The Effective Charitable Giver

In Friday’s post, I laid out four core approaches to philanthropy.

  • The Charitable Giver
  • The Philanthropic Investor
  • The Strategic Philanthropist
  • The Social Entrepreneur

As I wrote then, I don’t think that each philanthropist must choose only one approach. But by defining each style in a “pure” form, I hope that we can begin to better understand the ways that the various styles work together as well as the tensions that exist between them. Most importantly, I hope to offer better clarity about each approach so that we understand when we are having debates that are about which approaches are most effective vs. debates about how to execute a specific approach in the most effective way.

The Charitable Giver seeks to buy nonprofit program execution that will accrue to beneficiaries. It is classic “buyer” behavior as defined by George Overholser is Building is Not Buying. The Charitable Giver is concerned primarily with the value of the programmatic execution relative to grant size and cares little about the nonprofit enterprise for its own sake.

There is a sense in professional philanthropy that “philanthropy” is a superior form of “charity”. Philanthropy is often positioned as getting at the root cause while plain old charitable giving only addresses symptoms. I think this is both incorrect and confuses the purpose of charitable giving and strategic philanthropy.

Let’s take the case of a nonprofit afterschool tutoring program that provides services to inner city school children (a case study that George Overholser has often used). A Charitable Giver is a donor who wishes to purchase tutoring services on behalf of the children who will benefit. We call this “buyer” behavior, because the transaction is similar to a consumer who buys afterschool tutoring services for their own child from a for-profit tutoring service. The fact that the service is being bought on behalf of someone else makes the transaction a charitable one, but does not change the nature of the transaction. Both are a purchase of tutoring services.

Now the effective Charitable Giver, like a savvy shopper purchasing things on their own behalf, wants the best value for their expenditures. If nonprofit tutoring organization A provides more hours of tutoring or higher quality tutoring per dollar spent than tutoring organization B, the effective Charitable Giver should seek out organization A.

So the effective Charitable Giver needs to first decide what category of social value they are interested in purchasing (education, environment, arts appreciation, etc) and then comparison shop for the best value for their grant dollars.

There’s nothing about this process that is any more or less than the other categories nor does it limit the donor to funding “symptom” solutions rather than “root cause” solutions. The Charitable Giver may pay for program execution that ranges from direct services to advocacy to public good creation/stewardship (public parks for instance). The point is simply that they are purchasers of program execution, not investors in nonprofit organizations and not problem solvers themselves.

This means that the effectiveness of charitable giving is dependent on the success of comparison shopping for the most/best program execution per dollar. For the most part, organizational analysis is not part of the equation, the issue is programmatic analysis. The Charitable Giver should seek the services of a theoretical Consumer Reports of nonprofits, not a Morningstar (investment advice) of nonprofits.

Most radically, the Charitable Giver should not think of themselves as “supporting” a nonprofit any more than they decide to buy an iPhone out of a desire to “support” Apple instead of buying another brand of smart phone in order to “support” another manufacturer. One wrinkle to this though is that just as a coffee drinker might buy from a local coffee shop rather than a national chain for reasons that go above and beyond the value of the coffee, donors might certainly include such “intangible” value in their purchase decisions.

Instead of “supporting” the nonprofit, the effective Charitable Giver is purchasing valuable program execution on behalf of the beneficiaries. It is important to keep this in mind because too often Charitable Givers forget their main purpose and get caught up thinking about issues that aren’t relevant to the beneficiaries.

Let’s say that Tutoring Org A provides better tutoring services per dollar given than Org B, but Org A also pays their CEO much more than Org B and has grown at a much slower rate than Org B. While a Philanthropic Investor may care about that information, do you think the mother of the inner city kid cares? She cares about getting better programmatic execution. She wants Org A’s services delivered and she doesn’t care what the CEO gets paid or what the prospects for growth are. The effective Charitable Giver who is purchasing the tutoring services on her child’s behalf should feel the same way.

In addition, the Charitable Giver should not feel a need to be “strategic” in that there is not a particular need for the donor to try to figure out what combination of program execution from multiple nonprofits will provide the best mix for the beneficiaries (doing so is an option if the donor chooses to act as a Strategic Philanthropist). Instead, the effective Charitable Giver is a savvy comparison shopper of program execution who likely cares about a large number of issue areas. The key to success is to spend your charitable dollars in a way that provides the most value to your intended beneficiaries rather than to “support” the nonprofits to which you feel the most connection.

Choosing to distribute charitable gifts based on an urge to “support” specific nonprofits rather than based on comparison shopping for the best program execution is very similar to making traditional purchasing decisions based on brand loyalty rather than on the best value (a mistake that people make routinely in the for-profit market just as they do in the nonprofit market).


  1. Michael Moody says:

    I’ve followed these last 3 posts with interest, Sean, but I keep wondering where some very traditional philanthropic giving might fit in this typology. I’m thinking in particular about one extremely common form of giving: the donation to a religious organization.

    Let’s say, for the sake of argument, that we’re trying to categorize a donation to an organization providing religious services of which the giver occasionally takes part, but a donation that doesn’t specify the use of the money across the organization’s multiple programs. Does this fit under philanthropic investment to support an organization long-term? Or as charitable giving? What other information would we need to know to make that categorization?

    Or is this sort of giving–which usually isn’t very focused on either “programmatic effectiveness relative to grant size” or comparison shopping for the purchase of programmatic execution–simply not what you are trying to explain with the typology?

