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But I just got the following email from Ken Berger, CEO of Charity Navigator (published with his permission):

What do you think? Frankly, I agree that poorly executed panel alternatives are worse than a traditional panel. The real question is what does the audience want? A number of you will be attending SoCap. How do you want to see the sessions structured?

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Who are the most amazing, dynamic and engaging speakers you’ve ever seen talk about philanthropy, the social sector and social capital markets?

Too often, people end up on panels or giving presentations because they are experts. But the fail the communication challenge and end up boring their audience.

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But the most consistent and challenging reader input we receive was a series of suggestions on how to change the format of the conference. We heard loud and clear that people are sick and tired of traditional panel discussions. So the organizers of the conference have given their go ahead for me to change up the format of the Tactical Philanthropy track.

Today I’m back to ask for your input on a better conference format. If you’ve ever been bored in a conference session even though the topic was of interest to you, we want to hear from you. The social capital markets are simply too exciting to have the life sucked out of the topic by boring presentations.

A few things we’re thinking about:

• We could run “panels” which consist of two people who have been told to bring their A game and give a killer, short presentation (a la TED) and then go immediately to a strong moderator running audience driven Q&A.
• We could leverage the expert audience that SoCap attracts and have a moderator run a facilitated conversation with the audience rather then make the panelist the center of attention.
• We could hand out red and green cards to audience members and have them raise the green card to show agreement and the red card to show disagreement while the panelists are talking. This real time feedback would help the moderator focus in on topics that needed to be more deeply explored.
• We could skip any sort of prepared remarks by panelists and instead let the audience create a list of questions and topics at the beginning of the session. The moderator would then use the audience created agenda to run the panel.
• We could run structured debates instead of panels. We could bring in two panelists to argue a specific proposition and defend their point of view from audience questions.
• We could run short mini panels, which every 15-20 minutes would swap places with moderator chosen audience members.
• We could focus on producing actual work. Rather then simply discussing, for example, the most important non-financial metrics in nonprofit analysis, we could work with the audience to produce a top five list that could then be the focus of additional post conference conversations.

Now its your turn. I’m looking for specific ideas for how we structure the Tactical Philanthropy track. Just as your thoughts on topic concepts fundamentally shifted our thoughts, I’m looking to you to structure the Tactical Philanthropy track so that each session grips the audience’s attention and spurs people to action.

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What transpired was interesting because CNBC thought they had a “gotcha moment” when they pointed out the overhead expense ratios of some of the organizations were not perfect according to Charity Navigator. They even singled out College Summit, one of the most well regarded education charities, to ask about its seemingly low percent of revenue going to fund programs.

To Ian’s credit, he quickly pointed out that many people, even Charity Navigator, do not believe overhead expense ratios are the best way to evaluate nonprofits and do not capture how effective they are.

The video clip is interesting because it demonstrates how woefully ignorant the financial news media is about philanthropy. Considering philanthropy is a $300 billion a year industry and nonprofits book $1.5 trillion in revenue each year, the financial news media is dropping the ball on a major segment of the economy.

(Full disclosure: I’m on the advisory board to Charity Navigator helping them launch a new rating methodology.)

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By George Overholser

• Someone recently defined nonprofit “mid-caps” as organizations with revenues in the $5 million to $25 million range.

We need to keep in mind that the definition for for-profit mid-caps is 200 times as big:  revenues in the $1 billion range.

This matters because there are metaphors flying around that we need our nonprofit mid-caps to provide more financial disclosure to the “capital market”, just like for-profit mid-caps.

This is the equivalent of asking a guy who owns a couple of pizza restaurants ($5 million in revenues) to begin publishing detailed quarterly public reports of his financial and quality assessment results.  Problem is, his office is the kitchen table, and he needs to get up at 6am every morning to roll the dough.

Wall Street is the wrong metaphor for an online “nonprofit capital market”.  Wall Street only works for companies that are literally hundreds of times bigger than typical nonprofits.  Wall Street companies get easy access to equity, precisely because they are already so advanced that they can afford to provide exceedingly high levels of financial transparency.  But the vast majority of firms (for-profit and nonprofit alike) are nowhere near the size required to afford the cost of making these types of disclosure. That’s why the vast majority of firms are capitalized privately, by intimate investors who get to know them personally.

Let’s not kid ourselves into thinking that strategic equity-like investments should be made based on the snippets of data that an exhausted executive director posts on a web site.

If information is to be shared online, the better metaphor is Amazon.  The better information to share is more akin to marketing information than to investor information.  Keep it simple:  What am I buying with my donation?  What gets done as a result?  What does it cost?  And… for those very few that have gone through the arduous and expensive process of scientifically documenting impact, yes, what is the impact?

