In response to my recent Financial Times column about new approaches to funding growing nonprofits, the following letter to the editor appeared in the April 5 edition of the FT.
Sir, Sean Stannard-Stockton (“Non-profits look to invest in themselves”, March 29) errs when he concludes his interesting column by saying that “while yesterday’s donors were content to give to a non-profit based on emotional appeal, today’s donors want to know their money is really going to have an impact”.Since the late Renaissance and the Reformation era when the conceptual and applied shift towards “modern philanthropy” with its pursuit of rationalised solutions to systemic problems occurred, donors have sought to optimise the outcome of their investments. Today’s “venture philanthropists” promise greater results and more accountability by borrowing from the practices of venture capital, just as “scientific philanthropists” of the late 19th century did by adopting the principles of the reigning intellectual framework of science.
In order to grapple honestly with the strengths and weaknesses of beneficence, it is important to recognise that new and better practices are often old methods that have been revived – because the problem of an unequal distribution of resources endures – and that perpetual frustration with the limits of philanthropy is a prime reason for the continual reworking of ideas.
Amanda B. Moniz,
Department of History,
University of Michigan
Michael Edwards of the Ford Foundation responded to the same sentence in my column saying, “[you] assume that impact considerations are new, when in fact they have been around for fifty years or more – just not expressed in the ways you
think are satisfactory.”
I agree that the concept of impact (attempting to give in ways that can do the most good for your dollar) is not new within institutional philanthropy. Because a lot of my readers work at institutional foundations, consult for these foundations, or work at nonprofits that receive grants from these foundations, I often address issues of institutional philanthropy. But I’m not an expert in institutional philanthropy. My firm, Ensemble Capital, serves individual philanthropists. When I talk about The Second Great Wave of Philanthropy, I’m talking about major shifts going on with individual donors. When I write for the mass audience of the Financial Times, I’m writing for individual donors. But given how my writing on this blog veers into issues of institutional philanthropy on a regular basis, I can see how it is my fault if people perceive that I’m declaring “impact” as a new concept to foundations. It is not.
Individual donors have always been aware of the idea that their donations could do more or less good depending on which nonprofits they funded. While they might not often use the word “impact”, the concept makes sense if it is explained to them. But I reject the idea put forth by Moniz and Edwards that “donors” (and that was the word I used, not “foundations”) have embraced impact considerations for half a century.
If in fact donors understood impact, which at its core assumes that some donations do more than others, than you would assume that these donors would strive to achieve higher levels of impact. Yet there are almost no mass market books that discuss this issue, almost no articles in print or online, almost no organizations that help donors achieve impact.
Now before you send me emails pointing to Inspired Philanthropy or Don’t Just Give It Away, before you point out that I’m writing a mass market column on these very issues at the Financial Times, before you tell me about excellent consultants like The Philanthropic Initiative, Arabella Philanthropic Investment Advisors, or my own firm Ensemble Capital, let me just say that all of that adds up to just a bit more than zero.
Individual donors have access to almost nothing compared to individual investors. Every bookstore in the country has a whole section devoted to personal finance (books on which generally ignore charitable giving while lavishing pages of copy on other obscure financial issues). Every daily newspaper devotes space to advising individual investors and we have many mass market publications targeted directly to the individual investor. Investors issue with investment advisors is not so much finding one (believe me, there are thousands of advisors trying to find you right now), but picking from amongst the many qualified professionals.
Most individual donors don’t even know the difference between a nonprofit and a foundation. Institutional philanthropy actual is making a effort to let people know what they do since most Americans cannot even name a single large foundation. Individual donors with a portfolio of appreciated assets still mostly write checks to charity instead of transfering assets or setting up a philanthropic account (this is similar to saving for retirement in a checking account because an investor had never heard of a 401k).
I could go on and on.
I actual have my own criticism of the sentence in my column that Edwards and Moniz call out. When I wrote “while yesterday’s donors were content to give to a non-profit based on
emotional appeal, today’s donors want to know their money is really
going to have an impact,” I actually overstated the case in the opposite direction of the way they saw it. Edwards and Moniz argued that the statement was false because they believe yesterday’s donors were focused on impact. I would say that my statement was flawed because in fact, not even “today’s donor” knows what impact is. “Tomorrow’s donor” will be the ones deeply concerned with impact. But at least today we have real movement in that direction.
12 Comments
I for one am not convinced. Donors have always understood that some donations do more than others (what you define as being at the core of “impact”). To me, what is new is that many more donors now feel that they can – or at least have a right to – exercise an increasing level of control on how the organization uses their money to make impact. Most donors used to think that was something reserved only for the very wealthy (i.e., institutional donors).
