Donors who want to make the greatest possible impact often turn to strategic philanthropy, an approach to giving that has become increasingly complex in recent years. Strategic philanthropy, which involves a great deal of research and planning, can have a measurable impact on communities around the world. Often, strategic philanthropy is individualized. After all, this approach is defined by a mission statement and vision. At the same time, the lessons that many philanthropists have learned over the years can be generalized to other grantmakers in order to help them maximize the impact of their giving. Following are some key lessons about strategic philanthropy.
1. Focus on Depth Rather Than Breadth
Many donors approach giving with the intention of helping as many people as possible. While small gifts to a wide range of different organizations—even ones that work on similar issues—can have a positive impact, strategic philanthropy works best when individuals focus on a small number of carefully selected organizations. Another way to think about strategic philanthropy is to view it as a transformational—rather than as a transactional—process. Typically, giving is a transaction. Individuals make grants, and organizations use them for specific and oftentimes stated purposes. By focusing on depth, however, strategic philanthropists can watch an organization change and evolve with their assistance. Depth encourages partnerships with organizations so that their leaders can share new ideas and insights. The collaboration implicit in these partnerships can lead to great things.
2. Accept a Degree of Risk in Grant-Making
Not all donors are willing to accept risk in the gifts that they make. In truth, it is hard to give away money knowing that it may not make a difference at all. The problem is that most traditional donors will not take a chance on an idea that could be revolutionary and really effect significant change. Strategic philanthropy involves accepting risk every now and then for something that the donor really believes in to give the idea a fighting chance. While the program may never come to fruition, donors should understand that the opportunity still has provided valuable lessons that can be applied to future endeavors. In that sense, no investment is wasted even if its immediate impact is not visible. In a sea of “safe” givers, it takes someone willing to take a risk to find new solutions to long-term problems.
3. Decision-Making Involves Internal and External Factors
Strategic philanthropy suffers when individuals do not take into account both external and internal factors as they give. Focusing on one or the other can lead to careless decisions that do not cohesively work to make a real impact. External factors include what the philanthropic organization wants to achieve for the community or the world at large. All donors have some degree of external motivation, which is what attracts them to various issues. However, donors also have internal motivation. What do donors want to achieve with their giving? While this question can differ for individual grantmakers, families, and businesses, personal goals can often align with external factors to have the greatest impact possible on both fronts. When both internal and external goals are met, everyone is motivated to continue giving.
4. Giving Strategies Can and Will Change over Time
When strategic philanthropists focus on a specific issue, they need to pay attention to the changing circumstances surrounding the matter. Doing so allows these individuals to adapt their giving strategy over time in order to have the greatest impact. For example, imagine that you decide to tackle an issue such as malaria. The areas most affected by malaria may change over time, so it would make sense to focus your funding on those areas that have the greatest incidence of the disease. Furthermore, scientific advancements may reveal new ways of treating the disease, which could point to new and better ways of working to end it. A strategic philanthropist understands how to keep a finger on the pulse of relevant topics and make adjustments to giving for maximum impact.
5. Give Boldly
One of the greatest lessons of strategic philanthropy is that nothing will change if funds sit unused. Currently, almost a trillion dollars is invested in donor-advised funds and foundations. All of the funds are earmarked for charity. The money has already received a tax deduction and cannot be returned for personal use. However, each year only 5 percent to 20 percent of this money will actually go toward charitable causes. Most of the remainder is invested to watch the bottom line grow. While the idea of generating more funds for giving is noble, the truth is that a lot of good could be done with the hundreds of millions of dollars that are not being used. As it stands, philanthropy runs on the fumes of the system that supports it—and not the engine itself. Strategic philanthropy can help you to achieve your goals and enact meaningful change.