Fall 2007

By Keith Epstein & Alana Conner

As they do every winter, fleets of Japanese ships sailed into rough Antarctic seas to hunt whales last January. And as they do every winter, Greenpeace activists greeted the hunters with dramatic nonviolent protests, such as positioning their boats in front of the whalers’ harpoons and painting “Whale Meat From Sanctuary!” on one whaler’s hull.

Displays like these never satisfied Paul Watson, a founder of Greenpeace who parted ways with the organization in 1978 to create the more militant Sea Shepherd Conservation Society. He has called his onetime colleagues “the Avon ladies of the environmental movement” and “a bunch of wimps.” When confronting Japanese whalers, the bearded captain prefers a more direct approach. He raises a skull and crossbones flag on the mast of his vessel, the Farley Mowat (named after the Canadian wildlife author and activist), and then rams his enemies’ hulls with the 7-foot steel blade on his starboard bow that he calls “the can opener.”

“Nobody would walk by a kitten or a dog being kicked to death,” Watson explained to the Reuters news service last February.

Both the Sea Shepherd Conservation Society and Greenpeace are provocative environmental organizations with similar goals. Yet Sea Shepherd is more ideologically pure, with its long history of uncompromising stances, radical actions, and contempt for corporations. Greenpeace, in contrast, is becoming more pragmatic, with its recent history of working with Coca-Cola, General Electric, and other corporate giants to create greener products and processes. In turn, both organizations are viewed as purer and less pragmatic than Environmental Defense and the Natural Resources Defense Council, which are even more focused on working with businesses to cultivate market-friendly solutions to environmental problems.

As environmental organizations, like the nonprofit sector as a whole, increasingly join forces with and emulate businesses, the gulfs between many pragmatic and pure organizations – even those with shared objectives – are widening. Consequently, Sea Shepherd and Greenpeace’s greatest rivals often aren’t Japanese whaling companies. They’re each other.

Bickering between purer and more pragmatic organizations is not confined to the sea. Back on shore, the Native Forest Council roasts the Nature Conservancy for many of its practices, including its decision to sell land in Texas to trustees, who then allowed drilling for oil in the formerly protected areas. After the press exposed these and other actions, the Nature Conservancy established a risk evaluation committee and explored ways to mitigate the damage. Nevertheless, Timothy G. Hermach, founder of the Native Forest Council, still calls the conservancy “the real estate company that cares.”

“Pragmatic, as the term is being used by most of Gang Green, is but a justification for being dishonest,” Hermach says.

In response, Steven J. McCormick, the Nature Conservancy’s chief executive, says: “You have to sort of admire the nobility and passion and purity behind [Hermach’s stance]. But on the other hand, it’s rare you get much out of it.”

Which organizations do the most for their cause: the purer, or the more pragmatic? Sociologists increasingly conclude that “this is the wrong question,” says William P. Barnett, the Thomas M. Siebel Professor of Business Leadership, Strategy, and Organizations at the Stanford Graduate School of Business. “What’s most effective is to have both involved.” While purer nonprofits blow whistles on malfeasant companies, mobilize the public with worst-case scenarios, and muscle legislation through sluggish governments, more pragmatic nonprofits enact the small changes and quiet compromises that often make the biggest differences.

Pure and pragmatic nonprofits also make each others’ work easier. Without the threat of pure nonprofits’ radical actions, corporations and governments would often not be willing to work with more pragmatic organizations. And without the subtle legwork of pragmatic organizations, pure nonprofits would enjoy considerably fewer results from their actions.

All social movements need a variety of ideologies, but individual nonprofits must still decide where they will land on the purity-pragmatism spectrum. They must also learn to balance the purist and pragmatic tendencies within themselves. To do so they must first understand the price of being practical, as well as the cost of being pure.

Pragmatism Isn’t Cheap

Although nonprofits’ tilt toward pragmatism has led many major corporations to adopt more socially responsible practices, it sometimes takes a toll on membership and funding, finds Nicholas Switanek, a doctoral student working with Barnett at the Stanford Graduate School of Business. In his research, Switanek first classified more than 12,000 U.S. environmental nonprofits as either pragmatic – that is, working with companies on such tactics as carbon offsets, habitat conservation plans, and mitigation banks – or pure – that is, not working with companies. His analyses showed that between 1999 and 2006, more pragmatic organizations failed than did pure organizations.

Switanek thinks that the frailty of pragmatic nonprofits lies not in the organizations, but instead within the psychologies of their would-be members, volunteers, and donors. When people choose to support a nonprofit, they aren’t just deciding where to volunteer their talents or donate their dollars. Instead, they are choosing how to build their identities, which they construct, in part, from the organizations with which they associate themselves.

Many people want to view themselves as unique from – and even in opposition to – the mainstream. In other words, they want to construct what sociologists call oppositional identities. Associating with clearly unique, even antagonistic groups is one way to build such an identity.

Traditionally, environmental organizations were a good source of oppositional identities, says Barnett: “They had to take an oppositional stance to business to be true blue.” Yet as environmental nonprofits adopt tactics from business, they drift closer to the undifferentiated middle of the social world. “There are no identity benefits for pragmatists when polar bears and climate change are on the cover of every magazine on every newsstand,” notes Switanek.

Many committed environmentalists gravitate toward purer organizations to get their identity fix, but some middle-of-theroad environmentalists are actually leaving nonprofits altogether. “People who would have worked for NRDC or Environmental Defense are now going to work for Shell,” says Switanek. “And people who might have written a check to these organizations are now funding alternative energy start-ups.”

As a result, membership and funding for more pragmatic environmental organizations seem to be dropping off over time, while those of purer organizations seem to be holding steady, or in some cases even growing, says Switanek. For example, the more pragmatic Rainforest Alliance has had a rocky time financially, he finds, whereas the purer Defenders of Wildlife, Rainforest Action Network, and Earthjustice have watched their funding steadily grow over the past eight years. And though pragmatic organizations may turn to corporate contributions to make up for their losses, this reliance on corporate dollars sometimes calls into question their independence from the business sector.

Environmental organizations’ departure from their traditional roles of watchdogs and whistle-blowers can hurt them in another way, notes Switanek: “Only those organizations that have the purest, greenest credentials can go into a corporation and maintain their credibility. When they become market pragmatists, however, they cast doubt on their commitment to being creditable monitors, which should make them less likely to attract funding” – as well as public trust.

Other sociologists have reached similar conclusions about the price of pragmatism. In their 1978 classic, Poor People’s Movements: Why They Succeed, How They Fail, Frances Fox Piven and Richard Cloward argue that social movements are most effective when they’re purest, most radical, and most disorganized. “The mob in the street is always more effective than the bureaucratized, institutionalized organization,” summarizes Doug McAdam, a professor of sociology at Stanford. The father of sociology, Max Weber, made a similar argument some 30 years earlier, ¹ observing that as organizations get older, larger, and more bureaucratized, they lose their radical edge – a process he called the “routinization of charisma.”

A Crisis of Legitimacy

The Russian-American nonprofit partnership known as the Wild Salmon Center learned firsthand how difficult it is to walk the line between purity and pragmatism. The center’s original mission focused only on conservation: Protect and learn about one of the world’s last remaining strongholds of wild Pacific salmon and steelhead, located on the Kamchatka Peninsula in Russia’s Far East. Better to preserve the breeding grounds of perhaps one-fourth of all Pacific salmon, the organization reasoned, than to focus solely on areas where salmon had already headed into steep decline.

