Tactical Philanthropy & Major Donors

This post is part one of a three part series on defining the phrase Tactical Philanthropy.

Read Part I
Read Part II

Yesterday I laid out a definition of tactical philanthropy and made the argument that a tactical philanthropy orientation was distinct from a strategic philanthropy orientation. I said that the two orientations were not at odds, that some of the best philanthropists might draw on both approaches, but that the expertise and knowledge needed to utilize each approach were different.

So who should use a tactical philanthropy approach and who should use a strategic philanthropy approach? Who should be a social investor and who should be a social problem-solver?

I think this is a decision that each donor/funder needs to make on their own. They need to find an approach that fits them as an individual or organization. But I think that we can make some important generalizations.

Staffed foundations may choose either approach. They can put themselves on a tactical philanthropy footing and focus on analyzing nonprofit organizations and building a strong portfolio of social change agents or they can build teams of experts in specific program areas and try to figure out solutions to important problems.

Ultra wealthy individual donors have access to enough resources that they can build efforts to tackle problems with solutions they design themselves. Tom Siebel, the billionaire founder of Siebel Systems (which he sold to Oracle), seems to have had fantastic success pursuing this strategy with The Montana Meth Project. Although Siebel’s foundation is just him and two employees, they used their resources to create a program that is widely credited with significantly reducing methamphetamine use in Montana.

But just because they have the capacity to build their own programs, some ultra wealthy individuals might take the more tactical approach of investing in other groups they think are best positioned to solve social problems. Warren Buffett’s decision to “invest” in the Bill & Melinda Gates Foundation rather than try to formulate his own solutions to important problems is unique in many ways. But it is a striking example of an ultra high net worth individual deciding to approach philanthropy by supplying support to an agent of social change. At the time of the gift, Buffett said, “What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it?”

But foundations only account for 13% of annual charitable giving.The Gates Foundation accounts for less than 1% of annual giving. What about individuals whose giving accounts for 82% of charitable gifts? While a large amount of individual giving will always be done without any real planned “approach”, fully 50% of annual charitable giving or $150 billion a year is given by high net worth individuals who are in a position to adopt a specific approach to drive better results from their giving.

I think that tactical philanthropy is far and away the best approach for these high net worth donors.

For the donor who gives $100,000 a year or $1,000,000 a year or someone who gives much more but doesn’t want to try to solve social problems themselves, a tactical approach to their philanthropy allows them to put resources behind the most promising social change agents to achieve results they never could on their own.

Investing in a portfolio of organizations that are effectively producing social impact in issue areas about which the donor is passionate is, in my opinion, the approach that is most likely to produce the best results for major donors.

When a donor goes to a tactical philanthropy footing, a number of dramatic developments occur.

• The start investing in the overhead required to run great organizations because they are setting out to support organizations in the first place instead of trying to implement a program.
• They focus their giving, making fewer, larger gifts because they realize that finding a small set of great organizations achieves better results than spreading their giving out across many organizations working on important issues.
• They get proactive and seek out great organizations to fund rather than reacting to fundraising pitches when they become more clear about the portfolio they are trying to build.
• They share what they know with other donors and solicit others’ input because they realize that this is the best way to learn all you can about who is doing great work.
• They become results oriented as they stop seeing philanthropy as the act of making a gift and instead as the results that the organizations they support achieve.
• They support their grantees over the long term instead of looking for the next big thing, as they realize that the most important results that their portfolio of organizations can achieve are the ones that occur over term.
• They seek to measure the “performance” of their philanthropic efforts by tracking the metrics that their grantees themselves use for evaluation and support the costs of gathering this data.

Strategic philanthropists and tactical philanthropists agree on many things. They both are ultimately concerned with producing social impact. But they choose to approach philanthropy with a different outlook. Strategic philanthropists are social problem solvers. Tactical philanthropists are social investors. As one tactical philanthropist told me recently, “I don’t know how to fix the problems in our city, but I know who knows how to fix those problems and it is our job to support them.”

Read Part I
Read Part II