Last week I had the opportunity to attend the Philanthropy Ohio Conference: Philanthropy Forward ’17 where I presented on the issue of the Real Cost of Equity. Below is a recap of the presentation as well as some ideas that came from a robust conversation with attendees:
Lately there has been a lot of focus on the issue of equity. “Equity” is obviously a broad term that encompasses a range of issues including income inequality, wealth inequality, and economic opportunity. But at its core, it is ultimately about creating a level playing field and ensuring that everyone has an honest chance at achieving their potential regardless of their race, gender, economic status or zip code.
As Dr. Robert K. Ross, President and CEO, The California Endowment, writes in Philanthropy, Equity, and The Wizard, “It means assuring opportunity for all, regardless of circumstance, and across the full range of America’s socioeconomic spectrum. It means leveling the opportunity playing field, with an emphasis on those who often find themselves stigmatized, marginalized or ignored for reasons that may be political, racial, or ethnic.”
A number of large foundations and organizations including the Ford Foundation, Meyer Memorial Trust, Kellogg Foundation, the Weingart Foundation and Grantmakers for Effective Organizations among others have announced new focus areas designed to address the equity issue. Funders have changed their grantmaking priorities and program areas, they have changed their hiring practices, they are engaged in listening tours, and they have come together to pool resources to advance one of the most vital issues of our time.
While these efforts are to be applauded and encouraged, we need to go deeper. In the end, just changing what grantmakers fund will not be enough. We also need to change how grantmakers fund if we really want to move the needle on the equity issue. We need a new approach. As Einstein famously stated, “We can’t solve problems by using the same kind of thinking we used when we created them.”
We will never achieve our equity goals with outdated grantmaking practices and policies that focus almost exclusively on programs while neglecting investments in capacity and infrastructure. We will not get there when nonprofits cannot pay their employees living wages, when they have staff on public assistance, and when they can’t make needed investments in capacity. If nonprofits are struggling to make payroll, how are they going to achieve these lofty equity goals?
Aiming to “assuring opportunity for all” through exploiting the sweat equity of nonprofits is no path to success.
When funding does not cover the full cost of delivering programs, how do nonprofits close the gap? The most common method is through sweat equity – we overwork our people, we underpay them, and we rely on volunteer and in-kind support. While having people volunteer is fantastic, we are continually asking staff to put in 60-hour weeks without childcare benefits, without proper healthcare, and without retirement plans. We are asking staff to try and deliver on a wide range of funder, government or board expectations while using outdated computer systems, with poor internet service and leaking offices.
But it is more than just starving the nonprofit organization. By not allowing people to earn a living wage working for nonprofit organizations, we are denying them the opportunity to move up the economic ladder. School teachers can’t afford to live in the communities they work. Case workers spend hours on public transportation getting back and forth to work. Administrative staff are working multiple jobs to make ends meet. This is not a path to equity, this is not a path to economic mobility, this is not a path to closing the wealth gap.
And what does it mean for our equity goals, when the nonprofit sector that employs more than 11.4 people – that is 10% of the America workforce (that is third largest sector behind only retail and manufacturing) – as a matter of practice, as an inherent part of their business model, exploits their workforce.
Recently cities have been looking at increasing the minimum wage and this has raised concerns with nonprofit leaders. While they recognize that an increase in the minimum wage is good for people and the community, it also means increased overhead and increased operating costs. So to keep costs in line, nonprofit leaders are delaying hiring, delaying making needed investments in technology and delaying investments in growth – all of which actually impedes the development of an inclusive economy, and all of which impedes our equity goals.
To push forward on the issue of equity, funders and donors must do more than simply change who they fund. We must take a more holistic look at the organizations tasked with holding together the increasingly frayed social safety net. As the movement to combat inequity grows stronger, there are three key things that funders can due to ensure we are not building this movement off the backs of underpaid, overworked, and underappreciated workers:
- Engage in open, transparent conversations with grantees about what it honestly takes them to be able to deliver on mission both now and in the future. We need to move the conversation beyond focusing solely on programs, beyond overhead rates, and understand the liquidity, reserves, and investment needs of nonprofits.
- Educate boards of trustees, program and grants management staff. We all need to have a common understanding of real costs, a shared language to engage in meaningful dialogues, and the tools and resources to assess financial sustainability and impact.
- Recognize that investing in equity means investing in capacity, infrastructure and leadership development not just programs. Donors, funders and investors all need to acknowledge that without healthy, vibrant and sustainable nonprofit organizations, we will never be able to achieve the positive social change we are seeking.
The cold hard reality is that the fight for equity is going to be a long, hard struggle. And to win, we will need organizations that are adaptive, innovative and flexible with the necessary human capital to get the job done right. If we want to have real impact, then we need to end this culture of scarcity, and we need to end the starvation cycle. We need to change our thinking. If we are able to change our mindset and understand what real costs really means, we can change our funding practices releasing the power and potential of social sector organizations, and that is how we change the world.
