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Philanthropy challenges

December 2009

3D"Philanthropy David Carrington shares his thought= s on key areas a new European philanthropy research centre should be prioritisin= g

The Erasmus Centre for Strategic Philanthropy [1] was launched at Rotterdam University= in September. A joint venture of the University’s Schools of Management a= nd of Economics and the Adessium Foundation, the centre is an addition to the growing number of university-based centres in Europe which are concentratin= g on research and teaching in philanthropy. For the launch conference, ‘Doi= ng Good, Done Better,’ Iwas very pleased to be invited to talk about = 5;Philanthropy Challenges [2].’ This article is made up of ex= tracts from my speech.

This is an exciting and challenging time for the ‘philant= hropic sector’ – a time ripe for investment in high quality research and learning about philanthropy. Too often, anecdote and rhetoric have been the only ‘evidence’ available for the claims made by and on behalf of philanthropy. Research derived learning can influence not only the behaviou= r, impact and organisation of the philanthropy sector itself, but also policies and attitudes towards philanthropy.

Lots of questions need to be investigated and studied – h= ere are just five that demonstrate the potential breadth of the agenda:

1) Philanthropic resources are, inevitably rati= oned – there are never enough to meet all the needs and demands that = they could target. How best to focus and use philanthropic resources a= nd energies at this time to greatest effect?
2) The boundari= es – of role, responsibility and action – between the state, the priv= ate sector and philanthropy are especially fluid at present – changing and contentious. How should they relate to each other? What sort of partnerships, if any, are legitimate?
3) Recent econo= mic and financial traumas notwithstanding, we are living through a pe= riod when disparities of wealth within most communities are wider than they have been for decades. How can philanthropic effort respond = to such disparities, address the issues of social justice and the tensions within civil society that they provoke?
4)&nbs= p;Much philanthropy = is rooted in faith, in religion. Social and political challenges –&n= bsp; both positive and negative – are being generated by the emergence of more assertive faith communities within generally secular communities. What are the philanthropic dimensions of those developments?
5) Philanthropic activity and the behaviour of philanthropic organisations are under greater public scrutiny. How best can the governance, transparency and accountability issues that arise be dealt with?=

I’m going to offer some cautionary observations about som= e of the challenges the new centre faces and some suggestions for issues and top= ics that I believe are ripe for academic research and learning.

The new centre – some cautiona= ry observations

1) Clarity about what words mean<= span style=3D'font-size:10.0pt;font-family:Arial;color:black'>=

My first cautionary observation is about the title of the new centre. What is strategic philanthropy?

If I did a ‘vox pop’ poll in the U= K, asking the ‘man in the street’ to define philanthropy or a philanthropist, I suspect I’d get a picture of very wealthy individuals (or of large endowed foundations), giving away large sums of money, and doi= ng so very publically, with a high profile. ‘Buying your place in heaven&= #146; or ‘enhancing your status with your peers’ would be high on the l= ist of motives that I suspect would be suggested for why these sorts of philanthropists do what they do.

The possibility that philanthropy might invo= lve much more than just a financial transaction would, I suspect, not be advanc= ed.

If you turn to the literature, however, you = will find philanthropy defined as ‘voluntary action for the public good= 6; or ‘private action within the public realm’ – no mention the= re of any financial transaction, of any transfer of wealth. Those definitions embrace all volunteer activity, collaborative action by individual citizens= to enhance and improve civil society and to assist others within their communities. If that is the case in the UK, the philanthropic ‘agenda&= #146; is enormous.

We only have 8,500 foundations. There are, however, perhaps 900,000 organisations that in some way exist to translate = ‘voluntary action into public good.’ Most are tiny groups of
citizens focusing some of their spare time, passion and energy on some local activity or specific cause. Others are huge, spending millions of Euros each year, employing hundreds
of professional staff. The sector employs 1.4m people; that’s 6.5 per = cent of the entire national work force – and that does not include the 44 p= er cent of the population who volunteer, giving their time to the work or to t= he governance of those organisations. This is the equivalent labour to that of= 1m full time employees.

Defined as broadly as that, the philanthropic sector in the UK (and in most European countries) is a significant player within the economy, spending in the UK over £100bn each year and owni= ng assets worth about £200bn.

But few of that workforce or those volunteers would describe themselves as working within the ‘philanthropic sector’ – there is a disconnect between the definition and the perception of philanthropy, even among those who are involved as practition= ers in ‘voluntary action for the public good.’

