There have been a few distinct moments in my career when I’ve had the opportunity to pull back or step behind the curtain of some much-revered, awe- or fear-inducing thing. Each time, I’ve found that what’s behind it is often more manageable than mystifying. This was never more true than when I transitioned from my work in nonprofits to my role as a grant-maker.
Why Funders Do What They Do
Behind the curtain, I learned that funders have more in common with nonprofits than you might think. They, too, have missions they want to accomplish. They, too, are facing increasing pressure to be transparent and accountable. And they, too, want to be able to measure and describe their impact. In many cases, this has led to a shift from “funding” to “investing” or from “charity” to “strategic philanthropy.”
Paul Brest, former CEO of the Hewlett Foundation and a leading advocate of strategic philanthropy, defines strategic philanthropy as “the setting of clear goals, developing sound evidence-based strategies for achieving them, measuring progress along the way to achieving them, and determining whether you were actually successful in reaching the goals.”
That doesn’t sound too provocative, does it? So, what’s the big deal?
Strategic Philanthropy in Action
Because of their vast resources, privilege, and power, foundations have the potential to make tremendous and lasting impact. Yet, unless foundations deliver their own programming, they must rely on those they fund to execute their missions and measure their impact, piece by piece. So, in executing strategic philanthropy (as some have interpreted it), many foundations change how they structure their giving and how they interact with grantees. They might:
- Narrow their funding interests
- Shift their funding “upstream” to root causes or systemic changes
- Research, design, and prescribe program models they believe are likely to be most impactful
- Shift to pro-active rather than reactive funding, sometimes issuing RFP’s to find nonprofits to implement the work they’ve designed.
- Prescribe outcomes and measurements that grantees must use so they (funders) can aggregate it for their own analysis
Is Strategic Philanthropy Good for the Sector?
Turns out, this question sparks a lot of debate. We don’t have the time or space here to hash all that, but I’ll send you to these articles in Nonprofit Quarterly (one and another) and Chronicle of Philanthropy (one and another) to read the critiques. To read the rationale for and defense of strategic philanthropy, check out this response in Nonprofit Quarterly and this comprehensive essay in Stanford Social Innovation Review.
Clearly, the issue is complex and opinions are nuanced. For our purposes, I think the case for strategic philanthropy can be summarized in two main points:
- With billions of dollars at its disposal, philanthropy can and should dream big and work scientifically and strategically to solve problems rather than just distribute assets to worthy causes.
- With the privilege of its power and resources, philanthropy should be accountable to society for delivering measurable value.
And the main critiques go something like this:
- When foundations get prescriptive, this can limit, burden, and/or fragment nonprofits’ efforts and overlook their unique needs and approaches.
- When foundation strategies are developed in the privileged “bubble” of philanthropy without partnering with the front-line experts, they can turn out to be unrealistic, unresponsive, or irrelevant.
- Focusing on root causes and system change at the expense of more responsive and transactional philanthropy devalues and crowds out important work that is still necessary.
A Middle Ground
To be encouraged, here are two articles (one and another) that propose a middle ground. Essentially, the proposed solution is for foundations and nonprofits to listen to one another, respect each other’s unique needs and expertise, seek meaningful alignment with each other, then direct all their efforts in support of that strategy, and be willing to learn and improve together.
In my next post, I’ll describe some ways nonprofits can be more engaged, empowered, and effective in their conversations with funders about strategy, in order to seek that alignment.