Money Well Spent

A Strategic Plan for Smart Philanthropy, Second Edition

Paul Brest, Hal Harvey

• Publisher: Stanford Business Books
• Year: 2018
• ISBN:
  9781503606036
• Edition: 2
• Topic: Business
• Subtopic: Nonprofit Organizations & Charities
• Index: Business

Philanthropy is a booming business, with hundreds of billions of dollars committed to the social sector each year. Money Well Spent, an award-winning guide on how to structure philanthropy so that it really makes a difference, offers a comprehensive and crucial resource for individual donors, foundations, non-profits, and scholars who focus on and teach others about this realm.

Behind every successful grant is a smart strategy. Paul Brest and Hal Harvey draw on the experiences of hundreds of foundations and non-profits to explain how to deliver on every dollar. They present the essential tools to help readers create and test effective plans for achieving demonstrable results. Brest and Harvey tackle thorny issues, such as how to choose among different forms of funding, how to measure progress, and when to abandon a project that isn't working.

The second edition accounts for a decade of progress: a rise in impact investing, the advent of pay-for-success programs, the maturation of impact evaluation, and the emergence of a new generation of mega-donors. Today, the notion of results-driven philanthropy is more important than ever. With this book, the social sector has the techniques it needs to deliver on that idea with impact.

PART ONE

INTRODUCTION TO STRATEGIC PHILANTHROPY

“STRATEGIC PHILANTHROPY” is synonymous with “result-oriented,” “outcome-oriented,” and “effective” philanthropy. It refers to philanthropy in which donors seek to achieve clearly defined goals, they and their grantees pursue evidence-based strategies for achieving those goals, and both parties monitor progress toward outcomes in order to make appropriate course corrections and ultimately evaluate their success.

The basic imperative of strategic philanthropy is to deploy your resources to achieve your goals most effectively. This calls for approaching the work with a clear-eyed appreciation of the inevitable risks of failure as well as the potential for success. Your chances of success are greatly increased by having well-defined goals and a sound strategic plan to achieve them. The goals describe what success would look like, and the strategic plan details every step necessary to achieve them, including indicators that you are on the right path—or, conversely, that you’ve strayed or lost your way.

This one-chapter part begins with a section on choosing goals and then sets out some contemporary examples of strategic philanthropy.

Chapter 1

THE PROMISE OF STRATEGIC PHILANTHROPY

The Choice of Philanthropic Goals

Since strategy is merely a means for achieving goals, you can’t have a strategy until you have decided what you want to achieve. Some of Hal’s and Paul’s goals for their personal philanthropy, such as combating global warming, are identical. Some differ: Hal cares about protecting the great landscapes of the American West; Paul is devoted to classical chamber music. But, as we said in the Introduction, this book is designed to help you be effective in pursuing your goals, not ours.

Many philanthropists’ goals are determined by particular commitments and passions that motivate and precede their philanthropy. They may come from personal experience or be based on religious, philosophical, or personal beliefs—for example, the effective altruism movement’s argument that charitable giving should be dedicated solely to addressing catastrophic risks and improving the lives of the world’s poorest people,¹ or the idea (which is in tension with effective altruism) that philanthropists have a special obligation to their geographic communities.² For some, the urge to be altruistic precedes particular objectives; they may benefit from an inquiry like the famous What Color Is Your Parachute? approach to choosing careers.

Without suggesting that you should follow Cari Tuna’s and Dustin Moscowitz’s particular path, you may find these young Giving Pledgers’ approach evocative. At the time they made their pledge, Dustin, a cofounder of Facebook, wrote that he viewed his good fortune “not as personal wealth, but as a tool with which I hope to bring even more benefit to the world.”³

While Dustin devoted attention to building another company, Cari undertook a several-year exploration of their philanthropic goals and approaches. In her own words, Cari wondered “how many excellent causes I and other U.S. donors might be overlooking because we had never encountered them personally.”⁴ She joined forces with the cofounders of GiveWell, which rates charities that address global poverty, to have in-depth conversations with a broad range of practitioners and funders, and she co-funded grants with more experienced foundations to learn about grantmaking and get a direct sense of the activities and impact of grantee organizations.

