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.