The center created a novel fundraising and education model. It charged anglers some $7,000 for two-week trips into the Kamchatka wilderness, and then spent the proceeds on its own research. Helicopters ferried both fishermen and scientists deep into the wilderness, which lowered the cost of doing research, and the anglers helped the scientists collect data. The best way to enlist guardians of wildlife, the founders figured, was to get them both waist-deep in fly-fishing and elbow-deep in research. How better to save an ecosystem than to build a wealthy constituency that has been there, seen it, and fished it?

Foundations weren’t so sure. Helicopter-loads of anglers with net worths of $5 million to $30 million apiece did not help perceptions that the Wild Salmon Center needed foundation grants. “They got wary about the idea they were subsidizing rich fishermen,” notes Barnett. “They said, ‘Wait, are you an environmental organization or are you a tourism outfit?’”

The center’s Russian partners also grew suspicious, says Guido Rahr, president and CEO of the Wild Salmon Center: “They asked, ‘Do you want to protect this river because you want to protect a globally important source of biodiversity, or because you want to get angling concessions for foreign tourists?’” At the same time, many ecotourism operators – including the center’s commercial competitors – spun holiday travel as environmentally beneficial, and so the organization was having a hard time maintaining its unique identity.

Ultimately, the fishermen themselves were confused about what, exactly, the Wild Salmon Center did. “When we asked them for 5K to go fishing, and then for another 5K in donations, they thought they were being hit twice,” says Rahr.

For the Wild Salmon Center, the situation became nothing short of what Barnett terms a “legitimacy crisis.” Just how pure could this organization be?

As a solution, the founders created two organizations, one with a purer focus, and one with a more pragmatic approach. TheWild Salmon Center continues to concentrate on conservation and science. Meanwhile, a newly formed nonprofit, Wild Salmon Rivers, continues to offer angling tours. “It has been a bit of a challenge that among some audiences, for example, fishermen who went to Kamchatka in the early years of the program, we are still seen as an organization that runs trips to Russia,” acknowledges Rachel Uris, vice president of resources and communication at the Wild Salmon Center. “But this challenge is fading.”

And both organizations are prospering, says Rahr. Foundations like that each organization sticks to its knitting and develops its core competencies, which makes both the Wild Salmon Center and Wild Salmon Rivers more competitive for grants. The organizations’ Russian partners are also reassured. “To do conservation in Russia,” says Rahr, “everybody needs to be perceived as not making an end run at capturing a resource. It’s important to be seen as providing technical and financial assistance. But ecotourism is a very different model. By creating a firewall between conservation and ecotourism, we assured the Russians that we are supporting their efforts to protect important watersheds.” With its partners’ trust restored, the Wild Salmon Center has been able to implement its projects more easily, and thereby attract even more foundation funding.

Purity Is Also Pricey

Despite the challenges facing pragmatic organizations, both Barnett and Switanek believe that more pragmatic strategies may prove more effective than purer ones when it comes to making change across social issues. “Capitalism is a great engine for innovation,” says Barnett. “If you really want to get something done, you are going to play the pragmatist.”

Barnett cites the alliance between Environmental Defense and Wal-Mart Stores as an effective nonprofit-corporate partnership. (See “Partners for the Planet” in the Summer 2007 issue of Stanford Social Innovation Review.) Pushed by Environmental Defense, the world’s largest retailer claims it is well on the way to reducing its energy use by 30 percent, trimming its annual solid waste production by 25 percent, and saving 5,000 trees and 1,300 barrels of oil by reducing its use of cardboard. The corporate giant also intends to launch windmill-powered stores. By partnering with Wal-Mart, “Environmental Defense has done much more to help the planet than many organizations,” says Barnett.

Still, when Barnett recently asked a group of environmental activists, “Who here is too pure to work with Wal-Mart?” about a third of the hands went up. “They regard Wal-Mart as the enemy,” he says. “They’re saying, ‘We’re not going to contaminate our ideological stand and sleep with Wal-Mart just to make some changes at the margins.’ Their identities have become more important than the ultimate objective.”

Granted, cultivating identities is an important psychological need that affiliating with purist organizations can satisfy, says Barnett. Yet purist tactics may leave unchecked not only wayward businesses, but also recalcitrant governments. In the early years of the environmental movement, purist environmental organizations enjoyed powerful legislative successes, including the passage of the Clean Air Act, the Clean Water Act, and the Endangered Species Act. But since the Carter administration, activists have had far fewer legislative victories. As purist organizations continued their fruitless sparring with lawmakers, pragmatic organizations sidestepped government altogether, worked with business, and achieved some of the very same goals for which purist organizations had been fighting in courts and legislatures.

Purity is also hard for organizations to sustain internally. “Very few nonprofits have the luxury of being pure,” observes Elizabeth T. Boris, director of the Urban Institute’s Center on Nonprofits and Philanthropy. That’s because few organizations can operate in a vacuum of like-minded members, founders, and funders. An organization always answers to myriad stakeholders. “If nonprofits are dependent on the public, its members, or foundations, their constituencies are varied and have a claim on them. An agenda that may have been set by a few people in a room may not make it out into the real world in that form.”

Finally, time is not always on the side of purity. “Purity is a higher-risk strategy,” notes Barnett. “If the times are right, it can enhance the organization. A staunchly antinuclear group was the place to go during the Three Mile Island accident. But now, staunchly antinuclear groups are falling out of favor because people are beginning to think that nuclear power is a good idea. If you were really focused on opposing nukes in one era, you were a hero. But now, you would be seen as not progressive or unwilling to deal with the larger issue of climate change” – and membership, funding, and effectiveness would all suffer.

Movements Need Both

The tensions between pure and pragmatic organizations are especially uncomfortable in the nonprofit sector, where scarce resources and high stakes make everyone just want to get along. “There is a feeling in the nonprofit world that, ideally, we would all cooperate,” says Barnett. “And in a lot of cases, cooperation does make sense.”

Yet the clash of approaches feeds innovation, says Barnett: “We need just as much vitality and beautifully uncoordinated innovation in the nonprofit sector as there is in the economy at large.”

Within the ecosystem of a social movement, pure and pragmatic organizations play different yet equally important roles that, when combined, make change happen. Even someone like Captain Watson, the whaler hunter labeled a rogue pirate and ecological terrorist, may accomplish more for the movement than his opponents realize. His model might not be sustainable, since few governments are likely to adopt his method of enforcing international wildlife treaties. But such activists at the fringes of a movement can tug other organizations – and society – in important new directions.

“Pragmatic groups get more done, but part of why that is is the threat of a radical flank,” observes McAdam, using a term – “radical flank effects” – first coined by the sociologist Herbert H. Haines.² In their analyses of the civil rights movement both McAdam³ and Haines argue that purer groups made it easier for more moderate groups to pursue their agendas. In the 1950s, for example, the National Association for the Advancement of Colored People (NAACP) was illegal in the South. But once the more radical Martin Luther King and the Southern Christian Leadership Conference surfaced, mainstream support began pouring into the NAACP, says McAdam. And once the Black Power movement emerged, he notes, white leaders became much more willing to meet with King.

“When you have a really radical wing of the movement, it tends to increase the legitimacy, respectability, and leverage of more moderate groups,” says McAdam.

“The most radical group during the civil rights movement, the Student Nonviolent Coordinating Committee, realized that they weren’t getting the credit they deserved for King’s success,” he continues. “But they were willing to pay that price for the sake of the movement as a whole.”

