Philanthropy in Practice

Pragmatism and the Impact of Philanthropic Action

Ekkehard Thümler

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781315454719
• Edition: 1
• Topic: Business
• Subtopic: Nonprofit Organizations & Charities
• Index: Business

Philanthropic foundations are experiencing a crisis of professional identity. They attract considerable hopes due to an unusually high degree of independence and freedom of manoeuvre, which theoretically places them in a privileged position to find novel solutions to societies' most severe and intractable problems. However, the field is said to suffer from a pervasive lack of orientation as to how these aspirations can be realized. Compared to other professions, it can be said that there exists neither reliable knowledge nor established practices which might guide the strategy development and the daily practice of foundations. This void is frequently filled by changing fads which present easy to grasp recipes and often make bold promises of how foundations can change the world.

Yet, none of them has ever met these expectations. Philanthropy in Practice shows how philanthropic organizations can effectively address this predicament. Drawing on the public philosophy of Pragmatism, it argues that, to be effective, they need to go for the solution of social problems of middle range.

The book puts at center stage the crucial role of niches in terms of bounded, protected and stable social spaces which are rich in resources. They render possible the experiments required to develop effective interventions and facilitate the retention of novel solutions to social problems. The model builds upon, and is illustrated by four in-depth case studies from the UK, Germany and Switzerland.

With its sharp analytical eye and substantial evidence, Philanthropy in Practice will reshape the way we think about the questions of what impact philanthropy can reasonably hope to achieve, and by which means.

1 Introduction

Contemporary Philanthropy and Its Problems

There is a straightforward and widespread narrative according to which organised philanthropy is particularly well suited to help solve complex social problems of contemporary societies. It proceeds from the premise that the prosocial motivation¹ of making a beneficial difference to individuals and society is an important aspect of the institution of modern philanthropy.² It is further assumed that philanthropic organisations³ may operate in more systematic, sustainable and knowledgeable ways than individuals and on a much broader scale and scope. Philanthropic foundations attract particular hopes due to an unusually high degree of independence, flexibility and freedom of manoeuvre, all of which supposedly puts them in a privileged position to find novel solutions to societies’ most severe and intractable problems. These assumptions are mirrored both in foundations’ self-perceptions and aspirations as well as the hopeful expectations they mobilise among their observers (Nielsen 1972; Adloff 2004, 2010; Anheier 2005; Anheier and Leat 2006; Frumkin 2006; Gerber 2006; Fleishman 2007; Hammack and Anheier 2010; Zunz 2012).

However, philanthropic actors who seek to contribute to the solution of complex social problems are frequently confronted with a quite puzzling situation. When it comes to questions such as how migrants can best be integrated in society, how public schools can be improved or poverty alleviated, they have to deal with contentious ends and means and a lack of effective instruments. Furthermore, some philanthropists seek to further the public good in rather abstract ways as they tackle problems which reside on a “systemic level” and remain unrelated to individual welfare. Others address socially distant target groups whose needs may not be obvious to societal elites. Hence, philanthropic assumptions of what serves individuals and society may represent merely idiosyncratic preferences of detached donors or managers rather than responding to actual societal problems. In sum, it is often difficult to judge how desirable states of affairs would look like, why they should count as beneficial, how they can be brought about and how the size of the challenge can be met.

The above observations point at the fact that, in a historical perspective, foundations were not created with the intention to serve as tools for the effective solution of social problems. Being ambiguous organisations with roots in the gift economy (Adloff and Sigmund 2005; Adloff 2010), based on multiple rationales (Sigmund 2000) and often shaped as tools for expressive rather than instrumental ways of giving (Frumkin 2006), they frequently lack the organisational prerequisites to meet these complex demands (e.g., Nielsen 1972; Bacchetti and Ehrlich 2007; Adloff 2010). Furthermore, there is no such thing as a profession of philanthropy. There exists neither a reliable technique nor an established body of knowledge which might guide the practice of philanthropic organisations. As a result, the organisational field of philanthropy can be regarded as semi-professional at best. The situation is further aggravated by the fact that foundations as non-membership organisations lack important sources of democratic legitimacy which may render their interventions problematic from a political point of view.

