Back to the Future of Philanthropy

I received a kind email from Erik Anderson, of the Donor Dreams Blog, suggesting I take on the subject of The Future of Philanthropy for this month's nonprofit blog carnival. Easy peasy, right? Well maybe not.

In Erik's call for Future Philanthropy blogs he links to a TED Talk from 2007: Katherine Fulton on You are the future of philanthropy. I've watched the video a couple of times now, and Ms. Fulton makes some great points on several philanthropic trends (and I recommend you also watch it), but it didn't really help me answer the question of what I viewed the future of philanthropy to be.

Ms. Fulton begins her exploration with the establishment of the modern foundation form in the U.S. at the end of the 19th century by the Rockefellers, Carnegies, et al, but, indeed, the concept of philanthropy goes back to ancient Greece, meaning "love of humanity," and encompasses the giving of time, heart, and soul, as well as currency.

Even the story of "modern philanthropy" predates Rockefeller by at least 150 years, with the establishment of the Foundling Hospital in London. Established for the "education and maintenance of exposed and deserted young children," the Foundling Hospital is considered by many to be the first modern charity.

Wikimedia Commons

Not long after, "a group of London merchants and gentlemen" met to "discuss a plan to supply two or three thousand seafarers for the navy," founding the Marine Society. They, of course, sought sponsors and donors to support their efforts. Certainly that qualifies not only as philanthropy, but as professional fundraising, and maybe even crowd-funding.

Ms. Fulton references Warren Buffet, and another of her slides bears the image of Richard Branson, but what really differentiates these modern philanthropic leaders from Rockefeller and Carnegie, or even from the gentlemen who founded the Marine Society? Is it their motivation, is it their philosophy, or is it their tools?

Ms. Fulton describes the philanthropy of 100 years ago as "closed-small-slow-fragmented-short" and contrasts that with the "open-big-fast-connected-long" world of today's philanthropy.

"Closed-small-slow-fragmented-short" may seem a somewhat apt description of old philanthropy from today's perspective, but there's no evidence that it was seen as such in 1905, or that it was meant to be "closed-small-slow-fragmented-short" by intentional design.

What draws that comparison is not any change in the concept of philanthropy, it is all about the tools. 120 years ago, Andrew Carnegie building libraries across America was very open, connected, big,  long, and somewhat radical (okay, it probably wasn't "fast," but what was then?). Today his approach might be to distribute iPads to students instead, but his philanthropic ideals would likely be the same.

Even the much vaunted "democratization of philanthropy" is nothing new. If you read my blog, you know I absolutely love crowd-giving sites such as Benevolent, etc., but at their core, they are simply using new tools to expand upon the giving circles of previous decades that were, themselves, just updates of the old mutual aid societies that go back at least 250 years.

I guess what I'm saying is, the impulse to philanthropy is as old as society itself, and that the forms it takes always includes both, the "small and informal" (mutual aid to crowd-funding), and the "large and influential" (Carnegie to Gates). What evolves are the methodologies and tools.

There are certainly trends - I've lived through several: money for technical assistance, money for programs only, highly focused outcomes, more data, less data, forcing mergers, encouraging cooperation, and a few others - but those are changes in bureaucracy, not philanthropy.

So, I suppose my predictions for the Future of Philanthropy are as follows:

• New developments in technology - particularly communications technology - will continue to drive changes in how nonprofits and donors discover each other and build relationships.
• Trends in giving will continue to be driven by "thought leaders" emerging out of the currently dominant business sector (IE: Carnegie's steel then, Gates' high tech now).
• Despite the attention given to the "thought leaders" above, the real work of creating social change and improving the lives of ordinary people will always come in the form of peer-to-peer giving and assistance.
• Solutions-based philanthropy will continue to lose out to empathy-based charity (IE: eliminating poverty versus assisting the poor) as long as total giving remains at only 2% of GDP.

Solve that last problem, and then we can talk about real change and a brighter future.

The Rational Aspect of Irrational Philanthropy

A few weeks back I was at a social gathering and, in conversation with another attendee, wound up talking about the use of crowdfunding to help low-income people over hurdles on their way to self-sufficiency.

