Multiplying Effective charity
by Amy L. Sherman
Everyone knows the “give a man a fish . . . teach a man to fish” parable, but in an important way,
this time-honored principle is strangely absent from the philanthropic world. Some 75,000 charitable foundations in the United States give away around $43 billion dollars annually to nonprofit organizations. Their direct-service grants help these recipients do all kinds of important things, from feeding the hungry to mentoring youth to cleaning up polluted lakes. Only a paltry share of this tidal wave of giving, however, is earmarked toward efforts to help those nonprofits learn how better to sustain themselves—so that their good works can grow and last.
While direct service grants enable nonprofits to do their daily work of running jobs programs or homeless shelters, “capacity building” grants seek to strengthen the nonprofit organization itself. Building capacity is about such matters as increasing nonprofits’ ability to raise and manage financial and human resources, strengthening their governance, and improving their efficiency. It is vital work if nonprofits are going to be able to keep on keeping on in their frontline service. Research also shows that there is a direct correlation between nonprofits’ organizational strength and resilience and their success in achieving their goals.
Only about 4% of annual foundation grant dollars go toward capacity building. In 2000 (the latest data available), that meant about $422 million dollars. That was an increase from $134 million in 1994—so the trend line is going in the right direction. But this tiny amount is nowhere near enough to help ensure the thriving of the nonprofit sector. Nonprofits need investments from donors to help them grow in their ability to raise funds from diverse sources, generate earned income, garner in-kind donations, and effectively solicit and manage volunteers—because these kinds of investments position nonprofits for productivity and longevity. In other words, donors need not only provide direct service grants—aka, “giving a fish”—to nonprofits, but to make investments that help those recipients get better at “fishing” themselves.
Mission Increase Foundation (MIF), a modest foundation in Portland, Oregon, offers an exemplary model of this approach. Compared to the big boys in the philanthropic sector that give hundreds of millions or even billions of dollars annually, the work of MIF can appear insignificant. Over 10 years it has granted about $20.3 million to some 185 organizations. But through its innovative approach, that $20.3 million has generated over $102 million for the nonprofits it helped. That’s over a fivefold return.
Foundations much larger than MIF have engaged in some significant capacity-building initiatives. The James Irvine Foundation, for example, operated a five-year program that granted $4.3 million to 20 nonprofits. The Haas, Jr. Fund also offered a five-year granting initiative; it helped 14 nonprofits with an estimated $4.2 million in support. The Mary Reynolds Babcock Foundation spread its $6 million in capacity-building grants in its five-year initiative to 102 nonprofits. MIF’s total assets are far smaller than the assets of these foundations (see Table 1), but in the five-year period 2005–2009, it helped 496 nonprofits with capacity-building grants totaling $9.9 million. Within the small but vital slice of the philanthropic world that we might call “teaching nonprofits how to fish,” the little foundation from Oregon is leaving a significant footprint.
MIF’s Mission and Target AudienceLaunched roughly 10 years ago, MIF seeks to build organizational capacity among Christian social service nonprofits and to transform their understanding of fund development. It offers three main services: training, consulting, and grantmaking. This “mixed services” approach is somewhat unique, since many foundations provide only grants but no training and many intermediary organizations provide only training but no grants.
MIF targets small- to medium-sized nonprofits—those with annual budgets between $200,000 and $2 million annually. Two-thirds of their constituents come to them with very little background in fund development. They have not received much prior training or consulting for organizational effectiveness. Many of these nonprofits are also relatively young.
MIF’s ResultsVirtually all of MIF’s grants are set up as matching grants, thus ensuring leverage.
But the degree of leverage achieved has gone, in most cases, beyond the one-to-one match. As indicated in Table 2, in five out of MIF’s six branches, its grants have achieved more than a doubling. Portland, for example, has seen a sixfold return. In Phoenix and San Francisco, there has been more than a tripling of investment. This is obviously an attractive picture for potential donors to Mission Increase, for they have good reason to hope that their charitable contributions will achieve a multiplication effect.
MIF trains nonprofit leaders in a resource development model they call “Transformational Giving.” The emphasis is on donor development, rather than fund development. The goal is to create champions among the organization’s volunteers and donors, people who will spread the organization’s cause among their social networks and “own” responsibility for generating the support the nonprofit needs to accomplish its mission.
MIF’s training is intensive and extensive. Participants can complete some 18 modules of training that cover everything from marketing to special events to board development. Additionally, grant recipients receive personal coaching from branch staff as they seek to implement the principles and strategies they’ve learned in workshops.
Based on a study of 450 of MIF’s trainees, it is clear that a high percentage of those nonprofit leaders who take advantage of all that MIF has to offer achieve significant success on key performance indicators (see Table 3). Over 81% of those “intensively” involved with MIF report that they raised additional revenue as a result of MIF’s training/coaching. Roughly 80% report that they were able to acquire new donors and roughly 55% say they were able to diversify their revenue streams. About half (49%) of the leaders involved intensively with MIF indicated they had had success in capturing lapsed donors. And most to MIF’s delight, fully 84% of committed trainees reported success in moving donors from what they term mere “participant” status (writing checks) to “ownership” status (where they champion the organization’s cause within their own networks, thus expanding the donor base).
In the past 15 years, the philanthropic community has grown in its appreciation of the importance of nonprofit capacity building. As noted earlier, the trend line of giving toward capacity building is moving upward. A variety of large foundations, such as the Packard Foundation and the Kellogg Foundation, have undertaken major capacity-building initiatives. Another key indicator that nonprofit organizational strength is on more philanthropists’ minds is the continuing growth and influence of Grantmakers for Effective Organizations (GEO). Begun in 1997 with just a handful of philanthropic leaders who saw the need for convening and strengthening those donors committed to capacity building, GEO now sports some 350 grantmaking organizations as members.
All this is good news, but much more needs to be done. According to some estimates, as many as 50% of new nonprofits fail within their first few years. This results from a variety of factors, including tough economic times and leadership and management weaknesses. Clearly, investments in capacity building—like the kind of practical training and support offered to nonprofit leaders by Mission Increase—are needed just to help keep nonprofits alive. Moreover, as Paul Light, one of the foremost scholars of the nonprofit sector, argues, even small investments in capacity building can make a significant difference in strengthening organizational effectiveness. If we want healthy, robust nonprofits that fulfill their mission—and that last—we need more of the kind of investments Mission Increase has pioneered.
Dr. Amy L. Sherman is a senior fellow at Sagamore Institute, where she directs the Center on Faith in Communities.
 Torey Silloway, Building Capacity for Better Results (The Finance Project, Sept. 2010), 2.
 Paul C. Light and Elizabeth T. Hubbard, The Capacity Building Challenge, (Brookings Institution, April 2002), 1.
 Each nonprofit in the study was assigned an involvement score based on the number of hours the nonprofit staff had spent in MIF trainings, the number of staff attending, the estimated hours of coaching received from MIF, and whether or not the organization received a grant. The entire pool of 450 participants was then divided into four groups: intensive involvement, high involvement, moderate involvement, and low involvement.
 Donald Fann, “Organizational Healing: New Hope for Nonprofits in Crisis,” Journal for Nonprofit Management,Vol. 10, No. (2006), 26.
 C. J. De Vita and E. C. Twombly, “Nonprofit Organizations in an Era of Welfare Reform,” (paper, Association for Research on Nonprofit Organizations and Voluntary Action [ARNOVA] Conference, Indianapolis, Indiana, December 1997).
 See Paul Light, Sustaining Nonprofit Performance: The Case for Capacity Building and the Evidence to Support It (Brookings Institution Press, 2004).