‘Philanthropy does much good. But it’s a six-cylinder engine running on two cylinders. What would be possible if it were running on all six?’
Tom Reis, W K Kellogg Foundation

The enduring critique levelled at US philanthropy – that it doesn’t work well enough and isn’t adapting to changing circumstances fast enough – is as persistent as the hope that, at long last, someone will discover a way to ‘fix’ it. How can philanthropy be made more effective and more accountable? The answer, according to a study initiated by the David and Lucile Packard Foundation and the W K Kellogg Foundation, may lie in understanding how the environment for philanthropy is changing and in preparing for the opportunities and challenges created by new people, new tools and new pressures in the field.

Launched five years ago, the project was undertaken by Global Business Network (GBN) and the Monitor Institute, Monitor Group companies known for helping organizations look into the future in order to understand and adapt to long-term trends. Our aim was to contribute to a larger conversation about what it will take to create a better future for US philanthropy in a time of rapid change inside and outside the field.

This article is based on a longer piece written by Katherine Fulton and GBN practitioner Andrew Blau as part of the thinking that emerged from the project. The full working paper, along with many other materials, is available at our website, http://www.futureofphilanthropy.org. Though our analysis was focused on the US and we don’t want to presume that our findings apply in other parts of the world, we believe some of the ideas may hold true across international borders, and we hope that our thinking will be helpful to those working in other nations as well.

Looking back 20 years

Over the last two decades, not only has the number of US philanthropic foundations nearly tripled but there are also more donors, more donor-advised funds, more giving circles, more businesses vying to assist the wealthy, more non-profit organizations competing for funds. The sector has also diversified. America’s wealthy now includes growing numbers of women, young people, African Americans and people from minority ethnic and immigrant communities who bring to philanthropy their cultural traditions as well as their assets.

The sector’s infrastructure has undergone a corresponding development. A wide range of affinity groups and regional associations, as well as technology-facilitated brokers and networks, has emerged. In 1980, there were less than 50 infrastructure groups supporting philanthropy; by 2002 there were more than 170. This growth has also resulted in greater reflection on the sector’s work and increased public attention. University programmes, newspapers and journals, and research organizations devoted to the non-profit and philanthropic sector have proliferated, while the increased scrutiny of the press, the public and politicians has been made easier and more public by changes in media and communications.

Why is philanthropy hard to change?

In theory, the flexibility and independence of US philanthropy should allow it to adapt rapidly. In practice, however, its essential strength – that it is a moral choice freely made – has kept it from doing so. It is not amenable to the usual levers of change. Neither attempts to enforce improvements through centralized national solutions nor simply ‘letting a thousand flowers bloom’ from the bottom up will work. Let’s look at some of the characteristics of philanthropy that make it hard to change.

• Philanthropy is voluntary. Freedom and independence are proud features of what it means to be philanthropic, and any effort to dictate to others how they ought to give risks being rejected or simply ignored. Too many rules and requirements may simply cause some people to choose not to give.
• Philanthropy is expressive rather than instrumental. Another’s judgement that a gift is not ‘effective’ matters less than the values it affirms for the donor, the personal commitments it reflects, the web of relationships it helps to maintain. As Harvard scholar Peter Frumkin observed to us, ‘At its core, [philanthropy] is about expressing values, not outcomes. Philanthropy is a vehicle of speech.’
• Endowed foundations have little ‘survival anxiety’. According to organizational theorist Edgar Schein, organizations learn only when they are subject to ‘survival anxiety’ – the anxiety produced when they realize that they will not survive unless they change. This almost never happens to endowed philanthropic institutions. The result is a field in which there is limited (if any) feedback about donor performance and little real need to confront failure.
• Philanthropy is not a system. Individual institutions and givers in philanthropy are not reliant on one another; they exist independently and can act without much reference to what others do. Philanthropic actors relate to and learn from one another only to the extent that they choose to do so. They often don’t know what’s going on across the street, let alone across the country. If this is true of institutional funders, it is even more true of individuals.
• Donors and funders have their own capacity limits – too little time, too much information. And given that learning is voluntary, there is little motivation to overcome these limits.
• Learning is based on second-hand information. Since philanthropists normally support others in their work, whatever learning happens for the grantee is only communicated later (if at all) to the funder.

The upshot of all this is that while many observers see philanthropy’s inability to change as ‘the problem’, most participants, even those who might acknowledge it intellectually, do not feel it to be a problem.

Not only has the very independence that is the hallmark of philanthropy hampered the creation of a functional system for learning in the field; we would argue that it has produced a unique set of learning disabilities, where isolated successes are often not replicated and new innovations replace old ones before they have time to prove themselves.

