Sunday, July 31, 2011

Philanthropy with a Side of Management

Several years ago I wrote an article for Trusteeship ( “To Build or Not to Build?”) about the preparation and due diligence needed by a governing board before a nonprofit should embark on a facility project. I began with a story about how, when a university board let costs on a building project run out of control, Peter Lewis (Progressive Insurance) cut off his giving to every charity in the city until all of the trustees resigned.

Mr. Lewis is in the news again, along with Pierre Omidyar (eBay), in yesterday's New York Times (“Philanthropists Start Requiring Management Courses to Keep Nonprofits Productive”). They have each required beneficiaries of their philanthropy to accept some management consulting services along with their financial support.

Many foundations offer grants for planning services or organizational development, but most do not tie a requirement for organizational development to a financial grant. Over the years I have heard many times from foundations that they couldn't make a grant conditional on accepting “technical support”. It would be interfering with the grantees’ prerogatives, and being imposed from the outside, would not work.

It is also worth noting that sometimes a gift restricted to donor priorities can be a real problem (see “Is Salvation a Kroc?”).

While I can understand those arguments, several organizations quoted in the Times article seem to have found the combination of financial support and organizational consulting to be very effective, even if they had their doubts at first.

In many nonprofits, especially startups, there is strong aversion to thinking like a business. But as I have noted before ( “Business Planning in Nonprofits”), “nonprofit” is a tax status, not a business plan. Budgets must be balanced, people managed, resources used well, if an organization is to be sustainable.

It would be interesting to get a more in-depth sense of how the efforts described in the Times are working, and whether the idea is catching on more broadly.

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