What It Takes to Grow: Charities and Foundations Tackle the Challenge

New York

Businesses and nonprofit organizations get their start in much the same way, often with initial financing from organization founders and their friends and relatives. But as the entities grow, the financing options available to them change markedly, Robert Steel, a former Wachovia chief executive, told participants at the 2010 Inaugural Conference on Scaling.

“It kind of peters out for the not-for-profit world,” said Mr. Steel, who is co-founder of SeaChange Capital Partners, an organization that helps entrepreneurial nonprofit groups find the money they need to expand.

In the business world, said Mr. Steel, “there’s a sophisticated system that offers the ability to continue to raise capital and to take your business to several levels beyond that.”

More than 400 grant makers and nonprofit leaders have gathered here to discuss ways to help charities with proven approaches for solving social problems get the money they need to sharply increase the number of people they serve.

Mr. Steel said that helping a program that has been rigorously evaluated expand is a challenge that would be particularly attractive to what he called “first-generation philanthropists,” businesspeople who earned rather than inherited their wealth. But he cautioned that the recession will slow the process, at least for now.

Philanthropy’s traditional competitive “go it alone” approach isn’t going to be enough, Risa Lavizzo-Mourey, chief executive of the Robert Wood Johnson Foundation, told conference participants. The foundation co-sponsored the conference with the Growth Philanthropy Network and Duke University.

“In these harsh economic times, it’s really very true that no one grant maker, no one business is going to be able to take things to scale,” she said. “No matter how noble our objectives, it’s going to take the best kind of exchange of ideas

Ms. Lavizzo-Mourey announced that Robert Wood Johnson would award $100-million above its regular grant making from 2011 through 2013 through a new Impact Capital Fund and that the foundation planned to make those investments together with other grant makers.

The meeting itself has been designed to spur greater collaboration among grant makers.

During the first day of the conference, seven charities made presentations about why their groups are ready to grow. Afterward, grant makers had a closed-door meeting to discuss the organizations’ growth plans and were given the opportunity to sign up for teams that will review the groups for possible support over the next three to four months.

Evaluation Is Critical

The problem isn’t necessarily the total amount of philanthropy but how that money is allocated, argued Paul Carttar, director of the federal government’s new Social Innovation Fund. Evaluation, he said, is the key to making sure the money gets to the programs that can make the biggest difference.

“There’s a lot of good work happening, but a lot of good work can only resort to stories,” said Mr. Carttar. “If we don’t get better evidence about impact, the entire sector will still be vulnerable to making bad decisions because we are succumbing to our own myths and impressions and not relying on hard evidence about what works.”

When organizations are assessing programs, it’s important to be very clear about understanding whether an effort is making a real difference, Gordon Berlin, president of MDRC, a nonprofit research organization, told participants.

At first glance, he said, a job-placement program in which 80 percent of participants get a job would seem to be achieving greater success than another program in which only 40 percent do.

But, he told the audience, the picture starts to look different if most of the participants in the first program have graduated from high school and have a solid employment history while very few people in the second have diplomas or work experience.

For an organization to really understand what its results mean, it needs to have a control group to see what would have happened without the program, said Mr. Berlin.

“Most of the time when we only use outcome measures, we are counting what would have happened anyway and attributing it to the program,” he said.