Transcript: Jack Lund & Doug Bauer 1-04-13 #928

January 4, 2013


01/4/13- #928


CONSUELO MACK: This week on WEALTHTRACK, philanthropy as an investment. Two thought leaders on the art of giving- the YMCA’s Jack Lund and the Clark Foundation’s Doug Bauer- explain how to get the best and most effective returns from your charitable donations. Next on Consuelo Mack WEALTHTRACK.


Happy New Year and welcome to this edition of WEALTHTRACK, I’m Consuelo Mack. We decided to begin 2013 on a generous note and talk about what many call a uniquely American trait: charitable giving. Citizens of other countries do it, but no nation gives more or has philanthropy more ingrained in the fabric of its society and culture.


According to the 2012 annual report “Giving USA”, considered to be the bible of philanthropy trends, American citizens and organizations gave nearly $300 billion in charity in 2011, up 4% year over year. Despite the slow economy, individuals gave $217.8 billion of that, or 73%; add bequests from individuals and giving by family foundations and their share jumps to 88%. Non-family foundations and the 5% given by corporations complete the picture.


Where do we give? Religious institutions are by far the largest recipients, receiving 32% of our dollars; education is next with 13%, followed by human services, foundations, health organizations, international affairs organizations, which are a relative newcomer, and public-society benefit institutions. The remaining donations include arts, culture and humanities, and environmental and animal causes.


But the expectations and demands of donors are changing. More Americans are thinking of giving as an investment. They want to measure its impact, see its returns, and make sure it is an effective use of their money. We asked two financial thought leaders in the field to help us understand how philanthropy is changing and help us become more effective givers.


Doug Bauer is the executive director of the Clark Foundation, a fifth generation family foundation and one of the largest foundations in the country in terms of assets and grants. Doug has spent over twenty years with prominent foundations including Rockefeller Philanthropy Advisors and the Goldman Sachs Philanthropy Fund. Jack Lund is the President and CEO of the YMCA of Greater New York, the largest YMCA in the U.S. and the largest youth serving organization in the New York area. Jack has spent 35 years at the Y in numerous leadership roles all over the country and internationally, including as CEO of the Milwaukee Y and chair of the  YMCA World Urban Network, a network of Y CEOs from the world’s largest cities. And I have had the privilege of working with Jack as a member of the Y board. I began the interview by asking both leaders to identify the biggest changes they are seeing in philanthropic giving.


DOUG BAUER:  I think there’s a couple of things. In the last 10, 20 years, first of all, there’s a whole lot more of it. We’ve seen a dramatic jump in the number of private foundations created, the number of donor-advised funds, et cetera. The assets have jumped up dramatically that are committed to philanthropy.

CONSUELO MACK: And that is because of Wall Street? Kind of this gilded age we’ve been through?

DOUG BAUER:  Well, certainly Wall Street, certainly Silicon Valley and the tech, but I think what’s also interesting is there’s a lot of families out there, small businesses, family-owned businesses that have also generated tremendous amounts of wealth. So it’s not just both the coasts, but a lot of the family businesses that exist across the country. So there’s more philanthropy. I think also what’s interesting to me- when I started out in this field in 1988, it was hard to get anybody to pay attention to philanthropy as a topic. Now the media is very, very aware of it. You can thank, I think, people like Bill Gates and Warren Buffett for that, but certainly philanthropy has become a very hot topic among a lot of people, and clearly people have become very engaged with the issue, and they understand that it plays an important role in what happens with communities across the country. So those are very important.


I think the final thing is obviously there’s been a lot of attention about, you know, if I do get engaged with philanthropy, you know, what kind of return, what kind of measurement, what kind of impact should there be with the dollars that I grant or give or invest in a nonprofit? What kind of expectations should I have around the kind of impact or outcomes they’re generating? And there’s been a lot of attention about that issue as well. So it’s a very interesting time in the field I think.


CONSUELO MACK: So, Jack, what are your thoughts, and especially coming from an organization that is a not for profit, that’s a large established organization that is looking always, you know, that donors give to. So what’s your experience from that side of this business?

