Six Questions to More Effective Philanthropy Giving away money is easy. Getting ever-improving results for your money is a lot harder. Confronting six essential questions can help you achieve the success you want. Depending on where you are in your journey, click on the question below to find tools, donor stories, and other resources to help you along your way. GSO 624e7865-3d5c-4655-857a-f5a095eb0084 a74fdd59-9f43-4cb6-a723-982bc7afbf14 To help donors getting ever-improving results for their money c99b2a77-ed94-4eee-a4e5-4c1f92ecef23 Values & Beliefs Clarify aspirations 05baaf71-3456-468c-b722-54437d275ce3 1 Family Members Advisors Staff What Are My Values and Beliefs? All philanthropy is personal. Philanthropists can, and do, support almost everything, which can be a great strength. But if you are committed to making a real change in the world, you need to start by clarifying your aspirations. Getting started can be daunting with so many choices. In addition, everyone -- family members, advisors, and staff -- bring their own aspirations to the table. Getting clear about your aspirations makes it easier for everyone to work together. Motivation Understand why you want to give. 323e9c25-5297-4aeb-84ec-18152615889d 1.1 What are my motives for giving? Understanding why you want to give will help define how you want to give, including how personally engaged you want to be in your philanthropy. bafe7b2f-e1e6-4c8c-9ca1-619c9bc53d6d Values Consider the people, places, problems, pathways or philosophies that you care about most. 9818077a-9c08-45df-bd3b-2966b788bece 1.2 What values and beliefs will anchor my philanthropy? Consider the people, places, problems, pathways or philosophies that you care about most. 329fd06d-21ff-40a6-acc3-af2640256080 Aspirations Be clear about your aspirations. 5cf130ce-4492-4321-8ac1-918008c8d337 1.3 Who else is involved in my philanthropy? Everyone --family members, advisors, staff -- brings their own aspirations to the table. Being clear about your aspirations makes it easier to work together. f3a822fb-8917-4df7-8d74-06c6d2937730 Success Define success 2c751ef2-5694-4f3f-8d73-6dd03a14a0c7 2 What Is "Success" and How Can It Be Achieved? Just as every philanthropist has unique aspirations, every philanthropist will have a different definition of success. Knowing what you are trying to achieve is essential to getting results, and it's a deceptively difficult process. The complexity of the problems means there are many paths to choose from. Outcomes Translate your aspirations into specific outcomes. b9cbeb22-df2f-4cb3-9171-5b7db1a79c2b 2.1 What is a successful outcome? Defining success involves translating your aspirations into the specific outcomes that you want to see achieved. Who do you want to help? Where, geographically, will you focus? How long are you willing to wait for results? What, exactly, are you trying to achieve? 89c10e45-a8d0-480f-8b4f-8f9a0e1f5b45 Understanding Understand the situation thoroughly. f4b00f62-9ead-4452-8a7e-b6ecbc52b32c 2.2 Do I understand the situation thoroughly? To get the most out of your investment, do your homework. Who else is working here? What seems to be working? What isn't? 33b3c97b-6119-4204-94b3-4649b92fc429 Feasibility Determine what will be required to reach the desired goal. bd1ebc53-cfc7-4572-97ca-ebc839897301 2.3 Is success feasible? What will it take—really—to reach my goal? How much have other funders spent on similar initiatives, and what kind of results have they gotten? 2933ea99-5c58-4034-8765-ba083d3f7d2f Accountability Define a role for your philanthropy that both contributes to the outcomes you seek and matches your personal circumstances and preferences 0b39db83-e872-4a2a-8668-cd53dcb29a08 3 What Am I Accountable For? Even the wealthiest philanthropists need help in solving society's toughest problems. It's easy to overestimate what you can actually contribute -- so you have to be ruthlessly realistic about the resources you are willing and able to invest... Ultimately you will define a role for your philanthropy that both contributes to the outcomes you seek and matches your personal circumstances and preferences. Financial Resources Fund supporting activities or invest creatively or support for-profit activities that create social good. c8e5a604-a586-43b6-9f6c-ad177f0f6963 3.1 How can I best use financial resources to achieve impact? Besides making direct grants, you can fund crucial supporting activities (such as publicity), or invest creatively by putting your balance sheet to work (through debt or equity), or support for-profit activities that create social good. e3cf0919-4753-4477-a393-0276451e9de7 Time, Expertise & Personal Networks [Apply your] time, expertise, and unique personal networks. 