Because philanthropy is voluntary, because people don’t need to react or adapt to one another, and because there is no system for learning nor any strong reason to connect learning to action, philanthropy is an area in which experiments multiply but don’t add up.

Can philanthropy change?

If reformers have tried for generations to overcome these inherent difficulties, is there any reason to get our hopes up now? The simple but definitive answer is yes. The same large-scale forces that are creating many of the challenges that philanthropy aims to address are also producing a new mix of people, tools and pressures that provide opportunities for philanthropy to change.

New people
Change occurs in philanthropy when new ideas are adopted by those in a position to influence others, and the field at present is full of new actors with energy, passion and ideas. These new leaders are people who have made significant fortunes relatively early in life and want to give in new ways; a growing number of high-net-worth individuals who prefer to give while they are living; women and people of colour engaged with new and traditional philanthropy both as givers and as professionals.

New tools
The most obvious of these are the increasingly accessible and powerful information and communications technologies that accelerate the pace of learning and support coordination and collaboration across distance and organizational boundaries. Social networking programmes such as Meetup.com are changing the way people find others with shared interests. Community knowledge sources such as wikis are helping people find and share information. New tools for group action like Fundable.org are allowing people to pool resources to achieve joint goals.

It is clear that these tools are already changing how philanthropy is ‘organized’ and therefore how individuals are connected to their peers. We believe this reorganization could characterize the coming era to the same degree that the invention of new philanthropic organizations (the private and community foundation) did the last revolutionary era in US philanthropy 100 years ago. In 20 years, the new ‘organization’ in philanthropy could be the network (itself a kind of tool), facilitated by technology, taking its natural place next to organizational forms enduring from previous eras.

New pressures
The pressure to demonstrate impact will be one of the defining features of this era in philanthropy. As philanthropy has grown in size and ambition, it has attracted more attention from the outside and generated more reflection on the inside. Outsiders and insiders are asking harder questions. As the media and government officials continue to call for more accountability, every high-profile abuse will simply add force to the trend. Eventually better evidence about how charitable giving serves society’s interests could be demanded. Organizations might then begin to experience the kind of ‘survival anxiety’ we mentioned above, which in turn will provide a stimulus to organizational learning.

This pressure is not just external, however. Some donors and foundation leaders feel that intending to do good is not good enough. They are pushing for standards of practice, for ‘theories of change’, for more evaluation, and often for measurable results.

How will change happen?

What could shift philanthropy’s centre of gravity in the right direction and at the same time be consistent with the donors’ interests? Just as importantly, how can positive change happen that takes account of, rather than ignores, the inherent barriers described earlier?

One way might be to enact regulations that require, say, paying out a higher amount of money from a foundation each year. Another approach might be to make people confront the consequences of their action or inaction. Embarrassing or shaming people can have a powerful effect at times. So too can making actions more visible through required reporting and external scrutiny. But regulation and criticism, we believe, are unlikely to create transformative change in a field characterized by voluntarism and driven by aspiration. Indeed, top-down changes, no matter how well intentioned, could make things worse.

Instead, the new currents of energy flowing within philanthropy that we mentioned earlier – new blood, new pressures, new tools – suggest that a bottom-up approach might be more productive. The new currents are already prompting experimentation and a range of new practices, some of which will thrive and perhaps come to define the next generation of giving. But these experiments remain largely unconnected and subject to the limitations we have already outlined: choosing to experiment is voluntary, choosing to adopt lessons is voluntary, and even when you do choose to learn and adapt, no one else has to follow suit. What could change that?

Aspiration for the healthy or cure for the sick?

We believe that positive change will have to hug the form of philanthropy itself: it should be voluntary and spring freely from the impulses of givers themselves. It must emerge from choices not from compulsion. It should draw momentum from opportunities that donors see for themselves. It should be flexible and capable of expressing a range of (even contradictory) possibilities. Positive change will take hold when it can be embraced as an aspiration of the healthy rather than accepted as a cure for the sick.

So how do we appeal to people’s interests and enthusiasm? What interventions could be initiated at the field level that would increase the likelihood that experiments will be widely taken up and learned from and contribute to a more positive future for the field? We believe that in the US there are broadly three ways of doing this.

Creating a culture of applied learning
New ways of working based on more direct learning and feedback need to be devised. Increased internal and external scrutiny can be used to promote learning by making the lessons learned by individual grantmakers more accessible and visible to others.