JACK LUND: Well, I think as we look at the charities in the country, there is certainly a lot more competition. I think there are a lot more choices for donors. I think the demographics of donors have changed as well. I think with more women giving and with the emergence of minorities, that has really changed the donor behavior a bit, and I think probably the biggest change has been in donor behavior. I think, as Doug said, donors are asking for a return on their investment. They’re looking for results. I think they’re far more discerning. Statistically I guess 83% of donors do research on the charities that are approaching them for gifts. So there’s clear evidence that they’re doing a lot more homework than has ever been the case in the past, and I think donors want to be more involved with their charities. It’s not enough to write a check. They want to be involved, particularly the corporations that support charities are not just wanting to make a financial investment. They’re looking for opportunities for their employees to get involved as well. So they want to be on the scene, and that’s a big change that we’re seeing.


CONSUELO MACK: That’s so interesting that the companies want their employees to be involved as well. So there’s a sense that this is important from a corporate management point of view as well, that their employees get involved in doing good?

JACK LUND: Yes. When we approach companies, we’re very specific about opportunities for them to be involved in our organization.

CONSUELO MACK: Doug, as far as, you know, you’re Executive Director for the Clark Foundation. You’ve run a number of other organizations as well, so how have you changed in how you approach who you’re going to give to? I mean, how has your criteria changed? What’s remained the same, and how has your criteria changed for which organizations you’re going to support?

DOUG BAUER:  I’ve been involved with this, like I said, since the late ‘80s. I’ve always been interested. I come from a corporate background. I have a business discipline in the way I think about things. I’m interested in the kind of impact that a nonprofit can and should generate in whatever field they may be in. I’m interested in how they approach that and how they’re going to execute. So I’m interested in results-oriented and results-driven nonprofits. That really hasn’t changed.


CONSUELO MACK: And when you’re talking about results-driven, what do you mean? What kind of results?

DOUG BAUER:  Well, I think that depends on the nonprofit. Let me give you an example. So Meals on Wheels, kind of a classic nonprofit service. There are some folks who would be perfectly happy to write a check and take comfort in knowing that a meal has been delivered to a homebound senior or a homebound person with HIV AIDS, et cetera, but there are other donors who would say, I’m very interested in the process, but I’m also interested in the outcomes. For example, does that meal help, for example, with a person with HIV AIDS?  Does that help them with the proper taking of medication? Does the food help the uptake of the meds? Is the food of nutritional value that’s going to keep them healthy?


And so you get into some of the real mechanics behind what actually Meals on Wheels is trying to do, and is the person ultimately not only being fed but are they healthier? And are they getting nutritious food rather than something prepackaged, et cetera? So there are donors who are very, very happy to support Meals on Wheels because it’s a good and great thing to do, and there are folks who are like, I’m interested in Meals on Wheels, but I want to make sure that we’re having some really important outcomes tied to what Meals on Wheels should be doing for that patient or person who’s homebound.


CONSUELO MACK: So I mean, that’s actually a very demanding set of questions for Meals on Wheels, right?


CONSUELO MACK: So that puts more demands on an organization. Couldn’t that interfere with what Meals on Wheels is really trying to do which is trying to get meals to people with HIV AIDS?

DOUG BAUER:  Right. Well, and that’s part of the debate that Jack and I and others have been having in the field which is, how much is too much when you just want to deliver a meal, right, and feel good about that? And I think there is a balance to be struck there, you know, and with the homebound meal, because it is ultimately improving a health outcome, and unlike a lot of other parts of the nonprofit sector, you can kind of more than scratch out a health outcome. You can figure out a health outcome and so, therefore, I think that’s a fair challenge or a fair set of questions to ask a Meals on Wheels program about the nutritional value of the meal. Are, in fact, your clients healthier? Are they more engaged with various issues as it relates to their health? I think that’s a fair set of questions. It might not be a fair set of questions in another aspect in another field, but in that particular example, I think that’s a fair set of questions, because you can get that data. That’s not asking the nonprofit to take a huge stretch to get that data. That data exists, and you could probably get that data.