Finally, while the assets of many foundations look impressive at first glance, they actually remain marginal in relation to the needs they address. Largely regardless of the country or field in which they operate, be it education, science, health, the arts or social services, their share is usually no more than around 1 per cent of total expenditures and often much less (Hammack and Anheier 2010; Thümler et al. 2014a).⁴ Foundations are certainly neither willing nor able to substitute for a welfare state in retreat (Anheier and Daly 2007a: 30–31). Under these conditions, they may find it difficult if not impossible to contribute to the solution of social problems in responsive, effective and comprehensive ways.

1.1 Philanthropy’s Role in Society and the Rationalisation of Charity

Due to material as well as ideological changes in Western societies, the question of whether, why and to what degree foundations succeed or fail in realising their (more or less) prosocial agendas is no longer a concern of individual philanthropists or philanthropic organisations only: the results of philanthropic action are relevant from a societal point of view, as well.

Recent decades have seen a rapid growth in the financial assets of philanthropic foundations in Europe (European Foundation Centre 2008) and the USA (Foundation Center 2012). New philanthropic actors like Bill Gates and his “giving pledge”, an attempt to commit the wealthiest families and individuals in the USA and worldwide to give the majority of their fortunes to philanthropic causes, stir the imagination, and the criticism, of public observers. These developments are partially due to a growth of wealth in modern societies that is distributed highly unequally, giving rise to large fortunes in the hand of a few “high-net-worth” individuals (Adloff 2010: 145–150). In times of austerity, the role of the public welfare state is decreasing in many countries, and demands for a stronger engagement of private actors—foundations among them—to fill the emerging gaps, complement public systems under strain, provide funding for public services and solve social problems with their very own assets, methods and competencies are heard more often (Anheier and Toepler 1999: 255; Anheier and Freise 2004; Harrow 2010: 121). It is in this context that many observers (and foundations themselves) regard philanthropy as a particularly important institution of society.

Yet, this new attention does not come without strings attached. Scholars diagnose a utilitarian turn in societal attitudes towards philanthropy that renders more traditional gift-oriented practices problematic. Increasingly, the mere unconditional handing out of grants is regarded as inadequate, even illegitimate, behaviour. In particular, it is criticised for being irresponsive vis-à-vis complex social problems and, hence, an ineffective waste of tax-free resources (Porter and Kramer 1999).⁵

What is more, critical voices point out that inadequate philanthropic action may actually harm individuals or collectives if social problems are tackled in irresponsible or dilettantish ways. Historically, this has resulted in the loss of human life and the destabilisation of communities (Damon 2006: 4–7). A more recent and less dramatic example for this diagnosis is the Gates Foundation’s small schools programme. This aimed at breaking down large urban school systems into smaller independent units based on the erroneous belief that this would regularly result in higher levels of student performance. An approach that was praised for its potential to leverage⁶ private assets by means of the redirection of an “ocean of public dollars” (Greene 2005: 72) turns out to have resulted in the waste of public resources (Shear et al. 2008).

Foundations thus face a serious dilemma. They are confronted with external demands and their own ambitions to help solve major social problems, and they thrive due to the hopes they mobilise in this regard. At the same time, they lack the necessary intellectual, financial and organisational resources to cope with these new expectations. As a way out of this dilemma, foundations frequently choose the option of “functional dilettantism” (Seibel 1994), addressing social problems by utterly inadequate means and in merely symbolic ways which results in “successful failure” (Seibel 1996; Thümler 2011). In these cases, foundations strive more for the public credits they earn for announcing bold initiatives, while at the same time shying away from the risks inherent in tackling complex and controversial issues long term and in adequate ways. Thus, they consolidate the status quo rather than fostering social change (Nielsen 1972; Adloff 2004; Fioramonti and Thümler 2011; Thümler 2011), which has led to the portrait of foundations as maximisers of legitimacy rather than societal welfare (Hall 1992: 226).

