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).