“All social movements have an extreme faction,” agrees Ingrid Newkirk, founder of People for the Ethical Treatment (PETA), an organization whose tactics include juxtaposing photos of slaughterhouses with concentration camps, promoting nudity over wearing fur, and tossing red paint on fashion show runways that featured animal products. “Such activity seems to move the center forward,” she says, noting that the even more radical Animal Liberation Front, which has raided mink and chinchilla farms and released the animals, makes

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Illustration by Mick Wiggins

After ferocious in-fighting and the threat of a legal challenge, the parent swallowed its errant chapter this last October in a hostile takeover. “Many charities just aren’t necessary anymore,” says Manhattan merger attorney Eliot Green, who engineered the takeover. “Due to a scarcity of funds, charities can no longer afford to be inefficient.”

Elbowing into a merger proved far less dicey for Pacific Clinics, a mental healthcare nonprofit just outside of Los Angeles. There, it was a case of the acquired wooing his acquirer. At 65, Susan Mandel was chief executive of a venerable $60 million-a-year mental health nonprofit in the counties around Los Angeles; Jim Balla was an up-and-coming, 49-year-old CEO of a more modest, $13 million-a-year inner-city mental health charity struggling to make it to the next level.

She had all manner of ethnic clientele and influential connections; he had a focus on young people in metro and south L.A. She wanted his rehabilitation expertise, his housing, his IT staff, and an affiliation with his brand, and, nearing retirement, she wanted to know her cause would be left in good hands. Balla, at the same time, needed Mandel even more “for sustainability,” he says, and the chance to compete more strongly for millions of dollars of new state funding for mental heath. Balla courted Mandel, not the other way around.

So finally, this July, after some 27 months of complicated negotiation and restructuring — more than two years after Balla first asked Mandel to “talk about possibilities” over dinner after work one day in December 2005 — it’s all to become official: Pacific Clinics is set to acquire Portals House Inc. and the two will became one. Says Mandel: “Other agencies are afraid of us now, for being an 800-pound gorilla.”

Suddenly, fusion is in fashion. Among nonprofits large and small, an almost private-sector-style merger mania is taking hold. Some are marriages of convenience; some are unions born of frantic necessity, and others are sparked by shared passions and strategic goals, along with the possibilities of collaboration versus competition. Still others are being donor-driven in the name of more efficiency and results. “We’re seeing more dissolutions and more mergers,” says Kevin J. Curnin, a partner and chief of the pro bono practice at the New York law firm of Stroock & Stroock & Lavan.

To be sure, competition for survival in the rough-and-tumble philanthropy world has intensified, as benefactors grow more dubious of differences between the plethora of new advocacy groups that have cropped up in recent years. And donors are more demanding now, too — obsessed with provable outcomes. While some consolidations are lightly urged by funders hoping the groups they aid will take the hint, other mergers are only technically dissimilar to the corporate world’s so-called “hostile” takeovers.

True, there may be no activist investors or profit-driven forces at play in today’s charity arena, but there are, increasingly, activist philanthropists entering the ring, often at work behind the scenes, nudging — if not demanding — merger talks in order to streamline and revitalize the cash-strapped organizations they support. Sometimes, donors put up money to hurry some of the couplings along. Since 2003, the Packard Foundation has given nearly $180,000 to seven organizations to encourage mergers and “build capacity.” Mostly, Packard employs a light touch. “We don’t ever tell them you need to merge and go partner with nonprofit XYZ,” says Shiree Teng, a Packard Foundation program officer specializing in organizational effectiveness. “We do suggest, ‘Have you looked at who else is doing this work and how you might work with them?’”

“It’s a little bit of a shakedown,” says Marcia J. Lipetz, president and CEO of the Executive Service Corps in Chicago, where, she says, six nonprofits have closed so far this year. “And, frankly,’’ says Lipetz, “it’s about time. You can’t sustain all these [similar] organizations servicing similar things in the same community. If you have 10 central offices, 10 office leases, 10 computer leases, and 10 development directors, that becomes tough to sustain.” In the parlance of one lawyer specializing in the burgeoning new field of nonprofit mergers: “acquirers” are lassoing “targets” every day. “They’re not hostile takeovers in the business sense,” says the lawyer, Eliot Green of Loeb & Loeb in Manhattan, “but the negotiations are very intense.”

No fooling. Charities often resist. Most of the time, he says, nonprofit leaders don’t want to compromise. Worse still, Green adds, not everyone in a nonprofit group (usually the weaker one) can see the writing on the wall. “Usually by the time we get involved, there is no alternative,” Green says. “For the weaker organization, it often comes down to this: be acquired or be dissolved.”Green ought to know: the bitter United Way takeover was one of his more celebrated tie-ups.

Green, who heads his Park Avenue firm’s nonprofit-merger practice, says such couplings have been on the rise since 9/11. Before then, Green’s practice would handle maybe two or three nonprofit mergers a year, usually hospitals. But this year, alone, Green anticipates nine big nonprofit mergers involving all types of organizations. Green’s services don’t come cheap: His fees start at $30,000 for fairly simple, uncontested consolidations.

While no one has sweeping statistics documenting the scope of the national charity-merger movement, interviews with a variety of players in the nonprofit and philanthropy worlds confirm the trend is both significant and on the rise. In Chicago, a special corps of retired executive volunteers, called Executive Service Corps of Chicago, is actively engaged in helping nonprofits merge. At the University of Texas at Austin, an entire course is designed to teach students how to help nonprofits consolidate. A recent outcropping of specialized philanthropy arms of major banking institutions have just begun offering new or expanded merger services in hopes of capitalizing on the trend. “Foundations have really been pushing this, too,” observes Elizabeth Boris, director of the Urban Institute’s Center on Nonprofits and Philanthropy.

Ditto consultants. In the charity merger business, they call themselves “strategic restructuring” specialists, people who preach the gospel of cooperation as a survival mechanism. One of the leading such consultancies is Emeryville, Calif.-based La Piana Associates Inc., which specializes only in nonprofit matchmaking. Founder David La Piana’s promise: to help a good cause increase market share, add services, broaden mission, lower costs, attract and retain donors — and often, just simply survive. LaPiana offers nervous suitors and worried acquisition targets an array of life-raft services, from the lightest touch — short-term administrative collaborations involving minimal integration — to more urgent, permanent tie-ups, such as joint ventures, parent-subsidiary relationships and full-out mergers. The more desperate an acquisition target, the higher its chances of losing autonomy in a tie-up.

La Piana says the most winning mergers can help nonprofits cut costs by up to 15 percent and calm skittish donors. The December union of the Denver-based Young Audiences of Colorado and the Colorado Alliance for Arts Education has already led to new contracts from donors who’d been worried about overlap.

Of course, in any power struggle — even the most friendly ones — there is always, at least, some difficulty getting two parties to dance. For the acquired, giving up independence and power is “where all the tension comes in,” says La Piana. “The business reasons may be plain that restructuring is a good idea. It might even be a life-and-death idea. But the autonomy issues are the toughest ones, chiefly that sense of ownership, that sense that it may be a leaky boat, but it’s my boat.” Admits Portals House’s Balla, whose organization had to follow, rather than lead, in its merger waltz with the larger Pacific Clinics: “It was hard. It was like giving a baby away.”

And learning to let go is usually the easy part. After the founders get their heads (and emotions) wrapped around the idea of a merger — and if they do — then it’s time to get everyone else on board. That, too, can be a heartache and headache: executive directors can get ushered out. Board members often lose their positions or acquire new roles; staffers often lose jobs, too — or gain new duties.

