Growing Pains: How to Handle a Transformational Gift

Audio Description

McKenzie Scott sent shockwaves through the philanthropy world with her transformational gifts over the past two years. But what is it like to be a smaller organization on the receiving end of a game-changing donation? We talk to an expert in the field—David La Piana—about the promise and pitfalls of this kind of “sudden windfall”.

Transcript

00:00 - 00:19

Clare Golla

McKenzie Scott sent shockwaves through the philanthropy world with her transformational gifts over the last two years. But what's it like to be a smaller organization on the receiving end of this kind of game-changing gift? Today, we'll talk with an expert in the field, David La Piana, on the promise and the pitfalls of this kind of sudden windfall.

00:32 - 00:58

Clare Golla

Hi, everyone. Welcome to Inspired Investing. I'm your host, Clare Golla, head of foundation and institutional advisory at Bernstein. This podcast is where we strive to share insights with listeners like you who are engaged in the nonprofit and broader philanthropy sector. Today, I'm joined by David La Piana, managing partner of La Piana Consulting, a San Francisco based firm that helps nonprofits navigate change. Hi, David. Thank you so much for joining us.

00:58 - 01:00

David La Piana

I'm glad to be here. Thanks for having me, Clare.

01:00 - 01:24

Clare Golla

I'm excited about our conversation today, so I'm just going to dive right in. David, you are today a consultant and an author on all sorts of topics for nonprofits, right? Capacity building, mergers, strategic planning. I think for the context of today's conversation, though, I'd love for the listeners to hear a little bit about your background and how that's really informed your work. So let's dig deep here. You want to share a little bit about your background with us?

01:24 - 01:48

David La Piana

Sure, I'd be glad to. I am the child of immigrants who came over themselves as children and the first person in my family to finish high school and go to college. And of course, and then graduate school. And when I went off to college, I thought I wanted to become an intellectual and I studied comparative literature at Berkeley. I was at a doctoral program until I realized that I needed to do something a little more meaningful to the world.

01:48 - 02:33

David La Piana

And so I stopped after my master's degree and became a Vista volunteer. I worked with migrant farm workers. I worked in the inner cities, I worked in food security programs. I ran a program providing mental health services for Southeast Asian refugees. After the boat people came over, and then still in my 20s, I became the executive director of a small, struggling nonprofit organization, and I stayed there for 16 years and built the program from serving 20 kids to serving five thousand kids in Oakland and throughout Alameda County, California. Wow! And I got some notice from that by three major foundations, David and Lucile Packard, William and Flora Hewlett, and the James Irvine Foundation. And they suggested that I start a consulting firm to help others learn some of the things I had learned.

02:33 - 03:11

David La Piana

We spent the first five years, that was 1998, improving how nonprofits partner and I wrote a couple of books that were called the Nonprofit Mergers Workbook, Part One and Part Two, which were really revolutionary, and bringing the M&A perspective to the nonprofit world. And then I spent the next four years after that working on strategic planning, with 10 foundations funding our work, to reinvent the way nonprofits do strategic planning. Now, my firm has about two dozen people. We work nationally with all sorts of nonprofits. My own consulting in particular, I work with a lot of social justice, racial justice groups, and that's where I am.

03:11 - 03:49

Clare Golla

That's great. There's so much overlap we've talked about in terms of our clients and the organizations we work with. And what's so interesting is when you describe your background, you know, you've also mentioned before that finances weren't necessarily your strong suit, right? When you first stepped into the leadership role at that small organization, and then you grew significantly. I can't imagine you don't see some of your earlier self when you're working today with leaders of organizations who have received these outsized gifts. Maybe you could share a little bit on your perspective on this phenomenon, right, of transformational gifts in philanthropy today and specifically about the cohort of organizations that are in rapid growth mode that you've been working with.

03:49 - 04:33

David La Piana

Yes, I'd be happy to. It's interesting you mentioned that I might see myself in these folks because I definitely do see my younger self. These are folks who are all about the mission and are learning the administrative stuff sort of when they have to, rather than going to business school, learning the business and then going into some application of that. I'll tell you a little anecdote. I had a mentor when I was younger, who is a retired CPA who taught me about finance and how to manage and how to understand all the things that go into managing an organization's finances. And he would say to me, David, you say that you're not very good at math, but when we put a dollar sign in front of those numbers, your skills improved dramatically. And he was right because it was necessity that I needed to learn. And that's what I see in these folks.

04:33 - 05:18

David La Piana

We're working with a cohort of 30 grantees of the Ford Foundation who are in the social justice, racial justice space, who have all experienced unplanned, rapid, high growth in the last couple of years. And Ford was concerned that these groups might need some help in coping with that kind of growth. These are groups that some of them were quite small. Some of them were already sizable and fairly sophisticated, but they've all been stressed by a huge amount of growth, not just from McKenzie Scott grants, which some of them have gotten, but that many of them have gotten money in the post George Floyd murder racial reckoning funding that's come through. Some of the issues they're dealing with are How do we invest that money? That's when we brought Clare in because it can't just sit in a checking account. How do we think about that money long term?

