In the seventeen years I've spent running a non-profit, I’ve witnessed the best and the worst of philanthropy. I’ve watched organizations exhaust their energy on securing the next round of funding rather than investing what they have more effectively. I’ve witnessed nonprofits accept money that comes with very specific strings attached, diverting them from their core mission. And I’ve seen the corrosive effect of investors making decisions based on unrealistic or uninformed expectations.
I’ve also seen how beneficial philanthropic investment can be–funding core infrastructure, bolstering key talent, and ensuring the future of an organization. These practices, in aggregate, make the solution to some of the world’s biggest problems possible.
So, what makes philanthropy effective? To answer this question, I partnered with University of Pennsylvania's Center for High Impact Philanthropy to ask some of the most respected thought leaders in the field. We set out to debunk old myths about investing and encourage new ways of thinking about philanthropy. We explored how to rethink social investing and build sustainable organizations, what expectations for overhead and scale are realistic, and where the future of philanthropic investment lies. You can hear these conversations in a new podcast series, Philanthropy Unfilteredreleased on November 6th. As we approach the holiday season–the time of year when charitable giving hits its peak–here are seven lessons you should keep in mind before you write a cheque.
1. Look at a bigger picture: Philanthropy can sometimes seem to be more about the giver than the receiver. "As philanthropists, very often, we fail to ask the question, 'What's the difference between what might feel good to me and what might actually serve the world?‘" Abigail Disney, the documentarian and philanthropist, observes. You don’t have to give to a cause you don’t feel a connection to, but make sure that the one you give to actually makes a difference.
2. Do what you know: As Rob Kaplan, the President and CEO of the Federal Reserve Bank of Dallas and Co-Chair of the Draper Richards Kaplan Foundation put it, “Your skills. Your energy. Your leadership. Your coaching ability. Use the experience from your career to help an entrepreneur, or to help a social enterprise in your community. You will make a big impact.” All the skills that help create success in the for-profit world can help a non-profit succeed, too.
3. Give with both your heart and your mind: We’ve all been drawn to the organizations with great stories–over-the-top successes, personable staff, clientele with amazing trajectories–or inarguable data supporting their impact. But, as Jacob Harold, CEO of Guidestar, an information service specializing in reporting on U.S. nonprofit companies, notes, “No numbers without stories and no stories without numbers.” He adds, “If you focus only on the stories, you don’t have a sense of scale and if you focus only on the numbers, you can have no soul. But I believe we can do them both.” Non-profits are businesses, and their balance sheets need to make sense; but you can’t inspire people to change without the connection a story provides.
4. Fundraising is not optional: We’ve all heard the pitch: no investor dollars go to overhead or fundraising. But why is that so desirable? Every organization has overhead, and fundraising isn’t inherently evil. “Spending on fundraising is the biggest lever you have,” Dan Pallotta, the CEO of the Charity Defense Council, says. Investment in smart fundraising can have big returns–and that means more money for programming.
5. Have an appetite for risk: In order to make a big change in the world, social entrepreneurs need to take big risks. Sometimes those risks pay off, and sometimes they fail–but even failure has valuable lessons. As Steve Nardizzi, the CEO of the Wounded Warrior Project, argues, "How about we stop talking about what we can't do and start talking about what we ought to be doing?" That translates into impact, he says, even if it isn’t an unbroken path. “There will be failures that we’ll all have along the way. We need to be okay with that.” Funders need to let organizations dream big, and often spend big, to achieve true social change. Another one of my guests–Matthew Bishop, Globalisation Editor of The Economist–explains that, “entrepreneurial solutions are needed more than ever…be bold and take risks.” Our sector needs more practitioners who are willing to fail and then willing to try again.
6. Approach investing as a long-term relationship: Find an organization that you believe in, invest in their leadership team, and settle yourself in for a relationship that can last for years. True impact rarely happens in a single twelve-month funding cycle, and there will be setbacks. "I think that you need to have patient capital," says Marissa Sackler, the philanthropist and founder of non-profit incubator Beespace. “You need the money to get through it but you aren't going to see the results right away.”
7. Develop trust with the organization: Before investing, do your homework. Get comfortable with the management team, make sure that their numbers all add up, and research the impact that they have on the community. As Dina Powell, the Head of Goldman Sachs Impact Investing Business and President of Goldman Sachs Foundation, says, “If you want to run it [your foundation] like a business and have the efficacy that of course all philanthropists want to have, you have to have the right people to help you set that up.” Trust the management team that you’ve invested in, and let them do their work. Be an involved, interested investor–but when it comes to making operational decisions, take a step back. Micromanagement by investors makes getting real work done difficult, because the management team ends up burning energy on defending or debating their decisions rather than focusing on programming efforts. Ask questions and offer advice–but let them do what they are there to do.
The above article by Jacob Lief first published on huffingtonpost.com in Dec, 2015.