CONSUELO MACK: So Jack, at the Y which has a long history, and you’ve been at the Y and various Ys for a long time. You’re now running the largest one in the country. So tell me what kind of criteria are donors coming to you with at the Y, and how has that changed how you’re operating?

JACK LUND: It’s changed dramatically. You know, in the 1970s and ‘80s, we were able to say that we develop children in spirit, mind and body, and that was really enough for our donor public, but that has really changed. They are asking for results and looking for outcomes, and I think for us it’s added discipline and rigor and more structure. It means that our curriculum has to be better developed and that we also have to deliver the capacity to collect the data, to collect the outcomes and then report on it, and it is challenging. It is costly, but fundamentally it’s made us better.

CONSUELO MACK: So give us some examples of the kinds of things that you’re doing in response to donors interests.

JACK LUND: I would say probably the most extensive piece of research we’ve done is in our after school programs. We have a relationship with Fordham University, and for a 10-year period we measured school attendance, behavior, math scores and reading scores, and the kids that were in our after school program consistently outperformed their peers in every area but reading scores until we realized that about 75% of our kids were the children of immigrants where English was not the primary language spoken at home, and so we took a pass on that.


CONSUELO MACK: Right, but also, and I’m just thinking of the things that we traditionally think of from the Y, has it affected programs like that you teach all the public school second graders to swim, because as we know, drowning is the… I think it’s the major cause of death among young children. So has that…?

JACK LUND: Well, I suppose you could say the outcome is to prevent drowning but the output is to be able to demonstrate that you’ve learned to swim, and outputs can be a proxy for outcomes. You know, we have the same challenge in some of our children’s health programs that are really targeted to reducing youth obesity, the epidemic of youth obesity which it is and, in this case, the only thing we’re willing to measure safely is activity levels. We know based on research that Harvard has done that if a child has 30 to 60 minutes of moderate to vigorous physical activity five out of seven days, that it leads to good health behaviors, and that’s basically an output as a proxy for an outcome, and that’s enough for our funders, and it’s enough for us.


CONSUELO MACK: Doug, I’m just thinking. What hasn’t changed in philanthropy? I mean, what are just some of the foundations of philanthropy that have not changed, and when we’re talking about trends in giving?

DOUG BAUER:  Well, you know, it’s interesting to me as one who, you know, I’ve tried very hard to be a student of the history of the field, and I mean, we should remember that John D. Rockefeller and Andrew Carnegie very much brought a business perspective to their giving as did some of the others… including the Clark family as well. I mean, there was real discipline behind what they do. However, it is a mixture of head and heart, and I don’t think that’s changed at all. You know, good philanthropy is you’re giving because you want to do something. You want to do something positive. You want to do something that has a real benefit to community, and that the act of giving is ultimately a fairly emotional one, but you want that emotion infused and informed by some good due diligence, and so that’s where the business side comes in.

I mean, you want to look at the management practices. Is there someone like Jack running the show that knows what they’re doing? Are the finances strong? Do they have the capacity within their programs to do what they actually think they can do and should do? So it’s that marriage between all the stuff you need to do as a good business person who would look at an investment and do that work, but there’s also this, well, you know, do I really care about this charity? Do I think they make a difference in the community? And not all of that is tangible, so it is that marriage of those two ideals that I think does create great philanthropy, and there are numerous examples of that over the last 200 plus years of this country.


CONSUELO MACK: Right, and so, Jack, again from your experience, and you know the Y’s history as well, almost 200 years, so what hasn’t changed? What are the still the philanthropic, the donor behaviors that really haven’t changed?

JACK LUND: I think the fundamental principles are the same. People give to organizations that they care about, and you’re right. It’s a blend of head and heart, but it’s the organization’s case for support, their value, how well they’re managed. I think one of the most important things for us is strategic planning, and a lot of donors say, “Don’t bring your annual report, because any organization can make themselves pretty in an annual report. Do you have a plan, and do you have a strategic plan?” That’s an important question. I think a second thing that hasn’t changed is leadership. It’s not just staff leadership but boards. Our donors want to know who’s on the board and what’s the board doing? Is the board giving? Is the board supporting the charity? I think that’s very important as well.