My guess is that the reams of information available to the individual investor are related to a couple of things: the professionalization of the field and the democratization of the stock market (which has been fairly recent – believe me, 30 years ago it would have been hard for me to be investing in the market like I am today. My assets just didn’t measure up.). Most academic MBA programs, business scholarship, accreditations, etc. got their start after the turn of the last century. Academic programs and career training focused on the nonprofit sector have only begun in past couple of decades. Our sector’s just at the beginning of what’s been at the fingertips of the business sector for a century or more. And what I think you’re sensing is that donor democratization (the widespread desire to control and influence impact) has gained momentum as well. At the rate we’re going, it won’t take 100 years for us to catch up. You might have the same trouble picking a philanthropic advisor in the ensuing decades as you do picking a financial advisor now.
Whether the desire to control or demand impact (impact as defined by the donor, not the organization) is healthy depends in my mind on the types of things that Michael Edwards points to in his comments to your original post, and I think that Amanda Moniz has a very astute point when she says it’s important to recognize that “new and better practices are often old methods that have been revived.”
I take issue with both the statement that “[t]omorrow’s donors will be the ones really concerned with impact,”in contrast to today’s and yesterday’s donors who supposedly did
not know how to assess impact, and the statement that “what is new is that many more donors now feel that they can – or at least have a right to – exercise an increasing level of control on how the organization uses their money to make impact.” The issues of impact and control have concerned donors for centuries. In eighteenth-century England, associated philanthropy (that is, voluntary organizations funded by many donors)
replaced endowed trusts (generally set up through bequests) as the dominant form for charitable giving. A major reason for the shift was that associated philanthropy gave donors greater control over their giving. Moreover, associations gave middling people a voice in governance of charitable institutions and thus in governance more broadly. During the late eighteenth century and early nineteenth century, the vogue for associated philanthropy spread widely in the United States. Donors on both sides of the Atlantic were concerned with impact and with accountability. As one party to a nasty dispute
over, in part, control of the new dispensary (free out-patient clinic for the poor) in New York in the 1790s, explained, while some people had already subscribed to the nascent
charity, “a much greater number, however, and perhaps equally well disposed [to the idea
of the unfamiliar institution], keep back until they see, (to use their own phrase) how it will work.” Besides assessing how institutions worked, donors demanded transparency about finances from managers of charities. Managers met that expectation by publishing annual reports as pamphlets or in newspapers with the organizations? annual audits and
information on the number of people aided (or, really, processed – the only metric that can be quantified.)
Why do these historical examples matter? I think we should stop making a fetish of newness. Innovation is, of course, important. In the eighteenth century, charitable
infrastructures evolved and became elaborated due to the appeal to consumers of novelty and variety. Innovating solves problems and adapts beneficence to new contexts. But I
think that part of the reason we continually insist on the newness of a way of doing something – whether programmatic or administrative – is that we are unable to recognize
that philanthropy is symbiotic with failure. (Here I am thinking of philanthropy directed towards aiding poor folks in one way or another.)
There are three components to that relationship. First, charitable endeavors are predicated on the failure in the distribution of resources. Not everyone can win in a
competitive economy, and philanthropy both legitimates and redresses the resulting inequalities of wealth. Second, beneficence always fails; although it has real successes, it never achieves enough and therefore the leaders and supporters of
philanthropic organizations forever seek new and purportedly better programs or more businesslike practices or greater accountability. The search for new and better ways of doing things is a result of real frustrations and problems and of vain hopes that ignore the basic condition that philanthropy is based on unequal wealth and can never achieve enough. Third, philanthropy needs to fail or it would put itself out of business. Although there is little danger that beneficence will succeed to the point
of eliminating itself, charitable organizations remain in operation, employing people and engaging in other economic activity, thanks to the existence of poverty. That view
sounds gloomy and harsh, but it is written from a genuine interest in understanding the strengths and shortcomings of philanthropy. Since our conceptions of philanthropy
implicate ideas about the economic and social order, I think it is important for people engaged in beneficence to be forthcoming about its limitations. The constant need to make claims for newness suggests to me that we are evading honest reckonings about the
impact – positive and negative – of philanthropy.
“Associated philanthropy” has been alive and well in this country for a century. Community foundations help their donors (who have set up “philanthropic accounts”)make effective grants (or investments, if you prefer). These donors are eager for results, but emotion will always be part of philanthropy. More important, I think you ignore Edwards and Moniz’s underlying thesis–that philanthropy arises from inequality–and that real “impact” can’t happen until that fact is recognized.