1698c596-b3a9-4f63-b57c-69c8b07cdfe9 3.2 What non-financial resources can I bring to the table? Your time, expertise, and unique personal networks can be extremely valuable in the right circumstances. 654a44fa-d165-4cb2-8dfd-dd67b24d0dc8 Commitment Identify a commitment level that is commensurate with the task at hand. 4cc9d818-2cc9-40f2-bbb0-39485a3ca995 3.3 What am I willing to contribute to this work? Consider carefully your own expectations, tolerance for risk, and where each initiative fits in your philanthropic portfolio. This will enable you to identify a commitment level -- both financial and otherwise -- that is commensurate with the task at hand. Armed with these answers, you can define a role for your philanthropy that both contributes to the outcomes you want to see and matches your personal circumstances and preferences. 2865ad4b-d0bf-4456-ab2a-611a4ee629d6 Positioning Ensure positioning to deliver results 5888512a-390a-4335-80c6-667944b7808d 4 What Will It Take to Get the Job Done? Philanthropists have to make good decisions and also ensure that they and their grantees are positioned to deliver results. Ultimately, execution trumps strategy, and successful execution requires capabilities, resources, and discipline. Recruiting, Retention, Development & Leadership Facilitate recruiting, retention, development, and leadership. 49a1ad31-8388-4c6b-ab6a-f178156f76bf 4.1 What do my grantees need to be successful? Nonprofits need more than just checks. To execute with excellence, grantees need the right people and the right organizations in place. This requires attention to recruiting, retention, development, and leadership, which philanthropists can help facilitate. fa9306dd-0cfe-42a1-97e3-f7e2ebf2c119 Grantee Capacity Support building the capacity your grantees need with respect to people, systems, and processes that are critical to getting results. 3ac3f717-f5a8-4096-a021-98d60a9d1532 4.2 What kinds of support should I offer? A phobia of overhead costs plagues the nonprofit world. Work with your grantees to understand the people, systems, and processes that are critical to getting results, and consider how you can support building that capacity. 56620032-97ef-409c-bff9-963385d77b14 Impact Decide how to build your own capacity for impact. a2cdd83c-f003-4913-a632-04545f32c50d 4.3 Am I structured for success? As a philanthropist, you have choices about how to build your own capacity for impact. Should you outsource capabilities or hire staff to support your work? For institutions, there are further questions about boards, governance, and organization design that support impact without undue cost. 255ad9ca-587d-4772-9e7f-c7a6c6705c03 Grantees Choose grantees wisely and help them deliver the best possible results d093f104-6009-4b5d-a598-67393c4cf7a9 5 Grantees How Do I Work with Grantees? There are many paths towards making a difference in the world with your philanthropy. The most common path donors take -- which this question addresses directly -- is funding nonprofits. Since they -- not you -- are on the ground, doing most (if not all) of the heaviest lifting, it's really not much of a stretch to say that your single most important job is choosing your grantees wisely, then doing everything you can to help them deliver the best possible results... There are many paths towards making a difference in the world with your philanthropy. You might start your own nonprofit or advocate for something you believe in. Probably the most common path donors take -- which this question addresses directly -- is funding nonprofits. If you choose this path, it is important to acknowledge that it is they -- not you -- who are on the ground, doing most (if not all) of the heaviest lifting. So it's really not much of a stretch to say that your single most important job is choosing your grantees wisely, then doing everything you can to help them deliver the best possible results. How to do this? It might be helpful to break it down into what we call the "Six S's of Grantmaking" which includes a number of activities, namely: Sourcing 96f3c84c-c507-46a3-bf47-06728804c9fa 5.1 How do I find a set of organizations I might want to support? df1a095f-45f0-4691-8f15-28fb907010a8 Screening 20f15c36-437f-4494-80ad-3dab9df4cd29 5.2 How do I research and evaluate organizations I might fund (some call this "due diligence")? 