Fixing Philanthropy

One big check shouldn’t be able to rewrite a nonprofit's mission, but that’s exactly how many organizational budgets are built. This episode features Vincent Jones, CEO of Beyond Impact, to challenge the status quo and unpack a blunt claim: philanthropy’s current funding structure is a design failure. The conversation gets specific about how the “low overhead” mindset starves organizations of fundraising capacity, traps teams in constant donor courting, and concentrates power in a handful of decision-makers instead of the communities nonprofits serve.

Jones breaks down the two structural problems he sees most: the pressure to chase a small number of major donors and the sector’s tendency to fund only 501(c)(3) work even when the goal is systems change. Using a clear "ER vs. intersection" analogy, he explains the practical operational differences between a 501(c)(3) and a 501(c)(4) in plain language, detailing why C4 advocacy and lobbying can target root causes while C3 programs often focus on essential short-term relief.

Transcript

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SPEAKER_02 0:00

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SPEAKER_01 0:14

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Why The Funding Model Feels Broken

SPEAKER_02 0:22

Welcome back to the Nonprofit Hub Radio Podcast. I'm your host, Megan Spear, joined today by Vincent Jones, who's the CEO at Beyond Impact. Guys, I have to tell you, I get a lot of pitches for people who want to come be on the podcast. And normally the topics are, you know, it's like, yeah, that's a topic we've talked about before. That's a topic we've talked about before. I'm really excited about today because I do like when we get a little, a little spicier on the podcast in a good way, like a devil's advocate kind of way. And so when a pitch came across for why philanthropy's current funding structure is a design failure, I'm all in. Let's dig into that. It was a really intriguing statement to me because there are some flaws that I think we don't talk about often enough. So I am excited to dig in to this topic today. Vincent, welcome in. Thanks for joining us.

SPEAKER_00 1:14

Thanks for having me. I'm looking forward to the conversation.

SPEAKER_02 1:16

Yeah. So tell the audience a little bit about yourself and kind of your background that brought us to the conversation today.

SPEAKER_00 1:22

For sure. So I'm the CEO of Beyond Impact. We are a 501 fiscal sponsor, grant maker, and convener. Many people might know us as Tithes Advocacy. That was our name for a number of years. We're founded in 1992, but at the beginning of this year, we went through a brand evolution and we're now Beyond Impact. I myself, I have worked in philanthropy at foundations. I've run nonprofits. I have my consulting practice and I worked in government for campaigns. So my career kind of spans the gamut of social change. And now I have the pleasure of working with the team at Beyond Impact to be able to support our physically sponsored projects and grantees and the field to be able to really advance progressive change.

SPEAKER_02 2:07

So good. So, okay, so if we're going to say that the current mund the current model of philanthropy funding here in the US, uh,

Vincent Jones And Beyond Impact

SPEAKER_02 2:17

the structure is a design failure. Let's first define the structure so that we're all kind of level set starting from the same place. What do you how do you see that structure now? Before we dig into what's wrong with it, let's define what it looks like so that we can understand that and we're all kind of using the same language moving forward.

SPEAKER_00 2:35

Great idea. I think the structure is multidimensional. Um there's two failures that I really see. So on one dimension, you have most organizations do not have a large development operation. So they tend to go for like the big white whale, use the Moby Dicking analogy. So go for the big donors who can give a lot of money. And once those donors give, they end up having an oversized impact on the work of the organization, either be a foundation or an individual. So that's kind of one dimension. They go for big foundations, big donors to provide a large amount of money. The other issue is a lot of if you want to get, if you want change to happen, most individuals or most institutions want to just give to 501c3s because they're afraid of the risk that comes in giving it other ways and because they know it better. But 501c3s were never really intended to change the the systems that are creating problems for people in their daily lives. They're created to be more of a band-aid. And so that kind of that's my sense of the two structural issues we have to fix and some of the teaser for the problems that we have to solve.

SPEAKER_02 3:52

Yeah. So okay, so to that end again in a in the spirit of level setting, help us understand and define if someone is maybe not as as acquainted with the sector. What's the difference between a C3 and a C4?