05:18 - 05:53

David La Piana

But also, how do we go from a very minimal HR function to one that is adequate to hiring double or triple our staff size? And then how do we create a management structure when we can no longer... the small group of people who were doing the work and leading the organization, can no longer supervise everyone? We need to create the dreaded middle management tier. There are a bunch of issues around that. And then everyone knows times will change and the interest in racial justice will wane, unfortunately. And how do they make this a sustainable event rather than a one-time blip up and then drop back to being in bad financial shape?

05:53 - 06:17

Clare Golla

Yeah, no, I mean, there's so many issues. You mentioned bringing us in. You brought our team in really to discuss not just the best practices on building an investment program, but to really field some of these questions and dig in with organizations on how do you do that in a way that, you know, maintains an organization's integrity, that's aligned with your organization's work, right? There's so many concerns in just this one aspect of significant growth.

06:17 - 06:30

Clare Golla

You've described it as sort of a broader challenge when funds flood into an environment of historic scarcity, right? Some organizations have mentioned to you that it feels like they're on Shark Tank. Can you explain that a little bit?

06:30 - 07:20

David La Piana

There is a scarcity mentality in most nonprofits. People are just not used to having enough resources to do most of the things they need to do, and their sacrifices in terms of personally, the salaries people take and the benefits they receive. And also just the amount of people power to get the work done. And so suddenly, when there's all of this money, you have staff coming in and saying, we need raises. You have everyone in your network having a brilliant idea for how to advance the mission. It can be hard to say to those people, no, we're not going to do that. We're going to take a more planful approach and we need to prioritize getting our house in order and then thinking, really thinking deeply about how we can have the most sustainable impact. That can be stressful for leaders who are used to being in a more stressed position. And now it's a different kind of stress. How do we deploy resources rather than where are we going to get resources?

07:20 - 07:35

Clare Golla

Right, right. I always think of it as we're working with so many organizations in the system, it's moving from being on the hamster wheel, right, to actually, you know, looking prospectively and forward thinking and really being able to act intentionally with some of these additional funds.

07:35 - 07:53

Clare Golla

So what you've described with the Shark Tank mentality, with the sort of scarcity mentality is there's been quite a bit of ambivalence that I've heard from organizations on how public or private they should be when divulging any information about this gift. Help me understand sort of the pros and cons of each.

07:54 - 08:20

David La Piana

I think the concern that people have expressed, first of all, if the amount of money is known, other donors will back off and say, Well, you're good, you don't need the money now. And so they'll move on to other causes. And so it will actually hurt long-term sustainability. And another concern is engendering more of that shark tank mentality or feeling like your peers who may not have been as lucky as you might be jealous and feel like you're sort of boarding it over them that you've gotten this money.

08:20 - 08:54

David La Piana

But I think that while some of those are real concerns, my perspective is that this is an endorsement when you received a lot of money, whether it's McKenzie Scott or cumulatively from a lot of different donors, it's an endorsement of your work and you should celebrate that. Yeah, my experience in decades of fundraising is that it may be a little perverse that money goes to people who've already got money. The organizations that are stronger tend to get more money. Who has the biggest endowments in the country? It's the biggest universities with the biggest endowments getting more money added to those endowments, make them even bigger.

08:54 - 09:16

Clare Golla

Right? Well, and they have the ability to get the message out about their institution. It's it's interesting that you say this. I was just on a panel a few weeks ago with Sharon Robertson, and she's the president and CEO of the YWCA of Nashville and Middle Tennessee. And I was so impressed with her approach because people asked her about that specific question. You know, how did you react and were you quiet about it? Or what were your

09:16 - 09:58

Clare Golla

And she said, we were, enabled us in a time where donors and funders in particular were looking for anti-racism work to fund... it was also a time when nobody knew or relatively few people knew what the actual mission of the YWCA is, right, and that is to eliminate racism and to empower women. And so this gift, as she described, right, the manna from heaven, enabled them to do some serious branding and outreach to then drive in more support on these other issues that, frankly, people didn't even know were at the core of their work. So it was just a great example to me of how playing out what you just described, David.

09:58 - 10:16

David La Piana

David. It does take a bit of boldness though, a willingness to take some of those slings and arrows that might come your way. But I think it's worth it. And I think also, if you don't put out how much money you've gotten, then there's a secrecy aspect. And we live in an era in which transparency is of paramount value. And I think there's a lot of reasons to do it.

10:16 - 10:47

Clare Golla

I mean, there are so many issues here. I feel like we're seeing it from the investing perspective, right? It's not just, hear a few key points for your investment policy statement, right? Here's an example of a diversified portfolio, right? Just in our little part of the world, you know, figuring out what do we need and want in the near term versus the long term and liquidity needs and who's calling the shots regarding the investments and who are we partnering with and how are we ensuring that future decision makers are understanding not just what decisions were made, but why... really building a sustainable program.

10:47 - 11:05

Clare Golla

There's so many choices, and I could go on and on about the decision tree that folks just have to make in terms of the investments. You're working on this with all aspects of an institution's approach. And I'm curious, how do you help organizations prioritize?