CONSUELO MACK: And so I’m trying to think, and you’re helping us, too, because our viewers want to be better givers, and they want to be effective givers. So what are the kinds of questions that I should ask an organization? And Jack, let me ask you. So what are the kinds of questions that you’re being asked by your donors that you think are the right kind of questions? And you just mentioned, you know, do you have a plan? So what should I look for in a strategic plan, for instance?

JACK LUND: Well, I think first of all it’s fine for the organization to have a mission, but what’s the roadmap? You know, how will the organization achieve its mission in the lives of the people it’s serving? I think donors are really looking for transparency, evidence of transparency, and I think any good not for profit worth its salt should not only have its annual reports out there and on its website, but their 990s. I think their audits. I think organizations should engage in an intermediate sanctions review which is really looking at compensation for top management and making sure it’s inside the boundaries. All those things should be available to donors.


CONSUELO MACK: Right, all of those things that I know as a board member of the Y that the Y does, but it strikes me that, again, these are very demanding requests that are made, and the Y is large. It has a long history. It’s financially really well run, but for smaller organizations, as we’ve just talked about, there has been an explosion in not for profits. I mean, how can smaller organizations live up to this or can they actually meet the demands of donors in this current environment?

JACK LUND: I think it’s tough. It’s tough. We have these conversations all the time, and you’re right. We are a large organization, and it’s challenging for us.  We’ve managed to carve out relationships with some of the major educational institutions, and they help with our research- Fordham, NYU, Columbia University. That has made a difference as well, and then I think the foundation community has been particularly supportive in helping organizations become better at measuring their outcomes, because they’re asking for it.

DOUG BAUER:  I think when you’re working with smaller nonprofits, say six-figure nonprofits in terms of operational budget or mid-sized nonprofit to me is like a seven-figure type of nonprofit, it’s all the things that Jack mentioned earlier, and I think it is asking also, you know, talk about the depth of your programming. Why do you think you’re making an impact with that? Tell us how you manage what are modest resources, and then with the management of those resources, how are you trying to get an outcome or an output or dare you try to scratch the issue of impact?

I think the other thing that’s really important for the smaller groups, and perhaps less so for institutions the size of the Y is, do you understand the context in which you’re operating? Do you understand who your competition is? If in fact, you’re a smaller group within the community and the issue you’re trying to address, how do you know you’re making a difference? Why do you think… and I would probably guess groups of that size, there are peer groups. How are you better? And that’s asking nonprofit people who tend to be very modest people to be, in some cases, immodest to talk openly about how they think they are better at what they do, but you have to get at that, because that really determines whether they have the ability to succeed in what is a very difficult operating environment across the sector, and so those are questions that I would encourage donors to ask.


JACK LUND:  You know, it’s amazing. I recall a major funder in a Midwestern city telling me that in that particular city there were 16 different organizations that existed for purposes of preventing teenage pregnancy, and none of them knew the other ones were there, so you’re absolutely right. It’s understanding what environment you’re in, who else is in it and where you fit in.


CONSUELO MACK: What about younger donors? And you were talking about you’re dealing with multigenerational organizations and, Jack, you’re certainly seeing younger donors come forward now as well. Are their demands different?

JACK LUND:  Yeah, I think so. I think once again, they’re asking to be far more involved. I also think their methodology of giving is changing, and we’re seeing more electronic giving than we’ve ever seen before, and we’re just trying to catch up to make sure that we’re communicating with them the way they want to be communicated to.