2) Strategic Philanthropy is multi-dimen= sional – the heart influences the head

One well known definition of ‘strategic philanthropy’ describes it as ‘effective giving designed around focused research, creative planning, proven strategies, careful execution a= nd
thorough follow-up in order to achieve the intended results.’ [3]

This may be a comprehensive and accurate definition but it does seem a somewhat passionless and mechanistic image of action that, whatever else it is, must, in some way, be the expression of personal values, aspirations and a desire to see social or other changes in= the way society behaves, to ‘make a difference’.

My second cautionary word for the centre reflects that. How to ensure that, in focusing on strategic philanthropy, t= he necessary personal vision and values that generate and inspire ‘volunt= ary action for the public good’ are not squeezed out of the examination &#= 150; that the influence of the heart on the head is not ignored.

Research which assumes that philanthropy is entirely a rational, considered, ‘strategic’ act may significantly miss the point of why philanthropy happens, why so many in society are invo= lved actively in it – why it is so important a feature of all of our communities. That dimension of philanthropy needs not just to be understood= in any research or teaching in philanthropy – it needs, I suggest, to be celebrated.

3) Social risk capital – where are = the failures?

Sometimes, those who talk of strategic philanthropy also use terms like = 45;social venture capital’ or ‘the risk capital of social innovation’&= nbsp; to distinguish their work from ‘ordinary charitable giving’. Fair enough, but – and this is my third cautionary comment – if strate= gic philanthropy is focused on high risk activity and innovation, where are the failures documented? If it’s high risk, there must be things that don&= #146;t turn out as planned – lessons to be learnt about what not to do as wel= l as what might be developed further and scaled up. I do hope the new centre will pay lots of attention to the investigation of the lessons learnt from both sorts of outcome.

4) Philanthropy is political=

Philanthropic activity is not taking place i= n a political vacuum. Sometimes the most effective philanthropic efforts will challenge orthodoxies, will irritate or anger governments or established institutions. Sometimes philanthropic research initiatives generate major political as well as social change.

Some philanthropists claim that philanthropy= is non-political – I suggest as my fourth cautionary observation that the centre should ignore such claims and should always be alert to the political dimensions of the role and place of philanthropy within society.=

5) Strategic philanthropy is ‘good = business’=

My final cautionary words: note that strateg= ic philanthropy has acquired a commercial meaning – it’s widely used= by advocates of marketing led corporate social responsibility. ‘it’s good business and customers are watching‘ [4] – with a measurable return on investment in enhanced corporate reputation, building new markets and influencing consumer decisions, ‘strategic philanthropy can even inclu= de benefits to your bottom line’. [5]

The characteristics of philanthropy=

If the centre does, as planned, focus on ‘professionally = led grant-making and fund raising foundations’, it will be grappling with a sector which is characterised by diversity, complexity and universality = 50; it is that mixture which in part makes it such a fascinating area for study= ,
learning and debate.

1) Diversity

The philanthropic sector is diverse:

Geographically, between E= urope and other parts of the world, within Europe between different countries, and within individual countries.
Diverse because of differ= ent traditions, culture, religious, political and social history.
Diverse because of differ= ent fiscal and regulatory rules, tax incentives and opportunitie= s.
Diverse because of the different roles of the state and of non-profit or civil society organisations within individual countries.
Diverse in size – fr= om the huge Wellcome Trust in the UK and some of the Bank Foundations in Italy to foundations giving away just a few thousand euros each y= ear.
Diverse both in the sourc= e of funds – from individuals, families, companies, communities &= #150; and also in whether the funds are inherited, the present generation acting as stewards, or the philanthropy is that of a &= #145;living donor’, the direct result of the wealth creation by the philanthropist him or herself.
Diverse in financial stru= cture – whether the foundation has a permanent or an expendable endowment, or is fed with annual gifts, or is an intermediary such as a community foundation, seeking funds from others to deploy in its specialist area. <= /li>
Diverse in purpose, focus= and activity – whether primarily responding with funds to the ideas and plans of others; or pro-actively seeking out organisations to support; or commissioning work direct; or using funds for its own operations, managing services and activiti= es itself; or convening partners to act together to effect or influe= nce change – or a combination of several of these. &n= bsp;

All these differences are shaping the particular nature, focus, organisation and profile of philanthropy in each country. =

This rich diversity of forms and ‘philanthropic stories&#= 146; is something into which the centre will want to delve and should celebrate = – the challenge will be how to reflect that in its agenda, to avoid specious generalisations.

