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The strategic philanthropist

Resource type: News

Business Spectator |

By Michael Traill

The recent and welcome examples of significant giving from some of Australia’s newly minted billionaires highlight a real challenge: how to make that generosity deliver real impact?
It is a problem for the ages. As Aristotle observed: To give away money is an easy matter and in any persons power. But to decide to whom to give it, and how large and when, and for what purpose and how, is neither in any person’s power nor an easy matter.
In more contemporary times a Fortune magazine article observed: It is a remarkable fact about the new economy that so many of those skilled at generating mind boggling wealth are so utterly clueless in the act of giving it away.
The solution for these givers is to take as seriously the process of allocating their giving as they did the process of making the money. For many, the accumulation of substantial wealth has been the product of focus, discipline and persistence. Goals are set, return expectations are defined and when these aren’t met resources are reallocated. Hard decisions are made.
For those who want to take a strategic approach to their philanthropy and are interested in ensuring that their giving contributes to creating long term social and environmental outcomes in areas they are passionate about, the same approach should apply.
Six steps to strategic philanthropy
The following is a six step guide that summarises what the best practice corporate and individual foundations around the world are doing. It is a model of social investment that draws on many of the same principles that a prudent financial investor would use.
Identify areas of focus based on funder’s passions
Smart giving is all about connecting head and heart. Most givers are motivated by issues they have a passion for and strategic philanthropists are clear in identifying what they will focus on.
Do the homework
The most effective foundations like Atlantic Philanthropies and the Gates Foundation commit to serious research and analysis. They are prepared to invest significantly in the resources needed to understand the issues they want to help solve, either within their own teams or accessing them externally.
Be selective
When it comes to allocating funding, social investors are selective in identifying high-quality organisations and chief executives with a track record of delivery. That assessment and due diligence requires commitment and resourcing.
Be clear about return expectations
Social investors are just as concerned about the returns on their funding commitments as financial investors are in the business world. This requires clarity and two-way understanding between funder and recipient about the goals and social outcomes expected.
Be prepared to take a long-term view
Serious social investors understand that the most valuable support for non-profit organisations comes from long-term strategic funders who commit to and understand their goals providing targets are being achieved. Short-term funding and one-off grants do not sit comfortably with this.
Track performance and be prepared to make hard decisions
Just as some investments will underperform in a stock portfolio so, with the best of intentions, will some social investments. Social investors recognise the need to make hard decisions where it is clear that agreed targets are not being achieved.
I see many generous givers adopting what I have come to call a spray and pray approach to their philanthropy. Their giving is typically fragmented and involves cheques for relatively small amounts to a wide number of organisations. In most cases they are not clear or simply don’t have the time to assess how the non-profits they are supporting are performing. I am often perplexed at the contrast between the strategic and focused way many of these people made their money and the random and reactive approach to giving it away.
When the Gates Foundation undertakes their homework on US based non-profits they use extensively the resources of premier non-profit consulting group Bridgespan. This expertise is invaluable in working with prospective non-profits to ensure the kind of appropriate support needed to establish clarity around goals and outcomes. This is a new area of work we are beginning to support philanthropists in at Social Ventures Australia.
The global philanthropy landscape is changing. This country will be well served if the new and hopefully growing class of smart givers ensure their contributions are social investments and not merely generous gifts.
Michael Traill is CEO of Social Ventures

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nonprofits, Social Ventures