Have a wonderful Thanksgiving week and we'll resume posting on the 29th.
Tuesday, November 23, 2010
Monday, November 22, 2010
Nonprofits & Government
With some of these partnerships, the need for more transparency and oversight is obvious, as this story from the Sacramento Bee reports.
An excerpt.
“While the state weighed billions of dollars in social services cuts to bridge a gaping budget deficit, tax records show one state-funded nonprofit group paid its president a salary of $520,000 to oversee the housing and care of several dozen people with developmental disabilities.
“Jack Hinchman, president of the Ontario-based nonprofit Benson House, also received $281,800 that year to lease his own properties to the organization, according to the group's 2008 tax return, the most recent available.
“The nonprofit's board of directors, charged with monitoring Benson House's practices, included Hinchman's mother and another relative.
“Advocates for disabled people and two state legislators said the practices at Benson House aren't isolated cases in California's system of 21 nonprofit regional centers, which distribute billions of dollars in state money each year to groups aiding developmentally disabled people.
“Regional centers award often lucrative contracts to service providers without competitive bids, which would shed light on proposed spending and help tamp down costs. State laws don't require regional centers to reveal to the public the rates they pay specific service providers.
“The state doesn't even require the centers to produce lists of the providers they use, said Boyd Bradshaw, director of a coalition representing 1,200 state service providers.
“As nonprofits, the regional centers aren't subject to the same public information requirements that govern state agencies, although virtually every dime they receive comes from state and federal sources. The centers received $3.4 billion from the state in the 2009-10 fiscal year to serve 240,000 people.
“Of the $7.7 million in revenue Benson House reported in 2008, all but $210,522 came from fees and contracts from government agencies. The group received its vendor contract from the Inland Regional Center – the state's biggest.
“Hinchman also enjoys a special pipeline into the regional center, serving as the residential facility representative on the center's Vendor Advisory Committee.
"It's not just about how much (Hinchman) gets paid," Bradshaw said, "but what are these contracts that are so lucrative that allow him to get paid so much?"
An excerpt.
“While the state weighed billions of dollars in social services cuts to bridge a gaping budget deficit, tax records show one state-funded nonprofit group paid its president a salary of $520,000 to oversee the housing and care of several dozen people with developmental disabilities.
“Jack Hinchman, president of the Ontario-based nonprofit Benson House, also received $281,800 that year to lease his own properties to the organization, according to the group's 2008 tax return, the most recent available.
“The nonprofit's board of directors, charged with monitoring Benson House's practices, included Hinchman's mother and another relative.
“Advocates for disabled people and two state legislators said the practices at Benson House aren't isolated cases in California's system of 21 nonprofit regional centers, which distribute billions of dollars in state money each year to groups aiding developmentally disabled people.
“Regional centers award often lucrative contracts to service providers without competitive bids, which would shed light on proposed spending and help tamp down costs. State laws don't require regional centers to reveal to the public the rates they pay specific service providers.
“The state doesn't even require the centers to produce lists of the providers they use, said Boyd Bradshaw, director of a coalition representing 1,200 state service providers.
“As nonprofits, the regional centers aren't subject to the same public information requirements that govern state agencies, although virtually every dime they receive comes from state and federal sources. The centers received $3.4 billion from the state in the 2009-10 fiscal year to serve 240,000 people.
“Of the $7.7 million in revenue Benson House reported in 2008, all but $210,522 came from fees and contracts from government agencies. The group received its vendor contract from the Inland Regional Center – the state's biggest.
“Hinchman also enjoys a special pipeline into the regional center, serving as the residential facility representative on the center's Vendor Advisory Committee.
"It's not just about how much (Hinchman) gets paid," Bradshaw said, "but what are these contracts that are so lucrative that allow him to get paid so much?"
Saturday, November 20, 2010
The Future & Reason
In times of great uncertainty, words of wisdom are always appreciated and this short excerpt in today’s Wall Street Journal, written in 1953, is timeless.
An excerpt.
“When I was a younger man, I believed that progress was inevitable—that the world would be better tomorrow and better still the day after. The thunder of war, the stench of concentration camps, the mushroom cloud of the atomic bomb are, however, not conducive to optimism. All our tomorrows for years to come will be clouded by the threat of a terrible holocaust.
“Yet my faith in the future, though somewhat shaken, is not destroyed. I still believe in it. If I sometimes doubt that man will achieve his mortal potentialities, I never doubt that he can.
“I believe that these potentialities promise all men a measure beyond reckoning of the joys and comforts, material and spiritual, that life offers. Not utopia, to be sure. I do not believe in utopias. Man may achieve all but perfection.
“Paradise is not for this world. All men cannot be masters, but none need to be a slave. We cannot cast out pain from the world, but needless suffering we can. Tragedy will be with us in some degree as long as there is life, but misery we can banish. Injustice will raise its head in the best of all possible worlds, but tyranny we can conquer. Evil will invade some men's hearts, intolerance will twist some men's minds, but decency is a far more common human attribute, and it can be made to prevail in our daily lives.
“I believe all this because I believe, above all else, in reason—in the power of the human mind to cope with the problems of life. Any calamity visited upon man, either by his own hand or by a more omnipotent nature, could have been avoided or at least mitigated by a measure of thought. To nothing so much as the abandonment of reason does humanity owe its sorrows. Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in private and public life, have been the consequence of action without thought.”
An excerpt.
“When I was a younger man, I believed that progress was inevitable—that the world would be better tomorrow and better still the day after. The thunder of war, the stench of concentration camps, the mushroom cloud of the atomic bomb are, however, not conducive to optimism. All our tomorrows for years to come will be clouded by the threat of a terrible holocaust.
“Yet my faith in the future, though somewhat shaken, is not destroyed. I still believe in it. If I sometimes doubt that man will achieve his mortal potentialities, I never doubt that he can.
“I believe that these potentialities promise all men a measure beyond reckoning of the joys and comforts, material and spiritual, that life offers. Not utopia, to be sure. I do not believe in utopias. Man may achieve all but perfection.
“Paradise is not for this world. All men cannot be masters, but none need to be a slave. We cannot cast out pain from the world, but needless suffering we can. Tragedy will be with us in some degree as long as there is life, but misery we can banish. Injustice will raise its head in the best of all possible worlds, but tyranny we can conquer. Evil will invade some men's hearts, intolerance will twist some men's minds, but decency is a far more common human attribute, and it can be made to prevail in our daily lives.