DonorsChoose is a great example of this.  Check it out:  a highly intimate and transparent giving experience that has no need to share information about the financial health of the DonorsChoose enterprise, management team, strategic plan or theory of change.

Simply “asking harder” for information does not address the issue.  The problem is not one of candor.  Rather, the data does not exist, and cannot be afforded by such small and stressed-out organizations.  Asking harder merely adds to the trauma.

If a prospective investor comes along, who is prepared to write a big equity-like check, then have a face-to-face meeting, so that real due diligence can take place.  In the meantime, I would love to see online marketplaces focused on products and services… like Amazon and DonorsChoose!

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This is a dramatic declaration on Peter’s part. Peter is the kind of academic who talks about r-squared statistics in blog posts. For him to write that the “untheorized work that comes down to judgment and gut assessment… explains a lot more of the achieved social impact than anyone wants to admit,” is a shot across the bow of the philanthropy industry from someone who should more naturally side with the philanthropic process folks.

Personally, I think Peter is right. It isn’t comfortable to believe that the intangible art of judgment and gut assessment is the most important driver of philanthropic success. It would be far easier if we could all just learn specific, repeatable processes, that while complicated, insured that our giving was effective. But I think the evidence from other fields fully supports the importance of judgment over process.

In investing, Warren Buffett has a process, but it is his intangible gift for spotting value that makes him great. If the reverse was true, then anyone who read the vast literature covering the process that Buffett uses could fully expect to replicate his success.

In writing, novelists around the world study the writing styles of the greats. But The Elements of Style won’t make you Ernest Hemingway.

In economics, thousands of men and women run rigorous studies in an attempt to predict how the economy will behave. Yet we know that this process fails them time and again and fails to even adequately explain historical events.

This is not to suggest that process doesn’t matter. In the book Blink: The Power of Thinking Without Thinking, Malcolm Gladwell explains the incredibly important role of judgment and gut assessment in expert decision making. But he does not declare process and rigor is not important. In seems to me that systematic processes are necessary but not sufficient building blocks on which to develop effective philanthropy.

Unless we heed Peter’s warning that “judgment and gut assessment… explains a lot more of the achieved social impact than anyone wants to admit",” all the efforts to build a more effective philanthropy will do nothing more than create elegant mental models that sound great, but fail to make the world a better place.

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My objection to Martin feeling guilty about making a non-optimized charitable donation focused on the need for empathy in philanthropy to not be displaced by logic. But Dan took the argument a step further and argues that ignoring the empathic urge undermines philanthropic effectiveness.

Dan brings up the role of the emerging discipline of behavioral economics in helping us understand how people actually behave rather than how we think they should behave. Behavioral economics is a favorite topic of mine and one that I think can lead to great insights in philanthropy (I’ve just downloaded the eBook Dan points to).

As I work to craft the Tactical Philanthropy track at the Social Capital Markets conference, I want to follow up on the suggestion of Duke University’s Ed Skloot to include a session about what philanthropy can learn from behavioral economics. But I’m at a bit of a loss about how to structure such a panel and focus the conversation.

Do you have any thoughts about how to create a fantastic panel discuss about the intersection of behavioral economics and philanthropy? If so, leave a comment or shoot me an email!

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A Philanthropic Network Passes On Recommendations of Worthy Charities
March 7, 2010 | Chronicle of Philanthropy

In all the talk about measuring results in philanthropy and how best to determine which nonprofit groups are effective, a simple fact is often overlooked. All across the country, foundation program officers, senior nonprofit staff members, and academic researchers know which nonprofit groups are doing great work.

Now a new group called Philanthropedia is working to capture this knowledge about top nonprofit groups and make it available to everyone.

This sort of information, personal recommendations from people in a good position to pass judgment, is a fundamental process that people use to make decisions.

Getting recommendations from experts can mean asking your friend who loves to eat out what she thinks about the new restaurant in town or consulting a book review in The New York Times before choosing your next novel. Recommendations from trusted experts are so valuable that we often pay large amounts of money to gain access to them before making critical investment, legal, or medical decisions.

Philanthropy itself is largely built on recommendations. Studies show that one of the main reasons donors give to certain groups is that a friend asked them to do so.

When those friends are fellow supporters of organizations and not professional fund raisers, they are in effect recommending a group that deserves support. But while those sorts of recommendations motivate action, they are not unbiased or delivered by an expert.