Even if much of philanthropy today isn’t concerned with outcomes but with values and expression, we believe many in the new generation of living donors will want to know how to achieve their goals more systematically. Their efforts will join with those of the many experienced and thoughtful institutional leaders who are also working to increase the impact of their philanthropy. This kind of activity will promote ‘the aspirations of the healthy’. It will enable donors to learn both from their own and from others’ experience; to draw attention both to what works and to what doesn’t. New approaches will spread further and take hold more reliably if they can be shown to work. For this to happen, we need new kinds of data and rigorous research on impact.

It will also be important to show where innovations or practices don’t work or are underperforming and either stimulate ideas for improving them or draw attention to the need to abandon them. Funders and non-profits should, of course, remain free to try long-shots and unpopular approaches. The goal should be not to avoid making mistakes but to avoid repeating a mistake someone else has already made.

Investing in a new philanthropic infrastructure
Infrastructure – membership associations, research organizations, publications, consulting firms and other organizations that provide various kinds of support and relationships – won’t in itself solve problems. But certain types of connecting capacity are a precondition for doing things in new ways, for challenging the deeper assumptions governing practice. It has to be easier, quicker and even more satisfying to do things in new ways. Innovators need to be able to find one another easily, understand one another’s strategies, and come together for mutual benefit.

The good news is that we live in an era in which new kinds of connections are possible, and the infrastructure to create them is proliferating. Google, eBay and the World Wide Web itself constitute a new enabling infrastructure. All have transformed the activities they support by making it possible for independent actors to connect in new ways.

Given the new conditions in the world and in philanthropy, we believe it is time to redefine what infrastructure means and invest in the most promising approaches. The ‘new infrastructure’ may need to include commercial enterprises, such as Foundation Source and Kintera, which provide new tools and technologies for connecting philanthropists. It will need to embrace individual donors and other institutional forms of giving, not just foundations. In some cases entirely new vehicles for working together will need to be created. It might, for instance, make sense for funders to create ‘grants service’ bureaux, using affinity groups or regional associations as their base, to avoid the need for each organization to do its own analysis of grantees. Or large foundations with the resources to support independent research into a problem and its causes could create means for sharing their analysis with other philanthropists.

Supporting ‘new brokers’ that facilitate action as well as learning
Our basic premise is that bottom-up efforts are the best route to a better future. But we also believe that these won’t produce transformative outcomes for society much of the time. Creating sustainable social change will require more than self-organization. It will need active brokering, intentional strategies, and facilitation.

That’s why even a cursory look at the landscape reveals donors and funders attempting to ‘reorganize’ philanthropy and its infrastructure around action. They are working out how to act together or to pool funds, and they’re creating new vehicles for doing so. Sometimes these action-oriented networks are located within issue-based affinity groups or regional associations. But just as often they’re not, because the existing infrastructure groups generally don’t see their role as helping funders act together.

Such approaches may take time and effort, but they can also provide both the meaning and the increased pleasure that come from being part of a community, whether a giving circle of individual philanthropists or a foundation collaborative.

The new brokers are forging connections among individuals with shared interests, between philanthropists and non-profits working on the ground, among clusters of grantees, and across geographies and sectors. If they get the support they deserve at this stage of their development, we believe they will add the critical last piece to the learning culture and infrastructure investments we have already described.

Looking forward to 2025 – towards a new normal

Looking forward to 2025, our vision for US philanthropy is of a field that is both more diverse and more coordinated. While donors retain their independence, they increase their effectiveness by linking, learning and acting with others, especially the non-profits they support. As innovation and good practices emerge from the bottom up, the new infrastructure helps the field to share good ideas more quickly and donors are able to respond quickly and imaginatively to emerging social, health, educational and environmental challenges. As the new way of doing philanthropy is adopted more widely, and a new culture of feedback, learning and leadership develops, a tipping point will eventually be reached when what was innovative becomes normal. In this new normal, as philanthropic networks grow in size and strength, the field begins to act less like a fragmented collection of independent actors and more as a functional whole.

All these changes engender a growing performance culture that creates renewed trust in the non-profit sector as a whole, not only drawing in more money and talent but also targeting them at the areas of greatest need. The assets of private philanthropists and philanthropic institutions are increasingly coupled with the resources of governments and businesses to create a more robust capital market for public problem-solving efforts.

Guest editors for the special Alliance feature, ‘Whither philanthropy? Looking forward to 2025’

Katherine Fulton is a partner of the Monitor Group and president of the Monitor Institute, the vehicle through which the Group applies its knowledge, expertise, skill and capital to complex social problem-solving. She can be reached at katherine_fulton@monitor.com

Gabriel Kasper is a consultant at the Monitor Institute, and has more than a decade of experience as a foundation programme officer and adviser to philanthropists, non-profits and corporations. He can be reached at gabriel_kasper@monitor.com

See http://www.futureofphilanthropy.org