“I believe all this because I believe, above all else, in reason—in the power of the human mind to cope with the problems of life. Any calamity visited upon man, either by his own hand or by a more omnipotent nature, could have been avoided or at least mitigated by a measure of thought. To nothing so much as the abandonment of reason does humanity owe its sorrows. Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in private and public life, have been the consequence of action without thought.”
Friday, November 19, 2010
Knowledge of the Forest & the Trees
Perusing a recent article (Building Programmatic Capacity at the Grassroots Level: The Reaction of Local Nonprofit Organizations to Public Participation Geographic Information Systems) in the Journal, Nonprofit and Voluntary Sector Quarterly, the publication of the Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA) — an association I have found to provide valuable information over the years — I was struck by the importance of system thinking combined with mission thinking.
Though they seem incompatible, being able to understand and work effectively within the advocacy environment — including needs of funders — most grassroots survive or die in, while remaining true to mission and serving clients at the highest level of expertise and heart, is fast becoming mandatory.
Here is the first paragraph of the article.
“The philanthropic and charitable underpinning of social service nonprofit organizations creates a unique environment in which these entities function. In the past, contributors assumed that nonprofit entities spent funds in an accountable and efficient manner and trusted that public good resulted from their activities. As a result, contributors commonly expressed fewer expectations in terms of reporting requirements or measures of accountability. Not so today. The effects of government downsizing, devolution, and new public management now require nonprofits to explain, if not justify, their financial decision making to contributors. As nonprofit organizations struggle to serve more clients with static or declining resources, they too realize that sound management practices have become critical to their success.” (Volume 39 Number 6 December 2010. pp. 992)
Though they seem incompatible, being able to understand and work effectively within the advocacy environment — including needs of funders — most grassroots survive or die in, while remaining true to mission and serving clients at the highest level of expertise and heart, is fast becoming mandatory.
Here is the first paragraph of the article.
“The philanthropic and charitable underpinning of social service nonprofit organizations creates a unique environment in which these entities function. In the past, contributors assumed that nonprofit entities spent funds in an accountable and efficient manner and trusted that public good resulted from their activities. As a result, contributors commonly expressed fewer expectations in terms of reporting requirements or measures of accountability. Not so today. The effects of government downsizing, devolution, and new public management now require nonprofits to explain, if not justify, their financial decision making to contributors. As nonprofit organizations struggle to serve more clients with static or declining resources, they too realize that sound management practices have become critical to their success.” (Volume 39 Number 6 December 2010. pp. 992)
Thursday, November 18, 2010
California’s Money Woes & Nonprofits
As reported by Nonprofit Quarterly, the situation could be dire.
An excerpt.
“Outgoing governor Arnold Schwarzenegger called a special session of the California state legislature to deal with a $25 billion deficit, incorporating $6 billion in deficits that had just popped up in the last month. If you're the incoming governor, former governor Jerry Brown, what do you do to solve that problem?...
“Unlike much of the rest of the nation, California stayed in the Democratic column despite its "big government" problem. Former Governor Gray Davis (who was Brown's chief of staff during Brown's original run in the Capitol) advised his former colleague to "level with the voters" that there is simply "less money to spend." The Governor may have to level with the nonprofit sector as well, particularly as it has been the beneficiary of several Obama Administration initiatives, notably the various "green" projects that were promoted by the President’s "green jobs czar," Van Jones from the California-based Ella Baker Center for Human Rights….
“If it were a country, California would be one of the 10 top economies in the world; it accounts for 13 percent of the U.S. Gross Domestic Product. In terms of philanthropic assets, the same applies: in 2008, California foundations accounted for nearly 15 percent of "qualified distributions" and over 16 percent of the nation's total foundation assets. All indicators seem to point out that the impact on the state's nonprofits will be pretty horrendous.”
An excerpt.
“Outgoing governor Arnold Schwarzenegger called a special session of the California state legislature to deal with a $25 billion deficit, incorporating $6 billion in deficits that had just popped up in the last month. If you're the incoming governor, former governor Jerry Brown, what do you do to solve that problem?...
“Unlike much of the rest of the nation, California stayed in the Democratic column despite its "big government" problem. Former Governor Gray Davis (who was Brown's chief of staff during Brown's original run in the Capitol) advised his former colleague to "level with the voters" that there is simply "less money to spend." The Governor may have to level with the nonprofit sector as well, particularly as it has been the beneficiary of several Obama Administration initiatives, notably the various "green" projects that were promoted by the President’s "green jobs czar," Van Jones from the California-based Ella Baker Center for Human Rights….
“If it were a country, California would be one of the 10 top economies in the world; it accounts for 13 percent of the U.S. Gross Domestic Product. In terms of philanthropic assets, the same applies: in 2008, California foundations accounted for nearly 15 percent of "qualified distributions" and over 16 percent of the nation's total foundation assets. All indicators seem to point out that the impact on the state's nonprofits will be pretty horrendous.”
Wednesday, November 17, 2010
Social Programs Data
Getting good data that can determine success has always been difficult from programs that work to change behavior, as it is not always easy to measure behavior change, especially within the two or three year window most nonprofits interact with clients.
This article from the Foundation Center explores the issue.
An excerpt.
“There's no question that the need for better data is on the minds of just about everyone who is working to address seemingly intractable social problems. If you run a nonprofit, you've undoubtedly felt the push from funders to demonstrate the impact of your programs. If you're a foundation program officer or an individual donor, you are probably looking for data that enable you to compare programs and choose the most effective ones. And in today's tough economic climate, government leaders at the local, state, and federal levels are urgently seeking ways to use data to make better use of increasingly limited resources.
“Fortunately, we're on the brink of a sea change in how we generate and use data to address social problems — and change is exactly what we need. Although significant data on social issues exist, much of it is not publicly available or is not action oriented. Indeed, quality information about nonprofit performance is scarce and not typically standardized to make it possible to compare organizations working on the same issue. As a result, we don't know whether the billions of dollars invested annually in nonprofit organizations by the public and private sectors is achieving the desired results — or any results at all.
