Energizing Philanthropy, Magnifying Impact, Creating Change

by Christine Murakami Noonan

There is no going back. That’s the new mantra of the social sector. Along with the bad and the ugly of the economic wake-up call, though, has come some good – positive, forward-thinking change that is energizing and deepening philanthropy.

Harnessing the power of social networks $10 at a time. Signing text message petitions in support of clean water. Partnering to shape public policy. Boosting home ownership in distressed neighborhoods through creative financing. Leveraging foundation assets beyond grantmaking. Inspiring the next generation of givers.

These are just a few examples of how Minnesota foundations and corporate giving programs are looking inward at their own operations and capacity, as well as outward at the communities they support, to expand their impact and turn a stiff-sounding, fuddy-duddy word like ‘philanthropy’ into a hotbed of creativity and change.

Beyond our state, the national scene is shaking things up, too. “Catalytic Philanthropy,” Mark Kramer’s article in the fall 2009 issue of the Stanford Social Innovation Review, created quite a buzz across the sector as he made a case for a new approach to giving.

He writes: “Private donors, foundations and corporations have the clout, connections and capacity to make things happen … These donors can leverage their personal and professional relationships, initiate public-private partnerships, import projects that have proven successful elsewhere, create new business models, influence government, draw public attention to an issue, coordinate the activities of different nonprofits, and attract fellow funders from around the globe. All of these powerful means for social change are left behind when donors confine themselves to simply writing checks.”

Check-writing in Minnesota, though, is no small potatoes. From 1997 to 2007, the Minnesota Council on Foundations’ Giving in Minnesota research shows charitable giving increased 67 percent in our state. In 2007, giving by individuals, foundations and corporate giving programs totaled $5.5 billion.

These are tremendous numbers. Yet, there’s an increasing energy among Minnesota grantmakers poised to take their philanthropy to another level. They’re reinventing their giving by engaging a broader range of people and organizations, increasing the participation of those currently involved, and searching for more impactful investments in community.
 

Headwaters Targets Donor Engagement

As resources shrink, pressure increases on nonprofits and foundations to demonstrate impact and relevancy. Community foundations that rely on fundraising efforts to secure resources to fund their own grantmaking understand this well.

Beyond traditional fundraising strategies targeting individuals, Headwaters focuses on identifying groups of people who want to make a difference and on helping them do that together. “We view philanthropy as a community activity, rather than an individual one,” Harris describes. “People connections are what sustain our major, long-time donors. So, we need to figure out how we build relationships among people with similar interests and then how we enrich those relationships.”

Last fall, Headwaters organized a tour of the Central Corridor Light Rail Transit line for its donors and the nonprofits leading community organizing around the project.

“Donors want to know what they can do to help move ideas forward. This was a tangible way to show that the dollars they’re contributing to community organizing are impacting efforts to balance the benefits of this transportation project with ensuring that residents and businesses along the line can stay in place and thrive. It was an opportunity to connect donors with organizations that fit their values and for all of us to see our work in action,” Harris says.

To further expand its donor community, Headwaters also is considering lowering the minimum contribution required to establish and maintain a donor-advised fund. This fast-growing charitable vehicle allows individuals to contribute to a community foundation, which in turn awards grants to organizations recommended by the donors. “There is a lot of power in the tool of philanthropy,” Harris says, “How to make it more accessible is the focus of our strategic planning.

“I think the future of philanthropy will move beyond focusing on a few top individual donors to how we can make more tools accessible so that anyone can be a philanthropist,” Harris continues.

These tools include technology and social media, but to yield greater outcomes, organizing needs to be part of the mix, too. “Organizing to harness social media networks to support causes will have a huge impact,” she suggests. “A prime example was the ability to forward the text message code to donate to Haiti earthquake efforts. To give $10 was a small decision, but if you spread that out amongst the couple hundred people in your network, the ripple effect was really amazing.”

Aveda Leverages Electronic Support for the Environment

Aveda Corporation, manufacturer of flower and plant-based beauty products, is long known for its environmental leadership and social responsibility mission. While customers expect extensive Earth Month activity, the company continuously tweaks its signature program to keep the initiative fresh and to expand involvement. Increasingly, the company is turning to technology to accomplish this.