She found it very interesting, and asked, "What country are they aiding?"

My reply, "Well, um, here. The U.S., including groups down the street, right here in Berkeley!"

She was a bit surprised, but pleased. Because we were talking about small dollar amounts, she had assumed that the donations were going elsewhere, where there would be more "bang for the buck."

Put your money where there will be the greatest impact, right? Isn't that what the big philanthropists do, and the example that they encourage us "everyday donors" ($25-50) to follow?

I remembered this conversation this morning reading Hewlett Ends Effort to Get Donors to Make Dispassionate Choices on Giving on the Chronicle of Philanthropy. Hewlett had been a major funder behind encouraging better and more effective philanthropy through the use of results- and impact-driven data.

Not that this focus on charitable ROI (return on investment) didn't have its critics. William Dietel, a philanthropy adviser and former president of the Rockefeller Brothers Fund, decried it as an "instant-gratification strategy driven by young, tech-savvy philanthropists."

But the woman I was speaking with at the party was not a young, tech-savvy philanthropist. She was a 50-something sculptor with empty pockets. Such is the extent to which the message of "effective philanthropy" has permeated the culture.

Of course, even with this mindset being promoted, there were still many donors (particularly smaller donors) who didn't bother with the research and just gave "from the heart." And that's how the debate was framed: giving from the heart versus giving from the head.

When Hewlett started the effort in 2006, then-president Paul Brest wrote, "Personal philanthropy may sometimes be so profoundly emotional as to be invulnerable to rational analysis."

And here's where we get to my problem with this so-called "rational analysis." As part of the whole, "nonprofits need to operate more like businesses" meme, the means for analysis are primarily market-driven tools for evaluating programs that exist because of market failures.

Anti-poverty programs are a direct response to the realization that the operation of a free market society will always create a certain number of citizens who fall between the cracks - who are not economically viable. Culture and arts programs, too, exist as nonprofits where and when the free market cannot or will not support them as businesses, so how can you evaluate them as if they were held to the same market principals?

So, why help one person in poverty in the U.S. when the same investment can help ten people, or maybe even 100,  in poverty elsewhere?

The "rational" person, using their head and all the correct data, knows that the third-world philanthropic investment will give them far better ROI and results. Effective Philanthropy Achieved!

The "irrational" person, using only their heart and a little common sense, knows that they are part of a community, and that if they allow poverty to grow around them it will become a cancer, raising crime, lowering property values, and decreasing that immeasurable thing called "happiness."

Yes, we need to evaluate our programs, and yes, as nonprofit professionals we need to be as effective as we can be with the limited resources at our disposal. But the idea that one can eliminate the heart from philanthropy is one that I'm very pleased to see fading.

The Irregularity of Regular Giving

We love our regular donors. As nonprofit professionals, we just love to look over our donor rolls and know that there's a good percentage of those listed who will give again and again, year after year, and all we have to do is send them a nice annual letter. Maybe there's even a few of those donors who have trusted us enough to let us charge a small amount to their credit card every month without even asking. Man, do we love them! But don't get too complacent.

With each successive generation, giving is changing. New technologies play a roll in that, but so do overall trends in society and culture. Changing economic realities affect not only the amounts given, but the level of scrutiny and revue a donor puts an ask through. The loss of trust in institutions along with increased access to a world of information are changing the types of asks donors respond to.

There is a growing body of research into these generational differences. The Next Generation of American Giving by Convio, Edge Research, and Sea Change Strategies (2010 - download here) breaks donor groups down by the Matures (born before 1945), Boomers (1946-1964), Gen X (1965-1980), and Gen Y (1981-1991). One of the problems that becomes evident in this study is that most of our accepted knowledge and best practices around fundraising were designed to appeal to the Matures, who now account for only 21% of donors. Gen X outnumbers them at 25% of donors, with Gen Y (19%) coming up right behind (and growing). Boomers are the largest cohort at 35%, but are outnumbered when you consider Gens X and Y together.

Among the differences in donor attitude between these groups are the way in which donors give. 77% of Matures send checks through the mail, while only 26% of Gen Y donors have. Meanwhile, 14% of Gen Y donors and 13% of Gen X have donated by text, while only 2% of Matures have done so.

