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Peter Frumkin is professor of public affairs at the Lyndon B. Johnson School of Public Affairs and director of the RGK Center for Philanthropy and Community Service, both at the University of Texas at Austin. He is the author of On Being Nonprofit and Strategic Giving and coauthor of Serving Country and Community.

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The Essence of Strategic Giving

The University of Chicago Press

Contents

Preface......................................................................vii1. The Idea of Strategic Giving..............................................12. Dimensions of Philanthropic Value.........................................273. Logic Models: Theories of Change, Leverage, and Scale.....................514. Giving Styles.............................................................775. Time Frames...............................................................1056. Institutions and Vehicles.................................................1297. Toward Strategic Giving...................................................157Index........................................................................173

Chapter One

Two words—charity and philanthropy—are often used to describe the act of giving. Each has a special meaning that is grounded in the evolution of giving in the United States. While some have tried to simplify the connection between these two words by positing them to be incompatible or by imposing a historical or developmental order to them, the reality is that both charity and philanthropy have long operated in parallel.

Charity can best be understood as the uncomplicated and unconditional transfer of money or other assistance to those in need with the intent of helping. Though charity includes gifts of time, here I will focus on gifts of money. Charity has a long history, one that is deeply intertwined with many of the world's religions. Within Christianity, faith and charity have long gone hand in hand. In other faiths, charity has also been a central principle, a way of demonstrating caring and commitment. Charity is based on the presumption that no human being should live in misery and suffering, and that those with the ability have an obligation to help.

In modern times, charity has certainly had its critics. One argument against charity warns that by offering a handout rather than a hand up, charity reinforces social hierarchy as well as debases and humiliates the poor by forcing them to receive funds they have not earned. Second, critics say charity focuses only on the temporary alleviation of social problems like poverty. A third worry is that charity lacks professionalism. Even after decades of growth of social work as a profession, critics still worry about the training and capacity of charity workers to fashion informed and sophisticated responses to human suffering. Fourth, critics charge that charities create expectations of further private action, which makes the case for government action less compelling and broad systematic interventions difficult. Still, the urge to help those in desperate straits is strong, and the fact that this help may not get to the root of all social problems hardly means that aid should not be rendered to those in need.

What could be done to remedy some of these real and perceived flaws of charity? A new vision of helping and giving was conjured, one in which charity would be transformed into philanthropy. At the very center of the philanthropic alternative to charity are the principles of self-help and opportunity creation. In fact, these two principles were originally thought to differentiate philanthropy from old-fashioned charity so significantly that many still believe the elaboration of this distinction was the critical historical juncture in the evolution of giving.

Rather than just give the poor small alms on an ongoing basis, philanthropy aspires to do something more lasting and radical. By providing help to those willing to help themselves, many of the early donors believed they were improving on the model of charity by getting to the root causes of poverty and despair. Benjamin Franklin was a great proponent of philanthropy and argued against perpetual charity. His most famous dictum was that a razor could be given to those in need as a tool for self-care, one that would teach them the joys of self-help, free them from the dull and rusted razors of barbers, and give them a sense of satisfaction stemming from the money they saved. Andrew Carnegie felt that a modest lifestyle and philanthropy were duties of the rich. He also believed that philanthropy should never degenerate into mere almsgiving. Instead, serious giving should stimulate people to help themselves. Carnegie summed up his ethos of self-help: "The best means of benefiting the community is to place within its reach the ladders upon which the aspiring can rise." Since then, donors have continued to expand on this idea of intervention. With some simplification, it is possible to isolate at least five important purposes or functions that have emerged over time as philanthropy has sought to define a distinctive place for itself in public life.

One of the most common arguments about the function of philanthropy focuses on the ability of donors to use private funds to create social and political change. The use of private funds allows philanthropy to pursue a change agenda without having to spend large amounts of time mobilizing other sources of support, but also without achieving consensus among those affected. Of course, this power to deploy money in the name of political and social change makes many worry about the accountability of philanthropy.

A second function of philanthropy is to locate and support important social innovations, whether in the forms of research or programmatic breakthroughs. The freedom of choice and the absence of strong accountability mechanisms enable donors to strike out in new and unpredictable directions. Many donors give with the goal of generating new ways to conceptualize and respond to problems, though sometimes the effectiveness of social innovations is contested. Still, by enabling social entrepreneurship, philanthropy has the capacity for profound impact.

