In my earlier posts about being an effective Charitable Giver or Philanthropic Investor, I made the claim that neither needed to be “strategic”. While discussing the posts with George Overholser I’ve been convinced that this claim is confusing, so I thought I’d publish a clarification.
The word strategy means: 1) A careful plan or method, or 2) The art of devising or employing plans towards a goal.
Clearly all donors, employing any of the approaches I’m describing should have a plan. There are better and worse ways to execute the various approaches and giving thought to how a donor will execute their philanthropy is important.
When I wrote that Charitable Givers and Philanthropic Investors need not be strategic, I was using the word in the way it is used in the phrase “strategic philanthropy”. Strategic philanthropy does not simply mean having a plan for your philanthropy. According to Paul Brest’s book Money Well Spent, strategic philanthropists devise ways to solve problems and select grant recipients who can best carry out the approaches donors think will work best. I believe that this is the accepted way the term strategic philanthropy is understood.
To devise ways to solve a problem is to create a “theory of change”. My statement that Charitable Givers and Philanthropic Investors need not be strategic was meant to argue that they need not develop a theory of change. Instead, from the perspective of a Charitable Giver or Philanthropic Investor, the nonprofit enterprise is the entity charged with developing a theory of change.
The for-profit parallel to a theory of change is a business plan. The metaphor isn’t perfect, since nonprofits need a business plan in addition to a theory of change. But this is only because the nonprofit world is more complicated than the for-profit world. The success of the for-profit business plan results in the desired outcome (profit) because the two things are one and the same. Nonprofit business plans (the plan for financing the organization) may succeed even while their theory of change fails because they need a sustainable way to finance their activities AND successfully transform those finances into positive social outcomes.
For-profit investors and for-profit consumers don’t need a business plan. Charitable Givers and Philanthropic Investors don’t need a theory of change.
For-profit enterprises, whether they execute their activities internally or via outsourcing, need a business plan. Social Entrepreneurs and Strategic Philanthropists need a theory of change.
But clearly Philanthropic Investors and Charitable Givers should have a plan to guide their activities just as for-profit investors and savvy consumers should have a plan to guide their investing and purchasing. The elements of that plan however should focus on how to best select nonprofit enterprises to provide with philanthropic equity or how to best “comparison shop” to maximize the value of Charitable Giving.