Research further suggests that, under conditions of ambiguous or contentious goals and high uncertainty regarding the appropriate means for tackling particular problems, actors may take refuge in the alleged certainty of ideology (Schön 1971), thus replacing experimentation and processes of self-critical learning with a firm belief in prevailing rational myths. In this context, scholars have pointed at the role of foundations as drivers of the marketisation (Nickel and Eikenberry 2009; Edwards 2010) and financialization (Thümler 2016) of society and even of the very process of rationalisation of which they are objects themselves (Hwang and Powell 2009).

In both scenarios, society might ultimately be worse off and the institution of philanthropy itself might experience a loss of trust and legitimacy if it cannot come up to the expectations of its audiences, nurtured by its own ambitious aims and promises.

1.2 From Strategic Philanthropy to Emergent Strategy and Beyond

The current discourse on strategic philanthropy can be regarded as a response to these concerns. It is based on the Weberian ideal of rational bureaucracy and aspires to maximise value for money by deliberative and instrumental means and by imposing a high degree of control over processes and ends. It further implies the political project of establishing this framework as the standard approach to philanthropy. While not based on a unified and coherent doctrine, its proponents typically subscribe to the following set of beliefs.

First, the production of a particular type of outcome—social impact—is conceived as the very rationale of philanthropic action and the major criterion of success. Social impact in terms of the demonstrable, measurable and attributable effect of a philanthropic cause is regarded as the only legitimate aim and desirable “social return” of philanthropic action. Just as the performance of a business or a financial investment is judged by a look at the bottom line, the success of philanthropy is supposed to be determined by reference to the degree of impact it brings about (Porter and Kramer 1999; Prewitt 2006; Brest and Harvey 2008; Ebrahim and Rangan 2010; Liket 2014; Harrow and Jung 2015).

Second, the attempts to model impact as the allegedly straightforward new “currency” of philanthropy go along with an increase in attempts at standardising and measuring the effects of philanthropic action, because otherwise performance cannot be assessed and compared reliably. Scholars and practitioners try to capture impact in quantifiable and even monetary dimensions (Emerson et al. 1999; Rauscher et al. 2012; Kroeger and Weber 2014; Liket 2014) which are strongly influenced by the logics, methods and concepts of business (Ebrahim and Rangan 2010: 8) and, increasingly, the financial industry (Salamon 2014; Thümler 2016).

Third, effective performance is regarded as being dependent on the existence of a strategy in terms of an encompassing and coherent approach to problem solving which combines high precision in terms of goals, a detailed knowledge of the problem situation and alternative options for action, sophisticated plans which specify how to reach the goals and a close alignment between organisational resources, means and objectives (Porter 1996; Porter and Kramer 1999; Frumkin 2006; Brest and Harvey 2008).

The underlying logic has been formulated most clearly by Brest and Harvey (2008: 7). They stipulate:

accomplishing philanthropic goals requires having great clarity about what those goals are and specifying indicators of success before beginning a philanthropic project. It requires designing and then implementing a plan commensurate with the resources committed to it. This, in turn, requires an empirical, evidence-based understanding of the external world in which the plan will operate. And it requires attending carefully to milestones to determine whether you are on the path to success.

Rational philanthropic behaviour under conditions of resource scarcity is further framed as a kind of social investment (Frumkin 2003; Knott and McCarthy 2007; Thümler and Bögelein 2012; Zunz 2012). According to this line of thinking, foundations are supposed to achieve maximal social return on investment with the overly limited resources at hand by way of “leveraging” their contributions, thus generating impacts significantly beyond their financial inputs (Frumkin 2000; Hess 2005a; Katz 2005; Bishop and Green 2008; Adloff 2010; Hammack and Anheier 2010).⁷

As a response to the overwhelming dimensions of many social problems, this approach is frequently combined with demands to trigger processes of growth. Acknowledgement of unsatisfied demands comes first, followed by a close study of the nature of the problem. As a next step, philanthropists are supposed to develop a prototype and test and refine it in practice. In the case of success, it is turned into a standardised product ready to be distributed to end users by different means of societal diffusion or organisational scaling up. The more users adopt the innovative product, the higher the social impact will be (Dees et al. 2004; Gerber 2006: 342; Fleishman 2007: 59; Weber et al. 2013).

