This post is part two of a three part series on defining the phrase Tactical Philanthropy.
Investors tend to approach investing in the stock market with either a “value orientation” or “growth orientation”. Investors have found great success with both approaches. Neither approach dictates certain requirements, they just speak to the elements of investing that the investor finds most important. Many of the best investors pursue “GARP” strategies or “growth at a reasonable price,” a blend of the two styles. Success is not due to being dogmatic about style definitions, it is about figuring out what works for each individual investor.
I think philanthropy has two essential orientations as well: Tactical Philanthropy and Strategic Philanthropy. The best philanthropists might find that a blend of the two styles fits them best.
A definition of Tactical Philanthropy:
Tactical philanthropy is an approach to philanthropy that positions donors as suppliers of support to agents of social impact. Support generally refers to provision of capital through grants and social investments, but also includes nonfinancial support. A tactical philanthropist expresses his or her interests through supporting a portfolio of organizations that are effectively producing social impact in areas about which the donor is passionate.
This orientation positions tactical philanthropists as social investors.
The orientation of tactical philanthropy is fundamentally different (but not at odds) with strategic philanthropy. Strategic philanthropy, as defined in Paul Brest’s book Money Well Spent positions philanthropists as solvers of social problems. This problem-solver orientation is expressed through “analyzing a problem and developing a solution” that “solves the problem through a program strategy,” which includes “selecting grantees who will execute the strategy.”
This orientation positions strategic philanthropists as social problem-solvers.
Tactical philanthropists and strategic philanthropists require different expertise and access to different information. The best philanthropists will often draw on approaches from both styles.
Tactical philanthropy is not my invention. It is not a theory I’m proposing. Tactical philanthropy is an orientation, a frame of reference for approaching philanthropy. While they do not call it “tactical philanthropy,” in my opinion this is the orientation that the Edna McConnell Clark Foundation is taking when they say “Rather than design initiatives or programs itself, the Foundation works to develop and expand a pool of organizations… [We] focus solely on high-performing organizations and believes that making significant, long-term, financial investments in them (coupled with extra-financial supports) is an efficient and effective way to meet urgent needs.”
It is the orientation of New Profit who works to help “a portfolio of social entrepreneurs build world-class organizations and scale their social impact.” When I write about George Overholser, his paper Building is Not Buying and his thoughts about philanthropic equity, you’ll note that George never writes about how to solve social problems. George’s arguments about building and buying and providing nonprofits with growth capital are all about how funders can “provide support to creators of social impact.” When I write about SeaChange Capital Partners and the Growth Philanthropy Network, you’ll note that they see the role of philanthropists to be participating in “deals” that are structured arrangement to provide capital to nonprofits.
When I write about the need for philanthropists to focus on “performance” rather than “impact”, it is a call for donors to analyze the nonprofits to which they are considering providing capital rather than on analyzing the “solution” that best addresses a “problem.”
There is no doubt that philanthropy should play both roles, but not everyone is positioned to excel in both areas. The skill sets are dramatically different. As I’ve written in the past, a tactical philanthropy footing calls for donors to act like investors. For donors to see themselves not as entrepreneurs in their philanthropy, not as researchers or inventors, but as investors who’s claim to fame is their ability to spot outstanding investment opportunities and know which organizations to avoid.
A strategic philanthropy footing calls for an entirely different set of skills. Strategic philanthropists must have deep research skills, be comfortable with experimentation and understand the issues in the fields they wish to address. Strategic philanthropists have the opportunity to invent new solutions to intractable problems. Strategic philanthropists do not strive to “invest in agents of social impact” as much as they strive to be agents of social impact.
Both approaches offer the opportunity to change the world. But they are fundamentally different.
In many ways strategic philanthropy is harder. To be an effective strategic philanthropist you must have deep knowledge of the issue areas in which you are working. If you don’t, proposing a theory of change is the height of arrogance. But if a strategic philanthropist has deep knowledge about, for instance, the problems in the US education system, why shouldn’t they attempt to develop their own solutions?
But a good strategic philanthropist must know their limits. Just because a donor understands education or because they started a super profitable high tech company does not mean they are qualified to try and solve health care problems. If they have enough resources, they may decide to gather some of the smartest people in health care to tackle the problem (as Michael Milken has done with success), but even then they must know their limits.
Tactical Philanthropy on the other hand requires T-Shaped People or synthesizing generalists. It requires people who understand how organizations work. Finding great organizations is hard. It is a rare skill to be the kind of person who knows which organizations are going to win and which will fail. But the skill is transferable across issue areas.
There are two conversations happening in philanthropy today. One is the strategic conversation about how funders can be agents of change and design programs that work. The other is a tactical conversation about how funders can best provide support to a portfolio of nonprofit organizations. This tactical conversation is not confined to this blog, it is a widespread characteristic of the philanthropy dialogue at the dawn of the 21st century.
Both conversations are needed. And both definitions are still in flux.