Cari and Dustin created the Good Ventures Foundation and the closely allied Open Philanthropy Project.⁵ While the precise language of the foundation’s underlying values has changed over the years, they are captured on its current website:

The primary goal of our giving is to improve the lives of as many people as possible as much as possible. We believe that all lives are valuable, including future lives. These guiding principles have big implications for the foundation’s approach to grantmaking.

Some donors prefer to give closer to home. Some find it helpful to limit their scope to a particular country or region. We think being open to giving in any region is a comparative advantage of ours. Much of the foundation’s grantmaking to date has been focused on the poorest places in the world, where dollars go further toward saving and improving lives. But we’re also funding organizations in the developed world with the potential to increase human well-being at scale.⁶

The website explains: “As a new foundation, we’ve decided not to commit to focus areas just yet. Instead, we’re taking time to learn about causes across the major categories of philanthropy—direct aid, research and development, and policy advocacy—in search of important areas on which we could have an outsized impact long-term.”⁷ The foundation has set these criteria for choosing causes for grantmaking:

• Importance: What is the problem, how many people does it affect, and how deeply does it affect them?

• Tractability: What are the possible solutions, and do opportunities exist to make tangible progress?

• Crowdedness: Who else is working on the issue? Is it an area that is underfunded (rather than more “crowded” with donors) where Good Ventures therefore could have a bigger impact?⁸

Many new philanthropists do not have the capacity—or attention span—to engage in anything approaching Cari Tuna’s arduous learning journey. And, of course, you may start with a different set of values and goals. But she provides a model of a thorough process, which can be adapted to fit your own resources.

While Cari worried about overlooking charitable opportunities that she and Dustin had not personally encountered, philanthropy often begins with donors’ personal experiences. For example, when his wife was treated heartlessly by hospital staff, Dr. Harvey Picker, a pioneer in X-ray technology, used the resources of his family foundation in collaboration with the Commonwealth Fund to support research and advocacy that established the idea of patient-centered care.⁹ Bill and Melinda Gates’s exposure to poverty in Africa was a side effect of a safari trip they took in 1993.¹⁰ Ed Scott’s anchor gift to found the Center for Global Development was inspired by a documentary on the disastrous consequences of the World Bank’s and International Monetary Fund’s imposition of austerity measures on developing countries.¹¹

Although Cari and Dustin came out of the gate with incredibly ambitious goals, it is not unusual for people who have acquired great wealth to initially seek safer targets for their philanthropy and only later—if ever—consider bolder and more complex goals.

The Necessity of Strategy

And this brings us to strategy. Whatever your philanthropic motivations and goals may be, a sense of mission, commitment, and passion is essential to every aspect of your work. But for every case where mission, commitment, and passion were translated into impact, there are hundreds where philanthropists acted as if these qualities alone sufficed. Without the capacity to move beyond passion to reason, planning, and execution, the sector would be left largely with well-meaning gestures that confuse good intentions with real effects.

Whether you are concerned with combating global warming, eradicating hunger, curing diseases, or reforming education, you are in for a challenge not just because social change is the product of a large variety of forces that are hard to isolate, much less affect with any certainty, but also because, unlike the financial returns of a business or even electoral returns in politics, philanthropy has no common measures of success. Philanthropy is a field with poor feedback and messy signals—and those signals are often distorted by the pervasive flattery that colors transactions in the money-giving business.

Thus, once you have acknowledged your passions and determined your goals, mind and muscle must come in to design and implement a strategy to realize them. A strategy comprises the unromantic, nitty-gritty working out of the means to accomplish your philanthropic ends. The ultimate goal of a strategy is to achieve impact, which is at the opposite end of the spectrum from good intentions. Impact means making a difference—not in some existential or universal sense but rather in terms of your own philanthropic goals.

