Remarks by Susan V. Berresford at Duke University's Fuqua School of Business
February 6, 2007
Philanthropy: What's New, What's Not
Thank you for inviting me to take part in today's exchange on the subject of philanthropy. This is an exciting time for philanthropy. As the number of foundations has doubled over the last decade, as online donations grow by double-digit percentages, and as newly wealthy mega-donors attract media spotlights, expectations for philanthropy grow. It is a time for us to carefully examine our field's evolution and to encourage philanthropic practices that will improve lives and communities.
I hope to generate a discussion about this today by offering my views of the now popular dichotomy of "old" and "new" philanthropy, and the association of the "new" with "better." A December, 2002 Business Week article said this about "new" philanthropy:
- It's more ambitious…tackling giant issues
- It's more strategic…taking the same systematic approach they used to compete in business…plans that get at the heart of systemic problems, not just symptoms
- It's more global
- It demands results
- All of this requires a new level of involvement by donors
Joel Fleishman's fine new book offers a similar description of new philanthropy and he concludes:
"Increasingly, long-established foundations will evolve in that direction not only because their boards will increasingly be peopled with today's wealth creators, but also because it is steadily becoming obvious that charitable dollars disbursed by the methods and practices of venture philanthropy and social entrepreneurship significantly overachieve in impact dollars spent the old-fashioned way."
A Different View
As the president of an "old" foundation and as a nearly 40 year veteran in the field, I have thought a lot about this dichotomy of old and new philanthropy. I am here to say that while it makes good copy, it does not fit the reality I know. It does not capture the breadth of philanthropy's scope and history, and it has the potential to damage our field.
To think more deeply about this, let's start with basics. What is philanthropy? Philanthropy refers to altruistic concern for human beings and assistance to advance human welfare. It encompasses a spectrum from charity that addresses suffering, to the strategic use of resources for addressing root causes. Both ends of the spectrum have been present in U.S. philanthropy for many decades, and both will always be needed. I doubt that any society on earth will be totally free of troubling realities. While people struggle to address root causes of problems, communities will always need some level of charitable comfort and care. Too often, however, I hear a critique of the charitable part of our field labeled as "old" and by implication, "less important." Human need is still staggering. In my view, we should appreciate rather than disparage charity.
Turning then to the other end of the spectrum and philanthropy's role in strategic problem solving, we see that one size does not fit all donors.
If a donor wants to ensure that all elderly people in the community get a flu shot before winter, a relatively targeted and short-term donor strategy makes sense. If the challenge is to create a brand-new and ultimately endowed organization to ensure the rights of a marginalized community, 10 to 20 years of donor engagement in institution building will probably be necessary. And, if the aim is to help build in a formerly authoritarian state the governmental and civil society institutions that reflect democratic values, a broad set of activities and a relatively long time commitment will be needed. No one approach is best and no body of evidence suggests that we should favor one model or another.
New?
So, keeping in mind the breadth and variety of philanthropy and the immense challenges of social change processes, let us return to the "new venture philanthropy is better, old is worse" dichotomy and ask "what truly is new"? Is today's new philanthropy "new" and "better" because it is strategically aimed at root causes, results oriented, global, influenced by the business model and driven by donor engagement?
Hardly. Many of the large, medium-size and small foundations have done generations of work strategically aimed at root causes of giant problems. Let me note a few which I know well because the Ford Foundation partnered with many donors in these initiatives:
- Together we supported what is now called the Green Revolution and its successor efforts;
- Hundreds of foundations funded decades of work that renewed inner city neighborhoods;
- Hundreds helped sustain and strengthen the U.S. civil rights movement as it battered down barriers to personal safety, jobs, education, housing and marriage and;
- Thousands of donors worked strategically and persistently to support brave people dismantling apartheid's horrors.
To suggest that the "old" donors supporting these efforts lacked ambition or a results orientation is absurd.
So if it's not new to be ambitious about aims and results, let us ask: Is it new to be using the business model and introducing for-profit activity into philanthropy? Again I would say no.
Nearly 50 years ago, the Ford Foundation's Lou Winnick invented the concept and practice of Program Related Investments or PRI's in the 1960's. Since then, dozens and dozens of foundations of all types and sizes have provided assets and income to income-earning ventures with a charitable purpose. They have helped finance affordable housing, they provided loan guarantees to establish that banks misperceive the risks for low-income clients and they have financed micro-enterprise programs around the world.