11:05 - 11:34

David La Piana

we have sort of a three-pronged approach. The first is, and we did a lot prior to forming this, we did a lot of talking to these groups to hear what they really need. And the first prong is a series of workshops, which you guys did the first one. But there's going to be a series, one every month, on topics from cyber security to maintain your culture and the growth time or to hiring processors. All the different topics you can imagine. And we'll get people from all of these organizations, board members, staff of various kinds to come.

11:34 - 12:06

David La Piana

The second prong is what we're calling communities of practice where we've formed, I think it's 14 different groups by position. The CEOs, the finance people, the HR people, the program people, the evaluators, and also by identity. So there's women-led organizations, BIPOC-led organizations, and these are monthly, very personal gatherings of a dozen or so people facilitated by one of our staff. I've got my entire staff. Everybody is facilitating at least one of these and we're helping those folks to form relationships where they can help each other and learn together.

12:06 - 12:53

David La Piana

And then the third prong that we're delivering is very individualized. There's individual support by one of our consultants to each of these organizations around the issues that they're facing and whether it's the human resources issues or how to maintain culture or the financial system or growing pains generally. And we are developing, we're almost ready for primetime, a prioritization tool that will be able to be used with each of these groups to help them think through sort of the urgent versus important matrix and to then prioritize what they should tackle first. Because it can be kind of immobilizing to know that you have 50 things you have to do, and they're all important and they all feel urgent. But in fact, there is usually some logic to doing A before B before C.

12:53 - 13:22

Clare Golla

That, David, sounds like something I need for myself. I mean, especially for organizations who are doing such critical work in the community, and so many things feel like an urgency at any given time. I may come back to you for a whole other episode on that because I think that could be a fascinating conversation. Coming from the guy who mentioned earlier that he has a thousand tabs open on his computer that he's going to be prioritizing right with others. So that's great. So look, David, we've covered so much information today. As you look ahead,

13:22 - 13:28

Clare Golla

what do you see next for the organizations that you're working with and just in terms of this sort of trend in philanthropy?

13:29 - 14:03

David La Piana

Well, there are many different trends. I'm trying to figure out what they're going to mean when they come together. So some of those trends are the breaking down of what used to be the rigid barrier between for-profit and nonprofit. It used to be if you want to do well, you go to for-profit, if you want to do good, you go to nonprofits. Now we have young employees and businesses wanting their business to do good and people in the nonprofit sector wanting to make enough money to live, so wanting to do well. And we have social entrepreneurship happening across both platforms and sometimes in partnerships between them. That's one whole set of trends.

14:03 - 15:00

David La Piana

Another is this new generation. There are actually some wealthy donors who are quite young. The Gen Z people coming, who have a very different perspective on all of this, what that's going to mean. And then there's the real disruptors like McKenzie Scott and potentially Melinda French Gates and also Laurene Powell Jobs with her Emerson collaborative, who are taking a very different approach rather than the more bureaucratic traditional philanthropic approach. They're just handing money out and trusting people, and that kind of fits with another trend, which is community engaged philanthropy, where rather than sitting on a hill, receiving petitions and handing out money to those who are worthy, foundations are being urged to be more in dialogue with communities and letting them lead the way. So all of those things coming together with a very strong stock market in the last few years, so that means more money trickling down into these kinds of activities, those are all very positive trends.

15:00 - 15:51

David La Piana

At the same time, we have the pandemic, which, when it's all said and done, the longest lasting impact for the nonprofit sector, I think, may be a whole different attitude towards work, and this is true in the business sector as well. Those big office buildings maybe become empty hulks, where people can no longer say that you have to come into the office because I don't trust you to do your job at home because, hey, I've been doing my job at home for the last 18 months. Exactly. So that's going to change how people look at work. It could change demographic patterns of where people live. I've got one client, a national organization that had 500 people in its headquarters office before the pandemic. When this is over, the CEO said there'll be 50 people in the headquarters office and the other 450 will work from home. There's some very interesting trends that are, I'm not sure how they're going to align, but I'm very interested to see where it goes.

15:51 - 16:05

Clare Golla

Yeah, no, thank you. It's parallel to what we're seeing with investments too, the alignment of investments in who's making the decisions and how you're investing with what your worldview is. So. David, thank you so much for joining us today. This has been a great conversation.

16:05 - 16:15

David La Piana

Thank you, Clare. I always like talking to you, and it's fun to think about the future and also to be hopeful somewhat about the kind of change these organizations are making in our world.

16:15 - 16:29

Clare Golla

Yeah, absolutely. We appreciate what you're doing with these organizations, and we'll continue to be in touch. And thank you all for listening. If you'd like to learn more on Bernstein Foundation and Institutional Advisory Services, please see the link to our blogs in this episode's description.

16:29 - 16:47

Clare Golla

If you enjoyed this episode and haven't subscribe to our podcast yet, please go to wherever you listen to podcasts to subscribe and rate us. Also, please e-mail us with your thoughts, questions and feedback to insights@Bernstein.com, and be sure to find us on Twitter at BernsteinPWM. Thanks everyone!

Host
Clare Golla
Managing Director—Head of Foundation & Institutional Advisory Services

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