2) Complexity

Second, the complexity of the philanthropic sector:

For philanthropy to achie= ve almost anything is like assembling a complex ‘jig-saw puzzle’= ; of financial and other resources, the pieces have to be carefully fitted together to make the whole.
Most philanthropic activi= ty seeks to be measured against a range of different social and personal returns. Some returns may be measurable in financial ter= ms, some in financial proxies but some are not measurable at all&nbs= p;in numbers.
Poor performance in phila= nthropy is not necessarily a cause for change and improvement= – the people running most endowed foundations face no external = ;performance drivers, no “survival anxiety.” If they have performance standards, they are ones that they set and monitor themselves.
Many variables will dicta= te or influence outcomes – money is just one factor in whethe= r a philanthropic initiative achieves what it sets out to do – or not.
Seldom are philanthropic resources being used to support an initiative which has a single, clearly identifiable conclusion – the impact, if any, = of the activity may not be visible for many years.
Many philanthropists can = never identify with certainty the result of their efforts to ‘make= a difference.’ Simple, causal attribution is seldom found in the often complex t= asks and challenges that philanthropic resources are trying to ta= ckle – yet much of the literature describes philanthropic efforts= as if there is a direct and uncomplicated connection between mo= ney, outputs, outcomes and long-term impact – an understandable h= ope but not the reality.

The challenge for the centre will be to explore this complexit= y – not to be seduced into making fallacious claims about attribution or causal= ity or to adopt quantitative measures or models which may make things look simp= le but will almost certainly provide a picture that distorts reality.

3) Universality=

Last – but by no means least – the sector’s universali= ty:

There may be a diversity = of motives driving philanthropists – but all are present in some form in every society.
Getting involved in volun= tary action should be fun as well as creative, satisfying and producti= ve.
All can learn from and sh= are that experience.

For the centre, the challenge will be to make the most of the opportunity it has to become a forceful and pro-active source of learning f= or philanthropic practitioners and for policy
makers, and to engage with practitioners in order to translate research findings into teaching, philanthropic practice, governance and, therefore, = impact.

Philanthropy – within a market place=

Final= ly, some thoughts on specific themes that I urge the centre to explore. They all derive from my view of philanthropy as taking place within a market place. = Yes, it’s a social act, a cultural phenomenon – but there is supply and demand, there are providers, consumers, purchasers, service users and entrepreneurs all active within this market place.

There is value in studying how that market p= lace works and the place of philanthropic resources within it; for example:=

The cost of philanthropic transactions – some argue that much philanthropy is a very expensive way of getting relatively small amounts of mo= ney from A to B; that it’s not an efficient market place.=
The quality of the proces= ses used – some ‘consumers’ of philanthropy describe the process as often being clumsily managed, even counter-pr= oductive; that it’s not an effective market place. <= /li>
The financial instruments= that philanthropy uses to achieve its goals. Grants are only one = of the ways that foundations or other funders can support philanthro= pic activity – and a grant, once given, is lost to the giver; it cannot be recycled. If philanthropic resources are scarce, i= t is vital not only that they are managed well and focused on activity which cannot be funded in other ways, but that grants are only used where they are the only way a specific activity or organisation can be supported.
For many civil society organisations, the market within which they battle to survive is one of ‘money in-money out’ – there are of= ten severe limitations on their ability to build a resilient capital base, to invest for the long term; that the supply side of the market is not helping to build a stronger and healthier sector.
Only 3 to 5 per cent of m= ost endowed foundations’ assets are directed explicitly at = achieving charitable purpose – well over 90 per cent of the assets of = such foundations are invested without reference to that purpose or mission; the market fails to maximise social impact, to connect investment strategies to charitable mission.
And one more question abo= ut the ‘economics’ – and the politics – of philanthr= opy: the justification for the tax advantages that philanthropy o= ften enjoys – does society gain overall from the ‘loss’= it makes from the tax relief it allows philanthropy? Does society get a good financial return from its support for ‘volun= tary action for the public good’?

[1] http://www.erim.eur.nl/ERIM/Research/Centres/
[2] http://www.davidcarrington.net/
[3] The Philanthropic Initiative, Inc
[4] Charles Moore, Director of the UN Committee for Encouraging Corporate Philanthropy, in an Octob= er 1, 2008 interview with The Financial Times
[5] Paul Lemberg, President of Quantum Growth Coaching

3D"David

Author: David Carr= ington

David Carrington is an independent consultant working with charities, companies and the government on the funding and governance of charities and social enterprises. He has been chief executive of three foundations including The Baring Foundation (1992-1998) and is a member of = the supervisory board of Tridos Bank NV.

http://www.davidcarrington.net/