DOUG BAUER:  It’s interesting about the younger donors, because… and we can thank 25 years of community service, the result of 25 years of community service, you know, a requirement in high school or college to go out there and do volunteer work, the level of experiences that these students have at 18 and 19 coming into university. It’s far beyond anything you and I did when we were all growing up. That didn’t exist, and that’s made them very sophisticated, very knowledgeable. They’re very choosy, and if they’re going to get involved, they want to be involved in a very real and sincere way, or they’re not going to do it, and that’s not to say that older donors aren’t interested in that, it’s a different intensity that I don’t see with older donors, and it’s a remarkable thing to watch. It can be very hard to manage, but I think it’s exciting, and especially if you see them kind of line up behind, you know, let’s say one of the more socially entrepreneurial kind of nonprofits out there. That can be a very exciting, almost combustible kind of experience for everybody involved, and if it happens, those kind of nonprofits can just take off.


CONSUELO MACK: And so how worried are you two about the tax implications of a possible limit on charitable deductions? Jack, how big does that loom in your radar screen?

JACK LUND:  Anytime a donor is asked, “Why do you give?” way down on the list is for tax purposes. There’s so many other reasons why donors give. On the other hand, when donors are asked if their taxes go up, will it affect their philanthropy, the answer is, at least for half of them, is yes. So we are concerned.

CONSUELO MACK: So it’s an issue. Doug?

DOUG BAUER:  From my perspective, there’s lots of analysis out there about keep it the way it is, tamp it down, all kinds of formulas. What I know, again, as a student of the history of American philanthropy, I can tell you ever since we’ve had a charitable deduction in place, charitable giving has gone like that. In my mind, there’s no question it is a catalyst, and for savvy especially… not just savvy but affluent donors, clearly charitable deduction as a factor in their tax planning is huge, and so I think Jack is right. There’s going to be an influence one way or the other, depending on what they do with the charitable deduction. All I know is it’s been a very important catalyst. I think that history has demonstrated that. I’d hate to see that, you know, interrupted in any kind of way. It has completely contributed to why there is such a robust commitment to philanthropy in this country.


CONSUELO MACK: And let me ask each of you the one investment for long-term diversified portfolio that we ask everyone. What would it be? And it can be in the philanthropic field or not. You know, what investment should we make to be a more effective donor?

JACK LUND:  Well, I guess I would answer it this way. I think whatever the investment is, I would tell the donor to do their homework, to know the agency, to dig in, to make sure that they’re achieving their outcomes, to make sure that they’re financially stable, to make sure that they have good leadership.


DOUG BAUER:  Wow. Well, there’s 1.5, 1.6 million charities in the United States. To pick just one would be hard. I would say this.

JACK LUND:  I have one in mind.

DOUG BAUER:  I know you do. And it’s a good one, Jack.

CONSUELO MACK: Gee, could it be the Y?

DOUG BAUER:  But no, I would say pick a charity that, A, is meaningful to you in a deep and real kind of way and that is also making a huge difference in the community. If you’re able to satisfy both of those dynamics, then I think you will have probably picked a good nonprofit.

CONSUELO MACK: What a great way to start the New Year on WEALTHTRACK with the two of you. So thank you so much. Doug Bauer from the Clark Foundation and Jack Lund from the YMCA of Greater New York. It is wonderful to have you both here. Thanks.

JACK LUND:  Thank you, Consuelo.

DOUG BAUER:  Thank you, thank you.


CONSUELO MACK: At the conclusion of every WEALTHTRACK, we give you one suggestion to help you build and protect your wealth over the long term. This week’s Action Point is: resolve to be a more effective giver this year. Jack Lund and Doug Bauer gave us some great suggestions to combine your head and heart in your giving. Get to know the organization, its leadership and programs you contribute to. Ask them for their strategic plans, annual reports or 990s, the major reporting form required by the IRS for non-profits. Knowledgeable giving is more effective and much more rewarding.


I hope you can join us next week for our annual television exclusive with Wall Street’s number one ranked economist for 30 years running. ISI Group’s Ed Hyman will join us with his 2013 outlook, only on WEALTHTRACK. If you would like to watch this program again, please go to our website, Premium subscribers can see future programs 48 hours in advance, and additional interviews with WEALTHTRACK guests are available in our WEALTHTRACK Extra feature. And that concludes this edition of WEALTHTRACK. Thank you so much for watching and make the week ahead a profitable and a productive one.

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