SPEAKER_00 4:05

Great. So I I can give like two examples. In one sense, if we're at election time, a 51c3 organization can say, go out and vote. It is important to engage in the political process. A 51c4 can say, go out and vote for this person to advance these issues. So a 51c4 can do unlimited lobbying, can endorse candidates as 51c3 cannot endorse candidates, can do very limited lobbying. Another example I give often is like with the hospital. You know, you if you can have people at an intersection getting injured at car accidents, they go to the ER. The ER, that's a 501c3. They're very important. They're solving the immediate situation, immediate problems. The 501c4

Two Structural Failures In Giving

SPEAKER_00 4:56

goes out to the intersection, finds out what's happening, sees that there are structural and policy issues that have to be changed so that way fewer people go to the ER. And that's what a 501c4 does. They go to they're able to get to the root cause of the problem and solve for that. So that way we don't need the short-term fix that 501c3s provide.

SPEAKER_02 5:17

Oh, that might be the best definition or like the best example I've ever heard of anyone delineating those pieces. So thank you for that. I think that's some really good clarity. Yeah. Okay. So help us understand then if that's the model that we're going off of and that's the structure. Then where is the where do you see the biggest fly in the ointment, so to say? Where's the biggest flaw in that structure?

SPEAKER_00 5:43

So again, there's two issues. So on the one part, because like most most donors, most foundations, they all they don't want to give to overhead, so to speak. They don't want to give to they want to give right to the work. And fundraising is part of overhead, it's not part of the work. So as a result, most organizations don't have the capacity to do the deep level of relationship building it takes to be able to develop a diversified donor base. So what they do is it's a smart move that's be very efficient. They focus on a small number of foundations or a small number of donors who then become a large part of their funding base. And if that donor decides, okay, I'm mad at you now, I changed my direction, whatever else, that can be a big chunk of change that the organization then has to try to fill that hole with. At the same time, the organization ends up spending a lot of time trying to court that donor, keep them happy. Um, they may adjust their work to their whims, to their needs. And that's not what the issue requires. That's not what the problem they're trying to solve needs. And so, like, that's a design flaw where the organization is being more responsive to the donor because they're providing the resources than to the community that needs the work.

SPEAKER_02 7:07

It is a consistent hill that I will die on. That this idea of you know, nonprofits need to have the lowest overhead possible to solve the world's ills is the most ridiculous thing that we have ever put on an organization. It absolutely drives me crazy. So, yes, I yes and amen. It is a problem. Because you would never say to a for-profit company, we're gonna detailed look at how you run your business before we decide to buy your product. No.

SPEAKER_01 7:36

Exactly.

SPEAKER_02 7:36

We assume that there is a cost of doing business that requires people and resources to do the work. The fact that is even a discussion we keep having to have here in the year of 2026 is absurd to me. So I appreciate that call out for

C3 Vs C4 With Clear Examples

SPEAKER_02 7:52

sure.

SPEAKER_00 7:54

And all about you, but as an example, they are able to succeed because, like, when you think of Nike, you think of just do it and the swoosh. When you think of like certain things, you just think of the product. They've been able to saturate the world so that we're able to think of their product or their brand. And but in the nonprofit scheme of things, we are not able to do the things to be able to actually achieve the mission we set out to do. Instead, we have to focus more on donors. And I just really believe if we democratize donors, if we democratize who gets to donate, it shifts the power dynamic to where the organization who has who knows what needs to be done and has a skill set and a closer to the problems, they can then be able to dictate and not the person who is providing their funds to the organization to do that work.

SPEAKER_02 8:49

So good. So I am not a person who likes to identify problems without offering some sort of solution, right? I don't ever want to be part of the like, I'm just gonna complain about the fact that this is bad without ever engaging the second half of the conversation. So I'm curious then, what does that look like in your if you had to maybe redesign the system at this point? What does that solution look like to you? And are there steps that we can even in our organizations now be taking towards solving that problem?