On Facebook, for example, Aveda’s page features an interactive water footprint calculator during the month of April. For every water footprint calculated, Aveda will donate $1, up to $50,000, to Global Greengrants Fund, its 2010 Global Earth Month partner.

Success of the Earth Month campaign is due in part to the salons and employees having flexibility to raise awareness and money for issues impacting their own communities. By selecting local nonprofits that align with Aveda’s mission and the Earth Month theme of clean water, employees and customers learn how they can get involved and see the impact of their fundraising and volunteer efforts.

Katie Galloway

“Once a salon signs up to participate, they use their creativity to decide how they want to raise money,” Aveda Earth Fund manager Katie Galloway explains. “They can hold a fashion show or do a cut-a-thon and donate their fees for services. Last year, a salon partnered with the Surfrider Foundation to clean up a beach while participating in Aveda’s Walk for Water.”

Aveda has also created an online donation site for its Earth Month program at www.avedaearthmonth.org. The site is hosted by YourCause.com and allows salons and employees to create their own fundraising web pages to share via Facebook, Twitter and email. The pages can be used to raise awareness of specific issues, publicize fundraising efforts, and collect donations.

The company also is exploring ways to build on the popularity and ease of using text messaging to show support for causes. For instance, in 2007, the company used a text message virtual petition to ask people to show their support for clean water as a human right. Galloway explains that supporters texted the word “water” to the appointed number, then the service provider furnished information on who “signed” the petition, and Aveda passed this on to the United Nations.

Aveda’s goal is to raise $3.5 million during Earth Month, April 2010. Of this, $1.2 million will be a corporate gift to Global Greengrants Fund to support clean water primarily in developing countries. Grassroots efforts by salons and employees will raise an additional $2.3 million for 30 Earth Month partners in their local communities.

Northwest Area Foundation Tackles Public Policy, Collaboration

Even before the economic downturn, organized philanthropy was becoming more sophisticated in examining the impact of its grantmaking and creating change through leadership, advocacy and convening.

Kevin Walker

Increasing impact and effectiveness in these areas will require funders to focus, collaborate and listen, now that resources will be tight for years to come, says Kevin Walker, president and CEO of Northwest Area Foundation. “This is an opportunity for each of us to look at the maximum value that a funder or nonprofit can bring to the table, focus on what each of us does better than anyone else, and let some of the rest go by the wayside. I think we’re kidding ourselves if we think we can all keep doing everything that we’d like. There are not enough resources for that.”

These challenging times have not deflated but have energized Northwest Area Foundation’s work. Walker explains: “We’ve decided our strategic contribution around issues of poverty is in a longer timeframe. We’re focusing on seeking better public policy approaches to poverty, building community leadership, and strengthening the capacity of advocacy organizations that can frame and push forward an agenda that helps low-income families make ends meet.

“Shaping public policy has the biggest leverage potential for philanthropy. This is exciting, new territory for many funders. My exhortation to our sector as a whole is that we all have a responsibility to think about public policy, not just good programs on the ground,” Walker advises. “We’re living in transformative times, given the budget gap facing our state and some innovative federal programs rolling out. I hope all funders ask themselves, ‘Given the issues we care about, what are the public policy dimensions, do we have an opinion about those dimensions, and are there organizations that we ought to strengthen because we think their perspective needs to be heard?’”

Working together to leverage resources also will expand philanthropy’s reach. Walker commends the organizations that have long supported the Central Corridor Funders Collaborative as an example.

“The region’s most significant transit project in decades is going to be built through some relatively low-income areas with large immigrant populations. Civic and philanthropic leaders are working together to leverage philanthropic dollars, so the project plays out in a way that creates stronger community rather than destroys it,” Walker comments.

He continues, “While the project has a long way to go, I’m heartened that these funders have made a coherent contribution by setting aside their individual institutional interests, putting money into a central pot, and thinking together about how we can achieve the best community outcome.”

Sunrise Community Banks Innovates for Neighborhood Renewal

Driven by its corporate mission to be a leader in improving urban communities, Sunrise Community Banks offers financial services that support nonprofit customers in their pursuit of their missions.

Franklin Bank, Park Midway Bank and University National Bank, all part of Sunrise Community Banks, are three of only 60 certified Community Development Financial Institution (CDFI) banks in the country. A special designation of the U.S. Department of Treasury, CDFIs provide a unique range of financial services in economically distressed markets that promote home ownership, community facilities development and small start-up and expanding businesses.