One clarification: my comment did not mean to imply that the impulse of donors to control or influence impact was new. Indeed, I agree it has “concerned donors for centuries.” What I was trying to describe is an impression that it has entered a new phase. The explosive growth of donor-advised funds at community foundations and commercial gift funds over the last 10 years would be a good example; rather than create unrestricted or field of interest funds, or use bequests as the primary vehicle for giving, donors are opting to remain personally involved. “Venture philanthropy” legitimizes donor influence far beyond the sort of financial transparency and accountability described in Amanda Moniz’s example. And I think more donors, at lower levels of giving, feel empowered to have their say on how programs should work or ask for evidence on impact as they define it (which is not necessarily as the organization defines it).
While the efforts at control and influence have been around as long as charitable giving, I sense that it’s recently been taken to the next level and is more widespread.
That philanthropy fails to address—or perpetuates—the unequal distribution of resources that gives rise to the need for philanthropy in the first place, is an important concept and worthy of discussion. That said, it does not seem germane to the topic at hand except to shut down discussion: impact doesn’t matter because philanthropy is in symbiosis with poverty. It’s not “gloomy and harsh,” it’s oversimplistic and defeatist.
Amanda makes an excellent point about the fetishization of newness and innovation, and indeed the history of philanthropy is rich with lessons for current institutional and individual donors, but I think most people would agree that the scope and momentum of philanthropy in the United States are changing pretty dramatically. Many of the solutions are not new, but the ways in which they’re being implemented are sometimes radically different.
GuideStar gets 8 million hits per year. That’s new. And it’s important.
On the contrary, the symbiosis between philanthropy and inequality does matter if we are trying to assess impact. How is impact defined? Bandying about the word evades, rather than analyzes, the concept. Impact includes the effects on donors (for instance, their social standing), all economic activity related to donations, the effect on philanthropic institutions (such as where decision-making lies), and the effect on beneficiaries. To me, striving to maximize the impact for beneficiaries while minimizing donors’ control over them should be the key goal of improving impact.
Before going any further, I want to apologize to Ms. Moniz and to the Tactical Philanthropy community. The tone of my last post (namely, the last sentence of the 1st paraghraph) was not appropriate in a community that fosters discussion. Discouraging discourse was not at all my intent.
Further, I suspect Amanda and I are more aligned that it appears. (But perhaps not.)
If anyone reading this post has not read Rob Reich’s brilliant article from SSIR in 2005 (“A Failure of Philanthropy”: http://www.ssireview.org/articles/entry/a_failure_of_philanthropy/), I would encourage you to do so. It provides a brief & compelling analysis of how philanthropy encourages inequity and recommendations for how to fix it. Though I worry about Reich’s suggestion that a gov’t agency should determine which charitable causes are more deserving than others, I found most of the article to be spot-on. In fact, I think Reich could have gone further, observing that the types of social service organizations that receive funding often engender dependence and even exacerbate resource-inequity & class divisions. And yet the central assumption—that the goal of philanthropy should be redressing and remedying inequalities in our society—is unconvincing.
This same assumption informs Amanda’s argument and I think it’s the crux of our disagreement. The majority of charitable giving in the US is not related to remedying inequities. I think it should be. But I don’t think remedying inequality should be the Goal of Philanthropy more broadly. What about cultural institutions, the environment, animal welfare, the arts, scientific research, etc.? The nonprofit ecosystem is rich and diverse, and while it might benefit from shifting resources and a “thinning of the herd,” the existence of diversity is a good thing. I certainly wouldn’t look to gov’t or the for-profit sector to advance environmental awareness…
So, assuming that diversity in the np ecosystem is desirable, does it not make sense to measure the effectiveness of nps while simultaneously working to change federal policy and educate donors?
The broader community of donors (not just the affluent and those aggregated through “associated giving” programs) are increasingly looking for measurement & independent analysis and I think that’s an important first step. In my own case, I first became aware that I should ask questions of nonprofits instead of giving to people that I liked (my early-20s), then I learned to look for measurement (late-20s), and then I learned to look at the system more broadly and to question its complicity in the problems it seeks to solve (early-30s).
But I still want better tools for assessment. How else can I determine if: My gifts to the American Diabetes Association are more effective than gifting the same $ to smaller nonprofits focused on diabetes? My gifts to the SPCA are actually addressing the problem of unwanted animals? My gifts to Project Exploration are doing more to advance science education among minority girls than would gifts to related nonprofits?
-CG
PS, I use the word “impact” as rarely as possible because I find it vague and prone to use in evasion, as Amanda observes. I also think people use it because it makes management & long-term change sound like an action movie (e.g. “Nonprofit Impact 3: This Time It’s Personal!”)