“The enormous potential to improve the quality of and access to information is analogous to the information revolution that took place in the private sector during the twentieth century. The first stage of that revolution was inaugurated by Section 13 of the Securities Exchange Act of 1934, which required publicly traded companies to file annual reports (known as 10Ks) with the U.S. Securities and Exchange Commission. The information revolution continued with the rise of the tech sector in the United States in the late 1970s. Back then, tech start-ups were growing rapidly. Many investors, however, lacked data about industry trends, which companies were "hot," and how those companies were performing on a comparative level. One of the innovations that helped provide more transparency at the time was the development of an independent financial research industry. Reports, conferences, and advice began to be offered by the likes of the Yankee Group, Forrester, and Gartner Research. That information, in turn, provided investors with the insights they needed to make informed investment decisions and greatly increased the amount of growth capital available to tech companies, both young and established.
“In the nonprofit sector today, by contrast, the only standardized source of information is the 990 tax form. And while the 990 provides financial information, it offers no indication of whether an organization is fulfilling the charitable purpose for which it was awarded tax-exempt status in the first place. Imagine, then, what an information revolution similar to the one that transformed the private sector in the last quarter of the twentieth century might mean for twenty-first-century efforts to invest in social change. Rigorous and readily available assessments would ensure that "social investors" are able to identify the most successful approaches to our most pressing social issues. Nonprofits with access to better information could use that information to assess their programs and make informed decisions about ways to improve those programs. Funders would be able to more effectively compare programs and select the most promising grantees at every step of the innovation cycle — from early-stage testing of new models to replicating already proven approaches. And collaborations involving the nonprofit, government, and business sectors would be able to use data to help ensure that their efforts resulted in sustained social impact.”
This article from the Foundation Center explores the issue.
An excerpt.
“There's no question that the need for better data is on the minds of just about everyone who is working to address seemingly intractable social problems. If you run a nonprofit, you've undoubtedly felt the push from funders to demonstrate the impact of your programs. If you're a foundation program officer or an individual donor, you are probably looking for data that enable you to compare programs and choose the most effective ones. And in today's tough economic climate, government leaders at the local, state, and federal levels are urgently seeking ways to use data to make better use of increasingly limited resources.
“Fortunately, we're on the brink of a sea change in how we generate and use data to address social problems — and change is exactly what we need. Although significant data on social issues exist, much of it is not publicly available or is not action oriented. Indeed, quality information about nonprofit performance is scarce and not typically standardized to make it possible to compare organizations working on the same issue. As a result, we don't know whether the billions of dollars invested annually in nonprofit organizations by the public and private sectors is achieving the desired results — or any results at all.
“The enormous potential to improve the quality of and access to information is analogous to the information revolution that took place in the private sector during the twentieth century. The first stage of that revolution was inaugurated by Section 13 of the Securities Exchange Act of 1934, which required publicly traded companies to file annual reports (known as 10Ks) with the U.S. Securities and Exchange Commission. The information revolution continued with the rise of the tech sector in the United States in the late 1970s. Back then, tech start-ups were growing rapidly. Many investors, however, lacked data about industry trends, which companies were "hot," and how those companies were performing on a comparative level. One of the innovations that helped provide more transparency at the time was the development of an independent financial research industry. Reports, conferences, and advice began to be offered by the likes of the Yankee Group, Forrester, and Gartner Research. That information, in turn, provided investors with the insights they needed to make informed investment decisions and greatly increased the amount of growth capital available to tech companies, both young and established.
“In the nonprofit sector today, by contrast, the only standardized source of information is the 990 tax form. And while the 990 provides financial information, it offers no indication of whether an organization is fulfilling the charitable purpose for which it was awarded tax-exempt status in the first place. Imagine, then, what an information revolution similar to the one that transformed the private sector in the last quarter of the twentieth century might mean for twenty-first-century efforts to invest in social change. Rigorous and readily available assessments would ensure that "social investors" are able to identify the most successful approaches to our most pressing social issues. Nonprofits with access to better information could use that information to assess their programs and make informed decisions about ways to improve those programs. Funders would be able to more effectively compare programs and select the most promising grantees at every step of the innovation cycle — from early-stage testing of new models to replicating already proven approaches. And collaborations involving the nonprofit, government, and business sectors would be able to use data to help ensure that their efforts resulted in sustained social impact.”
Tuesday, November 16, 2010
Foundation Tool Kit
The Foundation Center reports on a new resource that could be of value for organizations—even those beyond the community foundations who are its primary target—whose work involves changing public policy.
News piece.
“According to a new publication from the Center for Lobbying in the Public Interest, foundations can do more to advance their missions, influence public policy, strengthen the democratic process, and create systemic social change by supporting civic engagement and advocacy efforts. Foundations for Civic Impact: Advocacy and Civic Engagement Toolkit for Private Foundations (28 pages, PDF) and a companion toolkit for community foundations argue that advocacy and civic engagement are essential elements of strategic philanthropy; explain what foundations can and cannot do legally in terms of lobbying; and provide sample grantmaking guidelines, grant agreements, and communications materials to help foundations empower their grantees and regular citizens.”
News piece.
“According to a new publication from the Center for Lobbying in the Public Interest, foundations can do more to advance their missions, influence public policy, strengthen the democratic process, and create systemic social change by supporting civic engagement and advocacy efforts. Foundations for Civic Impact: Advocacy and Civic Engagement Toolkit for Private Foundations (28 pages, PDF) and a companion toolkit for community foundations argue that advocacy and civic engagement are essential elements of strategic philanthropy; explain what foundations can and cannot do legally in terms of lobbying; and provide sample grantmaking guidelines, grant agreements, and communications materials to help foundations empower their grantees and regular citizens.”
Monday, November 15, 2010
Impact Investing
This new brand of philanthropy is described in a report from The Monitor Institute.
An excerpt.
“What is Impact Investing?
“In New York City, a low-income mother is moving into an apartment on land developed with a loan from the New York City Acquisition Fund. The Fund, created in 2004, aims to facilitate the construction of 10,000 units of affordable housing in a city with rapidly diminishing affordable housing stock. The Fund came together when private foundations made $32 million in low-interest, subordinated loans and a city-based charitable trust invested $8 million on similar terms, enabling commercial banks to raise and place more than $160 million of commercially priced debt into the fund.
“In rural Tanzania, a student is reading at home by the light of an electric light bulb powered by a solar panel her mother bought on credit from a local distributor. The distribution business could reach her village because of an equity and working capital investment made by E+Co, a nonprofit mezzanine fund focused on making debt and equity investments in businesses that develop and sell modern energy services.
“In Cambodia, a small business is expanding with debt from a microfinance bank. The bank is originating new loans after accessing commercial capital markets through a $110 million loan fund structured in 2007 by Blue Orchard, a Swiss microfinance-focused asset management company, and Morgan Stanley. The loan fund, rated by Standard & Poor’s, was syndicated on commercial terms among institutional investors, such as pension funds, in Europe and the United Kingdom.