As to the type of requests younger donors respond to, the 2010 Millennial Impact Report by Achieve and Johnson, Grossnickle, and Associates (download here) found that more than half of respondents were likely to respond to a specific request, while less than 8% were likely to respond to a general request (such as an annual appeal). This feeling was repeated in their 2012 survey which identified "not knowing how my gift will make a difference" as Millennial's biggest pet peeve.

Younger donors are also less likely to take your word for it that your organization is doing great work. They need to be able to know who the end beneficiaries are, and what impact their donation will make. They do, however, trust their peers: 74.6% said they would give if asked by a family member and 62.8% would give if asked by a friend.

Younger donors are not just more responsive to appeals from friends and family; they are also more willing to take part and help spread the word about your organization once they are on board. 19% of Gen Y and 14% of Gen X donors are willing to promote their chosen charities online compared to only 9% of Boomers and 5% of Matures.

So, what does all this have to do with regular, annual giving?

The bad news is that donor engagement is going to require more work going forward. The good news is that this engagement will be more meaningful and keep you focused on your mission.

In a world where you cannot rely on your annual holiday letter (delivered via USPS) to generate a flow of checks, your organization will need to engage across multiple channels, and communicate consistently throughout the year.

Your focus also has to shift to be more future oriented. Rather than looking back at the good work you've done, asks will need to be forward looking and explain how the next donation will be used. These asks will need to demonstrate impact and explain exactly who will benefit. You will need to experiment with new tools and trust your current supporters to make the pitch to new potential donors.

In a sense, the traditional annual campaign ("Remember us? We do great things, and you always support us: Time to send your check.") is dead. And, frankly, it's about time.

In this new world, every ask is a first ask. Yes, it will take more work than just updating last year's letter. But it will be relevant, it will be inspiring, and it will be empowering. In the end, it will make us better fundraisers and advocates for our causes.

And, if we do it right, it will keep donors coming back to us, year after year.

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NOTE: The day after I posted this blog, the Millennial Impact Project released their 2013 report. Among the findings, the respondents said, "they were turned off when a nonprofit's Web site had not been updated recently." 60% wanted information and success stories about the people served by their donation. While 52% would be interested in making monthly gifts, 70% said they would be willing to raise money for an organization they cared about, and 64% have raised money in a fundraising walk or race. The full report can be downloaded here.

What's Better than 40 Billionaires?

There's been a lot of media attention this past week for the Giving Pledge, an effort organized by Warren Buffett and Bill & Melinda Gates "to encourage the world's wealthiest individuals and families to commit to giving the majority of their wealth to philanthropy." The publicity and many of the news stories focused on the first forty billionaires to sign the pledge, and the approximate dollar value of those pledges (at least $120 billion).

Of course, this is wonderful news, and we all applaud each of the billionaires signing on to the pledge. but, as Jeremy MacKechnie points out on idealist.org, Small Change Adds Up to More Than a Billionaire's Bucks. Jeremy writes,

"While some of the money will go directly to nonprofit organizations, the majority will end up in the private foundations that the donors started themselves, like The Bill & Melinda Gates Foundation, and will then be funneled into other nonprofits through grants or used to support the foundations' programmatic work."

Of course, the full potential of $120 billion won't be donated to those foundations at one time, and once endowed, the actual payout of it as grants may be over the course of many decades. So, yes, this may increase over-all foundation spending ever-so-slightly, but it's not the immediate cure-all donation that some of the media hype is implying. In the idealist article, Jeremy has another important reminder:

"Individual donations (like yours) currently make up 75% of U.S. philanthropy while foundations make up only 12%. Collectively, individual donations are more than six times larger than those of our friends in the billionaires' club."

So, what does that mean for you and your nonprofit, and more to the point, does it mean that the Billionaires Pledge is worthless to us?

No, the Pledge is still of great value to all of us in the nonprofit sector, if we put the appropriate spin on it when asked by our donors or the media how it will effect us.

The key is that Gates and Buffett never intended for the billionaires to cure all our problems. Their intention was to lead by example and to encourage giving by all, not just billionaires. As Larry Ellison said in his statement, "Warren Buffett personally asked me to write this letter because he said I would be 'setting an example' and 'influencing others' to give... I hope he's right."

