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Philanthropy's Power Gap: Nonprofits Ain't Too Proud To Beg (Though Maybe They Should Be)

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This article is more than 9 years old.

This is the Yuletide story of two social sector managers.

One sits cheerily by a warming blaze, finishing the last of the holiday shopping list, feet propped up on a soft resting place, perhaps a glass of wine just at hand in a richly paneled room in one of the city's finer precincts. The work of the year is long since completed, and many festive collations beckon, all the more satisfying for such a rich contribution in the cause of saving humanity.

In a dismal little cell beyond, a sort of tank really, the other sits desperately opening the mail, scrambling for the last checks and pledge forms, while punching up the online giving figures on the starkly glaring desktop screen. This will continue till the counting houses close at year's end and the final philanthropic numbers enter the books - but hope yet remains that the programs that change so many lives will be saved.

Of course, you recognize the grant maker and the development director in this Dickensian sketch. "What right have you to be merry? What reason have you to be merry? You’re poor enough,” we ask one. “What right have you to be dismal? What reason have you to be morose? You’re rich enough,” we might say to the other.

The power disparity between donors and causes, between foundations and nonprofit organizations is as great a gulf as any other in civil society. And even in this era of crowd-sourced project funding, mobile donations, leaderless movements and networked social causes, the chasm remains a wide one. Want proof? Call any nonprofit development director you'd like to this week - they're still at their desks.

This is the second of a series of occasional posts in this space on this growing challenge to the traditional "powers that be" in major American philanthropy. In the last installment, I argued that the barbarians aren’t at the gates – the people are, and they’re pretty well connected and informed. It's now time to face the limits of that empowered crowd, alongside the promise.

"Old power works like a currency," wrote Jeremy Heimans and Henry Timms in a Harvard Business Review essay this month. "It is held by few. Once gained, it is jealously guarded, and the powerful have a substantial store of it to spend. It is closed, inaccessible, and leader-driven. It downloads, and it captures."

Their article, Understanding “New Power,” sought to sketch a new model for how organizations - particularly in the social sector - will deal with changing power structures affected by technology, information and networks. New power, they maintain, works more like a current - it spreads, it's malleable and anyone can participate: "Among those heavily engaged with new power—particularly people under 30 (more than half the world’s population)—a common assumption is emerging: We all have an inalienable right to participate. For earlier generations, participation might have meant only the right to vote in elections every few years or maybe to join a union or religious community. Today, people increasingly expect to actively shape or create many aspects of their lives."

There's no question that is true, yet the power structures in philanthropy remain remarkably intact; indeed, from my own perch as a consultant to nonprofits, the most common view is that the gulf between big causes and big philanthropy is widening - that the big money has more power than ever and is demanding ever greater reports on impact and scale. As Pablo Eisenberg wrote last year in his stinging critique of "strategic philanthropy" in the Chronicle of Philanthropy, big philanthropy sometimes asks too much - and delivers too little.

"Almost all of America’s social movements were started with ideas developed by grassroots charities, not by foundation leaders," wrote Eisenberg, a consistent critic of American philanthropy. "To their credit, grant makers large and small recognized the importance of the work of such groups and gave them the money they needed to grow. But today that money would be harder for grass-roots groups to find. No one questions the fact that foundations should be able to give money to programs and priorities they care about. But they should not look upon nonprofits merely as contractors or vendors hired to carry out foundation ideas and programs. "

Nor should nonprofits look at themselves as contractors or vendors. They're the engineers actually running the train - the ones fighting poverty, saving lives, improving education, helping people directly. Yes, they're a professional class in general and paid for their work. But their expertise and commitment are as important in fueling the social sector as donor dollars. In my view, there are two reasons why nonprofits, social entrepreneurs, and the organizers of social causes should stand tall and and lean toward a stance of equality in their dealings with funders - and not beg too much for that static pool of philanthropic dollars.

1. They offer opportunity. As I tell every board member and executive director I counsel, asking for money for a good program isn't begging - it's providing an opportunity to take part in something great that will help people. You're letting people of means in on the ground floor, or you're providing a great philanthropic capital investment for foundations. Don't apologize.

2. They represent a scarce but vital resource. The number of experienced nonprofit leaders in this country who know how to attack society's problems successfully is finite. Their work is incredibly valuable, yet consistently undervalued. The basic formulas that measure program spending versus staff salaries and overhead are somewhat valuable, but they also vastly overstate the importance of not spending - and they vastly undervalue the knowledge and skills of those who work in the sector. Yeah, I'm with Dan Pallotta on this.

There's a third reason, one that I mentioned in the last installment in this series: the license to shield wealth from taxation on the basis of charity is a huge concession from the populace of a republic. No one can take this lightly. Yet democracy doesn't yield much say in how that license is exercised; the irony remains that big capital holds an almost laissez-fare position over the social sector.

Technology changes that, of course. Or at least it should. But it may be a double-edged sword. One of the scariest views of changing power structures in the nonprofit world that I've seen recently came from the restless mind of social sector analyst Lucy Bernholz this month via her blog Philanthropy 2173 - in a post that imagined a near future in which "algorithmic philanthropy" took hold among grantmakers and pools of powerful donors. Using the trend toward artificial intelligence, automatic investing, self-driving cars, and both digital and machine-based automation, Lucy created a thought experiment that imagined "quant philanthropy" where funds would plug into data and measurable outcomes, and move resources automatically into social investments where the algorithms showed greater potential returns.

Yet even as she created this model, she recoiled Shelley-like from the monster: "How would the more personal, direct-involvement approach of most donors counteract this approach? What countervaling influence could intuition, expression, personal passions, minority voice, and donor choice have on this feedback loop? Just how far can we rationalize/algorithmically structure giving? And how far should we? What if we took all the humanity out of philanthropy?"

I think sometimes we're perilously close to doing just that, even in this age of crowdfunding, data transparency, and powerful networks. That philanthropy power gap is a stubborn thing. If anyone wants proof it's real, just visit a nonprofit development office during the last week of the year. And that ain't humbug.

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