"Old" philanthropies have been doing this work for decades. And in doing all of their work, many have also used practices such as setting strategic objectives, benchmarking progress and resetting strategies in light of feedback. This approach has been common sense in philanthropy as well as in business for many years, and is increasingly standard practice.
So, if it is not new to be ambitious and use business practices, is it new to be global? Again no. We have always had foundations large and small whose resources were aimed at global initiatives. They did not all look like the larger Ford, MacArthur or Rockefeller foundations with their networks of field offices. Small- and medium-size foundations like the Albert Kunstadter Family Foundation, the Rockefeller Brothers Fund and many of the corporate and other foundations fund global efforts to improve health, children's education, micro-enterprise development and many other campaigns.
New!
If the qualities associated with "new" philanthropy are not new, what accounts for the special focus on the novelty these donors bring to the field? I see three novel features.
The first is mega-wealth, starting with Ted Turner in 1997 and most recently illustrated by Bill and Melinda Gates and Warren Buffet. The scale of their assets devoted to social betterment is astonishing. It gives them a chance to work on heroic scale and, one hopes, achieve heroic results.
The second seemingly "new" feature is the source of their money – often originating from the tech companies and their extraordinary leaders. We associate them with life-altering inventions, powerful messaging and being global "out-of-the-box" thinking that pushes the envelope -- qualities that our minds may transfer to their philanthropy, even when we know little about it.
Third, it appears that a larger proportion of "new" donors describe themselves as activist problem-solvers rather than charity patrons than was true in the past. The media coverage certainly emphasizes this point, even though a veteran fundraiser recently told me:
"No one writes a big check and walks away. No way. They have always wanted to be involved, typically including a seat on the board and a part in decision-making."
So we probably can say it is new to have mega donors, out-of-the-box thinking and many activist philanthropists. But we should widen the frame and ask what else is new and perhaps even more significant for all in philanthropy.
On the "plus" side, our societies have seen huge advances in science and technology. We have new ways to cure diseases and prolong life; we have astonishing ways to send messages and images around the globe in seconds; and we are learning about human origins and genetic heritage.
On the "minus" side are widening gaps in income and education, damage to the earth and atmosphere and horrifying levels of violence and injustice.
We see that progress in some areas has not altered some of our most disturbing realities in others. Our challenge -- philanthropy's challenge -- is to apply new knowledge where it can augment efforts to foster progress. So rather than employ the old/new philanthropy dichotomy to separate groups of donors, we should see what philanthropy's diversity can accomplish in new combinations.
Professional Experience Plus New Ideas
Donors and practitioners who have worked for decades in a given field have much to offer newcomers about what works and what does not work. They often have acquired a very good sense of the dynamics of change and the complex interactions of vested interests, change agents, public opinion and other crucial factors. To ignore professionalism in fields which have strong bodies of knowledge about effective practice and excellence is wasteful and careless.
Of course, fresh ideas and new kinds of capacities can augment the tools and effectiveness of donors and practitioners. For example, in education we have only scratched the surface on ways that new technologies can improve access to schooling. The Sloan Foundation has been doing excellent work on this for years now, and more can be done. A coalition of donors is working on expanded bandwidth access for African universities and certainly much more is possible here as well. And business management principles can improve and empower leadership in public agencies. For sure, future breakthroughs in medical technologies will help to make or keep us healthy.
So let us welcome the new donors, with their large scale resources, technical know-how and activism and let us combine our knowledge and experience with the assets they bring. It is exciting to have new thought leaders and reformers among us. We can work together to help communities that need optimism, idealism and powerful allies. Moreover, we can work together on communication.
New Allies for Our Sector
With our new philanthropic colleagues we can better explain the value of the nonprofit sector. Nonprofit organizations flourish in our country because people believe progress can be generated not only by government and business activity, but also by organizations that are nonpartisan and nonprofit. We all need occasional reminders of the fact that advances in human well-being came from the nonprofit sector's innovation, experimentation and exhortation – through organizations such as settlement houses, community development corporations, community foundations, HIV/AIDS activism and the like. New donors and the attention their philanthropy gets can help explain that historical and present record.
These donors can also be a powerful force in promoting understanding and appreciation of the full spectrum of donors we have and want. Philanthropy expresses a very simple and powerful idea – that the success of one can support the hopes and dreams of others in charity or change. On the change side of the equation, philanthropy offers innovators a source of long-term, patient capital often required to build to the point where effectiveness can be reality-tested; it can support brave people taking on sensitive and controversial topics that need to be aired; and it can provide resources for efforts that will never generate income or be appropriate for government support but that improve people's lives. New philanthropists can help explain this role to the public, as well.
