The Effective Strategic Philanthropist

This is a continuation of my exploration of four core approaches to philanthropy.

• The Charitable Giver
• The Philanthropic Investor
• The Strategic Philanthropist
• The Social Entrepreneur (I need to change this label, see here and here)

The Strategic Philanthropist seeks to buy nonprofit goods and services in a way that aligns with a theory of change defined by the strategic philanthropist. Like the Charitable Giver, it engages in “buyer” behavior, but the funder is primarily concerned with the degree to which the net result of the programmatic execution across their grantees advances the solution that they believe is most likely to solve the problem they seek to address.

Most people think of philanthropy as an act of “giving” money. But as we’ve seen, the Charitable Giver is really paying nonprofits to execute their program and Philanthropic Investors are investing money that they expect the nonprofit will use to grow their organization.

Strategic Philanthropists, like Charitable Givers, generally operate by paying nonprofits to execute their programs. However, while the Charitable Giver views each donation as a discreet transaction and is similar to a “consumer” in for-profit markets, the Strategic Philanthropist is operating more like an enterprise which is buying from “vendors”.

The Strategic Philanthropist, like the Social Entrepreneur, develops their own theory of change. However, rather than building their own programmatic organization, the Strategic Philanthropist effectively outsources program execution by creating “business to business” type relationships with nonprofit enterprises.

Apple does not make iPhones. They have manufacturing agreements with other companies that make the iPhone. But that doesn’t mean Apple is “buying” iPhone from the manufacturing companies the way Charitable Givers “buy” program execution. Instead, Apple, and Strategic Philanthropists design their own theory of change, their own “program”, but work with other organizations to execute.

This is why Strategic Philanthropists talk about their own “programs”, not just their portfolio of grantees. The theory of change and the programs are theirs, they just execute their programs via outsourcing relationships with nonprofits.

Of course, Strategic Philanthropists also make investments in nonprofit enterprises, but these are more akin to the “strategic investments” that many corporations make in other companies than they are to the investments made by organizations that are primarily concerned with investing rather than with running an enterprise.

As Paul Brest, the president of the Hewlett Foundation and my sparing partner on all things related to strategic philanthropy, noted in a comment on an earlier post, the Hewlett Foundation has made “philanthropic investments” in the Energy Foundation and ClimateWorks as part of their strategy to address global warming. However, these investments are made in service of furthering Hewlett’s own energy and climate change program.

On Hewlett’s website, they describe their energy and climate change program by noting their three core strategies; working to improve global climate policy, working to establish energy and climate policies that increase energy efficiency and environmental health, and working towards developing sustainable transportation systems around the globe. Hewlett has published the logic model for their environment program (of which energy and climate change is a part) here.

The point here is that the Strategic Philanthropist operates their own enterprise in much the same way that Social Entrepreneurs do. Their “production” (program execution) process is just different. Since Strategic Philanthropists, by definition, have their own funding, they do not need to seek Charitable Givers to pay for their programs nor Philanthropist Investors to provide growth capital.

Strategic Philanthropists have essentially gone “meta” on the nonprofit enterprise concept. By outsourcing program execution, the Strategic Philanthropist frees themselves to focus on the question of “what needs to be done” rather than doing it.

Through their environment program, the Hewlett Foundation is able to focus on conserving wild life, slowing climate change, and encouraging the development of clean energy. While it is very unlikely that any one organization could directly execute programs across all of these domains, it also makes sense that progress on all three may be needed to further Hewlett’s goals. By operating at a “meta” level, hopefully Hewlett and other Strategic Philanthropists are able to provide for the execution of a range of programs that together advance their theory of change. In addition, they position themselves well to influence the “ecosystem” within which the problems they seek to correct are located. By convening stakeholders, engaging in advocacy, providing non-monetary support and funding activities that may operate outside any particular nonprofit enterprise, Strategic Philanthropists seek to tackle big problems in ways that no single nonprofit enterprise can on their own.