SPEAKER_00 9:22

So I think if I were a foundation program officer or president or board member, I would I would structure my grant making to encourage and incentivize grantees to diversify their donor base. They should always be encouraged to have multiple sources of revenue and to be given the tools and support and the staffing to be able to sustain that long term. If I was an individual donor, I would try to make sure that my support is not only going directly to the work, but also helping to build the orgs capacity to be able to sustain that fundraising beyond my giving. I would always tell them don't expect me to give to you forever. Expect for me to be a partner with you to build the capacity to be able to generate the same amount of resources on the long term. And the but the other part of the problem, because I didn't get to go into more detail, is if the donor or the foundation wants to see change, then they have to also consider giving to 51c4s. They have to encourage their 51c3 organizations to create an affiliated 51c4 entity. They have to not be afraid to support 51c4 giving through the legal ways they're possible to do.

SPEAKER_02 11:05

We

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The Overhead Myth And Donor Control

SPEAKER_02 11:19

feather f so talk to me about, or maybe give us an example of an organization where that would be a really, a really solid strategy is to have the 501c3 have its own 501c4 associated to it.

SPEAKER_00 11:49

For sure. So oftentimes groups that do services are working with communities who are impacted by systems. So if you think about like a so I'll give an actual example of a multiple structure and then kind of give an example of one that doesn't really have one. So we know about Planned Parenthood, for example. They have, you know, they have clinics that are often 51c3s, and then they have 51c4s to do their advocacy work. There's the COVID, they work on environmental stuff. They have a 51c3 to do education more broadly about the issues, and then they have C4s to be able to do the advocacy to be able to change the policies. And there are like there are a number of groups who are structured like that. So you think about groups and they're more community-based organizations that are working with families who are who are living in poverty. There is the immediate need to help them to get fed, help them to get housing, help them to get medical treatment, help them to get supplies for the kids to go to school. At the same time, the reasons why they are living in poverty are also connected to failing systems. And the people who are impacted, who are living in poverty, can and should be part of the solution to change those systems. So that same organization has a very strong tie with the community, but they're not able to then do the organizing with them to really change the system. So they can have an affiliated 51c4 entity that is leveraging some of the goodwill and relationships they've built by providing the services to also engage them in doing the system of policy change. Does that help explain it a little bit better?

SPEAKER_02 13:34

Yeah, that's helpful. So I'm curious then from a so if I'm if I am the executive director of a nonprofit who's listening to this podcast, right? And the work that we do does exactly what you're saying, right? Helps a community is pouring into a local population that has been impacted by a whole history of systems. When we talk about giving, because I one thing I know to be true, right, because of the overhead problem, is that we have a lot of folks who are working in nonprofit storytelling, nonprofit fundraising, maybe the director of development, et cetera, who is already looking at a wildly full plate. Because we keep adding to, you know, we did direct mail and now we add email and now we add social content and now we have the newsletter and we keep piling more and more onto a fundraiser's plate when we have this piece of it now. How the C3 versus the C4 tells a story to do its fundraising is gonna have to be different. So in your again, if you're designing the system from the ground up, is that two different teams? Can the same team handle balancing that messaging, or does it need to be super segmented to be effective?

A Better System Through Capacity Funding

SPEAKER_00 14:52

It can be either or. And the other entity has a cost-sharing agreement with the home-based entity to pay for the time that they're providing to the other entity. So let's say we have a C4, a C3 together, we are staff of the C3, we're paid by the C3, our C4 will pay the C3 for time that we're spending doing C4 work. And we're only using C4 resources when we're doing C4 work. That's how it happens structurally and legally, but in terms of the messaging and whatnot, oftentimes a C3 donor who's giving to causes like hunger and homelessness or whatever, they want the issue to end. They do not want to keep giving to it year after year. So I think for the organization that is dealing with these issues, it helps them to be able to say, we are dealing with the short-term need and trying to deal with the long-term problem through the C3 and the C4. I think it strengthens their case for support by having both. And there are some donors who are only going to want to give to the problem solving, the long term, and they're less interested in the short-term fix. And they're some more interested in the short-term fix. So I think it actually expands the possibility of donors to them. And it also can help them to increase the giving from their current donor base who are like, you're right. I don't want to do this forever. If I do a give a little bit more, I can be able to reduce the amount that I have to give for this problem in the future.