“The New Yorker moving into her first home, the student in Tanzania studying under electric light, the small-business owner in Cambodia expanding her payroll—none of these people would recognize one another as coparticipants in the same emerging industry. Neither, perhaps, would the commercial banker placing debt in the Acquisition Fund, the high-networth individuals investing in E+Co, or the German worker whose pension fund invested in microfinance through Blue Orchard.
“Yet these are all examples of the proliferation of activity occurring as a new industry of impact investing emerges. This industry which involves making investments that generate social and environmental value as well as financial return, has the potential to complement philanthropy and government intervention as a potent force for addressing global challenges at scale. This document is intended to shed light on the industry’s recent emergence and highlight the challenges it faces in achieving its promise.” (p 3)
An excerpt.
“What is Impact Investing?
“In New York City, a low-income mother is moving into an apartment on land developed with a loan from the New York City Acquisition Fund. The Fund, created in 2004, aims to facilitate the construction of 10,000 units of affordable housing in a city with rapidly diminishing affordable housing stock. The Fund came together when private foundations made $32 million in low-interest, subordinated loans and a city-based charitable trust invested $8 million on similar terms, enabling commercial banks to raise and place more than $160 million of commercially priced debt into the fund.
“In rural Tanzania, a student is reading at home by the light of an electric light bulb powered by a solar panel her mother bought on credit from a local distributor. The distribution business could reach her village because of an equity and working capital investment made by E+Co, a nonprofit mezzanine fund focused on making debt and equity investments in businesses that develop and sell modern energy services.
“In Cambodia, a small business is expanding with debt from a microfinance bank. The bank is originating new loans after accessing commercial capital markets through a $110 million loan fund structured in 2007 by Blue Orchard, a Swiss microfinance-focused asset management company, and Morgan Stanley. The loan fund, rated by Standard & Poor’s, was syndicated on commercial terms among institutional investors, such as pension funds, in Europe and the United Kingdom.
“The New Yorker moving into her first home, the student in Tanzania studying under electric light, the small-business owner in Cambodia expanding her payroll—none of these people would recognize one another as coparticipants in the same emerging industry. Neither, perhaps, would the commercial banker placing debt in the Acquisition Fund, the high-networth individuals investing in E+Co, or the German worker whose pension fund invested in microfinance through Blue Orchard.
“Yet these are all examples of the proliferation of activity occurring as a new industry of impact investing emerges. This industry which involves making investments that generate social and environmental value as well as financial return, has the potential to complement philanthropy and government intervention as a potent force for addressing global challenges at scale. This document is intended to shed light on the industry’s recent emergence and highlight the challenges it faces in achieving its promise.” (p 3)
Saturday, November 13, 2010
Great Philanthropists
America is blessed with many and Fast Company reports on one.
An excerpt.
“Call it a midlife crisis gone terribly right. After 28 years in finance, Ron Cordes--co-chairman of the $21 billion asset management firm Genworth--is dedicating his energy to building an online portal that will make impact investing a whole lot easier.
"I spent the first half of my life building businesses designed to be the best in the world," Cordes tells Fast Company. "For the second half, I really want to support businesses that are the best for the world."
“As he approached the age of 50, Cordes found himself in rural Uganda, in a village five hours off the beaten track. The place was full of widows who had lost their husbands to a two-decade long civil war; Cordes had funded a small microfinance program there, and the women were now running successful small businesses and supporting their kids. "One woman came up to me and said, 'We appreciate it when [white people] come to try to save our children, but we need to be able to save our own children. Thank you for investing in us so we can do that.' I'll never forget that moment."
“That was the moment Cordes realized empowerment was more powerful than pity. He started to brainstorm ways in which his expertise as a financial manager could help create opportunities like this on a much larger scale. Now, with a new product he's calling ImpactAssets, Cordes is adding a crucial element to the impact investing space.
“ImpactAssets is a platform that will bridge high-rolling investors with social enterprises. Financial advisers will find information about solid impact investment options. The absence of a good system of finding, processing, and measuring impact investments, he says, is barring billions of dollars from being invested in good causes.
"There's no ecosystem to help advisers have conversations with their clients about social and environmental investments,” says Cordes. “U.S. investors own $37 trillion of investment capital. Even catalyzing 1% of that is $370 billion--enough to have amazing, groundbreaking, life-changing differences."
“Most people already have philanthropic causes that they support. Meanwhile, entrepreneurs all over the world are starting businesses within these issue areas that are also investable business opportunities. "Part of the process is to create awareness that these opportunities exist," Cordes says. "Once people are aware, we need to create opportunities to turn that awareness into engagement, and then to turn that engagement into actual dollar investments. That's what's going to solve problems."
An excerpt.
“Call it a midlife crisis gone terribly right. After 28 years in finance, Ron Cordes--co-chairman of the $21 billion asset management firm Genworth--is dedicating his energy to building an online portal that will make impact investing a whole lot easier.
"I spent the first half of my life building businesses designed to be the best in the world," Cordes tells Fast Company. "For the second half, I really want to support businesses that are the best for the world."
“As he approached the age of 50, Cordes found himself in rural Uganda, in a village five hours off the beaten track. The place was full of widows who had lost their husbands to a two-decade long civil war; Cordes had funded a small microfinance program there, and the women were now running successful small businesses and supporting their kids. "One woman came up to me and said, 'We appreciate it when [white people] come to try to save our children, but we need to be able to save our own children. Thank you for investing in us so we can do that.' I'll never forget that moment."
“That was the moment Cordes realized empowerment was more powerful than pity. He started to brainstorm ways in which his expertise as a financial manager could help create opportunities like this on a much larger scale. Now, with a new product he's calling ImpactAssets, Cordes is adding a crucial element to the impact investing space.
“ImpactAssets is a platform that will bridge high-rolling investors with social enterprises. Financial advisers will find information about solid impact investment options. The absence of a good system of finding, processing, and measuring impact investments, he says, is barring billions of dollars from being invested in good causes.
"There's no ecosystem to help advisers have conversations with their clients about social and environmental investments,” says Cordes. “U.S. investors own $37 trillion of investment capital. Even catalyzing 1% of that is $370 billion--enough to have amazing, groundbreaking, life-changing differences."