    And then of course, once we categorize this gift, we confront the bigger question: Is there anything essential about this sort of “transaction” (from either the giver’s or recipient’s perspective) that is de-emphasized by that categorization in a way we should worry about? That is harder to answer, but I have to ask.

    Please know that I’m not trying to challenge what you propose, but rather to better understand this way of making sense of the messy world we try to make sense of.

    • Thanks Michael. Could you clarify you question about the transaction de-emphasizing something? I’m not sure what you mean.

      Regarding religious gifts. There are a couple ways to think about these kinds of gifts to my way of thinking.

      1) Religious gifts are a form of “membership organization” support. Like gifts to other non-profit membership groups to which the donor belongs, the transaction is a cost of membership. This suggests that the donor is still seeking value. But they are unlikely to shop around consistently once they’ve decided on membership (although it seems to me that more and more people search out the religious experience that provides them the most value rather than just sticking to the religion they were born into). This is a Charitable Giver activity in which the donor is buying social value that accrues to them and other members, it is simply a smaller circle of public benefit that is defined by the members.

      2) Members may feel that the value of the membership services is such that they want to invest in the growth of the organization so that it is available to more people. In this case they are classic Philanthropic Investors.

      3) Religious gifts support direct services undeserved. Many religious groups provide services such as soup kitchens or other services for the poor. By making gifts that intend to support this sort of activity, the donor is acting as a Charitable Giver and purchasing program execution.

      When I talk about philanthropy, I am focusing on philanthropy that is intended primarily to benefit the public. However, there is a lot of charitable giving that is done to reinforce social bonds between individuals (ie. supporting the nonprofit that your neighbor is on the board of or supporting a local kid who is raising money for a cause). These gifts have a whole different set of value drivers, but are still Charitable Gifts in the sense that they are purchasing social value, but in this case that value is often the direct benefit to the donor of reinforcing the relationship.

  2. Michael Moody says:

    Thanks for the good reply Sean. Your explanation fits what my inclination was in the comment, that in order to classify this sort of giving we would have to know more about the giver and the giving situation. As you show, in some cases the purpose or reason behind a religious gift like this would make it fit under investment (building), while in other cases it would look more like charitable giving as you define that (buying).

    I find it interesting (and welcome) that your classification places such emphasis, in this way, on what the philanthropist is trying to do with the gift/grant—to buy services, to build an institution, to advance a theory of change, etc.—and on the goal of the giver to provide a public benefit or create social value. We get caught up too often in this false dichotomy of focusing on donor intent “versus” focusing on impact or strategy. As I read your descriptions of these 4 types of philanthropy, it seems that a lot of the distinctions lie in the purpose of the giver, what they want to accomplish, not just the strategic arrangement or structure of the transaction qua transaction (as a purchase, an investment, etc.). I like that.

    This point about purpose also helps me explain what I meant by the question about how the framing of the religious gift as “purchasing program execution” or “investing in the growth of the organization” might de-emphasize something important about the transaction. It might de-emphasize some other aspect of the often complex reasons why the donor is making the contribution, the purpose of the gift that is so important to explaining it.

    I’m thinking in particular about the expressive reasons why people give, which is very easily seen in the case of a religious gift. People might give (at least in part) to express some social value, to promote some belief they have in what is for the public good, to share or advocate for an idea that they believe will improve the world.

    We could make this sort of purposeful giving fit into the category of, say, charitable giving, to the extent that the giver is trying to purchase the program of advancing this idea in the world so others can benefit from it. But my question is whether this explanation gives enough attention to the donor’s expressive reason for acting philanthropically, especially if that reason is the dominant one among the multiple reasons for giving.

    As you know, there is a long history of classification systems like the one you are presenting with such openness here—I’ve run one or two of them up the flagpole myself. Every system is going to highlight some aspects of the phenomenon and de-emphasize others. My point in raising that last question was just to muse about what this particular system might de-emphasize, so that we know how to be careful when applying it.

    Again, the goal is to help us be able to make sense of (and advance) philanthropy, a field in which both the concepts and the phenomena are diverse.

    • Good point about the expressive purposes of giving. I would argue that since the value being created under each approach accrues to the public and not specifically to the donor, that the expressive purpose must be the dominate motivation. I’ve written about philanthropy being primarily a form of self-actualization in the past.

      So I would suggest that the intent of viewing philanthropy through the lens of these approaches is not to de-emphasize the expressive element, but to help donors express themselves (or self-actualize) more precisely.

      You make a good point about me putting the purpose of the gift ahead of the transactional nature of it. I think there are two reasons for that. First, I’m sketching out these approaches in the hope that a more precise understanding of what a donor is doing will help them do it better. So their purpose is key. Secondly, the nature of philanthropic transactions is not as precise as for-profit transactions. If you invest in a for-profit company, your are doing so in an externally classified way. In other words, your investment can’t be mistaken for a “purchase” because legally you are due no goods or services and you have a legal claim on future earnings. Same with a consumer purchase. You might have the intent of “supporting” the store you are shopping at (such as when people intentionally shop at local stores rather than national chains), but legally you are due specific goods and services and have no claim on the equity of the company.

      In philanthropy, there is no legal recognition of the existence of equity, so philanthropic investments can only be define by intent except under special circumstances such as the SEGUE grant system created by George Overholser at NFF Capital Partners. In addition, Charitable Givers have no legal claim on program execution, both in that it does not accrue to them but also in that they don’t even have a legal basis for demanding the products/services be delivered.

      So given the elusive objective nature of philanthropic transactions, it seems to me that the purpose (the donor intent) should be of primary consideration.

      Thanks for your thought provoking comments!