310f5e41-9319-4697-854d-8235554459f4 Structuring 7b9a5fb5-4f72-49cd-a20a-6d1de0a5e77d 5.3 How much money should I give to any one organization, and how should that money be given? For example, should I give it all at once, or make funding contingent on results? Should I attach any restrictions to my funding? 9e516ddf-52ec-45d2-8c59-01a45cef4267 Selecting 53bf522a-e2bf-45b9-a644-83a76504a56f 5.4 Family Foundations Family foundations have special dynamics. Families rarely make decisions the way a corporate board or a high-performing executive team would. Along with individual ideas and personal agendas for what the foundation ought to be doing, each member brings a lifetime's worth of experiences, relationships, and emotions into the collective decision-making process. Achieving results, however, demands both clarity about how decisions are made and the discipline to make them within the context of how you've decided to focus your giving. This usually means saying no most of the time, both to avoid making grants that would throw your strategy off course, and so that you can double down when that is desirable from a strategic perspective. Being honest and clear up front about who gets to decide what can offset potential conflict. If a board of trustees is responsible for approving every grant and has a ninety-nine percent approval rate, it is reasonable to infer that the board's decision-making role is mainly a formality. Conversely, if the benefactor can override any decisions made by staff, and does so on a regular basis, then perhaps decision-making authority needs to be structured accordingly. How do I -- and any advisors, staff, or family members -- make the final "go/no go" funding decision? ... "Selecting" refers to the final decision to make a specific grant to a specific grantee. In situations where there is one decision maker (an independent philanthropist, for example), this process is fairly straightforward. A more complicated decision-making environment, such as a family foundation, needs a formal decision-making process. Such a process will clarify who has the final authority to make the decision, how input will be considered, and what each stakeholder's role will be. Clarity about roles and steps in the decision-making process will result in: * Decisions that are more effective, efficient and responsive * Greater transparency and reduced conflict * Less time in limbo for potential grantees 2ce2b98d-b47b-4ca6-b8e0-a881ee65d088 Authority Clarify who has the final authority to make the decision b9f2cb5e-c162-491c-a2f6-5de51cc2d3d9 5.4.1 490162ee-0852-4b59-9e14-bcc3f378e84b Input Clarify how input will be considered 112461f3-31c3-4a17-9527-32bf649a7be5 5.4.2 62b5cd12-c5ce-45b0-8bbe-e9014509586f Roles Clarify what each stakeholder's role will be 2194bd3c-0277-4324-bfd4-0c31050833f4 5.4.3 dda01eb4-ca5b-47e5-a678-6768018ec527 Supporting ae1acdb3-968f-4eaa-b7cc-b55ab03949d8 5.5 How might I support grantees beyond just writing a check? f97fa26d-b2a6-45c3-8cea-d6ba4fc3cff2 Organizational Health Understand what a grantee is trying to do and what it will need to get there 84d48719-2a29-41ee-ac3c-ddcbd13549f7 5.5.1 Funding mistake #1: Investing in programs at the expense of organizational health We know that strong organizations -- with efficient IT and financial systems, thoughtful people management, compelling fundraising campaigns, etc. -- are necessary for long-term success. Yet many funders view "infrastructure" investments such as hiring a talented senior team or installing new technology (investments that would virtually be automatic for a growing for-profit) as excessive "overhead" within the non-profit context. Instead, grants go primarily to support specific programs, particularly new program initiatives. And non-profits are asked to restrict nonprogram spending to unrealistically low levels (often 15% of costs for government grants). In this way, the funding world sends an unambiguous signal: do not invest to recruit and develop the best people. Do not invest in the systems needed to support these people. And do not waste leadership time on smarter planning and management. Deliver great programs on the cheap -- and do it year after year. The result is an organizational version of chronic fatigue, with non-profit teams stretched and less able to deliver the outcomes we collectively seek. How can you avoid this pitfall in your giving? First, avoid using set ratios for giving to program vs. non-program investments. Instead, take the time to understand what a grantee is trying to do and what it will need to get there, then determine where your gift can have the most impact. (For a deeper dive on the overhead challenge and what grantees need to succeed, see The Nonprofit Starvation Cycle.) 