Philanthropic Successes and Failures

The chapters of this book are full of real-world examples, intended to give you a sense of the range of the practices and tools of philanthropy and their applications to varied situations. We describe failed as well as successful philanthropic efforts. Grantmaking almost always involves risk taking—sometimes relatively low, as in grants to long-standing service-delivery organizatons; sometime extremely high, as in the case of policy-advocacy strategies—and risk taking entails a chance of failure. The relevant questions are whether the potential reward is worth the risk and whether your strategy is designed to mitigate risks to the extent feasible.

We emphasize failures because philanthropists can learn a lot from failure. As Joel Podolny, dean of Apple University, remarked, “Success is a lousy learning environment,”¹² and learning from one’s failures is among the core tenets of strategic philanthropy. But you can learn from your failures only if you are candid in recognizing them. With great respect for Krista Donaldson’s leadership of D-Rev in designing products for developing countries,¹³ we couldn’t disagree more with her comment that “calling a learning a failure will discourage honesty and integrity—and hinder the pursuit of impact.”¹⁴

Taking the opposite point of view, Vanessa Kirsch, founder of New Profit, the venture fund for social entrepreneurs, astutely said, “If an organization walks through our door and says they’ve never failed, we’re skeptical.”¹⁵ When we were at the Hewlett Foundation, we inaugurated an annual contest for “the worst grant from which you learned the most.” Because of the foundation-wide learning that came from it, the prize became a sought-after honor rather than a mark of opprobrium. For the same reasons that the foundation’s grantmaking improved by telling it like it was, we believe that yours will as well.

In most instances, it’s pretty obvious when a strategy has failed: the activities necessary to implement a strategy were not carried out or, if they were, did not create the sequence of events necessary to achieve your intended outcome. Seemingly successful outcomes present a particular problem, however. It is often difficult to determine whether a good outcome was the result of your grantee’s intervention or whether it would have happened in any event—what’s called the “counterfactual”—as a result of other forces.

Why does it matter? Not mainly so that you can feel good (or bad) about your accomplishments—though we wouldn’t begrudge anyone those feelings—but rather so that you and others can learn what works and doesn’t work in order to improve your own performance and that of your grantees.

As we see in Chapter 5, there are some robust methods for testing causality in interventions that provide goods and services such as food, health, and education. It’s far more difficult, however, to assess causality in efforts to influence legislative policy and corporate behavior. To some extent this is inherent in the complex social and political dynamics intrinsic to these interventions. But it’s also a product of the poor level of analysis and transparency of many philanthropic efforts and the tendency, not discouraged by philanthropists, their supplicants, and their peers, to be self-congratulatory.

One noteworthy effort to bring rigor, including counterfactual analysis, to these stories is the Open Philanthropy Project’s commissioned case studies of the history of philanthropy.¹⁶ Our book draws on several cases from this nascent collection. With this background, we examine some examples of different modes of philanthropy with successful, unsuccessful, and ambiguous results.

Fighting Poverty through Service Delivery

The Robin Hood Foundation, whose approximately $200 million annual budget is funded by hedge fund managers and other individual donors, is devoted to fighting poverty in New York City.¹⁷ The foundation has four programs:

1. Jobs and economic security (e.g., microlending, financial literacy, and helping people access public benefits)

2. K–12 education (e.g., high-performing charter schools)

3. Early childhood and youth (e...

Table of contents

• Cover
• Copyright
• Title Page
• Series Page
• Dedication
• Contents
• Preface to the Second Edition
• Introduction
• Part 1: Introduction to Strategic Philanthropy
• Part 2: Philanthropic Strategy from Soup to Nuts
• Part 3: Grantmaking
• Part 4: Tools of the Trade
• Part 5: Organizing Your Resources for Strategic Philanthropy
• Afterword
• Acknowledgments
• Notes
• Index