Fees for helping to keep in-house bruisings to a minimum while hastening the journey toward restructuring and then integration can run from $20,000 to well over $50,000 — depending on how willing, or able, everyone is to play nice. Complications requiring specialists can crop up over leadership struggles, fights over new marketing messages, and thorny, intricate legal work and accounting. Many groups, rather than punch through it themselves, hire out or secure pro bono legal services. Some nonprofits have been known to score grants to pick up the tab. Quips one self-described “burnout” candidate recalling her merger experience: “It was cheaper than therapy.”

Still not convinced? Fading — if not gone — is the stigma of entering the merger ring to begin with. “Ten years ago, it was almost an admission of failure in the nonprofit world if you said you were looking for a merger partner,” observes La Piana. “Now it’s being seen as strategic.”

La Piana’s own practice, ironically, owes much of its own birth and survival to just such a strategic merger — or three. Some 10 years ago, La Piana was approached by a group of donors — in this case, the heirs of the Hewlett- Packard fortune. They and the executives of their family foundations — the David and Lucile Packard, James Irvine and William and Flora Hewlett foundations — were becoming worried that many of the nonprofits hitting them up for money seemed suddenly to be losing their way and their focus, awareness of shared goals, and attention to in-house efficiencies. In request after request for funding, the families and their grant managers started seeing a slew of new charities asking, in many cases, for too much money to fund too many copycat programs and initiatives. Worse, the grant applications, when taken together, formed an alarming picture of overlapping programs, gaps in service, battles over turf, and a lack of coordination with like-minded rivals seeking to serve the same sets of needy people in the same types of ways.

It got La Piana thinking. Around that same time, the late 1990s, the corporate world had begun to wrestle with some excess of its own — and responded by busting time-honored boundaries with big mergers and forceful takeovers that streamlined overhead, enhanced revenues, beefed up shareholder returns and delivered stronger brands to larger markets. Could consolidation of nonprofits enhance philanthropic results in similar ways?

La Piana had a personal interest in finding out. For 15 years, he’d headed a rapidly growing Bay Area mental health nonprofit of his own. That organization, the East Bay Agency for Children, had merged once well, but a second time so poorly it lost tens of thousands of dollars, and finally, a misbegotten third merger resulted in firings, a shuttered clinic, and the neighboring Oakland community’s ill feelings — in short, a full-scale public relations disaster. Surely, La Piana agreed, there had to be a better way of merging. The Hewlett-Packard families throught so, too, and gave La Piana $3 million to create a set of best-practices and a merger consultancy that would help encourage more responsible giving across the sector. La Piana established some methods for mergers in the philanthropic world, and then set about to prove they could work. Since setting off on his own as a business in 1997, La Piana and his associates have guided more than 150 nonprofit mergers and dozens of other philanthropic partnerships — all aimed at better tackling an array of social problems, from AIDS to poverty to domestic abuse.

How bad is the charity glut? Consider the numbers: Today, there are around 1.4 million nonprofits, about half of them new since 9/11. Sustaining so many over the long term may be beyond market capacity; with giving stuck at around 2 percent of individual donor income — despite a concurrent growth in the number of donors giving — there may not be enough new deep pockets to keep up with any further surges in the number of charities.

Indeed, say fundraising experts, the philanthropy explosion may be nearing its peak. “There is real pressure,” notes the Urban Institute’s Boris. “Can the economy sustain the number of organizations that exist?” And rivalry for public attention and donor largesse among nonprofits has never been so brutal, she says. The threat of organizational mortality — or at least a decline in any nonprofit’s capacity to maintain quality services amid the current pace of expansion — is real.

Statistics gird such perceptions. According to data compiled for CONTRIBUTE magazine by the Urban Institute’s National Center for Charitable Statistics, over the last five years, nonprofits have been fading away at a bit of a faster clip than was normal prior to the post-9/11 surge in new charities. In each recent year, nearly 4 percent of nonprofits died, compared with less than 3.3 percent prior to 2001. Organizations devoted to social services, health, the arts, sports, and religion have been disappearing well above such normal death rates. Observes the charitable statistics center’s director, Thomas H. Pollak: “There’s at least some accumulating evidence that it’s easier to start a new organization but much harder to sustain it.” (See “Shakeout!”, above.)

All the more impetus, then, for the new merger movement and its champions. Says Marguerite H. Griffin, one of the nation’s new legion of so-called “wealth advisers” — people who help high networth clients choose the right targets for their philanthropic dollars: “Donors are very confused about what the organizations’ stories are and how they’re different.” Griffin sees a lot of that confusion in her job in the philanthropy arm of Chicago-based Northern Trust Bank. “Nonprofits, meanwhile,” Griffin says, “are having trouble distinguishing themselves.” Especially since the 2001 terrorist attacks, she says, “wealthy donors have been asking: ‘How can we be more efficient and leverage our dollars more?’ That’s when conversations start to revolve around the question, Do we really need all these nonprofits?”

Raising such questions, especially now, isn’t winning any popularity contests for Griffin or her colleagues in the merger movement — at least not among many charities. Griffin is the first to admit that she’s unsettled some nonprofit leaders in recent months with her provocative public presentations on the need for nonprofit mergers. After a recent presentation in New York, hate mail flooded her in-box. One woman complained that forcing mergers would stifle creativity and innovation.

Griffin is unfazed. “Merging can be equally creative and good for philanthropy,” she counters. With a merger, donors would have confidence that the nonprofit has thought about efficient use of resources, that they’d be good stewards of that money. To not consider [mergers] and have your head in the sand is misplaced. If you go it alone, you’re disconnected and there’s a lot of waste. Donors just aren’t interested in that anymore.”

Rockefeller Philanthropy Advisors CEO Melissa Berman agrees. In New York City alone, she counts at least 24 literacy organizations, though stresses that some similarities may be only skin-deep: one literacy group that focuses on adults who slipped through educational cracks is hardly a clone of another literacy group that focuses on teaching English to recent immigrants — but how many donors are going to take the time to find out? And further, even if two literacy organizations target two different populations, they still have a set of similar administrative burdens and require employees with similar skills. Couldn’t a gaggle of various literacy organizations, regardless of their target populations, benefit cost-wise from some form of administrative consolidation?

Berman isn’t the only one wondering. “It’s mind-boggling that in the city of New York there are more than 80 organizations devoted to breast cancer,” observes New York Private Bank & Trust chief executive William R. Fuhs, who is actively exploring the creation of a New York nonprofit to identify organizations ripe for consolidation. “Is breast cancer a worthy cause? Absolutely. Are the people involved because of an impact on a family and friend? Probably. Do you need 80 to have the same net impact? Or could you have less and have a larger impact?”

Yet for all the talk of mergers, there are some who worry that the merger movement may discourage nonprofit innovation. “Should people who run nonprofits be tested by funders? Absolutely. But should that efficiency eclipse passion for a cause? Absolutely not,” says Curnin, the Stroock lawyer. “We’ve seen stranger things in New York than a shoestring, potentially redundant community service provider that, after 20 years, nobody would want to live without.”

Spring 2006

By Keith Epstein

The swing of public compassion toward the most recent headline-grabbing crises – the tsunami in Asia, the hurricanes along the Gulf of Mexico, the earthquake in Kashmir – has left many nonprofits in the lurch. Even as emergency- related private giving in the United States soared to unparalleled levels – $1.8 billion for the tsunami, $3.1 billion for Hurricane Katrina, $130 million for the Kashmir earthquake¹ – many other organizations, large and small, felt the pinch of a sudden stinginess. Services began to suffer, and so did their clients.