A third purpose of philanthropy—to achieve a small measure of equity through the simple redistribution of resources—is pursued by a large number of donors, particularly smaller contributors. Equity or redistributive giving is most often embedded in programs and services designed to provide long-term solutions to the problems facing the needy and often takes a local form, where caring is expressed for those in the community who are less well-off and where the concept of equity is more manageable. The equity-seeking, redistributive function of charitable giving is thus the least controversial of philanthropy functions.

A fourth rationale for philanthropy is the pure and unapologetic affirmation of pluralism as a civic value. The fact that hundreds of billions of dollars are applied each year to public purposes by disparate groups of individuals and private institutions, rather than by government, holds forth the possibility that pluralism as a value is affirmed. Giving allows a multiplicity of ideas and programs to exist in the public domain, rather than a limited number of "preferred" solutions. The argument that philanthropy affirms pluralism strikes some as both inefficient and undemocratic, in that private parties are acting in competing fashions rather than through a single, democratically selected course of action. Given the overlay of private interests on public needs that occurs when gifts are made, these shortcomings may not be a problem. After all, with a myriad of competing conceptions of the public good, power within philanthropy is dispersed and stable.

Philanthropy's fifth core function is to support the self-actualization of donors by helping givers translate their values into action. To date, this critical fifth function of philanthropy has largely been ignored, or treated with suspicion and contempt when acknowledged. After all, some might ask why one should care about the psychic benefits generated by giving when the needs of communities are so desperate. The answer lies in the complex dependence of philanthropy on the goodwill and motivation of donors. Without validating and taking seriously the donor side of philanthropy, the field runs a risk of failing to provide a viable long-term explanation for philanthropy's continued growth and its ability to carry out any of its other more public purposes. Make no mistake: Philanthropy can and should be about producing public benefits. However, it can and should also be about presenting the giver the chance to enjoy the fruits of philanthropy in the form of psychic satisfaction. In many cases, philanthropy performs an essential service of allowing individuals to find meaning and purpose in their lives. In the best cases, the interaction of the public and expressive dimensions leads toward mutual reinforcement. On this account, philanthropy is simultaneously about enacting and expressing the values of the donor and achieving public purposes.

In the end, the meaning of philanthropy is negotiated and defined every time donors and recipients are joined together through philanthropy. Philanthropy translates the private expressive desires of donors into public action aimed at meeting public needs. It has both public and private functions, enabling communities to solve problems and allowing individuals to express and enact their values. What makes philanthropy at once exciting and perplexing is the strange and at times jarring interaction of public needs and private choices that giving promotes. While philanthropy may begin with the individual's impulse to help others, it often ends in a set of relations and arrangements that may or may not achieve this simple end.

Effectiveness, Accountability, and Legitimacy

Philanthropy is a field in which donors give freely to others, and it is hard to imagine why any problems at all would be associated with the simple exercise of generosity. The philanthropic exchange linking donor and recipient can take innumerable forms, but the basic structure of the relationship remains fairly straightforward. Donors and recipients are joined in an act of giving and getting. Even though this voluntary transfer of resources seems simple, it can and does create a number of complex challenges for both sides, particularly when the amounts of money changing hands are significant and when the public needs to be addressed are substantial. Today there can be little doubt that important problems lurk within both individual and institutional giving, and that leaders within the field have expended large amounts of effort and resources searching for solutions. At the core of the angst within philanthropy are three complex and intertwined issues that have long confronted donors of all kinds: effectiveness, accountability, and legitimacy.

EFFECTIVENESS

It is hard to imagine donors faced with the choice of "being effective" or "being ineffective" in their giving who would consciously opt for ineffectiveness. People engage in giving because they want to accomplish something, either for someone else or for themselves, or for both. In all three cases, if being effective means achieving one's stated objectives, effectiveness is as close to a universal aspiration in the balkanized field of philanthropy as one is likely to encounter. The problem is that this consensus is thin and has little practical meaning. Donors do not agree on how to define philanthropic objectives, how to assess whether they have been realized, and, perhaps most importantly of all, how to use knowledge and experience to improve their work over time.

