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From the President's Office, February 2008

Dear Friend:

Private foundations are an integral component of our nation's nonprofit sector. Without these influential institutions, only a fraction of the charitable programs that so many people rely on would receive the funding they need to survive. We here at GuideStar are grateful for the generous and patient funding we have received from many foundations.

Over the last few years, much attention has been given to how nonprofit organizations can be more effective and efficient. Increasingly donors are asking how to measure the outcome and impact of the work of nonprofits. Despite the indispensable role that foundations play, however, less attention has been paid to how they spend their money and the impact they make.

There is something undeniably mysterious about the ways in which foundations function, but this aura is perhaps due less to a lack of transparency on the part of foundations and more to a lack of clear understanding on the part of the public. We appreciate the groundbreaking contributions that the Center for Effective Philanthropy and Grantmakers for Effective Organizations have made in helping foundations operate more effectively.

Here at GuideStar, we also see foundations seeking to improve operational efficiency through technology and services such as our Charity Check tool. In an effort to understand foundation activity better, GuideStar recently partnered with the Urban Institute and the Foundation Center to issue a report titled What Drives Foundation Expenses and Compensation? Results of a Three Year Study. This large-scale study examines expense and compensation data from the 10,000 largest U.S. grantmaking foundations, documenting the ways that various characteristics of these organizations affect the manner in which their money has been spent.

There is much valuable information to be gleaned from the results of this study. Among other findings, it shows that the key factors in determining a foundation's expenses and compensation are its type and the size of its staff and its operating activities. The report shows that foundation spending patterns remain consistent despite fluctuating economic conditions. I encourage you to read the full report for yourself; it is currently available for downloading from the GuideStar Web site. Download report

For me personally, the report serves as a reminder of the incredible diversity of the sector as well as the problems that this diversity sometimes brings, especially when we rely too much on averages and ratios. The category foundation includes a wide range of organizations, from a small family foundation focused on addressing a single local issue to the mind-bogglingly ambitious international-scale efforts of the Gates Foundation. It is only reasonable that variance in their compensation and expense patterns would be equally wide. We must be careful not to compare apples to oranges.

Transparency, however, is a good thing; it can lead to the kind of revelations that are sometimes needed to rejuvenate stalled progress. And there's little doubt that better understanding of foundations is necessary, if for no other reason than the incredibly important role that they play in our society. If this new report helps every foundation in this country find a way to be only slightly more efficient and increase its impact, the cumulative effect would be staggering. We are proud to have contributed to this effort.


Bob Ottenhoff
President and CEO

Everyone's a Winner on the GuideStar Exchange

The GuideStar Exchange Giveaway came to a close January 31, and on February 4, 10 organizations were randomly selected to share the $10,000 grand prize. Every organization that had been accepted as a member of the Exchange was automatically entered into the drawing. The Exchange is a new initiative at GuideStar, aimed at helping nonprofits share a greater scope of information on their goals and achievements with grantmakers and potential donors.

"I'd like to offer my congratulations to the Giveaway winners and my sincere thanks to everyone who filled out a GuideStar Exchange Form, thereby helping us create a valuable win-win situation within the nonprofit sector," said Bob Ottenhoff, GuideStar's president and CEO. "Participating organizations are rewarded with a richer report that can provide a more complete picture of their good works. Donors and funders benefit with easy access to more information on the nonprofits they support."

The following GuideStar Exchange members will each receive a check for $1,000:

Building Donor Affinity While Incorporating Financial Data into Fundraising Campaigns

Every once in a while the finance team and the development and marketing departments will get together, mostly for budgeting purposes. But the finance department and the numbers it maintains can make a dramatic difference in the success of the development team's campaigns. Financial information can be used for more than setting and maintaining the budget. Below are four ways nonprofits can use financial information to help increase the success of fundraising campaigns.

The Case for MBAs in the Nonprofit Sector

There is a lot of buzz out there about MBAs joining the ranks of the nonprofit sector. We wanted to find out what is behind all the buzz. Are nonprofits really hiring MBAs? Are MBAs interested in working in the social sector? What are some of the challenges that nonprofits face when considering hiring candidates with MBAs?

The Aspen Institute, in its 2007-2008 publication Beyond Gray Pinstripes, reports that over 30 percent of 112 schools of management offer a special concentration focused on social and environmental issues. Additionally, coursework and academic research on social and environmental issues has increased dramatically in the past few years. Even with increased access to such curriculum, Net Impact, a nonprofit organization that helps business school students use their skills for social impact, reports that only 6 percent of MBA graduates plan on pursuing careers in the social sector.

What will it take to get more MBAs into the social sector? Is there even a demand for these types of hires? This article describes the success that two organizations have found in hiring MBAs, outlines some of the challenges associated with hiring candidates with MBAs, and provides some suggestions for overcoming those challenges.

Poised to Make a Difference in D.C.

The Catalogue For Philanthropy:Greater Washington is the latest philanthropy portal to take advantage of GuideStar's unparalleled ability to promote transparency. (See GuideStar's clients.) The goal of this Washington, D.C., nonprofit is "to raise the visibility of effective nonprofits in metropolitan Washington, and to introduce new donors to new charities." It does so through its Web site and also through a printed version mailed free of charge to 30,000 families and individuals throughout the region.