So, when you get those questions about whether your organization will benefit from the Pledge, remember its purpose: "To encourage giving." Your message must be a positive one thanking all your small donors, and recognizing that they're your strength, not bemoaning that you can't get your hands on all that billionaire cash.

Of course, even without the prodding from Buffett and Gates, research has borne out that regular folks have always been more generous than the wealthy when it comes to charitable giving. So, with a little more encouragement from the Billionaires Club, who knows what you can do with your individual giving plan this coming year!

Bottom line, 40 billionaires pledging to give half of it away is really very nice, but small, individual donors are still the backbone of any fund development plan. Of course, if you need help with the fund development plan, you can check out my book on the subject ;^)

Reminder, I'm now on twitter under the name NonprofitKenG.

How Philanthropy Destroys Charity & More on Volunteer Giving

I have two short items to blog about today. The first is to point you to an article in the Guardian (UK) called "Why business won't save the world," in which the author talks about efforts, such as the Gates Foundation's work in vaccine development, and asks some very good questions about the effect on nonprofit work when a few wealthy individuals drive the nonprofit sector's agenda.

At the heart of the issue is the "philanthro-capitalists' desire for data and control" taking precedent over considerations of need. As the author states:

Investing in new vaccines against malaria is great, but there's no vaccine against poverty, inequality, violence or corruption, areas in which there are no "short-term returns on investment", only a long, hard slog through politics and social change. Does that mean only the easiest causes will be funded?

This is something I've felt and feared myself for some time, as the agencies I work with strive "to reach their numbers" and potentially loose sight of the individuals those numbers represent.

The other short note I wanted to post was to share a comment Monica posted on a previous blog here, "Money Follows Involvement." In that post, I restated my conviction that volunteers have already shown their dedication and interest in your cause, and that not asking them for donations was leaving money on the table.

Monica wrote (in part):

I have been volunteering with one specific organization for over a year and they have yet to ask me to donate... If this organization has not asked me, I bet that they haven't asked other volunteers either - effectively missing a large pool of constituents.  ... Hank Rosso suggests that the most likely potential donors have three characteristics – linkage, ability, and interest. Since the volunteer is involved it is clear that linkage to the organization and interest in mission are already in place. The remaining characteristic is ability. Often an organization will know if their volunteer has the ability to give, if the organization doesn’t know, the only way to find out is to ask. ...

I usually think of the "linkage, ability, and interest" equation as the "Triple A Qualifications: Ability, Affinity, & Access." Whichever terms you use to remember this by, it's excellent advice. And thank you, Monica, for sharing your story.

How Much Should Board Members Give?

This is the question that has haunted many a nonprofit Executive Director and Development Director. How to encourage Board giving without either asking too little or scaring off new members.

A posting today on the Chronicle of Philanthropy's website asks if "the expectation of giving is something that is simply understood?" and gives a quick roundup of how some organizations answer the question.

The Asian American Justice Center in Washington, asks board members to "either donate or raise $2,500 for the organization - an expectation that is spelled out in their job descriptions."

Gail Perry, a consultant and author in Raleigh-Durham, N.C., says that "Board members will contribute and raise money for organizations that they believe in strongly," and that "They will give the minimum when they 'have' to." Ms. Perry believes that un-engaged Board members will find giving requirements "offensive." "Our job, of course," Ms. Perry goes on to say, "is to get them so fired-up that they are sitting on the edge of their seats ready to ... give."

My experience is that "give or get" policies are popular, but I always encourage my clients to tell their Board that they need to "give and get."

To me, the "getting" is part of their fiduciary responsibility as a Board member to make sure the organization is financially stable and sustainable. The "get" can be done in many ways, from directly asking friends and family, to arranging matching gifts through their employer, to helping plan an event, to writing grant proposals, etc.

The "give," on the other hand, is a recognition of their personal commitment beyond the work. The point I make to Boards is that if they have not personally invested in the organization, why should anybody else? And, I go on, people will know. Perhaps not the average donor, but Major Donors will ask about Board giving, and so will Foundation officers when they come on site visits.