“Most people already have philanthropic causes that they support. Meanwhile, entrepreneurs all over the world are starting businesses within these issue areas that are also investable business opportunities. "Part of the process is to create awareness that these opportunities exist," Cordes says. "Once people are aware, we need to create opportunities to turn that awareness into engagement, and then to turn that engagement into actual dollar investments. That's what's going to solve problems."
Friday, November 12, 2010
Trying Times
While this is surely trying times for most nonprofits, it is also an opportunity to explore the founding vision of your organization in relation to funding and mission sustainability.
Is your organizational mission and your organizational competency still relevant and effective, so that donors—though perhaps greatly reducing their donations—will continue to support your work?
At the core of my practice to grow nonprofits, lies this essential question; for any capacity building consultation must start here.
Is your organizational mission and your organizational competency still relevant and effective, so that donors—though perhaps greatly reducing their donations—will continue to support your work?
At the core of my practice to grow nonprofits, lies this essential question; for any capacity building consultation must start here.
Thursday, November 11, 2010
Social Enterprise & Nonprofit Blogging
There are a couple good articles from the Axelson Review about those two strategies, both excellent tools for nonprofits to consider.
Both are crucial for social change nonprofits as they expand the venue for advocacy, while keeping the message fresh and connected to other advocacy efforts throughout the community.
Both are crucial for social change nonprofits as they expand the venue for advocacy, while keeping the message fresh and connected to other advocacy efforts throughout the community.
Tuesday, November 9, 2010
Fund Raising Costs vs Results
Called ROI—return on investment—this story from PRNewswire reports the results of a recent report on the ROI for health related nonprofits.
An excerpt.
“WASHINGTON, Nov. 8, 2010 /PRNewswire-USNewswire/ -- With charitable pledges – especially in the Western United States – declining due to the deepening recession, fundraisers were forced to spend significantly more money in fiscal year 2009 than in past years to secure gifts and grants for nonprofit hospitals and health care systems in the United States and Canada, according to benchmarking data released today by the Association for Healthcare Philanthropy (AHP).
"The recession's impact and duration were felt more strongly in the U.S. than in Canada, where health care philanthropy tended to advance slightly or at least hold its own despite lower levels of government support," said William C. McGinly, Ph.D., president and chief executive officer of AHP. "U.S. nonprofit hospitals, however, often struggled just to keep giving levels steady, and some saw declines."
“McGinly added, "The constant message that shines through the data is that organizations that best survived last year's worsening economy were those who persevered by keeping sufficient staff and resources to maintain well-rounded philanthropic opportunities and programs."
“AHP gathered detailed data from 66 institutions across the U.S. and Canada, including community hospitals, academic/ teaching, tertiary and specialty hospitals and health care systems. On average, the recession hurt charitable giving to health care institutions most severely in the Western region of the U.S. Sample wide, median Return on Investment (ROI) – a measure of fundraising effectiveness – fell 23 percent in 2009 from $4.63 to $3.57. For cash donations alone, median ROI fell 17 percent to $3.26.
“On the brighter side last year, physicians and other hospital employees of the organizations reporting data in this study donated more money and did so more frequently. Gift amounts from physicians and physician groups averaged $5,000, up $3,000 from 2008 illustrating great strides in foundations' efforts toward building the internal culture of philanthropy.”
An excerpt.
“WASHINGTON, Nov. 8, 2010 /PRNewswire-USNewswire/ -- With charitable pledges – especially in the Western United States – declining due to the deepening recession, fundraisers were forced to spend significantly more money in fiscal year 2009 than in past years to secure gifts and grants for nonprofit hospitals and health care systems in the United States and Canada, according to benchmarking data released today by the Association for Healthcare Philanthropy (AHP).
"The recession's impact and duration were felt more strongly in the U.S. than in Canada, where health care philanthropy tended to advance slightly or at least hold its own despite lower levels of government support," said William C. McGinly, Ph.D., president and chief executive officer of AHP. "U.S. nonprofit hospitals, however, often struggled just to keep giving levels steady, and some saw declines."
“McGinly added, "The constant message that shines through the data is that organizations that best survived last year's worsening economy were those who persevered by keeping sufficient staff and resources to maintain well-rounded philanthropic opportunities and programs."
“AHP gathered detailed data from 66 institutions across the U.S. and Canada, including community hospitals, academic/ teaching, tertiary and specialty hospitals and health care systems. On average, the recession hurt charitable giving to health care institutions most severely in the Western region of the U.S. Sample wide, median Return on Investment (ROI) – a measure of fundraising effectiveness – fell 23 percent in 2009 from $4.63 to $3.57. For cash donations alone, median ROI fell 17 percent to $3.26.
“On the brighter side last year, physicians and other hospital employees of the organizations reporting data in this study donated more money and did so more frequently. Gift amounts from physicians and physician groups averaged $5,000, up $3,000 from 2008 illustrating great strides in foundations' efforts toward building the internal culture of philanthropy.”
Monday, November 8, 2010
Medical Nonprofit’s Beneficial Diagnoses
In an object lesson public oversight leadership needs to be aware of in every region, this Baltimore nonprofit seemed to always benefit from their diagnosis, as reported by the Baltimore Sun.
An excerpt.
“Kevin Brown knew he was hooked on crack cocaine. That was obvious each time he set off on another smoking binge. But Brown says he never imagined that he also suffered from a mental illness until he walked into Baltimore Behavioral Health Inc.
“A day or so after he went to the private, nonprofit Southwest Baltimore clinic in 2007 hoping to kick his drug habit, a psychiatrist diagnosed him with major depression. Soon, he was living in one of BBH's houses, taking antidepressants and spending hours each day in group therapy, half of it focused on mental illness. The treatment lasted months and cost taxpayers thousands of dollars.
“But Brown, 46, doubted that he had a psychiatric illness or needed medication. And for good reason, says Amy Jackson, a University of Maryland mental health social worker who counseled him over a recent six-month stretch after he'd relapsed: He never was clinically depressed.
"Once he was no longer using the substance, he was no longer showing signs of the depression," Jackson said. In other words, he suffers from a chemical addiction, and when that is under control, his mind is not burdened by mental illness.
“Brown, an addict diagnosed with a psychiatric illness that some outside health providers do not think he has, illustrates a recurring theme at BBH.
“Addicts who step into BBH from the city's drug-racked streets are three times more likely to be deemed mentally ill than are addicts treated at other centers across Maryland, state records show.