In what follows, this conception of philanthropic action will be labelled the “bureaucratic model”. Far from being a theoretical ideal only, this approach flourishes in practice as well as in practitioner’s discourse. It is actively promoted by an emerging industry of consulting firms and non-profit rating agencies such as the German Phineo, the UK-based New Philanthropy Capital or Charity Navigator in the USA (Gordon et al. 2009; Kail and Lumley 2012; Phineo 2012; Kurz and Kubek 2013). This is further reflected in the reliance on projects as highly controlled, but temporarily limited organisational forms (Institute for Philanthropy 2009).

1.2.1 The Bureaucratic Project and its Challenges

A wide body of scholarship sheds doubts on the claims that organisational behaviour based on the bureaucratic model represents the state of the art of organisational effectiveness, that it adequately describes what effective problem solvers do and that it represents the ideal of what organisations in pursuit of effectiveness are supposed to do. These assumptions have repeatedly and convincingly been refuted by research on a broad range of issues such as the effectiveness and evaluation of non-profit organisations (DiMaggio 2001; Ebrahim and Rangan 2010), organisational decision making (Cohen et al. 1972; Brunsson 2006), industrial and corporate innovation (Nelson and Winter 1977; Van de Ven et al. 2008), corporate strategy development (Mintzberg 1979a; Hayes 1985; Grant 2003; Wiltbank et al. 2006), managerial problem solving (Wagner 1991), urban planning (Blanco 1994), entrepreneurship (Sarasvathy 2001), the psychology of complex problem solving (henceforth CPS) (Funke 2003), management under conditions of complexity (Levinthal and Warglien 1999; Snowden and Boone 2007) and public school reform (Cohen et al. 2014).

In particular, critics point at the weakness of the bureaucratic ideal when it comes to action under conditions of unclear problem situations, contentious and ambiguous goals, environmental complexity and dynamic change as well as a lack of reliable problem-solving technology, which are regarded as being characteristic of and increasing in contemporary societies (e.g., Rittel and Webber 1973; Crozier 1982; Chisholm 1995; Kettl 2009). Under these initial conditions, actors can neither formulate clear preferences, predict outcomes with a sufficient degree of precision nor exert control over the process of problem solving. Instead, an adequate definition of problems, the formulation of prudent ends and the generation of new or better causal knowledge are the result rather than the point of departure of the process of problem solving. In other words, the bureaucratic model provides no answer to the question of how to cope with profound uncertainty and how to generate novelty. This is the proper domain of (social) innovation rather than strategic planning (Moore and Westley 2011).

Second, the preference for processes of growth to match the size of social problems is problematic for a number of different reasons. For instance, successful problem solving in the field of school improvement in general is often highly idiosyncratic to the local problem situation (Tyre and von Hippel 1997). In these cases, problem solvers generate “sticky” knowledge that cannot easily be transferred to other sites (von Hippel 1994). What is more, there is a manifest trade-off between effectiveness on the one hand and growth on the other. Rather than multiplying the impacts by multiplying solutions, effectiveness decreases as solutions are more widely distributed. This phenomenon has been explained by the variation inherent in local situations and the necessary degree of required adaptation to local needs, which results in a loss of effectiveness of interventions (Slavin, personal communication). Research on the diffusion and institutionalisation of civil service reforms has shown that the adoption of new practices is driven by considerations of superior performance only in the early stages of the process. The pace accelerates as the sources of adoption change from an emphasis on performance to a focus on legitimacy (Tolbert and Zucker 1983). Finally, the very concept of growth may frequently be inadequate to the requirements of civil society actors. For instance, scholars of innovation at the grassroots level have observed that the sustainability of local projects can be undermined by suppor...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• List of figures
• Acknowledgements
• 1 Introduction: Contemporary Philanthropy and Its Problems
• Part I Theory
• Part II Case Studies
• Part III Analysis
• Appendix A: List of Cases
• Appendix B: Interview Schedule
• References
• Index