As to how much they should give, I don't believe in stated dollar minimums. Rather, I prefer the phrase, "Board members must give at a personally meaningful level." That means that if a member normally makes $500 gifts to other nonprofits, they should give $750 or $1,000 to the nonprofit they're on the Board of. If they normally give $25 to others, they should give $50 here.

I work with mostly smaller, local organizations, who are particularly timid about the Board member ask because their Boards are more likely to include former clients and neighborhood activists than high-powered international executives and bank owners. An ask that takes ability to give into account, while still recognizing and honoring their commitment to your organization, allows the client representative to give $2 while sitting next to the Doctor who gave $5,000, each knowing they were respected and that they did all they could.

It is up to the Executive Director and Development Director (if you have one) to personally craft the ask, just as you would any Major Gifts ask, based on what you know of your Board member's giving history, occupation, net worth, etc. Explain the "personally meaningful" policy clearly, and ask with confidence.

If your Board member is still reluctant to give, it may be time to question their commitment and start recruiting to fill that seat.

The soul of philanthropy: when giving becomes receiving

Michael L. Wyland of Sumption & Wyland consulting has written an op-ed piece on Argus Leader (dot-com) under the unassuming title of "Accountability changes philanthropic landscape" that perfectly expresses what I'm sure so many of us have been thinking for years.

The opening paragraph reads:

"There has been a major change in philanthropy in recent years. Accountability and impact are increasing the demands placed on charities because the purpose of charity from the donor's perspective has changed. It's become acceptable, in the name of accountability, for philanthropy to be about receiving rather than about giving. Hypervigilant and misapplied accountability risks killing the soul of philanthropy upon which charities rely for support."

I will add to that the charge that this hyper-vigilant accountability is killing the ability of small, local, and grassroots nonprofits to operate at all. The costs of compliance are out of line with the costs of providing needed services, leaving these organizations no options but to either merge with a larger organization or close their doors.

As Mr. Wyland states, the IRS, and all the various nonprofit watch-dog groups that analyze our IRS filings, all base their evaluations on data that is "overwhelmingly financial in nature... As long as every transaction is documented and as long as no one's enriching themselves at the charity's expense, the IRS and the watchdogs are satisfied."

But what happens to the small nonprofit whose administrative expenses seem too high only because of an effort to comply with all the data collection, analysis, and reporting requirements of their funders? The same funders who will then use that nonprofits' high administrative expenses as a reason to discontinue funding them.

In another recent post here, I called out Paulette V. Maehara (president and CEO of AFP) for admonishing nonprofits to "put the needs of donors first." I believe that we've coddled and begged and babied the donor foundation long enough. We need to educate them about the needs of our clients, and how they are best served by locally provided community-based nonprofits, and, perhaps, on the true definition of the word "charity."

How generous is your state?

Thanksgiving is done with (hope yours was peaceful and happy), and we're now officially into the Holiday Season. That means plenty to each of us personally, of course, but as nonprofit professionals it also means quite a bit work-wise as well.

As you hope for the best return on that holiday pitch you should have already prepared, and as you get set for those final big asks of the year, you might want to see where your state stands in the new state-by-state assessment of charitable giving.

Prepared by the Boston College Center on Wealth and Philanthropy, this second annual survey takes into consideration such factors as each state's religious and ethnic group mix, the existence of nonprofit organizations, and the local cost of living and tax burden, "including changes within states that are driven by levels of urbanization-which affects cost of living at the more local level," in order to more fairly index the comparisons.

Now, however you interpret the results, don't make the mistake of calling this a "generosity index." The authors caution:

"Generosity is a moral, spiritual or social psychological characteristic of individuals and perhaps families and households. We do not believe that the term generosity should be associated with our measures, nor any other measures that do not directly study the inner disposition ... of generosity. In truth, every purported generosity index that has ranked states is, in fact, a charitable giving index."

And the top five states for charitable giving are... New York, the District of Columbia, Utah, California, and Connecticut. And, at the bottom, Iowa, South Dakota, Vermont, West Virginia, and North Dakota.

You can download the full report from Boston College at www.bc.edu/research/swri.