“Thanks for the provocative commentary on the report Sean. We couldn’t agree with you more about the importance and power of leverage. In the coming years, we believe that the most effective funders will increasingly be able to leverage outsized impact and trigger resources that are far larger than their own, whether it’s by influencing other funders (institutional or individual), catalyzing government support, mobilizing public will and opinion, or stimulating markets to sustainably provide services…
But I wonder, though, whether the main distinction you are really highlighting is less about “internal” versus “external” leverage (many of the examples of Acting Bigger from our report—especially in the section on “Leveraging Others’ Resources”—are primarily about influencing the flow of external resources, after all), as much as it’s about “direct” and “indirect” impact.
And in that respect, your point remains a powerful one. In the end, the greatest impact of the Women Moving Millions campaign, for example, may not be in exactly how many dollars the initial gift ends up leveraging directly, but instead in how the effort raises awareness about women’s and girl’s issues and how it shifts the behaviors and attitudes of generations of women who are empowered and encouraged to give in the years to come.”
Gabriel makes a good point in questioning the internal/external vocabulary I used. My point in the post (and in the presentation I gave on Friday to the Social Venture Partners conference) was to suggest that the impact of a funder’s actions may be felt much more largely away from the targeted area intended by the funder.
In the post I wrote:
“I believe that in many cases, external leverage is FAR more powerful than internal leverage. But internal leverage is far more measurable. We can see this dynamic at work in Warren Buffett’s gift to the the Gates Foundation. The internal leverage (Buffett’s utilization of the Gates Foundation’s resources to distribute his giving) is significant. But as I’ve argued many times, the big impact of Buffett’s gift is the external leverage generated through the richest people in America modeling a changing attitude to philanthropy.”
Gabriel suggests that direct/indirect might be better than internal/external. I hesitate to use this vocabulary, because I think the “external”/”indirect” impact of Buffett’s gift, for example, is actually very direct. His actions are directly influencing the way Americans think about philanthropy. It may be difficult to measure and it may be difficult to control, but it is very real.
But Gabriel is right that internal/external isn’t very good either. Clearly a funder can leverage internal sources of leverage (non-monetary resources) or external sources (other fund flows). These actions can be directed towards precise, targeted activities or towards influencing larger spheres.
Regardless of what we call it, an important take away for me is that a real tension can exist between measuring impact and maximizing impact. The relationship between the two is neither completely correlated or negatively correlated. Often measuring impact can be a key tool for maximizing it. Yet I think it is important for philanthropy to grapple with the idea that those things which can be measured are not always the most important things. As we strive towards measuring impact, it is critical that we don’t end up thinking too small. Achieving measureable objectives while ignoring opportunities to create much larger impact simply because the larger impact isn’t measureable would be a tragedy of epic proportions.