Chrill Care Inc., a community agency that helps low-income, frail, and disabled adults in Essex County, N.J., with their housekeeping, meal preparation, and shopping, is one nonprofit that suffered a steep drop in donations following the big disasters of the last two years. Clients seeking aid are now more likely to encounter a waiting list, and those who benefited from 10 hours of visits now receive no more than six. “We are a small but well-established entity,” says Gail Ahrens, the organization’s operations director. “But we cannot run a large marketing campaign or reach the millions of viewers that a Katrina reaches night after night on television.”

The latest catastrophes have also overshadowed the globe’s more widespread and protracted problems. Each month, an estimated 250,000 people die from AIDS, 150,000 die from famine, and another 80,000 died from malaria. Unsafe water and a lack of sanitation lead to another 180,000 deaths, mostly of children, from infectious diarrhea.² That’s a total of 660,000 deaths. Contrast these numbers with those caused by the most publicized disasters of the last two years: the Asian tsunami claimed a total of 280,000 lives, the Kashmir earthquake 73,000, and Hurricane Katrina 1,093.

Yet American philanthropy – individual, foundation, and corporate – is weighted heavily toward rescuing emergency victims, and away from tackling chronic conditions. An analysis of data by the Stanford Social Innovation Review found that because of this trend, there is little relationship between how much donors give and how many people need help. (See graph, p. 51.) Among the many striking discrepancies: Private donors to date have spent about $1,839 per person affected by Hurricane Katrina, but donated only $10 per person diagnosed with AIDS. Even “fatigued” private philanthropy associated with the Oct. 8 earthquake in Pakistan, at $37 per person affected, dwarfs the $3 donated for each person with malaria.³

“From a strictly rational perspective, we ought to apply all the resolve given to helping in natural disasters to inner-city problems, to rural poverty, to broken educational systems, to lack of health insurance, and so on,” notes Stephen G. Post, a bioethicist at Case Western Reserve University’s School of Medicine. Instead, “much of the public has a kind of crisis mentality, giving only when they can see that affected populations are in severe, life-threatening emergencies,” laments Ellen Seidensticker, special adviser to Raymond C. Offenheiser, president of Oxfam America.

As irrational as this pattern of giving might seem, a growing body of research on how people think, feel, and act suggests that donors’ seemingly misplaced giving actually makes psychological sense. The deluge of generosity following headline calamities, as well as the underwhelming response to quieter sufferings, have their roots in human evolution and the kind of mind that it produced. Understanding why sudden crises more readily pull heartstrings and loosen purse strings than do more persistent issues can help nonprofits keep their donors’ commitment when louder, more vivid causes burst onto the scene.

Money Well Spent

Nongovernmental organizations like Oxfam have long recognized the challenges presented by donors’ crisis mentality. “It’s much easier to raise money in response to crises than for either disaster prevention or long-term development,” observes Seidensticker.

Yet the best way to address emergencies is usually before they happen, by investing in prevention and in the alleviation of long-standing problems. The tectonic shuddering that unleashed the tsunami, for example, was all the more deadly because the dense coastal populations it affected were already struggling with inadequate infrastructure, widespread poverty, and malnutrition. Likewise, the poverty and segregation of a city built well below sea level made New Orleans a humanitarian crisis waiting to happen. Not to mention that the risks of flooding were hardly unknown: In an October 2001 article, Scientific American warned that “a major hurricane could swamp New Orleans under 20 feet of water, killing thousands” and that “only massive reengineering of southeastern Louisiana can save the city.”

An analysis by the World Bank and the U.S. Geological Survey shows that during the 1990s, some $40 billion in preventative measures would have reduced economic losses from the world’s natural disasters by $280 billion.⁴ In China alone, the World Bank estimates that $3 billion in flood control measures spared the Chinese from $12 billion in losses. Such analyses suggest that every dollar spent on lessening risks saves as much as $7 in relief and repair expenditures.

“More effective prevention strategies would save not only tens of billions of dollars, but save tens of billions of lives,” United Nations Secretary-General Kofi Annan wrote in 1999.⁵ “Funds currently spent on intervention and relief could be devoted to enhancing equitable and sustainable development instead, which would further reduce the risk for war and disaster.”

Feelings First

Just why people respond more to sudden crises than to ongoing or chronic conditions, even when those conditions spawn greater turmoil and tragedy, is becoming less of a mystery, thanks to a growing body of social science research. On the surface, the explanation seems simple: Emergencies stir stronger emotions than do protracted problems. Yet understanding why people’s emotions elicit greater giving than do their more analytical tendencies not only offers a fascinating lesson in the workings of the mind, but also suggests a surer route to philanthropic efficiency and effectiveness.

In what cognitive psychologists describe as a “dance of affect and reason,” people’s behaviors are governed by two different modes of thinking. One mode, which cognitive psychologists call “System 1,” is intuitive, nonverbal, and usually unconscious. System 1’s rapid and automatic responses are triggered by associations, experiences, images, and feelings.

System 1 developed first in our evolutionary history, when humans lived in small communities where everyone knew everyone’s name, and when dashing to avoid immediate dangers – a stalking tiger, a grumbling belly, or an enemy warrior – was the order of the day. “We didn’t have to think about large-scale problems, or people who live elsewhere, or large numbers of people. Just the survival of a few people in the here and now,” says Paul Slovic, a cognitive psychologist at the University of Oregon. And so to this day, System 1 responds most readily to life-or-death situations, close locales, small numbers, and the present tense.

That’s why most of us are so quick to respond to, say, the plight of a dozen trapped coal miners broadcast into our living rooms. As far as System 1 is concerned, this crisis at our hearth requires that we leap off the couch, log on to the Internet, and offer a hefty donation to the Red Cross. Meanwhile, the World Bank statistics on infectious diarrhea gather dust on our desks, not even eliciting a blip on System 1’s radar.

On Second Thought

“System 2,” on the other hand, is analytic, deliberative, and usually conscious. This mode of thinking deals in rules, arguments, calculations, and deductions. It is our watchdog, our inspector general, and our auditor, monitoring the quality of System 1’s intuitive impressions. Just as System 2 evolved after System 1, it is still our secondary mode of thinking. Unless System 2 is nudged into action to evaluate, say, the relative utility of donating money to a wide-eyed victim of the latest domestic disaster versus the millions of faceless victims of malaria somewhere overseas, the cause attracting System 1’s sentiments gets the check. One life, narrative, or image can trump millions of lives. Emergencies profit, lingering problems languish.

Contrary to how people have traditionally thought about reason and passion, good decision making does not depend upon the ability of reason to knock passion out of the ring. Instead, “both System 1 and System 2 are necessary for rational behavior,” says Slovic. Just as the contemplative System 2 corrects the impressions of the emotional System 1, System 2 must enlist the motivational gusto of System 1 to get things done.

In the world of charitable giving, however, System 2 is all too often asleep on the beat. And unabated tragedies like malaria or AIDS, which require an appeal to System 2’s analysis to draw out donors’ dollars, all too often end up missing out on the money.

Between Heart and Head

The solution to this problem would seem to be appealing to Systems 1 and 2 at the same time. Ironically, combining both emotion and analysis in the same pitch can backfire. Long intrigued by the relative indifference of otherwise compassionate people to the world’s most devastating crises – especially genocide – Slovic and his co–authors Deborah Small of the Wharton School and George Loewenstein of Carnegie Mellon launched a straightforward behavioral experiment.⁶ They asked: What best induces people to contribute to a long-running cause: a story about one suffering person, a set of facts and figures, or both?