SPEAKER_02 16:42

That's so good. I think it's such an interesting perspective to look at it that way. Because yeah, I think I so literally just before we got on this, I was on a webinar, I was hosting a webinar. We do a monthly webinar on Nonprofit Hub that's a Ask the Experts. And today's was about storytelling and how we do storytelling well. Um and so it's it in light of that framework of the conversation, one of the things that we were talking about was telling stories of impact. Instead of just telling telling us about the problem, right? And it's that whole framework of ethical storytelling. Instead of just telling us about the problem, tell me what you did about it or what you intend to do about it and show those outcomes. But I do agree, so often we get stuck in this cycle of just here we are putting the band-aid on it. Here we are, we're just trying to get through. And after a while, that leads to donor fatigue and donor burnout. There is no other way for it to go. Right. And so I I do really appreciate this idea of the both and, if you will.

SPEAKER_00 17:50

Yeah.

SPEAKER_02 17:51

I'm curious in your experience when organizations kind of take that approach, because I think again, I'm I'm putting myself in that executive director seat at the moment. My initial pushback is going to be, well, I don't wanna I don't want the C three to get less donors. I don't how do we hold that tension? We don't wanna we don't want to view the C4 as

When A C3 Should Add A C4

SPEAKER_02 18:18

taking away from.

SPEAKER_00 18:19

Right.

SPEAKER_02 18:20

Right? Because we do still need to fix the band-aid problem. If someone is in a car accident, they still need an ER. So how do we make sure that that doesn't get impacted? What does that tension and that balance look like for you?

SPEAKER_00 18:32

Well, it's uh it's really a fake tension because a C4 can do everything a C3 can do. It's just that a C3 cannot do everything that a C4 can do.

SPEAKER_02 18:41

Got it.

SPEAKER_00 18:42

So C4 dollars can be used to do what C3s do. The challenge is most of the time it's much harder to raise C4 dollars. And so people prefer to use C4 for C4 purposes, but even with the C4, there's a whole idea of a primary and secondary purpose. So a C4 can do unlimited lobbying and endorse cases and everything else, but it can't be their primary purpose. Their primary purpose has to be social welfare of a community of a community. So oftentimes a 51c4 will get C3 funds to do the primary purpose work. So it really doesn't, it doesn't take away from the the work of the C three side of the house. It just provides another way to fund it.

SPEAKER_02 19:33

Help us flesh that out in an example. Like if it like whatever organization you want to pick, but help us understand what that looks like from an actual organization perspective.

SPEAKER_00 19:45

You mean the the primary purpose spending on the C3 size? Okay, so so let's say that um let's say you have an organization, uh I'll stay with the hunger and homelessness issue, and they want to educate the community about the homelessness issue within their community. Now they can use C3 dollars to do that. It can be money that is provided to C3 directly, or if they get C4 dollars, they can use C4 dollars to do the exact same thing. Now, with the C4 money, they can also say, well, these members of city council, these members of the state legislature are not supporting the funding that is needed to be able to put people in housing or not supporting these policies that we know will help to reduce the number of people who are living on the streets. And then they can be able to say now for if you support, if you support us and the one in homelessness, support us and not voting for these people. Those that's the only C4 dollars, but the C3 money can be used to do the education and do a certain amount of engagement in the process. Does that help to plan a little bit more?

SPEAKER_02 21:02

Yeah, I think that's helpful. Okay, so one final question is as we are coming up on time, but one final question. So again, the way the topic was phrased was why the current funding structure of philanthropy is a design failure. And this is maybe opening a can of worms with not a ton of time.

SPEAKER_00 21:21

Open it, open it.

SPEAKER_02 21:22

But I think I think the current structure, and correct me if I'm wrong, you know, we're talking about communities in general for organizations that may have been failed through systems, right? I think there are a lot of organizations that have been failed through systems because of the way the current thing is structured, especially go back to the, you know, I'm going after the big whale, the big donor piece, very negatively impacts organizations that are led by minority communities. Right. And so is there in an ideal world, this is maybe the Solution to help level set that system, right? Is am I thinking about that correctly?

