Giving Strategically, When the Government Can’t Help

THIS is a season of fiscal austerity for governments, and state and local officials across the country are threatening to cut programs that aim to help the less fortunate. With tax revenue down and budgets constrained, they say they have little choice. 

By Paul Sullivan.  Now, a new book “Give Smart” (Public Affairs), written by two philanthropy experts, Thomas Tierney and Joel Fleishman, argues that the wealthier philanthropists around the world can focus on solving problems that government cannot undertake while also paying for research into new ideas that may be adopted later.

“Philanthropists can innovate, but the government must sustain,” said Mr. Tierney, chairman of the Bridgespan Group, which advises nonprofits. “This innovation can be accompanied by scaling up. It’s very different from providing shelter to the homeless or food to the hungry.”

He categorized what he and Mr. Fleishman, a professor of law and public policy sciences at Duke University, were advocating as “a shift from not just serving to solving.” Mr. Fleishman, described their approach as a how-to guide to strategic or venture philanthropy.

But their strategy is not without its detractors. “Philanthropy needs to be looked at as a continuum,” said Lorie Slutsky, president of the New York Community Trust, which manages about 2,000 charitable funds. “This is one important piece on the continuum. But you couldn’t do strategic philanthropy in a settlement house without individual donors who provide support or government contractors.”

How, then, should donors give in a time of increased need for social service programs? The answer is that it is easy to give money away but hard to do it in a way that will solve a problem.

HOW TO DO IT Some of the best examples of strategic giving come from people who set their sights on a narrow problem.

In 1953, John Dorr, who made his wealth through an engineering firm, theorized that many accidents were caused when drivers hugged the center line on highways when fog or snow reduced visibility. He began lobbying for a white line to be painted on the shoulder of highways. But highway departments balked at the cost, $150 a mile. So Mr. Dorr got permission to paint a white line along the edge of the Merritt Parkway in southern Connecticut. It was credited with reducing accidents, and a decade later the white line was adopted around the country.

With bigger problems, focusing on the component parts is the key. This is what Donald and Doris Fisher, who founded Gap, did in the 1990s when they started financing charter schools. Mr. Fisher had become concerned about the state of public schools in San Francisco, where he grew up. He figured that if he found a way to improve schools there, the model could be marketed around the country just as Gap’s khakis had been.

Today, their son John Fisher says that 75 percent of the family’s giving is tied to supporting not just the Knowledge Is Power Program, or KIPP, the charter school network his family has heavily financed, but to groups that work all around the charter school movement.

“Each of the organizations we backed really focus on a particular area, whether it’s advocacy or running great schools or finding the next group of leaders,” said Mr. Fisher, who advises KIPP. “If KIPP is focused on running great schools, where else can we benefit KIPP?”

While charter schools are well known now and have become popular with strategic philanthropists, they were not when the Fishers got involved.

And with governments cutting existing social service programs, most innovation is probably going to come from private donors.

“Government is a lot less flexible to testing out the new idea and documenting it,” Mr. Tierney said. “That’s why we talk about giving smart. It’s not enough for philanthropists to give away money. You need to build the initiative, particularly in a time of hardship.”

PITFALLS Doing that is not easy, and there are several major pitfalls with strategic philanthropy. The first is what the authors call “fuzzyheadness,” which they define as a big gap between what people want to achieve and what their money can accomplish. If there is any doubt, even the Gates Foundation, with $37 billion at its disposal, has had to pick and choose what to finance in its global health effort.

The second mistake some philanthropists make is not realizing that big, intractable problems have not been easily solved for a reason. Going it alone is probably not the best strategy. “Very little of substance is accomplished alone,” Mr. Tierney said. “This is tough with self-made people who are often quite independent.”

And then there is the risk of underinvesting in a problem. This happens when philanthropists try to keep the costs so low, they starve the organization of resources.

Ms. Slutsky said that problem pointed to the need for overlapping types of philanthropy. “If you have a painting and give it to a museum, that’s a great gift,” she said. “If you have someone who wants to pay to bring children to see it, that’s a great gift. But if you don’t have someone to pay the electricity bills, no one is going to see it.”

Avoiding these traps is not the only thing to contend with. Expectations also need to be managed. Joanna Jacobson, the former chief executive of Converse, helped found Strategic Grant Partners in 2002 with 15 wealthy Massachusetts families. The group, which focused on education and child welfare, has avoided the pitfalls on the “Give Smart” list. But in the process, she said she had lost some of her idealism.

“We all thought that government would cheer wildly, and say, ‘We’ll replace the things that don’t work with the things that do work,’ ” she said. But that did not happen. “I just believe that government should be transparent and require outcomes. Then some of the risk-taking work we do could be better utilized.”

This is where being realistic about what you want to accomplish is important. “The bigger the problem, the more reasons it hasn’t been solved,” Mr. Fleishman said. “You have to ask yourself, How will you go about doing it?”

OTHER OPTIONS Of course, philanthropists can give away their money as they want to. It is, after all, their money. And philanthropy is one area where learning on the job is fine.

Diane Feeney, a director at the French American Charitable Trust and daughter of Charles Feeney, the co-founder of Duty Free Shops, said she began giving away her family’s money in a completely nonstrategic fashion.

“We started out giving to our alma maters and the communities we were living in,” she said. “We had an endowment of $40 million, which was a lot for your local soup kitchen or your alma mater.”

Then, she and her siblings and mother began thinking of how they could have a big impact in one specific area: helping develop leaders in impoverished communities. Over 18 years, this interest grew.

“We started realizing that the management of these community-led groups was not very strong,” she said. “We started a technical assistance program, and we offered them consultants to help them work on whatever was most needed.”

The foundation will close next year, but even in shutting it down, Ms. Feeney said she was committed to acting in a way that helped those who received her grants to find aid elsewhere. And she is free to do exactly that.

“Philanthropy is a voluntary use of money,” said Melissa Berman, president of Rockefeller Philanthropy Advisors. “That’s why we stress understanding your personal goals and motivations.” 

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