After collecting their pay for taking part in an unrelated experiment, the unwitting study participants encountered a fundraising campaign for Save the Children. One-third read about a poor, starving 7-year-old girl from Mali named “Rokia,” whose photograph was also given. Another third of the participants viewed a statistical snapshot of that part of Africa: 17 million severely hungry people in four nations, plagued by food shortages and crop failures, and another 4 million without homes. The last third of participants received both sets of appeals; they read Rokia’s story and the statistical information – not unlike readers of The New York Times or students of relief organization annual reports. All participants were then invited to donate money for “relieving the severe food crisis in southern Africa and Ethiopia.”

Participants who read only about the hungry child Rokia gave the most money. “When it comes to eliciting compassion,” says Slovic, “the identified individual victim, with a face and a name, has no peer.” System 1 jump-starts the check-writing once again. And as the researchers predicted, reading only the broad statistical portrait inspired the least giving. System 1 failed to notice; System 2 snoozed.

Most surprising, though, was the behavior of participants who read both Rokia’s story and the statistical facts. This most informed group of all was considerably less generous than the group that read only Rokia’s profile, and only slightly more generous than the group that viewed only the statistical snapshot. In other words, the simple story of one identifiable victim came out ahead, while trying to give a sense of the scale of the problem only blunted the fundraising pitch.

Discussing these findings, Slovic quotes novelist Barbara Kingsolver’s “High Tide in Tucson”:

A newspaper could tell you that one hundred people, say, in an airplane, or in Israel, or in Iraq, have died today. And you can think to yourself, “How very sad,” then turn the page and see how the Wildcats fared. But a novel could take just one of those hundred lives and show you exactly how it felt to be that person rising from bed in the morning, watching the desert light on the tile of her doorway and on the curve of her daughter’s cheek. You could taste that person’s breakfast, and love her family, and sort through her worries as your own, and know that a death in that household will be the end of the only life that someone will ever have. As important as yours. As important as mine. (p. 231)

The Pull of Personal Connection

The “identifiable victim effect” is even more pronounced if the victim is similar to someone the donor knows, or if he or she lives in a place with which the donor is familiar. Not too surprisingly, we feel more empathy for people with whom we have a personal connection – who look like us, who live near us, who come from places we have been, or who have had experiences similar to our own. (Animals that resemble us also draw our empathy)

Small believes that levels of charitable giving vary so greatly in part because the degree of “social distance” between victims and potential benefactors differs so much by cause. Nancy Reagan, Rob Lowe, and Mia Hamm all promote charities involving ailments afflicting members of their families. Most Alzheimer’s Association volunteers knew someone with Alzheimer’s disease. And friends of someone who died of AIDS are more likely to volunteer for charities supporting AIDS victims, Small has found.

In behavioral experiments, Small found that subjects who befriended a “victim” in a specially designed game were more generous to other anonymous victims of the same misfortune.⁷ “The shorter the social distance, the more people feel that they have a connection to the problem, whether it is a one-time event or an ongoing problem,” says Small. “Lots of people know someone with breast cancer. Lots of people had traveled to New Orleans and thus felt a connection to the people and place.”

A Problem of Magnitude

Few people, however, are intimately acquainted with thousands of people. And though modern humans have more family, friends, and acquaintances than they did in prehistory, our brains still have a hard time reasoning about large numbers. Unless a cause can plug into System 1’s sensitivity to the small and the local, philanthropic action may lag.

Psychologists have long demonstrated that as the magnitude of stimuli like brightness or even quantities of money increase, people’s sensitivity to them drops. This effect is known as “psychophysical numbing.” Slovic believes a similar process of numbing results from losses of life as they become larger, so that while the passing of one life feels huge, the difference between 100 versus 101 deaths is barely noticeable.

Moreover, while people don’t know how good or bad it is to save 150 people, they do know that it is better to save half a village than it is to save a quarter of it. In other words, System 1 is more responsive to proportions than to raw numbers. In one of Slovic’s studies, he found that as the overall size of a Rwandan refugee camp increased, people’s willingness to send lifesaving aid to prevent 1,500 deaths decreased. The larger the community, the less people cared about saving the same 1,500 lives.⁸

Once again, Slovic blames a lax System 2, which would have recognized that saving 1,500 lives is equally important in a smaller and a larger camp. “System 1 is distracted by images that produce strong, though erroneous feelings, like percentages as opposed to actual numbers,” he says. This means that “the subjective value of saving a specified number of lives is greater for a smaller tragedy than for a larger one” – yet another reason why concentrated disasters get more attention and money than do larger, more diffuse misfortunes.

Meanwhile, the bar for what people consider sufficiently compelling keeps getting higher. If the event isn’t big enough, or if too many occur over too short a period, interest wanes. Princeton University psychology professor Daniel M. Oppenheimer offers a simple rule of thumb: “If two crisis-related disasters hit in close succession, people will be less likely to be charitable toward the latter, because their emotional resources would have been drained.” System 1 has limits of its own.

One of Oppenheimer’s studies now under way examines why people can only care about so much, and for so long. A person reaches the point of “ego depletion” after exerting willpower; resting, relaxing, and looking the other way hold more appeal than continuing to dwell on a negative subject. “It takes emotional effort to focus on the suffering of others,” explains Oppenheimer, and because we have limited willpower to maintain the focus, “slow-developing, long-term disasters will be mostly ignored, because they are too emotionally draining to continue to worry about.”

Media Bias

The minds of journalists who produced what goes on the air or into print likewise dance between Systems 1 and 2, with System 1 often calling the shots. Even when producers and editors can override their own emotional intuitions, they still usually cover what they think audiences will respond to most strongly – the dramas of individual victims, near or resembling their audience members, accompanied by riveting pictures. Laments Rockefeller Philanthropy Advisors CEO Melissa Berman: “Conditions don’t make news. Crises make news.”

Genocide, for example, rarely makes it to the top of a newscast – or even into it. Ongoing turmoil in Darfur and other parts of Africa, where tens of thousands have been murdered and millions forced to flee plundered villages, obtained relatively scant coverage in 2004 – only 23 minutes on ABC, CBS, and NBC combined.⁹ Long-running, ongoing problems involving large numbers of people far, far away often fail to arouse System 1’s concern, and thus are of marginal interest to news organizations.

Yet if TV doesn’t cover an event, most people don’t know it happened. “Donors can respond in significant numbers to crises only if they are aware of them,” notes George Rupp, president of the International Rescue Committee. And so decisions by television producers and newspaper editors exacerbate donors’ individual tendencies to give to the latest local or well-publicized drama.

“Media coverage exerts a tremendously powerful influence,” agrees Seidensticker. “Many people are motivated to give by seeing video shots of children and families left homeless or traumatized by natural disasters or violent conflict. The daily misery and psychic violence inflicted by grinding poverty normally attracts little attention from the media, and so it is easy for people to ignore.”

News organizations have their budgetary limitations and priorities, too. Despite the implications of the Sept. 11 terrorist attacks, most news organizations have continued to scale back foreign coverage that is not related to American interventions like the war in Iraq. Even when covering the tsunami, they tended toward more familiar figures, such as Western tourists and supermodel Petra Nemcova.

Gaming the System

Armed with the knowledge of how Systems 1 and 2 interact, organizations can employ the following tips to secure funding for long-standing social problems, farsighted development projects, and wide-reaching preventative measures – even amid the clamor of late-breaking disasters.