Nikki Foster

With its community development mission, Sunrise provides financing that other institutions might view as risky. “We’re willing to take the extra steps to make some of these projects work, because we know they will positively impact the community,” acknowledges Nikki Foster, Sunrise Community Banks’ vice president of community development. “We’re entrusted with depositor dollars, so we have to make sure we’re making safe and sound decisions, but we also believe that investing in our communities is a very good bet.”

Through its Sunrise Homeownership Alliance, an innovative, nationally recognized initiative, Sunrise Banks secured deposits from organizations such as The Minneapolis Foundation and the John Larsen Foundation. These deposits fuel lending through the Greater Metropolitan Housing Corporation and Dayton’s Bluff Neighborhood Housing Services. These nonprofits provide financing to individuals to buy homes on a three-year contract for deed, during which time the individuals participate in credit counseling to learn how to repair their credit and set aside savings, so they’re able to refinance into a conventional mortgage. Also part of the financing mix are federal dollars from the Family Housing Fund.

This initiative demonstrates a growing emphasis on collaboration, notes Foster. “There’s a wave of people who want to work together and think about what specific part of the puzzle they can bring to address the housing problem. The Sunrise Homeownership Alliance leveraged the resources and expertise of foundations, a bank, nonprofits, city dollars and large intermediaries. This is the way it should be. This will be the new standard, even when the economy turns around.”

HRK Creatively Leverages Foundation Assets

Kathleen Fluegel

For younger members of a multi-generation philanthropic family, it is hard to imagine how they might build upon the immense contributions of their parents and grandparents. “The weight of what has come before can be oppressive,” says Kathleen Fluegel, executive director of HRK Foundation, an umbrella for several family funds and trusts.

But when the younger generation of HRK trustees introduced program-related investments (PRIs) as a new foundation tool, the idea was “embraced by the older generation, and it energized all of us because of new, creative possibilities,” Fluegel continues.

PRIs are loans, loan guarantees, lines of credit and equity investments that earn a foundation a return on its investment – through repayment or return on equity – of 1 to 2 percent in most cases. While this appears to be a below-market rate of return, it is preferable to losing 30 percent, a not-uncommon hit to foundation assets during the recent economic downturn.

“This is one reason why PRIs are becoming more prevalent,” Fluegal says. PRIs are a tool that foundations can use to control for market volatility within their portfolios while also putting assets to work to further mission.

While larger foundations have dominated the 40-year history of PRIs, a broader range of foundations is increasingly incorporating PRIs into investment portfolios. With the assistance of intermediaries such as Nonprofits Assistance Fund, even small foundations can venture into this complicated arena.

“While foundations traditionally have given great attention to the 5 percent of their assets they typically pay out each year, PRIs provide us with an opportunity to think about what we do with the other 95 percent and what our role could be in working with our community partners,” Fluegel suggests.

For example, HRK was able to offer a PRI to one of its long-time nonprofit partners who was having difficulty timing cash flow to acquire pieces for its museum. “We realized that a line of credit could give the organization more flexibility,” Fluegel explains. “Raising money for the acquisitions wasn’t an issue; it was quick turn-around that presented challenges.” With the line of credit, the museum could purchase an object and then take the time needed to raise the money and repay the loan.

She adds, “Our foundation’s modest PRI activity has given us a different perspective on the work we do and how we use our money. The clarity with which our trustees and staff need to look at the financials and understand what an organization does and how it’s going to pay for what it does is something that all of us are more aware of because of making PRIs.

“HRK has become a cheerleader for the use of PRIs. Funders are recognizing that there are creative applications of PRIs that haven’t been thought of yet, and that’s exciting.”

Andersen Family Inspires the Next Generation

Another multi-generation family of philanthropists, the Andersen family, is conscientiously and strategically working to involve younger generations in its work and acknowledges that the enthusiasm and commitment of this next generation is integral to the family foundation’s future.

Sarah Andersen

Sarah Andersen, board president of the Bayport-based Hugh J. Andersen Foundation, emphasizes to the next generation of family members that philanthropy is “giving of yourself and your resources to other people or organizations without expecting anything in return, and this means philanthropy is woven into all human interaction.

“Many families do philanthropy without naming it – bringing a meal to a sick neighbor, working at a food shelf, knitting a prayer shawl, donating money – but it is important to name what you’re doing and talk about philanthropy,” she stresses.