The most popular model of assessing effectiveness today is program effectiveness, which looks at the impact of the work done by those who receive philanthropic support. With program effectiveness, protocols, procedures, and tools that can be used to carry out assessments are well established. Data showing which organizations are more effective compared to their peers can be used to deploy philanthropic resources more effectively and guard against criticism that philanthropic decisions are based on something other than merit. Unfortunately, the performance data used in the non-profit sector is often incomplete, unreliable, and incommensurable. Measures of program effectiveness are almost never taken using formal experimental techniques (control and treatment groups) and almost always have a number of assumptions embedded within them. Regardless of these technical limitations, the concept of program effectiveness is widely used today. Complicating the measurement problems related to program effectiveness is the issue of the relative size, timing, and conditions under which a philanthropic contribution is delivered. Consider the following two grants: the first small and given late in the fundraising process, the second large, coming at a critical early stage, and accompanied by technical assistance. Clearly, both donors should not be considered equally effective based solely on the recipient's eventual success. The issue of program effectiveness in philanthropy cannot be separated from the donor's relative philanthropic contribution. Effectiveness—even the narrow concept of program effectiveness—requires a meaningful causal link between the giving and the results. The more donors do to make gifts meaningful, the more supportable their claims of effectiveness become.

An alternative conception of effectiveness—"mission effectiveness"—looks at the quality of the grantmaking and donors' success at achieving their stated goals. It is a measure of overall impact that is far broader than whether a grantee executes well on a particular funded program. It turns the effectiveness question toward the donor and away from the grantee. When in addition to meeting specific public needs donors have other goals, like self-actualization or creation of knowledge, these objectives also become part of assessing mission effectiveness. Mission effectiveness is not simply the sum of the programmatic effects achieved by nonprofits, but is instead related to the quality of strategy and level of execution achieved by the donor. To be mission effective is to achieve one's philanthropic objectives. It is even more elusive than the concept of program effectiveness.

ACCOUNTABILITY

Even if a donor scales the effectiveness wall, there is another substantial obstacle just ahead: the problem of accountability. One of the nagging issues in philanthropy today is whether donors are ever held adequately accountable for their giving. The accountability issue arises in part from the tax deduction that donors receive for their giving, but it is also connected to the power that donors have in philanthropy to use resources to enact agendas. Interestingly, the accountability issue is more pressing in some parts of the field than in others. For individual donors who operate quietly or who give only modest amounts of money, there are rarely groups complaining about access, transparency, and fairness. For large institutional donors, including private, corporate, and community foundations, the accountability issue is far more pressing. These donors face several organized and mobilized watchdog groups that do nothing but monitor and critique foundation practices. At the center of the accountability issue is the concern that philanthropy's fundamental power asymmetry between donor and recipient makes it very hard to create accountability systems appropriate for a field that now delivers hundreds of billions of dollars a year.

The most significant step taken to address accountability concerns has been the movement to offer increased procedural accountability or transparency, particularly within the world of private foundations. The most common transparency move involves the simple release of information. Institutional donors have set up elaborate and informative web pages, published annual reports in ever greater numbers, issued concise grantmaking guidelines explaining what the donor intends to fund, and released concept papers laying out assumptions and preferred approaches to particular problems. This transparency work has produced greater understanding of the field of philanthropy among the general public and allowed nonprofit organizations to research and direct their funding proposals more efficiently.

Yet moving information about process into the open is neither the functional nor moral equivalent to creating an accountability mechanism anchored in substance. Instead of a dialogue between the world of philanthropy and its many stakeholders, transparency is pursued by donors as a long and uninterrupted monologue, offering the world information and making no real commitment to listen or to respond to feedback. To be sure, a few large foundations have experimented with surveys of their grant recipients. Even with a promise of anonymity to respondents, however, it has been a struggle to elicit honest comments. Moreover, these surveys may provide some insight into how nonprofits are treated by foundation staff, but they provide no information on the substantive issue of whether wise philanthropic choices and effective grants are being made. What is needed is substantive—not process—accountability, grounded in real efforts to measure whether the donor's goals are being achieved.

(Continues...)

Excerpted from The Essence of Strategic Givingby Peter Frumkin Copyright © 2010 by The University of Chicago. Excerpted by permission of The University of Chicago Press. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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