First, organizations can take advantage of the identifiable victim effect by telling donors the story of just one person who is contending with a chronic condition. Save the Children has long recognized the power of this technique, connecting donors to a single named child, rather than seeking generalized support for its larger cause. “It’s personalized, so you know your money is not a small contribution to a huge problem of famine, but a small contribution that means a lot to a particular individual,” explains Slovic. ConAgra Foods used a similar strategy when it focused on one child in its public service announcements about childhood hunger. And Partners in Health’s 2004 annual report has “before” and “after” images of a man named Joe; skin and bones in the first image, Joe looks muscular and healthy in the second.

Similarly, organizations should make donors feel like they are not just part of an anonymous mass, but rather are individuals who are making a difference. “Make it clear that their contribution is not a drop in the bucket,” advises Slovic. “Even though the problem may be big, assure [donors] that their response will make a difference for one person or a select concrete group – a concrete effect from their concrete response.” Marketing consultant Carol Cone similarly advises that with widespread, drawn-out problems, fundraisers should “communicate small wins and progress made against the Goliath, helping donors understand how their help really can do so much.”

Organizations also need to concentrate on their most important donors, keeping them well-informed and involved. “Most people do not stop supporting their favorite schools, churches, hospitals, museums, or soup kitchens even during major humanitarian catastrophes,” says Seidensticker. Organizations such as the International Rescue Committee depend upon their largest and most loyal donors to support their core work “even as we supplement that support with contributions to emergencies,” says Rupp. They tend to view disasters as “stretch” or “above and beyond” donations. Communicating directly with the largest donors, meeting with them personally on a regular basis, and staying in touch with all supporters through letters, publications, and e-mails are therefore especially important, says Rupp.

In the course of their communications, organizations should educate donors about the solutions, not just the problem. Too often, says Berman, “donors say to themselves, ‘I think poverty is a terrible problem, so I’m giving to X.’ That’s not funding a solution at all. They need to think about the causes of poverty and ways that might be broken, then explore four or five solutions.” This enables donors to visualize a cause-effect plotline: You are showing them the beginning, middle, and end to the problem. For example, Afghan Women Leaders Connect not only encourages the delivery of healthcare services, but also employs Afghan women to deliver those services, thereby training them for leadership roles in their society.

To maintain a focus on the future, fundraisers should encourage donors “to view their contributions like an investment. The payoff is over the long haul,” says Michael MacHarg, associate director of development and partnerships at the Institute for OneWorld Health, a San Francisco-based nonprofit developing new medicines for neglected diseases. Organizations can also assure themselves staying power by “building a movement,” as Cone puts it, with donors and partners who feel vested in the ongoing effort. “They can help strategically develop the brand and act as stewards” over time. Organizations such as the American Heart Association, the Susan G. Komen Breast Cancer Foundation, and St. Jude Children’s Research Hospital have all launched long-term campaigns, such as St. Jude’s new slogan: “We never stop looking for cures. For any child. Ever.”

Finally, organizations should educate both their donors and themselves about feelings’ sway and logic’s laxity. Slovic recommends that fundraisers explain that “most of us are very well meaning and compassionate people. It’s just that under certain circumstances our compassion and well-meaning get diverted” to less needful causes.

And organizations must be careful not to allow their missions to suffer when disaster strikes. Some, like the Institute for OneWorld Health, have become practiced in the art of turning away donations that are earmarked for crisis intervention. (See sidebar “Choosing Mission Over Money,” p. 53.) Other organizations, like Oxfam America, have developed fundraising strategies that allow them both to respond to crises and to continue their day-to-day work, “so no dollars are diverted from one area to the other,” explains Seidensticker. Oxfam also educates donors about the wisdom of early intervention, which can prevent small crises from escalating into full-blown emergencies.

Overall, both donors and organizations should show sympathy to crisis victims, but stand tough on their commitment to prevention and to the alleviation of protracted problems. Slovic acknowledges that this is not easy: “It’s like Ulysses tying himself to the mast when confronted with the Sirens, because he knew otherwise he wouldn’t be able to resist.” Likewise, addressing the world’s most pressing problems will require people both to bridle System 1’s impulses and to inspire System 2’s analysis.

1 According to the Center on Philanthropy at Indiana University.

2 World Health Organization. “World Health Report 2000” and “Millennium Development Goals.”

3 SSIR analysis by researcher Catherine Spence based on data from FEMA Public Affairs office, the Center on Philanthropy at Indiana University, UNAIDS/World Health Organization, Funders Concerned About AIDS, the United Nations High Commissioner on Refugees, and World Health Organization/Roll Back Malaria/UNICEF. See chart for more details.

4 Benson, C. “The Cost of Disasters,” Development at Risk? Natural Disasters and the Third World (London: UK National Coordination Committee for the International Decade for Natural Disaster Reduction, 1998): 8-13.

5 Annan, K. “Facing the Humanitarian Challenge: Towards a Culture of Prevention” (New York: United Nations Department of Public Information, 1999).

6 Small, D.A., Loewenstein, G., & Slovic, P. “Can Insight Breed Callousness? The Impact of Learning About the Identifiable Victim Effect on Sympathy” (Eugene, OR: Decision Research Report No. 04-01, 2004).

7 Small, D. & Simonsohn, U. “Friends of Victims: The Impact of Personal Relationships With Victims on Social Preferences for Other Victims,” Social Science Research Network (November 2005).

8 Featherstonhaugh, D., Slovic, P., Johnson, S.M., & Friedrich, J. “Insensitivity to the Value of Human Life: A Study of Psychophysical Numbing,” Journal of Risk and Uncertainty 14 (1997): 283-300.

9 Tyndall, Andrew. Personal interview. Jan. 26 2006. See the Tyndall Report for more information (http://www.tyndallreport.com).

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KEITH EPSTEIN is an investigative journalist and freelance writer who covers Washington, D.C., for The Tampa Tribune and Media General News Service. A former Washington-based investigative reporter for The Plain Dealer (Cleveland), he has also written for The Washington Post on travel and health, for CIO Insight, and for Post-Newsweek publications on technology policy and organizational management.