94fa3bbf-9009-49c2-b339-e8f120a6512f Investment Scope Structure your giving to learn and make more informed, and often larger, investments over time. 89fac760-6907-4fc7-9a37-6e9cc55ac10d 5.5.2 Funding Mistake #2: Doing too little for too many (aka, the peanut butter approach) Many donors prefer to spread small gifts among many recipients, rather than making bigger commitments to a shortlist of grantees. At times, this makes sense. Early in your experience as a donor, for example, you may have little sense of what you want to achieve and what kinds of organizations will help you get there. But too often the thinking that drives this "peanut butter approach" is faulty. First, donors have a tendency to be overly optimistic, to underestimate what it's going to take to solve problems. Save the oceans for $5 million a year. Transform public education for $3 million a year. The mismatch between funding and aspirations is often alarming. At the same time, we can be risk-averse. The bigger the bet, the greater the risk. So donors hedge their bets and avoid larger investments. The problem is that it usually takes significant time and money to achieve impact. That means that small tentative commitments may be your riskiest bets of all, particularly if they keep many grantees at mediocre levels of performance rather than helping a few take great leaps forward. How can you avoid this pitfall in your giving? Structure your giving so that you can learn and make more informed, and often larger, investments over time. This is the same approach venture capitalists and corporations take when they are building new relationships or starting a new line of business. Where grantees are succeeding with your support, consider doing more while being sure to re-align your giving to their situation. Just as your experience changes your grantmaking, your grantees will have changing needs over time. For help thinking through how your grantmaking may change depending on where you are, see The 6 Phases of Grantmaking. 2da05131-932d-4f17-9c2b-babf5c96bebf Skills Identify your skills and assess your willingness to use them 687abdb3-6162-4d7f-9c0d-fc13362324f4 5.5.3 Funding Mistake #3: Assuming that a check is all you have to offer. Writing a check is the most common and straightforward form of giving. It would be a mistake to think that money is the only resource you have at your disposal. You also bring a valuable network of contacts and relationships. To support a grantee, you may be able to refer a trusted friend to serve on the board or connect the CEO to other agencies, partners, and funders in the community. You or your team may also have relevant expertise like financial or legal knowledge that can help a non-profit. The bottom line is that giving shouldn't be a "one size fits all" proposition. How can you avoid this pitfall in your grantmaking? To make the most of your assets, identify what your skills are, and assess your willingness to use those skills. Do you have a business or legal background you could use to advise grantees on mergers? Could you provide facilities or services at a reduced or free rate? Examples of potential non-financial supports you could think about providing include (but are not limited to) the following: * Strategic supports: - Strategic planning & business model advice - Organizational design advice - Performance management advice - Board development * Tactical supports: - IT assistance - Communications / marketing support - Financial planning / accounting - Staff / management training * Field-related supports - Catalyzing collaboration, seminars and convenings - Offering insight and advice - Using the power of your voice to draw attention 937733ce-7690-4069-98bc-33d58f1cb57d Priorities Work alongside those tasked with day-to-day execution and to not underestimate what you may have to learn 7fb69e65-43e5-46d2-a676-51382203b58a 5.5.4 Funding Mistake #4: Subordinating a grantee's priorities to your own. It is important to take the needs of your grantees into account. Once you have identified if there are any non-financial resources you are able and willing to provide, find out if your grantee actually wants this help! You want to avoid at all costs having a grantee accept help that is a strategic distraction, for fear of alienating you. If, on the other hand, your grantee requires something you can't provide, you might broker the relationship between a provider and your grantee. This approach allows you to have a voice in the work while still deferring to the grantee (the strategy is theirs after all) and the more knowledgeable provider. If you have