Tread Carefully
Philanthropy is a vital force for charity and a source of R&D for society. We need to be careful to avoid discrediting the special capacities the nonprofit sector brings to the table. I worry that the "new vs. the old" paradigm has this negative potential. The association of the "new and better" with a business or venture capital approach is leading some donors to distort philanthropic practices that served society well. For example, more and more philanthropies seem to be steering their work into three- to five-year plans with very specific goals and quantifiable measures of progress, and very donor-driven initiatives – supposedly the "venture" model.
Isn't it possible that too much reliance on short-term plans can miniaturize ambition for justice and for progress on deeply entrenched problems such as racism, poverty and inequality? This is an important question for us. Decades of support by Ford and others for the world's human rights movements, assistance to the U.S. civil rights movement or the anti-apartheid struggle would not have fit the short-term planning formula; nor would philanthropy's support for people challenging school finance formulas that appeared to disadvantage poor children. The New York Community Trust was one such donor that stuck with the school finance campaign for 15 discouraging years – losing litigation, sponsoring research that got no traction, etc. In years 15 through 20, the picture changed to one of progress and policy reform. The aims of the people and organizations we supported in these various justice initiatives were highly aspirational. Progress was slow and not measured in human terms year to year. So let us beware of reducing all of our aims into short timeframes that can reduce ambition and idealism.
In the same spirit, I think we should be careful about too many foundations shifting the way they operate to designing and driving all the work they fund, again the venture model. When I look back on my now 40 years in philanthropy at Ford, I see that half of the results I am proudest of came from ideas we might describe as "hatched at the foundation." But fully 50 percent came from ideas others brought to us because they needed money to make them happen and they took their chances with us. If too many donors seem to shut off openness and readiness to support ideas from outside our walls, we will cut off a source of creativity and undermine one rationale for our existence – being an R&D resource for the innovative ideas that spring from diverse populations.
I now hear some of these concerns spoken softly and with some trepidation, by the grantee community. Some would like to speak more fully but fear displeasing donors.
Finally, if people are convinced that the new philanthropy is so much better than the old, and if we see new donors emerging in the future, shouldn't they allow the old and supposedly ossified philanthropies to wither away? In fact, why not impose a time limit on foundations or force them to spend at a high enough rate to ensure eventual disappearance so the landscape is not cluttered with dinosaurs?
To my mind, this would be unsound social policy from several vantage points. Most "old" foundations are not dinosaurs. They are beacons of idealism helping people in myriad ways. It is wonderful that Alfred Nobel created the Nobel Foundation more than a century ago. It still serves us well as it celebrates excellence and has, over time, reinterpreted its mandate appropriately. We celebrate Benjamin Franklin's 200-year-old philanthropy that funded fellowships for young apprentices, and later created organizations such as the Franklin Institutes of Philadelphia and Boston. His philanthropy was structured with a specific purpose at the start and then later opened to new ideas and needs. It still supports young students and scholars with fellowship assistance.
Encourage and Inspire
We need to encourage the Franklins and Nobels of the world to dedicate their funds for the long term to ideas they hold dear. We should want donors to have options for their generosity – selecting a specific purpose and timeline for their money's use or recognizing that new needs will emerge and having faith that foundation stewards will make wise choices. Are we really so distrustful or cynical that we cannot see value in these options? Our national culture favors options and choices – freedom. We take away these possibilities only when they appear to be harmful – surely not the case with options in philanthropy.
Let us inspire people to be donors in whatever ways they wish, including with high aspirations to help people struggling against great odds over many eras, especially on issues that may go out of fashion. I want that, for as I look back over my professional life, I see the tough challenges we still have before us.
I hope you now understand why I believe it would be good to discard the "old/new" effectiveness dichotomy. It is false and divisive at a time when we need to understand our field's history, apply knowledge gained from decades of donors' experience and inject new and exciting ideas and capacities. We need all kinds of donors and philanthropies, all kinds of skills and ambitions. We need people with near-term goals as well as long-range aims. We need business management skills but also moral leadership skills, and much more. Great leaders such as Dr. Martin Luther King Jr., Nelson Mandela and Mahatma Gandhi combined powerful moral vision, expressive power and extraordinary dedication and courage. For enduring social change, for humankind, we need it all.