A Tribute

Whenever I conduct a workshop, which I did earlier this week in Chicago, I am touched by the dedication of those in attendance, both the advancement professionals and the academic leaders who come to better understand how the exercise of their responsibilities might create more philanthropic opportunities for the disciplines entrusted to them. Most of them work with very modest budgets and under less than ideal circumstances but they do come to complain or make excuses. They acknowledge the limitations they labor under while manifesting a determination to work through or around them. When they have a chance to speak, either during the workshop or at one of the breaks, they do use the time to dwell on all they struggle against but to ask what is possible given what they have to work with. As I listen to them, I am reminded why philanthropy continues to work despite the shortcoming of institutions, be it the short-sightedness of some who lead them or the propensity of their cultures to recognize and respond to change.

I define philanthropy as “a compact between donors and doers to get something of mutual interest done.” In these workshops and conferences, I see doers. They listen attentively; they challenge; they ask insightful questions, and they stay on task. Even at breaks, or in the evenings they seek me out asking for more. When the workshop is over, I feel as if they have given me more than I have provided for them.

Since I have written about a growing public skepticism toward institutions, and about the internal behaviors that have led to a loss of external financial and moral support, I thought it only right and fair to pay tribute to those within those places who defy the cultural norms and strive to bring about positive change. These are the people that create new sets of possibilities, that sometimes shuttle between the false expectations of institutional leaders and the misapprehensions of would-be donors, educating both and aligning purposes as they go until new arrangements and new models are created. These are the people that make their institutions better by bringing positive influences in and their supporters wiser by helping them understand how great ambitions are best realized by working through great institutions. They are not just representatives of individual institutions, they are agents of philanthropy. They know that the cannot advance the former without respecting and replenishing the latter.

So, even as the polls show the public trust in institutions in decline, and even as I fret about it and clamor for attention to it, I see real signs of real hope in every conference. I see mission-driven professionals remaining true to their institutions’ founding causes and I pray that life will afford me the continuing possibility of being helpful to them.

The State of American Philanthropy

A person I respect, a measured, positive man not given to gloomy pronouncements, told me recently he was “more than a little concerned about the state of American philanthropy.” I shared his concern but realized that I needed to clarify in my own mind exactly what troubled me most, consider what might happen if the problem were not attended to, then develop strategies for addressing the issue before it worsened.

As I thought it through, I concluded the greatest threat to American philanthropy is the tendency of too many of us to take it for granted, to assume it is there just for the asking. Once we make that assumption, our focus turns to getting more people to give more, more often. We consume ever greater amounts of energy thinking about who we should ask and for how much, and less on the highest and best use of the dollars we might secure. We spend more and more time planning campaigns, exploring the outer limits of what we might get, while dedicating less and less time to strategic planning or exploring ways that we can enhance or expand our service to others. We reach the apogee of irony when institutions impose ever more explicit and aggressive goals on fund raisers while holding themselves to ever less explicit and aggressive institutional goals, thereby inverting the philanthropic equation. And, the more metrically-driven fund raisers they put out there with ever weaker cases, the more weary and disillusioned their donors become. That is exactly what we are now -- with a skeptical majority asking institutions, “What you did with the money you had and what exactly are you going to do with the money you’re asking for?”

So if this pattern persists, what’s the worst that can happen? Will Americans cease giving? It’s possible but not probable. Philanthropy runs deep in our national character. If we become less philanthropic, it will be by degrees, not all at once. It is more likely that Americans will redirect their support to new organizations or institutions they see as having a greater impact or those that establish new models for informing, engaging and strategically directing the investments of the philanthropically minded. Indeed, this has already begun to happen. Last year Americans gave less to religion, education and the arts, and more to medicine, the environment and international aid. In addition, a great deal of philanthropic energy has been forming around the concept of “social entrepreneurship” particularly as it might affect the developing world. In short, we should expect to see more American philanthropic dollars going overseas where the needs are greater and the possibilities of cost-effectively remediating them seem far more immediate and attainable. (Imagine, then, how much more difficult it will be for domestic organizations with high operating costs and low vision to convince donors to keep giving them more.)

So, in that context, let’s look at American higher education. The trends there have been pretty positive, right? Yes, philanthropic support for higher education has continued to climb in recent decades, thanks in large part to the top 20 universities that usually account for about thirty percent of the total contributions in any given year. Last year, the top 20 received $7 billion out of the total $27 billion. And, support for higher education has declined for the past two years. That pattern is not likely to be reversed even if the economy turns around (and I can substantiate this with various studies cited in earlier blogs). And, even if it does, the top 20 are apt to be the greatest beneficiaries. That means that the rest of higher education should expect, under the best of circumstances, to secure about $20 billion each year. While that still seems like an impressive amount, $20 billion distributed evenly to 4,000 institutions yields only $5 million for each. Suddenly, $20 billion doesn’t seem to be the answer to everyone’s dreams.