The Catalogue for Philanthropy: Greater Washington focuses on "smaller, local charities." As the organization's Web site notes, "Though they comprise about 85% of all nonprofits, the public rarely hears about them because most cannot afford to make themselves heard. Yet dollar-for-dollar, they offer some of the most cost-effective opportunities for philanthropy. If 'making a difference' is one of your goals, then excellent smaller charities may be for you."

"We are especially happy to be working with the  Catalogue For Philanthropy: Greater Washington because we have an office in D.C.," said Bob Ottenhoff, GuideStar's president and CEO. "We are glad to support our neighbors—both donors and other nonprofits—in the area's philanthropic community. There is also a spotlight on philanthropy in this city as never before. With a growing professional class, the area's wealth is increasing, and local nonprofits are benefiting."

According to a study released in November 2007 by the Nonprofit Roundtable of Greater Washington, the area's 7,614 nonprofit organizations contribute at least $9.6 billion to the region's economy. In 2005, D.C.-based private and community foundations gave $655.5 million, a 7.3 percent increase from 2004, according to a study by the Washington Regional Association of Grantmakers.

Philanthropy in the nation's capital is seen as an investment in the quality of life for area residents. Such investments involve due diligence, and it is here that GuideStar is poised to make an important contribution to area donors and nonprofits: All applicants for the 2008-2009 edition of the  Catalogue For Philanthropy: Greater Washington must update their information on GuideStar. Because only nonprofits recognized by the IRS as tax exempt can appear on GuideStar, donors can give with greater confidence to the organizations listed in the  Catalogue For Philanthropy.

Opportunity for D.C.-Area Nonprofits

February 22 is the application deadline for the 2008-2009 edition. Any nonprofit that (1) is a 501(c)(3) public charity located in the D.C. area, (2) has total revenues of less than $3 million, and (3) has updated its information on GuideStar can apply for inclusion. For more information on applying, go to The Catalogue for Philanthropy:Greater Washington Web site.

For charities that update, the benefits extend beyond the D.C. metropolitan area. Updating allows nonprofits to reach out to the millions of donors and funders who rely on GuideStar. Last year, users from all over the United States—and some from other countries—visited GuideStar nearly 11 million times. Updating on GuideStar makes nonprofits more accessible to these potential supporters. Donors are able to access vital information via the GuideStar Web site that enables informed decisions.

"GuideStar is proud and honored to play a role in the important work being done by the Catalogue for Philanthropy," Bob Ottenhoff stated. "Such relationships help us advance our mission to promote better philanthropic decision making and to encourage charitable giving. We look forward to working with other organizations—local, regional, or national—that connect donors and charities."

Kelly Whalen, February 2008
© 2008, Philanthropic Research, Inc. (GuideStar)

Kelly Whalen is GuideStar's director of development.

Going for Consensus, Not Robert's Rules

Excerpt from Great Boards for Small Groups: A 1-Hour Guide to Governing a Growing Nonprofit

In my work with nonprofits, I'm always mystified by the pervasive use and abuse of parliamentary procedure, also known as Robert's Rules of Order.

Many, many board members believe that their discussions and decisions are somehow more valid when they make motions, second those motions, call the question, and hold formal votes that are recorded in the minutes.

Furthermore, people who know the rules—or think they know the rules—often use their alleged know-how as a way to exercise power within the group. "That's out of order," bellows the board bully. "You need to raise a point of order if you're going to reopen discussion on that motion, and you can't do that because we've already accepted an amendment to the original motion."

In response, everyone else feels sheepish, looks confused, and refuses to speak. All sorts of petty arguments arise from the ignorance or abuse of parliamentary procedure.

There is no law mandating that nonprofits must make decisions using Robert's Rules. After all, you're not a parliament. You're an animal shelter, or a sports league, or a theater, or an advocacy organization.

By way of comparison, imagine you're sitting around with a group of friends, trying to decide on a place for dinner. You discuss the options; people advocate for one restaurant or another. Perhaps you reach a tentative decision. At that point, someone opts out, saying, "I had Thai for lunch, but if that's what everybody wants, please go and enjoy yourselves." Maybe the rest of you decide to go, but more likely you return to the list to try to identify another option that will work for everyone.

The decision-making model you're using is called  consensus, and it works something like this:

Federal Agency Taps into the Power of the GuideStar Database

The General Services Administration (GSA) recently announced the addition of GuideStar products and services to its Financial and Business Solutions Schedule. As the agency that is responsible for facilitating the basic operations of other federal agencies, the GSA has recognized the GuideStar database as an effective means of providing federal employees with easy access to the information on nonprofit organizations that they need.

Part of the GSA's mandate is to procure a ready supply of the various goods and services that are required by the federal government. It does so by establishing pre-negotiated contracts with outside entities, including nonprofit organizations.

Federal grantmakers, contract procurers, regulators, and policy analysts all need timely and accurate nonprofit information. By accessing GuideStar products and services through the GSA Financial and Business Solutions Schedule, these employees will be able to make decisions with confidence and perform their duties with greater efficiency. And, of course, everyone benefits from a more efficient government.

The GSA Financial and Business Solutions Schedule offers federal decision makers the full range of GuideStar products and services, including GuideStar Premium, data sets, GuideStar Charity Check, the GuideStar Nonprofit Compensation Report, and much more. Click here for more information: GSA authorized price list.

Patrick Ferraro, February 2008
© 2008, GuideStar

Patrick Ferraro is a freelance writer in Seoul, Korea, and a former editor of the Newsletter.