determined that the grantee does not require any particular non-financial support to be effective, your direct participation is unlikely to be useful and simply writing a check will make the most sense. How can you avoid this pitfall in your grantmaking? Keep in mind that non-profit organizations -- like all businesses -- are complex. And the individuals who work in them are experienced professionals. Put offers of advice or expertise in this context. While grantees will welcome your support, it's important to work alongside those tasked with day-to-day execution and to not underestimate what you may have to learn. For more information, see On the Money (GEO) and More Than Money (CEP). c2cf7ef5-e761-4407-8b42-fab3a6426260 Communications Make communications clear and regular 905241cc-59bc-4625-b3ff-9ee8386bacff 5.5.5 Funding Mistake #5: Asking too much of your grantee. As a "great giver," you've developed a strategy to help you get the most out of your resources. You've established milestones to track how well you are doing. A new challenge is ensuring that this good thinking doesn't inadvertently undermine the work your grantees have underway. How could this happen? After all, you became a donor because of your belief in the organization, its mission, and its team. One unavoidable truth is the imbalance of power between a funder and a grantee. CEOs are unlikely to say no to donor requests if they put significant dollars in jeopardy. They will take another meeting, write another report, they may even adjust programming to meet your preferences. But the work of a non-profit shouldn't be driven by funder requests; not when the expertise of staff vastly exceeds that of its donors. And a CEO's time is a scarce resource. With every extra hoop you ask a non-profit to jump through, the cost of raising funds goes up and the potential value of your donation goes down. How can you avoid this pitfall in your grantmaking? First, keep outcomes front and center and avoid prescribing how the work gets done. If you want to talk about strategy, be sure it's the grantee's strategy - not yours - that drives your grantee's decisions. At the same time, respect your grantee's time and limited resources by making communications clear and regular, but not burdensome. 39d4aade-f018-42ff-8e57-4beb772b2919 Sustaining 7b7c1f12-0326-4235-a355-b0396c488ef8 5.6 Should I continue to fund my grantees? For how long? ... "Sustaining" refers to the decisions you will need to make once you have supported a grantee for the agreed-upon term. You will need to decide whether to renew your grant, to exit (but provide some sort of transitional support), or to exit without providing support. 69f691f9-d696-4f3f-a47c-c195dbd7c7b8 Improvement Focus on improving over time 5fdbdc81-4a6c-4c8f-bc48-f43404138f1d 6 Am I Getting Better? A success-driven philanthropist wants to understand results and how to maximize them. Yet for the complex problems philanthropy tackles, results are rarely black and white. So instead of focusing energy on perfect metrics, focus on improving over time. Understanding Understand the connections between your activities and the outcomes you expect 07c7feb4-1233-4b3c-a846-6f5e758befc0 6.1 How can I judge if this is working? Reflect on both your grantees' performance and your strategy to understand the connections between your activities and the outcomes you expect. This can help you identify where learning matters most -- and how to learn best with and through your grantees. 1b8639fb-865b-4695-8ee8-cb5c073a563a Measurement Focus on data that will inform your decision-making a4fecd0f-ee04-48de-9890-0e0ec3081969 6.2 Where might measurement help me? The key is to focus on what data will directly inform your decision-making, and to be realistic about what numbers can tell you and what they can't. 194a8ad0-6b94-47cb-a080-2606970a5d24 Excellence Impose standards of excellence upon yourself 3e7c80ea-4c66-4cba-8df7-68e50642be27 6.3 How can I learn from my experience? The endless need for philanthropic dollars as well as the lack of competition means that you must impose standards of excellence upon yourself. This means acknowledging "failures," learning from others, and investing in experiments. 07ac3566-dd9f-43c6-82b5-01038867348f Failure Acknowledge "failures" e9c8dbfc-37c2-4419-90cf-5cb97deeedab 6.3.1 738f3743-483e-4dca-8c56-4c9d9fafda1d Learning Learn from others 67ea7668-980f-4367-aee8-c116d57f3ca0 6.3.2 4a953282-1a2c-4006-aaa7-0d452b02b237 Experiments Invest in experiments 38f64a35-0580-4f1d-943e-add9c62a19f8 6.3.3 50a55e4f-ece1-42ad-973b-eaaa656c6f29 2013-11-20 Owen Ambur Submit error.