Andersen recalls that when her generation was given the responsibility of making decisions for the family foundation after the death of several directors, there had been no conversation or education. “We were not prepared,” she notes, “and the transition was not easy.”

Now, to ensure that future generations are energized by philanthropy, understand its importance and are not only prepared but excited to take on bigger roles in the family foundation, the children in the family start learning about philanthropy at a very young age. “I took my children to site visits at the zoo and the theater, for example, so they would see ‘behind the scenes’ and start thinking about the many things they enjoy and how they came to be,” Andersen says.

“We also volunteer together on projects such as Habitat for Humanity, and through Girl Scouts my daughters learned about giving and becoming engaged with the community.” Next-generation family members also have participated in training sessions through the national Council on Foundations and the Minnesota Council on Foundations.

The family established the Next Generation Fund within the Hugh J. Andersen Foundation in 1996 so younger family members could work together to create guidelines and priorities, make giving decisions and develop leadership skills.

In addition, Andersen and her sister, Christine, have both set up funds within the foundation and allow their children to advise where some of that money is given. “This is an individual decision, so the giving reflects what’s really important to them.”

Bridging multiple generations presents challenges, too. Andersen believes that one of the biggest challenges that will face family philanthropy lies in how the generations define community. “My generation defines it more geographically – where we live. Supporting the neighborhood food shelf may be important to us. The next generation is much more global. What’s important to them may be on another continent.”

Furthermore, family foundations may have difficulty continuing to emphasize a place-based focus as more next-generation family members establish themselves across the country and connect with the communities where they’re now raising their families. “How do we as a foundation that currently defines itself geographically, focusing on the St. Croix Valley and St. Paul areas – and that emphasizes that we support ‘community’ – address the challenge of only having one or two trustees living in the area where the foundation makes its grants?” Andersen asks. “There isn’t an easy answer.”

Addressing these challenges will require innovative approaches by family foundations.

Best Buy Aims at Teen Years

Laying the foundation for philanthropy can start in early childhood, as the Andersen family does, and it can be nurtured into the teen years.

Best Buy has focused its corporate social change point of view on the successful development of teens. Titled @15, this platform encompasses grants, employee giving programs, a website, cause marketing, data collection and research targeting the strengths of teens.

Tim Showalter-Loch

Over the past year and a half since @15’s inception, Best Buy has gained valuable insight into what might inspire community engagement in teens. “Teens want to make a difference,” explains Tim Showalter-Loch, senior manager of community relations at Best Buy. “They’re extremely inclined toward volunteer work and using their time, networks and influence with other teens to have an impact.”

For example, teens participating in activities on the @15 website earn points to give to organizations they believe should receive a share of $1 million that Best Buy awards annually.

“It’s been amazing to see how nonprofits are involving teens in leading and executing strategies to drive interest. The dollars directed by teens are great for an organization, but there’s also an energy and enthusiasm for creating more teen engagement,” Showalter-Loch says.

He explains a fundamental key to sustaining involvement: Teens will participate to the extent that they think someone is really listening and doing something about what they say. “If they don’t think their participation will make a difference, they stop participating, and then people think they don’t care.”

Teen interest also is driven by how “real” the initiative is. For instance, Showalter-Loch points out, “If a teen can apply for a scholarship, help give away $1 million, enter his film in a contest, that’s more real than us promoting our connection to a celebrity.”

Framing Best Buy’s work is research conducted with the Search Institute identifying primary assets that must be developed and nurtured in teens. Spark, voice, relationships and opportunities are the most important factors in teen motivation and engagement in civic life – and in their future as philanthropists.

What Does the Future Hold?

What will the landscape of philanthropy look like next year, in five years or when today’s teenagers are at the helm of foundations and corporate giving programs?

Major forces of change are brewing, write Katherine Fulton and Andrew Blau, authors of Looking Out for the Future: An Orientation for Twenty-First Century Philanthropists. Responses to these forces are shaping “how philanthropy is practiced for the next generation and what philanthropy is called upon to do.”

“Philanthropists are experimenting with their grantmaking strategies, rethinking available resources, redefining the spheres of activity, creating a culture of learning, aggregating actors and questioning traditional forms,” the authors continue.

© Copyright 2010 Minnesota Council on Foundations
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