Monday, March 16, 2009

A New Take on Investment "Portfolios"

A bad economy could take its toll on an alternative kind of currency and a different type of capital: civic currency and social capital. Although overnight we are seeing major financial institutions, law firms, and other business leaders close their doors and board up their windows, the philanthropic sector is also suffering.

Where did the money come from to fund non-profits and philanthropy generally? It was dependent on the investment portfolios of foundations and individual donors, whose coffers were contingent on the economy continuing its upward trajectory. In the wake of the current state of global economics, it is no surprise that philanthropic and cultural giants like the J. Paul Getty Trust are slashing their budgets nearly 25% for the coming fiscal year, in what is being deemed an emergency response to investment losses.

As a public affairs strategist, it is normally prudent to avoid rendering investment advice. Yet, two key pieces of advice, one borrowed from the 2008 election cycle, and the other borrowed from a reigning scholar on "capital," could help point the philanthropic community back towards a long-term investment strategy that is not contingent on a bullish market.

For Philanthropists and Philanthropic Organizations Generally

Philanthropic organizations need to refocus themselves on patrons. While it would be foolish to suggest that they should fail to cultivate their large dollar donors, many organizations, primarily museums or art galleries, should focus on small dollar patrons by demonstrating their value to the community. More often than not, when I asked people why they donated to Barack Obama, even if it was just $10-20, they told me it was because they thought their money would make a difference, that they were buying into something that would affect them positively. It is much easier for a local museum to directly tie its utility to a local community than a candidate running for nationwide office. Museums, particularly,have become these esoteric marble buildings that you may visit once while in grade school. By investing in schools, senior citizen centers, and other demographics who are open to their offerings, they are likely to yield more donations and recruit more members.

Additionally, diversifying outreach to different populations also opens up these types of institutions to investors who might not ordinarily donate to such a place, but from seeing its impact on a community, decide to open their checkbook.

It is the responsibility of trustees to maintain a diverse portfolio. In a time of crisis, this mandate must also include the need to be flexible and creative with investment strategies. Re-investing in individual patrons and community members could prove to be more sustainable, and have the effect of not only enhancing the financial security of the philanthropic institution, but build social and cultural capital for the communities they target.

For Non-Profits


Non-Profits need not be afraid in this time of uncertainty to invest in the one thing that makes them successful: their staff. While we watch many of our bank accounts become drained and our country's wealth seems to have virtually disappeared, no time is better than now to address what is a growing problem for non-profits: the public sector brain drain.

Investments must come on two fronts: financially and personally. From a financial perspective, non-profits should focus on having a small, talented staff capacity. To recruit the best and the brightest, especially with the looming specter of student loans that most people face, non-profits should focus on less staff, better pay, and measurable results. This does not just breed financial security for members of the staff, but also creates a dynamic that facilitates personal investment in members of the staff.

At non-profits, when the staff feels more secure and not like they are continually working just to secure their jobs, they are more free to be creative, think strategically, and build the types of working relationships with their fellow staff members that are necessary to achieve "success." Accountability increases, personal investment increases, leading to deliverables that are more likely to lead to donations to sustain the organization.

There has been too much investment in the idea of "sacrifice" in the non-profit world versus the idea of commitment. The non-profit mentality is to give...and give...and give...with no questioning of the organization or its real success, but a blind adherence to sacrifice to the greater cause. As an information hound, I have not seen studies supporting productivity in environments such as these, where there is no reciprocity from the organization to the staff.

Non-profit organizations are mini-networks and networks that institutionalize reciprocity, which is a part of creating social capital, enable "innovation, mutual learning, and productivity growth." If non-profits wish to be innovative, to keep fresh, and remain funded, investing in people and how they interact organizationally is key.

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