SPEAKER_00 22:06

You definitely are. It's I mean, so I was born to like a young mother, young single mother in Compton, California, where if you know about it, it's not the best community. But now I'm leading a uh organization with a close to $100 million budget and 36 staff members all across the country. And that would not have happened without a lot of support and um and hard work on my part as well. But I don't, I didn't grow up

Staffing, Messaging, And Cost Sharing

SPEAKER_00 22:35

with this familiar relationship of wealth. Um I have come to know people who are wealthy and have means. And I and like and I'm able to tell a story to be able to try to engage them and connect with them, but I didn't come with that. And so by being able to democratize donors and democratize who gives, it allows for anybody to really be able to be at the table and lead an organization. Because it's not about you having the friend at the country club or having a friend who can write the million-dollar check, but being able to connect with the people who can give $100 a month, can give $1,000 a year, can give $500 every once in a while for an event or whatever. And but philanthropy is not set up to allow organizations to have the capacity and the structure to really do that, unless you are a really large organization with hundreds of staff and a you know, multi-million dollar budget, then of course you're gonna have that large team that has like 10 people just doing direct mail, 10 folks just doing email. But most organizations have one person doing all fundraising. So they can't do everything.

SPEAKER_02 23:46

So good. I yeah, I think again, in in the sense of leveling the playing field, I really like this perspective and your view on this. So thank you so much for for sharing all of that. Really appreciate it. If somebody wanted to learn more about the work that Beyond Impact does or how to connect with you to learn more about this topic, how do we go about doing that?

SPEAKER_00 24:07

So we're at beyondimpact.org, and that's beyondimpact.org. They can go there and find out more about us, how we can help them to start a 51c4 project connected to their C3 or just start a 51c project on their own that's not connected to a C3. They can also reach out to me at vjones, V-J-O-N-E-S at BeyondIpact.org. I love to talk to folks about this issue and how um we have to democratize donors, and I'm happy to come speak to you know anyone who wants to talk about it more.

SPEAKER_02 24:37

That's great. Okay, so last question as we do wrap up today. We have dubbed this year on the podcast is the year of learning. So I would love to know from you what is a book that you would recommend everyone

Democratizing Donors To Level Power

SPEAKER_02 24:50

put on their to read list that has really impacted you in that way.

SPEAKER_00 24:54

So given that your audience is primarily both leading nonprofit organizations, um, a book that really inspired me in a way that I lead is called The Provocateur. Um written by Larry Weber. It's um at the core, it's a once you start to read it, it makes a lot of sense. But it's really about the an old and new way of leadership. Okay, old way, you have like a Lee I coca, you know, it's like, I want to sell this many number of cars this year, you're going to sell them and be a general and like lead the troops to to battle. Then you have the provocateur who's Oprah, who's like, you know, if you ask most people what's Oprah's mission in life, they would say to help people to live their best life. And if it was primarily women, but everyone connected to it. And she was so good at helping to people to connect to that shared value that they would say, oh yeah, this show is helping me to live a better life. And they and her team will learn more. Then you get the Angel Network, then you get the book club, then you get like favorite things, you get all these things that are really about helping people to live their best life. And it's much more of a community that's being created and not just one person saying, I'm going to lead the troops to do what I want them to do. Yeah.

Book Recommendation And Closing

SPEAKER_00 26:15

I think in a nonprofit world, we should strive to be provocateurs. You know, with we have donors, we have staff, we have many stakeholders who are trying to build a community around to be able to solve a problem, to address an opportunity, and to make change in the world.

SPEAKER_02 26:31

So good. I will definitely be adding that one to my list. That sounds really interesting. Vincent, thank you so much. This was a really enjoyable conversation. I really appreciate your perspective. Thanks for joining me today.

SPEAKER_00 26:42

Thanks for having me. I love what you're doing. I think a lot of folks in the nonprofit world need to have these kind of conversations. I know when I got started, we didn't have podcasts. We didn't have out there. So what you're doing is really um so it's like a chef's kiss to the community. So thank you for having the podcast and having.

SPEAKER_02 26:59

Absolutely. Thank you so much. Again, my guest has been Vincent Jones, who's the CEO of Beyond Impact. This has been another episode of the Nonprofit Hub Radio Podcast. I'm your host, Megan Spear, and we'll see you next time.