“And BBH has long funneled patients into the costliest outpatient treatment programs available to poor Marylanders — programs they would not qualify for without a diagnosis that they have a psychiatric illness. In some years, state data show, the West Pratt Street center has swallowed up 85 taxpayer funds spent on intensive outpatient mental health carepercent of the across Maryland.
“From modest beginnings in 1997, Baltimore Behavioral Health grew by last year into a $17 million-per-year operation, with more than 250 staff members tending hundreds of patients a day, making it one of the region's largest providers of drug treatment. It has diagnosed and treated thousands of the city's most broken and desperate, offering many a bed in its network of area rental homes, then busing them daily to the center for state-funded treatment.
“But former patients and employees, as well as outside doctors, say BBH has been diagnosing mental illness — and collecting public money to treat it — in some patients whose main affliction is drug addiction.”
An excerpt.
“Kevin Brown knew he was hooked on crack cocaine. That was obvious each time he set off on another smoking binge. But Brown says he never imagined that he also suffered from a mental illness until he walked into Baltimore Behavioral Health Inc.
“A day or so after he went to the private, nonprofit Southwest Baltimore clinic in 2007 hoping to kick his drug habit, a psychiatrist diagnosed him with major depression. Soon, he was living in one of BBH's houses, taking antidepressants and spending hours each day in group therapy, half of it focused on mental illness. The treatment lasted months and cost taxpayers thousands of dollars.
“But Brown, 46, doubted that he had a psychiatric illness or needed medication. And for good reason, says Amy Jackson, a University of Maryland mental health social worker who counseled him over a recent six-month stretch after he'd relapsed: He never was clinically depressed.
"Once he was no longer using the substance, he was no longer showing signs of the depression," Jackson said. In other words, he suffers from a chemical addiction, and when that is under control, his mind is not burdened by mental illness.
“Brown, an addict diagnosed with a psychiatric illness that some outside health providers do not think he has, illustrates a recurring theme at BBH.
“Addicts who step into BBH from the city's drug-racked streets are three times more likely to be deemed mentally ill than are addicts treated at other centers across Maryland, state records show.
“And BBH has long funneled patients into the costliest outpatient treatment programs available to poor Marylanders — programs they would not qualify for without a diagnosis that they have a psychiatric illness. In some years, state data show, the West Pratt Street center has swallowed up 85 taxpayer funds spent on intensive outpatient mental health carepercent of the across Maryland.
“From modest beginnings in 1997, Baltimore Behavioral Health grew by last year into a $17 million-per-year operation, with more than 250 staff members tending hundreds of patients a day, making it one of the region's largest providers of drug treatment. It has diagnosed and treated thousands of the city's most broken and desperate, offering many a bed in its network of area rental homes, then busing them daily to the center for state-funded treatment.
“But former patients and employees, as well as outside doctors, say BBH has been diagnosing mental illness — and collecting public money to treat it — in some patients whose main affliction is drug addiction.”
Saturday, November 6, 2010
Privatization
This strategy for reducing government costs often involves nonprofits assuming the service delivery previously held by government, and, as this article from Governing reports, sometimes it works out real well, and sometimes not.
An excerpt.
“Back in 2008, the U.S. Senate voted to privatize the operation of the Senate restaurant, which was not only losing money at an alarming clip -- roughly $2 million a year -- but also serving lousy food. As the joke went at the time, the food was bad but at least the portions were small.
“The move to privatize caused anguish for the Democratic majority at the time. Democratic Sen. Robert Menendez of New Jersey argued against contracting out, telling the Washington Post that "you cannot stand on the Senate floor and condemn the privatization of workers, and then turn around and privatize the workers here in the Senate and leave them out on their own." California Democratic Sen. Dianne Feinstein said, "It's clearly not the sort of thing I ran for the Senate to do."
“To her credit, Feinstein opted for privatizing the restaurant rather than watching taxpayers subsidize a substandard operation. But for many, the decision to outsource seemed to be the moral equivalent of an attack on government, an admission that government isn't any good at anything.
“On the flip side, there are some who seem eager to privative at all costs.
“During the occupation of Iraq, the Bush administration appeared content to drive the majority of projects through hastily arranged contracts with private providers, many of them on a no-bid basis. A recent article in the Los Angeles Times notes the "legacy of waste" associated with this approach. This assessment is largely based on the findings of Stuart Bowen, the special inspector general for Iraq, whose job it was to review these contracts. In many cases, these contracts turned into costly white elephants, like the $40 million spent on a prison that has never been opened. "Billions of dollars have already been spent and billions have been wasted," Bowen said.
“Ideology often serves as an impediment to good decision making. Why can't we simply agree up front to the blazingly obvious truth about privatization: In some cases, it leads to better services and lower costs; in other cases, it doesn't.
“The political embrace of preconceived positions regarding government and markets simply doesn't help. Clinging to the notion that a government-run restaurant is inherently better (or worse) than a privately-run restaurant is ridiculous. The proof really is in the pudding -- that is, outsourcing decisions are best judged by their outputs and costs.
“Once we get past the ideology, we can focus on what really matters: the results. We can look at the evidence and start to see the conditions that make successful privatization more likely. Is there an established private market for this service? Are the deliverables relatively straightforward to measure? Is there good data about internal costs that allows for a meaningful comparison of in-house and outsourced services?
“There is evidence that when the conditions are right, outsourcing can be a great way to deliver public services for less, in areas ranging from fleet maintenance to janitorial services, from wastewater treatment to street sweeping. Acknowledging this isn't the moral equivalent of attacking democratic government.
“There is also evidence that outsourcings can go awry. Corrupt bidding practices can lead to problems. Large, complex outsourcings, as with IT systems and the like, depend on highly skilled contract administration, and do not always end well. Acknowledging this isn't the moral equivalent of attacking the free enterprise system.”
An excerpt.
“Back in 2008, the U.S. Senate voted to privatize the operation of the Senate restaurant, which was not only losing money at an alarming clip -- roughly $2 million a year -- but also serving lousy food. As the joke went at the time, the food was bad but at least the portions were small.
“The move to privatize caused anguish for the Democratic majority at the time. Democratic Sen. Robert Menendez of New Jersey argued against contracting out, telling the Washington Post that "you cannot stand on the Senate floor and condemn the privatization of workers, and then turn around and privatize the workers here in the Senate and leave them out on their own." California Democratic Sen. Dianne Feinstein said, "It's clearly not the sort of thing I ran for the Senate to do."