Source URL: http://www.ssireview.org/articles/entry/66/

Consider the 15-year-old Russian-American nonprofit partnership known as the Wild Salmon Center. Like the JCCA, its mission once seemed unambiguous: To protect one of the world’s last remaining strongholds of wild Pacific salmon and steelhead on the Kamchatka Peninsula in Russia’s Far East, perhaps one of the last untouched breeding grounds for nearly one-fourth of all Pacific salmon. But in recent years, Wild Salmon Center leaders devised an innovative, powerful new fundraising model: mixing sport fishing with research. Wealthy anglers would pay $9,270 to take remote, two-week trips into the wilderness, with the proceeds benefiting the science. The best way to enlist guardians of wildlife, the founders figured, was to get them waist-deep in water. But foundations that gave the salmon center at least 60 percent of their total funding balked at the prospect. “They got wary about the idea that they were subsidizing rich fishermen,” notes Stanford’s Barnett. “They said, ‘Wait, are you an environmental organization or are you a tourism outfit for rich fishermen?’” For the Wild Salmon Center, the situation was nothing short of what Barnett terms a “legitimacy crisis.” As a solution, the founders recently created a new organization to focus on angling tourism, Wild Salmon River Expeditions. The salmon center, meanwhile, will focus on conservation and science. While not all expedition profits will be funneled to the salmon center, anglers — with individual net worths of $5 million to $30 million apiece — may become new donors who, because of their experiences, are more likely to understand and care about the need. But a key question remains: How much of the split will go to the nonprofit? “That’s going to be another battle,” says Barnett. The Nature Conservancy, meanwhile, has similarly been forced to reexamine its mission and identity — in its case, following a spate of bad publicity that raised questions about how closely it was sticking to its stated purpose. The Conservancy had sold land to trustees at reduced prices and allowed drilling for oil, among other practices. The struggle erupted anew this year when the Conservancy helped forge new protections for 21 million acres of wilderness in British Columbia, a package that allowed managed timber-harvesting in another 14 million acres. Which areas should be most protected? Some argued to safeguard areas rich in charismatic endangered species such as wolves and grizzly bears; others argued for diversity of species, many far less celebrated or at risk of extinction. Which stand is purer? Which is better for the environment? Conservancy CEO Steven J. McCormick argues thatthe bigger question should be, “what difference are we making?” To be sure, without a revenue stream and a reliable stable of donors, these questions may be especially difficult. “Very few nonprofits have the luxury of being pure to their missions,” observes Elizabeth T. Boris, director of the Urban Institute’s Center on Nonprofits and Philanthropy. Adds Diana Aviv, president of Independent Sector, the Washington, D.C.-based coalition of nonprofit leaders: “Those people who hold out for an all-or-nothing approach are opting for a strategy that’s likely to fail 29 times out of 30.” Is survival and prosperity possible without losing one’s organizational soul? Nonprofit experts suggest some formal soulsearching may be in order. “Remember,” advises the Urban Institute’s Boris, “you’re not doing this alone. You have funders, board members, members.” The Road Less Traveled Ultimately, the Jewish Child Care Association did just that — it looked inward, sounding out its donors, board members, employees, and volunteers. But it did this only after fiercely intense scenes between members of the board and among volunteers forced a formal reassessment of the association’s very identity that inspired a board retreat, the intercession of an organizational psychologist, training by a provocative Orthodox rabbi, and the involvement of an outside consultant specializing in nonprofit strategy, fundraising, and branding. Photograph: William Irwin To be sure, those who wanted to provide more services to Jews rather than non-Jews had always voiced their opinions. But by 2001, those voices had grown forceful. “The split of opinions on the board is long-standing but became more intense with the post- 9/11 fiscal realities,” says Jane Barowitz, the association’s vice president of communications and marketing. “This brought the [Pleasantville] campus into focus as a real estate asset versus a mission-central necessity.” Some partisans argued for a return to core organizational values: a return to serving Jewish children exclusively. Others argued for broader scope. Altman, the former social worker who had assumed the organization’s helm in late 2003, realized the JCCA needed to go beyond spending cuts and layoffs. To find common ground and identify key questions, he had New York-based Anthony Knerr and Associates lead a board retreat in April 2005. The well-known strategic consultancy, often retained by nonprofits in periods of change, has helped organizations as varied as Radcliffe College in its merger with Harvard, the Salzburg Festival, Carnegie Hall, Columbia University, and the Investor Responsibility Research Center. For the Jewish Child Care Association, the key question became — as organization records later described it — how to restore “financial equilibrium” and retain “Jewish values and programs” while adapting to “changing demographics.” In the end, it was the chief executive, Altman, who convinced everyone that redefining the JCCA’s mission could help it move forward. “He was the change agent,” recalls Barowitz. Altman realized that without any change, the endowment would be depleted, forcing a shutdown that would, in effect, abandon future generations of children who needed the services JCCA provides. By the summer of 2005, a strategic planning group guided by Altman to consider the fate of the Pleasantville campus zeroed in on a fresh approach, noting in a report how it resolved “to develop a plan for infusing Jewish values…in all of JCCA’s programs, including those that primarily serve a non-Jewish population.” While committing to expand programs for the Jewish community, meanwhile, the committee added a caveat: programs for middle-class families had to pay for themselves with fees charged to families. As part of strategic planning that began late that year — and which ended only last November — one Jewish donor wanted participation of a Manhattan think tank known as the National Jewish Center for Learning and Leadership. The donor urged supporters to understand why a Jewish organization might choose to aid people outside the faith, and the learning and leadership center seemed perfect for the task. Deliberately provocative, its mix of rabbis and scholars boasts of helping revitalize institutions by getting them to confront “intellectual and ethical challenges of the wider world” so they can “imagine new Jewish possibilities.” The think tank itself has faced questions of legitimacy and, as it notes on its Web site, “has been accused of championing shallow forms of Jewishness that have no sustainability” and “legitimizing forms of Jewishness that are inauthentic to Jewish tradition.” Leading the planning sessions for JCCA’s staff was the think tank’s director of organization development, Tsvi Blanchard, an Orthodox rabbi and organizational psychologist. Blanchard likes to explain how individuals and communities alike are part of larger circles — that a “web of relationships” extends well beyond one’s own group. As he puts it on the leadership center’s Web site, Jewish “spirituality
is also about how you organize society — what are the values and principles that underlie the creation? Are you building inclusive, expansive communities, where many voices can speak fully, or are you defining the terms of what is admissible and what goes outside of the line?” He reminded his listeners of the Jewish mission to “repair the world” — in Hebrew, tikkun olum — and to seek social justice, or tzedakah. The world is filled with people in need of remedy and justice.

Blanchard’s message proved persuasive — even among donors who might have been reluctant to continue supporting an organization serving non-Jews. “There’s always a subset of people who say, ‘My money is for Jewish causes only,’” explains Altman. “But we’ve learned there’s a group of Jews out there who have a core belief system in which they feel it’s an obligation to serve the entire community. This is a Jewish obligation because of our tzedakah obligation and part of our tikkun olum values. We are supposed to open our arms to everybody.” Indeed, it was the children telling their stories to board members that ultimately convinced a board task force to keep Pleasantville intact. “It gets to your heart,” says JCCA President Leonard Elman, a Manhattan lawyer and 30-year board member who was, himself, unsure about the property until hearing from the children at a January 2006 meeting. “We save lives.” The board also hired a branding consultant to distill JCCA’s identity and broader message — eventually reinforcing it with a new tag line, “Every child deserves to grow up hopeful” — and replaced an outside fund developer who’d focused on foundation grants with an in-house VP whose job it was to build a donor base. Still, the move was considered risky. “We were very worried,” acknowledges Altman. If fundraising around the new identity failed, everyone knew, the only possible fallback was to cut more jobs, cut programs, and, worst case, sell the Pleasantville campus. But so far, so good. Fundraising was up 28 percent in the first year, and the JCCA netted $2.8 million last year. Targeting donors has also paid off: there is now a potential donor list of 18,000, up from 12,000 only a couple of years ago, providing a better balance of income. Rather than rely on foundations for 70 percent of revenue and acquiring 30 percent from other sources, the split is now more like 55-45, Altman says. And while “the few Jewish family foundations we made pitches to by and large turned us down, probably because of the new broad-based mission,” Altman acknowledges, the JCCA is finding its way back from the brink. Says Elman of the former social worker CEO: “It’s important for people in this business to be good businessmen.” Though it still can’t unbind the strings to spend money designated for orphan girls — some legacies are untouchable — this year the board expects to tap roughly 5 percent of its endowment to meet its deficit. In the year following 9/11, it had been a hemorrhagic 11.5 percent. Photograph: William Irwin Spending has not changed, and the Pleasantville campus is intact. The difference now: the fresh infusion of foundation and general fundraising dollars. Also, funding from a variety of new public sources, including state money targeted for mental health care. Meanwhile, new and successful advocacy for restoring cuts in government funding also has helped. The JCCA is back in control again. By discovering how to be true to itself, the organization has found that it can afford to be.

KEITH C. EPSTEIN is a contributing writer for CONTRIBUTE and a
reporter in the Washington bureau of BusinessWeek magazine. His last case
study for CONTRIBUTE was about the American Red Cross.

Please send comments to editors@contributemedia.com .