Another age-old dynamic: Shopping for demonstrated impact should not necessarily become a justification for using “funder muscle” to shape how a nonprofit is managed.
In my board work as a venture capitalist, and as a public company board director, I am struck that the vast majority of people who “give” money to a for-profit firm have very little right or expectation to exert influence on the inner workings of the firm. Rather, as customers, they react to what the firm has to offer, and, on that basis, decide whether or not to buy. Even equity stakeholders (the few check-writers who do have a right to meddle) generally interact with one another before engaging with management teams. That way, management can maintain a higher degree of focus and autonomy.
My experience with nonprofits has been radically different. Nonprofit management teams often spend their lives meeting with one influential funder after another, each with a different idea of how the program should be improved. Seeing no alternative, the management teams too often say “yes” to disruptive grants. Rather than raising money simply to do more of what they have shown they can do, they find themselves accepting money that requires them to constantly change what they do.
Everyone acts with the best of intentions, but the result can nevertheless be chaotic.
Someone once told me that the five scariest words heard by an Executive Director are when (yet another) funder says “I just want to help.”
One of the difficulties we encounter in the emerging world of “venture philanthropy”, is that it is difficult to determine who should, and who should not have the right/role of influencing nonprofit management teams.
How do we avoid having too many cooks in the nonprofit kitchen?
First, Chris, no offense taken. I’m an academic; my skin is pretty thick. Thanks for alerting us (me, at least) to the Reich article.
I would be curious to explore more the issue of why the goal of philanthropy should not be about redressing inequality. Or rather, why donors should get tax deductions for gifts that redistribute wealth to the well-off. I certainly think there is much value to cultural non-profits and I agree that diversity in the non-profit ecosystem is desirable and, in fact, is one of its strength. But I question whether taxpayers should subsidize gifts to non-profits that mainly serve elites. To me, assessing impact in terms of broad economic impact – who non-profits employ, what communities their money is spent in – is critical because evaluating long-term impact of programs is so much harder. This brings me to another comment. In my discussions with family and acquaintances about my study of eighteenth-century beneficence, I have found that the general public generally does not think about the power dynamics of philanthropy that we have been discussing on this blog. I recognize that non-profits don’t want to publicize these issues for fear of alienating donors. But I think that making those issues more explicit to the general public could perhaps help avoid some of the problems of too many cooks in the non-profit kitchen. Rather than eliding power issues, non-profits should educate donors about them.
All of these comments are extremely valuable and interesting. Thanks to all of you for sharing your thoughts. I’ve been traveling and having trouble participating in the conversation at the level that I’m use to, but clearly all of you held up the conversation wonderfully!
On the plane today I finished Just Another Emperor. The book lays out a well done criticism of “philanthrocapitalism”. Part of the argument rests on the idea that philanthropy should be about reducing inequality and redistributing wealth.
The book also gives a number of examples of “business-thinking” in philanthropy that have been around for centuries as Amanda has argued. I think I have my work cut out for me to try and explain my point of view well. So I’m going to be writing a full post on Just Another Emperor and responding to a number of the points raised in this conversation when I do.
Wow. What a discussion. When i hear maximize impact, I got to tell you it even makes me say, Huh sometimes and i do understand it. I nearly lost the point to this discussion.. but honestly, when we (np and philan folk)use the word impact… my experience is with businesses or family/individual donors, most don’t have a clue what ‘impact’ even means. The term I hear over and over, “we want to make a difference” and still the notion of measuring anything is beyond a donor’s interest. It’s up to nonprofits to convey their measure of success with donations and putting it at a reading level that most people can understand. I not saying dumb down, rather be smarter about who the audience is and what the audience wants and can can understand.
RE: Donor control is nothing new and dates back to the the 18th century and philanthropy & higher education which still goes on today. Nonprofits say no and understand the implication of strings/control attached to gifts is not always the best gift to get.
I appreciate the academic discussions. I just think we as a sector don’t do such a great job at communicating to certain audiences. No one in particular, just as a field.
Amanda: I’m glad you took my comments in the spirit in which they were intended. I grew up in an academic household (my father, a professor of the history of science & medicine) so I like a little vigor in my discussions, but many people see a critique of an idea as a criticism of their person, and these online communities can get snarky quite fast, so I figured I’d err on the side of politeness. I’m a guest in Sean’s home, after all. Come over to my house some time and we can chop it up.
Speaking of which, I look forward to discussing the role/goal of philanthropy further, and I think Michael Edwards’ Just Another Emperor? will provide excellent grist for the mill. With Sean planning to post on JAE (and with a busy work week afoot), I need to beg off for now. Cheers!