Getting better, steadily better, requires better decisions on every front, from fundamental strategic decisions (like how to define success) to key operational decisions (like whom to hire for a senior staff role). Decisions are how we allocate resources, and as a donor, your resources, not just your money but also your time and influence, are ultimately the only lever you have to effect change.
The challenge for philanthropists is that many, if not most, of these decisions are often clouded by ambiguity and uncertainty, because the objective data and feedback that could make them more straightforward don’t exist, or because they aren’t easily available. As a result, more often than not, you’re apt to find yourself relying largely if not entirely on your own judgment to make important calls. That in turn means keeping a watchful eye out for some insidious traps that lie in wait at every turn. Undermining good intentions and impeding results, even among astonishingly capable and experienced philanthropists.
The first of these traps is fuzzy headedness. It occurs when donors allow their emotions and wishful thinking to override logic and thoughtful analysis. Replying to the question “What are you trying to accomplish?” with a response as undefined (and therefore unattainable) as “curing cancer,” or “ending poverty,” or “stopping global warming” is a common symptom. So is relying on a miracle to get your giving to its desired result: assuming that a $10 million gift can transform an urban school district with an $800 million budget, for example. Another common symptom is falling in love with a charismatic nonprofit leader’s plan without examining it through the lens of rational analysis. One consequence of fuzzy headedness is “feel-good” philanthropy, where happy sentiments abound, but the odds of success are small.
The second trap that donors often fall into is flying solo. One of philanthropy’s great ironies is that very little can be accomplished by individuals acting on their own, even when those individuals are extraordinarily wealthy. The grander your ambitions, the more certain it is that success will require working with and through a broad range of other players, including the nonprofit or nongovernmental organization (NGO) grantees you support; other donors who are passionate about the same issue or issues; government agencies at home or abroad; or members of the public whose views you will have to influence in order to effect change. The list of potential candidates is long and varied. Yet far too many donors and foundation leaders fall prey to trying to go it alone, arrogantly assuming that they have all the answers and can achieve success unilaterally.
The third trap is underestimating and underinvesting. It is astonishing how often donors fall into it, given how much philanthropic wealth is created in the high-pressure crucible of business, where mastering the intricacies of finance is essential to survival. The old saying “Everything takes longer and costs more than you expect” holds as true when you are trying to repair the world as it does when you are engaged in home repairs. Yet, as donors, we chronically underestimate what it will actually cost to deliver results and underinvest in the capacity required to make those results a reality.
The consequences of falling into this trap are predictable. The organizations we depend on receive less than they need to perform successfully, and so the next time around we give them even less (or nothing), because they didn’t perform as we expected in the first instance. This pattern will persist until more of us are willing to step up as the Fishers did, and say, “You know what? This is going to cost multiple millions of dollars and take years (if not more). So let’s not fool ourselves, or those we want to help.”
The fourth trap for the unwary is nonprofit neglect. It manifests itself chiefly in philanthropy’s widespread resistance to providing general operating support, which grantees can use to develop their organizational capacity. No one likes wasting money, and funding for “overhead” can feel like a waste. But is such money always wasted? Suppose we all decided to fly on the airline that reported the lowest maintenance costs? Or went to the hospitals with the oldest, most depreciated equipment? In many circumstances, consumers gladly pay for more overhead if it delivers value to them.
Nonprofits, too, have good overhead and bad overhead. Paying excessive rent or entertaining lavishly is obviously a waste of money. But what about hiring a chief operating officer who can take on crucial management responsibilities for which the executive director has no time, or a chief financial officer who can develop a long-term funding model to sustain the organization’s programs? Are those bad investments? Definitely not, and yet we consistently fall into the trap of believing that nonprofits can deliver A-level results with a malnourished team.
“Prudent” boards of directors make this mistake all the time. They’ll have an executive director who is doing a fabulous job of raising money and growing the organization, but is also burning out. And the board will resist funding a chief operating officer, even though it would help the organization sustain its results and ultimately do more, because the position would cost $120,000 a year. Industry leaders call the consequences of this trap the “nonprofit starvation cycle.”
The starvation cycle is the most egregious manifestation of nonprofit neglect. For the most part, donors’ results depend on the performance of the nonprofits they support. Great giving is not accomplished in a vacuum. Yet philanthropists routinely impose an excessive “cost of capital” on their grantees, which erodes the value of their contributions as surely and as imperceptibly as water flowing through a corroded pipe seeps away.
What does this hidden cost of capital look like? It comes in many forms: the philanthropist who thinks he knows how to run an after-school program better than the folks who have been doing just that for twenty-five years and insists on imposing his strategic ideas; the grant maker who annually requires her grantees to fill out fifty-page reports about how the grant was used and what results were achieved, but never acknowledges the reports and probably never reads them in their entirety. The costs of such behavior in disrupted strategies and unproductive working relationships are real, though rarely tabulated. And because of the enormous power imbalance between those with money and those who need to raise it, they can remain invisible and persist for years on end.
In a world without competition but overflowing with appreciation and praise, grant makers quite naturally fall into the trap of satisfactory underperformance: accepting things as they are without really pushing toward what might be possible. Results are calibrated as “good enough,” or perhaps even outstanding, but the motivation to excel, to improve future results by even 10 percent is lacking.
When asked about their relative performance versus that of others, most experienced grant makers would undoubtedly place themselves in the top half of their field (if not the top quartile), a perspective that inevitably nurtures complacency. The only antidote to such complacency is the courage to admit that you could be doing better and the willingness to ask hard questions to that end:
- What’s working, and what isn’t?
- What are other people doing that we could help with or learn from?
- What could we bring to the table besides our money that might help to accelerate and improve results?
Acknowledging the existence of these traps, and recognizing that they will never really go away, however experienced and wise we become, offers some help in avoiding them. Asking yourself the hard questions below is likely to prove even more helpful, as well as more productive and fun!
- What are my values and beliefs?
- What is ‘success’ and how can it be achieved?
- What am I accountable for?
- What will it take to get the job done?
- How do I work with grantees?
- Am I getting better?
Taken together, these questions create an approach for donors and grant makers who want to give smartly. Wrestling with them will require you to develop strategic clarity about what you hope to accomplish and what you believe will have to happen for your hopes to be realized.
References
Give Smart: Philanthropy that Gets Results. Book by Joel Lawrence Fleishman and Thomas J. Tierney