“To her credit, Feinstein opted for privatizing the restaurant rather than watching taxpayers subsidize a substandard operation. But for many, the decision to outsource seemed to be the moral equivalent of an attack on government, an admission that government isn't any good at anything.
“On the flip side, there are some who seem eager to privative at all costs.
“During the occupation of Iraq, the Bush administration appeared content to drive the majority of projects through hastily arranged contracts with private providers, many of them on a no-bid basis. A recent article in the Los Angeles Times notes the "legacy of waste" associated with this approach. This assessment is largely based on the findings of Stuart Bowen, the special inspector general for Iraq, whose job it was to review these contracts. In many cases, these contracts turned into costly white elephants, like the $40 million spent on a prison that has never been opened. "Billions of dollars have already been spent and billions have been wasted," Bowen said.
“Ideology often serves as an impediment to good decision making. Why can't we simply agree up front to the blazingly obvious truth about privatization: In some cases, it leads to better services and lower costs; in other cases, it doesn't.
“The political embrace of preconceived positions regarding government and markets simply doesn't help. Clinging to the notion that a government-run restaurant is inherently better (or worse) than a privately-run restaurant is ridiculous. The proof really is in the pudding -- that is, outsourcing decisions are best judged by their outputs and costs.
“Once we get past the ideology, we can focus on what really matters: the results. We can look at the evidence and start to see the conditions that make successful privatization more likely. Is there an established private market for this service? Are the deliverables relatively straightforward to measure? Is there good data about internal costs that allows for a meaningful comparison of in-house and outsourced services?
“There is evidence that when the conditions are right, outsourcing can be a great way to deliver public services for less, in areas ranging from fleet maintenance to janitorial services, from wastewater treatment to street sweeping. Acknowledging this isn't the moral equivalent of attacking democratic government.
“There is also evidence that outsourcings can go awry. Corrupt bidding practices can lead to problems. Large, complex outsourcings, as with IT systems and the like, depend on highly skilled contract administration, and do not always end well. Acknowledging this isn't the moral equivalent of attacking the free enterprise system.”
Friday, November 5, 2010
Donor Response
A brief post from Fast Company on five simple ways that organizations can respond to donors.
An excerpt.
“Hopefully, many of you do or will contribute generously to causes that you care about, and even step up to join nonprofit boards and help to fundraise. Fundraising is an exciting and very concrete way to build support for a mission that you are really passionate about.
“For those of you who get involved in fundraising on a nonprofit board, be alert to how the organization treats its donors. It can make all the difference in whether or not your donors are enthusiastic repeaters, or drift away. I continue to be surprised that there are still too many nonprofits that scare away donors by neglecting to:
1. Say thank you in thoughtful ways (or even at all!)
2. Provide opportunities for donors to make site visits to see programs "in action"
3. Provide straightforward information about how funds are used to achieve meaningful results
4. Involve donors in service activities if they are interested
5. Recognize donors at events, on the organization's website, and in the annual report.”
An excerpt.
“Hopefully, many of you do or will contribute generously to causes that you care about, and even step up to join nonprofit boards and help to fundraise. Fundraising is an exciting and very concrete way to build support for a mission that you are really passionate about.
“For those of you who get involved in fundraising on a nonprofit board, be alert to how the organization treats its donors. It can make all the difference in whether or not your donors are enthusiastic repeaters, or drift away. I continue to be surprised that there are still too many nonprofits that scare away donors by neglecting to:
1. Say thank you in thoughtful ways (or even at all!)
2. Provide opportunities for donors to make site visits to see programs "in action"
3. Provide straightforward information about how funds are used to achieve meaningful results
4. Involve donors in service activities if they are interested
5. Recognize donors at events, on the organization's website, and in the annual report.”
Thursday, November 4, 2010
Evaluating Social Enterprise
The social enterprise concept is an excellent one, bringing forprofit principles into the nonprofit world, and when handled correctly, benefits both.
Many New York social enterprise efforts have recently been evaluated, as reported by the Wall Street Journal.
An excerpt.
“Hundreds of New York's social-service organizations are short-changing the people they are supposed to serve by focusing on money-making schemes, according to a report released Wednesday by Pace University.
“By pursuing income-related activities such as selling donors' contact information to third-party marketers and running online shops, nonprofits have diverted income away from service activities, says Rebecca Tekula, the report's author.
"Organizations that spend money and divert resources to other activities do so at the detriment of the homeless, domestic violence victims and people who need these services," says Ms. Tekula, executive director at the Wilson Center for Social Entrepreneurship at Pace University. "Social enterprise may be an innovation," she says, but it is one that can tempt nonprofits into a substantial "mission distraction."
“Researchers analyzed the tax forms of 700 social-service organizations across New York County between 2000 and 2005. The organizations in the sample raised an average of $1 million in so-called unrelated business income, putting the money toward average expense budgets of $19 million.
“The report found that organizations that engage in unrelated business activities, often called social enterprise programs, are more likely to run less efficient shops than their peers. As income from peripheral businesses went up, the share of a contributed dollar that went to actual services went down, according to the report.
“While Ms. Tekula says the report does not prove causality, she maintains that the high correlation between poorly performing nonprofits and those that pursue income-generating projects is cause for concern.
"Organizations with unrelated businesses were not investing profits in their mission-related services," Ms. Tekula says. "Instead, profits were reinvested in the business, and losses were subsidized with funds that might have gone to clients."
“For instance, she points to God's Love We Deliver, an organization that prepares meals for people with serious illnesses, which in 2006 lost about $100,000 on merchandise it sells via holiday catalogs. Since then, it has made between $36,000 and $55,000 a year through online sales, according to tax forms.
“God's Love maintains that the real loss was closer to $7,000 and that the larger number reflects an Internal Revenue Service accounting rule that requires charities to record donated goods as expenses, even if the charity did not pay for them.
“The sales ventures "either break even or have a positive bottom line every year," says Karen Pearl, the group's president and CEO. "Our catalog and gifts are a teensy part of our $9 million budget but it helps keep God's Love in the forefront of peoples minds, hearts and ultimately in their giving."
“Covenant House, a $37.6 million New York-based nonprofit that provides food, shelter and crisis care to homeless youth, has earned between $500,000 and $700,000 a year by renting out its list of donor contact information to third-party marketers. Meanwhile, only half of the nonprofit's revenue went to run its programs, with the other half going toward administrative and fund-raising expenses, according to Ms. Tekula's analysis.
