations are best able to improve the lives of hurting people.  So long as we fail to move towards an evaluative framework that is centered on sound social outcomes practices, the only top ten list we can reliably compile is the “Top Ten Worst Ways to Rank Non-Profits.”

Originally posted on inforumusa.org

(Photo by surfspirit)

To talk about “business” is equally pointless. We tend to talk about the software industry, or automobile industry. When we talk about “business” in general, all that ties these organizations together is an interest in earning profit, nothing else. Similarly, the non-profit sector is a group of organizations that do not seek profit.

I am in the social service sector, as are most of you reading this post. Our knowledge of the non-profit sector is secondary to our expertise in social services, which is markedly different than the experience and expertise of those who work for museums, for example. In fact, we social service “nonprofits” have more in common with our government social service counterparts than non social service non-profits.