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November 12, 2009

In subtle ways, those of us in the nonprofit sector contribute to the lack of appreciation for its strength when we act as though every good idea came from outside it and simply import the language and frameworks of business. Worse, doing so often leads to poor management choices and reduced effectiveness, because the sector needs frameworks that are responsive to its distinctive context and purpose.
Ironically, the person to make the most cogent argument on this topic in recent years is a business guru, Jim Collins, in his terrific monograph Good to Great and the Social Sectors: Why Business Thinking Is Not the Answer. “We must reject the idea—well intentioned but dead-wrong—that the primary path to greatness in the social sectors is to become ‘more like a business.’ Most businesses—like most of anything in life—fall somewhere between mediocre and good,” he writes. “So, then, why would we want to import the practices of mediocrity into the social sectors?” Why indeed.
It always surprises me the degree to which people in foundations believe we at the Center for Effective Philanthropy (CEP) are seeking to import “business practices” to philanthropy. We’re not. We’re trying to improve the effectiveness of foundations through better data—and insights gleaned from that data. That’s not a “business” idea.
Our surveys of grantees that provide comparative assessment data to foundation leaders through our Grantee Perception Report (GPR) tool aren’t “customer service” surveys. Customers pay for a product or service; grantees receive funding from foundations. The analogy to customers doesn’t make sense. When my colleagues and I developed the GPR, which has now been used by some 200 foundations, our model (admittedly also an imperfect analogy) was surveys of students at colleges and universities conducted by a nonprofit that I had some knowledge of as a result of past positions in higher education.
At CEP, we believe that establishing clear and specific goals, developing strategies to achieve those goals, and defining performance indicators to gauge progress along the way are the essential elements of effectiveness in philanthropy. And I think it’s tougher in philanthropy to accomplish this than it is in business. As Warren Buffett said when he announced his gift to the Bill & Melinda Gates Foundation. “In business, you look for the easy things to do. In philanthropy, you take on important problems, and it is a tougher game.”
Despite how tough it is, we in the nonprofit sector have many successes to point to, including those I mentioned in yesterday’s post. And there are many others. Why, for example, did we leave it to McKinsey to tell the amazing story of a small nonprofit called the Institute for Healthcare Improvement (IHI) that spurred hospitals to innovate to reduce by 100,000 the number of lives lost through preventable medical errors?
McKinsey trumpeted this as an example of innovation from which business could learn. But I have never once heard it mentioned at a foundation or nonprofit conference (and I go to many). We undermine the sector by not telling our stories of success more forcefully.
We need to tell both the individual success stories and also the collective story of the sector’s importance. Thankfully, there are some organizations pushing hard to change this, like the Philanthropy Awareness Initiative and the Communications Network. I also have great respect and appreciation for organizations such as Bridgespan: created by Bain & Company, the corporate strategy consulting firm, it nonetheless operates with humility and a deep appreciation for the distinct challenges facing nonprofits. Indeed, it has helped build a better knowledge base for the sector that is increasingly informing practice.
As we work to articulate our successes, let’s not cede the push for higher performance, innovation, and greater impact—the push for excellence—to anyone. Indeed, this has always been the quest of the most effective nonprofit leaders! It isn’t a new concept, or a concept that needs to be imported from outside the sector. It’s at the heart of what the best of the nonprofit sector has always been about.
Disclaimers and Disclosures: The views I express here are entirely my own. They are of course very much informed by my perspective as president of the Center for Effective Philanthropy but we have had spirited debates among our board and staff on the very issues I discuss in these blog entries. CEP’s mission is to provide data and create insight so philanthropic funders can better define, assess, and improve their effectiveness and impact. It should be noted that several of the foundations I cite as examples in this blog, including the Robert Wood Johnson Foundation and the Bill & Melinda Gates Foundation, have been clients of CEP’s and have also provided grant support to the organization. A full list of our funders, by size of funding, can be found at
Tomorrow’s post: Will the Real Nonprofit Sector Please Stand Up?
Wednesday’s post: The Attack from Within.
Tuesday’s post: The Attack on Philanthropy.

Phil Buchanan