"List rentals aren't an ideal way to earn money but it translates into a source of income that can help hundreds of kids," says Tom Manning, a spokesman for Covenant House.
“Because Covenant House is an umbrella organization with 18 affiliates, its administrative expenses appear higher when looked at alone, Mr. Manning says. Including the affiliates, which run the bulk of the organization's programs, he says the amount spent on programs rises to more than 71% of its expenditures.”
Many New York social enterprise efforts have recently been evaluated, as reported by the Wall Street Journal.
An excerpt.
“Hundreds of New York's social-service organizations are short-changing the people they are supposed to serve by focusing on money-making schemes, according to a report released Wednesday by Pace University.
“By pursuing income-related activities such as selling donors' contact information to third-party marketers and running online shops, nonprofits have diverted income away from service activities, says Rebecca Tekula, the report's author.
"Organizations that spend money and divert resources to other activities do so at the detriment of the homeless, domestic violence victims and people who need these services," says Ms. Tekula, executive director at the Wilson Center for Social Entrepreneurship at Pace University. "Social enterprise may be an innovation," she says, but it is one that can tempt nonprofits into a substantial "mission distraction."
“Researchers analyzed the tax forms of 700 social-service organizations across New York County between 2000 and 2005. The organizations in the sample raised an average of $1 million in so-called unrelated business income, putting the money toward average expense budgets of $19 million.
“The report found that organizations that engage in unrelated business activities, often called social enterprise programs, are more likely to run less efficient shops than their peers. As income from peripheral businesses went up, the share of a contributed dollar that went to actual services went down, according to the report.
“While Ms. Tekula says the report does not prove causality, she maintains that the high correlation between poorly performing nonprofits and those that pursue income-generating projects is cause for concern.
"Organizations with unrelated businesses were not investing profits in their mission-related services," Ms. Tekula says. "Instead, profits were reinvested in the business, and losses were subsidized with funds that might have gone to clients."
“For instance, she points to God's Love We Deliver, an organization that prepares meals for people with serious illnesses, which in 2006 lost about $100,000 on merchandise it sells via holiday catalogs. Since then, it has made between $36,000 and $55,000 a year through online sales, according to tax forms.
“God's Love maintains that the real loss was closer to $7,000 and that the larger number reflects an Internal Revenue Service accounting rule that requires charities to record donated goods as expenses, even if the charity did not pay for them.
“The sales ventures "either break even or have a positive bottom line every year," says Karen Pearl, the group's president and CEO. "Our catalog and gifts are a teensy part of our $9 million budget but it helps keep God's Love in the forefront of peoples minds, hearts and ultimately in their giving."
“Covenant House, a $37.6 million New York-based nonprofit that provides food, shelter and crisis care to homeless youth, has earned between $500,000 and $700,000 a year by renting out its list of donor contact information to third-party marketers. Meanwhile, only half of the nonprofit's revenue went to run its programs, with the other half going toward administrative and fund-raising expenses, according to Ms. Tekula's analysis.
"List rentals aren't an ideal way to earn money but it translates into a source of income that can help hundreds of kids," says Tom Manning, a spokesman for Covenant House.
“Because Covenant House is an umbrella organization with 18 affiliates, its administrative expenses appear higher when looked at alone, Mr. Manning says. Including the affiliates, which run the bulk of the organization's programs, he says the amount spent on programs rises to more than 71% of its expenditures.”
Wednesday, November 3, 2010
Group Wisdom
An interesting look at the thinking that often comes from groups, from Governing; and the answer to the author’s question in the second paragraph is: because they are bigger, more diverse, and not always dominated by authority.
I just ordered the book mentioned and will blog about it after reading it.
An excerpt.
“In 2004, James Surowiecki had a bestselling book entitled The Wisdom of Crowds. In it, he argued that tapping into the wisdom of groups was a great way to determine how to proceed in a wide variety of social situations, including thorny public policy questions.
“But if groups are so wise, why are committees so moronic? We all know that while anyone can make a mistake, it takes a committee to really screw things up.
“Have you ever been trying to cross a busy street with three or four other people? It can turn into a horror show. Someone starts to cross, and then stops; the group lurches out behind them, and then lurches to a stop, turning a routine event into a mini-disaster. The context generates poorer decisions when people try it as a group than if they were to go it alone.
“It isn't just your imagination. As Surowiecki notes, while under the right conditions groups can generate wise decisions, a group can produce outcomes worse than any individual might be expected to make in other cases. The context of collective deliberations turns out to be critical to good decision making.
“So what makes for group wisdom?
“Consider a 10-person committee given the task of guessing how many jelly beans are in a big jar on the table. One approach to collective decision-making would be for the group to work together to reach consensus on their best guess. Another approach would be for each person to generate an estimate independently, then to average all the estimates.
“Surowiecki might argue, and experience bears out, that while both approaches have merit, the second method is more likely to yield an estimate closer to the truth. In committees, there can be a tendency for the strongest personalities to exert great influence on the group's thinking. The second method taps into each member's intelligence and their unique experience.”
I just ordered the book mentioned and will blog about it after reading it.
An excerpt.
“In 2004, James Surowiecki had a bestselling book entitled The Wisdom of Crowds. In it, he argued that tapping into the wisdom of groups was a great way to determine how to proceed in a wide variety of social situations, including thorny public policy questions.
“But if groups are so wise, why are committees so moronic? We all know that while anyone can make a mistake, it takes a committee to really screw things up.
“Have you ever been trying to cross a busy street with three or four other people? It can turn into a horror show. Someone starts to cross, and then stops; the group lurches out behind them, and then lurches to a stop, turning a routine event into a mini-disaster. The context generates poorer decisions when people try it as a group than if they were to go it alone.
“It isn't just your imagination. As Surowiecki notes, while under the right conditions groups can generate wise decisions, a group can produce outcomes worse than any individual might be expected to make in other cases. The context of collective deliberations turns out to be critical to good decision making.
“So what makes for group wisdom?
“Consider a 10-person committee given the task of guessing how many jelly beans are in a big jar on the table. One approach to collective decision-making would be for the group to work together to reach consensus on their best guess. Another approach would be for each person to generate an estimate independently, then to average all the estimates.
“Surowiecki might argue, and experience bears out, that while both approaches have merit, the second method is more likely to yield an estimate closer to the truth. In committees, there can be a tendency for the strongest personalities to exert great influence on the group's thinking. The second method taps into each member's intelligence and their unique experience.”
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