Yes, I realize that philanthropy is not allocated by formula but earned by individual institutions from individual donors. And that’s precisely my point. No institution of higher learning will secure more support by playing the same old fund raising formulas based on the assumption that all it has to do is ask. That assumption is greatest threat to their future. Institutions that hope to secure more support must pursue that objective by:

• Growing more of their their own supporters with long-term strategies that begin with the students’ earliest interactions and persist throughout the campus years, the early phases of alumni career building, the creative engagement of alumni over decades, and the nurturing of estate gifts.

• Cementing a reputation for being an effective steward of all resources while targeting philanthropic support to provide the margin of excellence, not the margin of survival, or mediocrity, or no discernible margin at all.

• Earning the admiration of the most discerning philanthropists with creative, results-oriented, society-serving initiatives that define, develop and leverage institution’s unique strengths.

• Positioning themselves where philanthropic energy is beginning to mass (as is the case of social entrepreneurship) by inventorying and rapidly mobilizing internal assets, and augmenting them with capacity building gifts, to make a timely and substantial contribution to a cause that is greater than a single institution.

Non profits that do not have the benefit of students or alumni must still think about building families of support over long periods, and employing the last three of these strategies. They must reverse the pattern of recent decades by assuming that no additional philanthropic support will be forthcoming unless or until they can prove they have come up with better way to serve some segment of society.

Going through this exercise helped me realize that I was not nearly concerned about the state of American philanthropy as I was about the fate of those institutions that take it for granted. I can only hope that the leaders of our institutions understand the distinction.

The Entrepreneur As Bellwether

If you want to get the jump of where philanthropy is going, pay attention, and pay heed, to entrepreneurs. If we map the most significant contributions in the past decade against the givers’ source of wealth, entrepreneurs emerge as the most generous. However, they do not give out of the goodness of their heart (which is not to say that they don’t have a good heart) but to invest seed capital to stimulate the propagation of opportunity. They are “next wave” thinkers who are far more interested in bringing something bold out of the ground than in investing in traditional systems and approaches. They will continue to give very large gifts to projects they believe in and, their philanthropic investments will have a critical factor in the building of non-profit brands.

So, as we think about securing the support of entrepreneurs we must remember:

They made their name with big ideas or by seeing value where others did not; as philanthropists that are not interested in our needs but our breakout opportunities. They are interested in big and bold concepts, but they had better come with a business plan.

They pursued their career-making opportunities in the face of adversity, indifference, entrenched beliefs, and bureaucratic thinking; as philanthropists they will bristle at the notion of cultural limitations, preset ideas, or the insistence that something can only be done one way.

They built their businesses with a mania for minimizing nonessential costs; “overhead” was the beast that had to be suppressed so that maximum investment could be made in people and new initiatives. As philanthropists, they a jaundiced eye on expensive buildings, fancy offices, or any frippery that funnels resources from the core objective.

They learned the importance of staying close to the consumer and remaining light on their feet to adjust and adapt to ever-changing markets; as philanthropists they have little interest in “endowment” which they believe isolates an institution from the realities that must eventually be faced. They want institutions to stay lean and live off the land, and thereby constantly adapt.

We must look monitor where they are placing their tremendous energies, whether it is third world development, green technologies or social networks because it will suggest where they see the greatest opportunities. In some instances, entrepreneurs will encourage non-profits to jump on the bandwagon too soon, as was the case with those who predicted that traditional higher education would be supplanted by “the classroom in the computer.” Those who invested great sums of money in that seeming inevitable took a bath. Notwithstanding their occasional over-zealousness, they often the first to see new developments on the horizon and the first to profit from them, skills that non-profits need in far larger quantities. And, since even great institutions can be hidebound, self-protective and risk averse, their leaders need to surround themselves with entrepreneurs. Non-profit leaders would be unwise not to seek out entrepreneurs’ reviews of their plans, systems and approaches. And, all non-profits should be concerned by entrepreneurs growing belief that most institutions, including those of higher learning, are ill-attuned and overly resistant to change. If entrepreneurs believe an institution has an important mission but is incapable of necessary change, they will seek to create new one will prove to be fierce and effective competitors for limited philanthropic resources.

So, while their instincts and inclinations may vary, the most successful non-profits in the future will be those who engage, learn from, and import the ideas and practices of entrepreneurs. Those entrepreneurs will create the new waves; non-profits need not be the first to jump on every one but must watch their formation to make sure the big ones don’t pass them by.