Philanthropedia is working to make expert recommendations of nonprofit groups as accessible as the expert recommendations that help shape our decision making about which movies to see, restaurants to patronize, or retirement strategies to deploy.

Working with a quickly expanding network of experts that includes grant makers, nonprofit staff members, scholars, and other experts, Philanthropedia is making available expert recommendations on topics that include organizations working to curb climate change, improve education, extend small loans to struggling entrepreneurs abroad, and reduce homelessness in the San Francisco Bay area.

Co-founded by Howard Bornstein, a former employee of the Bill & Melinda Gates Foundation, and Deyan Vitanov, an entrepreneur who had previously built an online community for computer programmers, Philanthropedia began operations last year with extensive support from the William and Flora Hewlett Foundation.

The Philanthropedia team uses a survey methodology similar to one developed by the RAND Corporation to use expert recommendations in situations involving a large degree of uncertainty.

Given the nonprofit world’s current inability to systematically measure the effectiveness of nonprofit programs or even agree on what attributes make for a well-run organization, Philanthropedia’s approach makes a lot of sense.

The big weakness in Philanthropedia’s model is that the recommendations it offers are only as valid as the expertise of the organization’s network.

Because so much of philanthropy is not based on evidence, it is quite possible that the nonprofit groups recommended by the organization’s experts are not truly the most effective ones. It could be that the people in the network have biases that produced flawed ideas about what makes a nonprofit group successful.

However, in a recent background paper, Philanthropedia showed that the nonprofit groups it recommends have little in common based on how much money they raise, how well known they are, and their age, number of employees, and accountability ratings from Charity Navigator.

This means that the experts are picking up on something else. Given that the experts are foundation employees whose job it is to analyze nonprofit groups, researchers who have spent years studying conservation, education, poverty, and other topics, and nonprofit senior staff members who see firsthand the activities of their peers, it seems likely that many of the groups Philanthropedia recommends are among the best.

In the wake of the Haitian earthquake, the Gates foundation, the Ford Foundation, the charity research group GiveWell, the University of Pennsylvania’s Center for High Impact Philanthropy, and the nonprofit Acumen Fund all made grants or offered recommendations of which organizations were in the best position to help.

Each of them listed Partners in Health as one of their choices. While this fact does not guarantee that Partners in Health is the most effective nonprofit organization working in Haiti, it does offer a useful piece of information for donors trying to decide what groups to support.

Philanthropedia offers the potential to gather this sort of information for different causes and to offer recommendations that are international, national, or local in scope.

What is fascinating about Philanthropedia is that its process is not only effective but it is also inexpensive to run and easy to expand.

Other organizations working to identify outstanding nonprofit groups by conducting original research may offer some advantages compared with Philanthropedia.

But Philanthropedia’s system allows it to analyze far more nonprofit groups by simply bringing to light what experts already know.

Philanthropedia could quickly become a great way for donors to learn from the people in the best position to know which organizations are the most effective.

Sean Stannard-Stockton is chief executive of Tactical Philanthropy Advisors in Burlingame, Calif., and author of the Tactical Philanthropy blog. He is a regular columnist for The Chronicle of Philanthropy.

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Then social investors came along and decided to change all that. They insisted that their giving was not intended to discharge a moral obligation. Instead, they were making proactive “investments” meant to generate positive “social returns”. These social investors were operating higher up in Maslow’s hierarchy of needs as they sought self actualization rather than the more lowly need of being accepted by their community.

But then something strange happened. Social investors began to experience a new kind of guilt. And now, putting the sarcasm aside, we turn to Martin Brookes. Martin is the CEO of New Philanthropy Capital. I admire Martin and his firm very much. But recently, he posted an entry to the New Philanthropy Capital blog that typified the emerging guilt complex of the social investor.

Martin, who has long pointed to fact that donkey sanctuaries in the UK (where he’s based) have long received far more donations than charities that work to end domestic violence, wrote the following:

I’m all for social investing. My take on effective philanthropy, what I call Tactical Philanthropy, makes no mention of making donations to donkey charities to make your child happy. But I think that guilt, whether the traditional guilt that comes from noticing inequity or the neo-guilt of the non-optimized social investor, is one of the worst emotions to drive charitable giving.

Here was my response to Martin:

Martin responded here with a thank you for my compliment to him, but an insistence that he was guilty as charged. What do you think? Was Martin’s support of the donkey sanctuary a betrayal of his social investing ideals or was it a heroic parental act? What role does and should guilt play in philanthropy? As we become more and more aware of the inefficiencies in the charitable sector, what obligation do we have to direct all of our giving towards righting those inefficiencies even if doing so draws us away from the emotions that drive our giving?

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