Wednesday, January 28, 2009

Philanthrocapitalism Unhinged

"..Harlem Children's Zone now serves thousands of kids, some of who are showing impressive test scores...But Wall Street's meltdown and money manager Bernard Madoff's alleged financial fraud threaten the donor base that bankrolls Mr. Canada's work. Facing declining revenues, he's had to lay off staff and cancel plans to expand. He says he doesn't yet "have a Plan B" for replacing his Wall Street support, which had reach upwards of $15 million annually."

Mike Spector, "Bear Market for Charities," The Wall Street Journal, January 24, 2009.

I can't imagine what a "Plan B" might be, except to become one of Obama's Promise Neighborhoods. So much for replication.

The case of Harlem Children's Zone represents both new territory and an old story for nonprofits. What's new is how Geoffrey Canada was able to attract this level of financial support from private donors. The old story is that nonprofits face an unpredictable stream of resources to deliver services over a long period of time.

What lessons can we begin to draw from this experience -- and I suspect others like it, if not in scale then in reliance on funding sources. At this point, I have more questions than answers.

1) I'm sure the Harlem Children's Zone will rebound and continue its great work, maybe not at the same pace or with the same flexibility. Plan B may just be to hold on tight.

2) Is relying upon this level of Wall Street funding a prudent choice? I suspect the same story could be told of groups relying upon special streams of government dollars?

3) Does "scale" create its own vulnerabilities to changes in the economy and government priorities?

4) Won't nonprofits with long-term interventions inevitably confront recessions and policy changes, hopefully not of the magnitude we see now. Working on some options in advance may be helpful.


Kingsshare said...

Hi Bob,
I just found your blogsite yesterday and have enjoyed your perspective and experience. I've been following Harlem Children's Zone and Promise Neighborhood conversations for about 2 months now.

When it comes to not-for-profits (NFP)and funding their vision/mission, it's those which have a diverse mix of funding that survive these storms. I've also been intrigued by Mohammad Yunus' work with the Grameen Bank and his conversations about having a poverty museum. I wonder if some of his learning could be applied in a more practical way to a larger segment of NFP's across the country.

I also think there is something to learn from the social entrepreneurship movement that is emerging across the globe.

Years ago, I thought about starting for-profit ventures under a NFP umbrella that would fund the mission of the NFP.

These ideas have helped me whether a few rough seas in my journey of 28 years in the NFP industry.

Again, thanks for your insights and keep them coming.

Bob Giloth said...

Thanks for comments. I'm intrigued by "poverty museum" concept. I still don't think we have seen a full translation of Yunus'work into the US context. It's just not a literal translation of microcredit. Social enterprise financial benefits are definately a part of the right mix of sustainable funding that nonprofits should consider -- although they bring their own risks. I'm also persuaded that the nonprofit sector needs its own venture capital field.