During the holiday season, our mailboxes are overflowing with catalogs, holiday cards — and requests for donations. Our voice message boxes are not much farther behind.
At this time of year, when people are feeling particularly generous, nonprofits work hard to raise needed funds for the upcoming year. Although critically important to nonprofit budgets, most year-end giving is transactional rather than transformational. Givers give one time — devoid of strategy — and nonprofits receive a one-time donation. Next holiday season, the whole process starts over.
Donors who wish to truly maximize the impact of their giving must develop a strategic rather than a random approach to philanthropy. As with any important decision — investment, business or personal — a thoughtful longer-term strategy enables you to determine what you want to achieve and how to do so effectively.
Following these five key steps will help you get the most “bang” for your philanthropic buck.
1. Engage family and determine the reasons for giving.
People engage in philanthropy for many valid reasons — including gratitude, theology, altruism, recognition, influence, tradition, tax planning, legacy creation, passing values to the next generation, social pressures and guilt. Engaging family members across the generations in meaningful discussions about what motivates your giving is an essential first step to developing a strategic giving plan.
2. Identify desired outcomes and focus on impact.
Philanthropy seeks either to preserve something of value to the donor (such as forests, symphonies, libraries, democracy or community) or to improve something that needs to be changed (such as reading, equality, environmental degradation, health, education and opportunity), or both. A narrow focus on a limited number of causes enables donors to have a greater impact, derive more meaning and satisfaction, and become more personally involved in the desired outcomes.
“Go deep, not wide” is a mantra of strategic philanthropy.
3. Seek “best in class” nonprofit partners.
With more than 1.5 million nonprofit organizations in the United States, it is difficult to determine which are truly effective at designing and implementing programs that actually achieve their missions. Before donating to a nonprofit, research its effectiveness, financial sustainability, professional and volunteer leadership, responsiveness to shifting needs, engagement of beneficiaries and other stakeholders, the theory of change deployed, and the difference actually made (rather than just the activities undertaken).
4. Make sure all philanthropically committed capital achieves your mission.
In the U.S., more than $800 billion currently resides in foundations and donor-advised funds. That money is philanthropically committed to mission, has received a federal tax deduction and cannot be returned to the donor. Each year, just 5 percent to 20 percent of those funds are distributed to nonprofits. The remaining capital is invested in public and private markets, usually for the sole purpose of financial growth.
The goals of these investments may not match and may even counteract your philanthropic priorities and objectives. Take steps to ensure that these investments do not contradict — and hopefully further — the foundation’s or donor-advised fund’s charitable mission and utilize all of your philanthropic capital to achieve your charitable goals. (“Mission-related and impact investing” will be the focus of my January column).
5. Evaluate and make changes as needed.
Philanthropy that makes a real difference over time is difficult to do well. It takes more than a spate of year-end check writing. Effective philanthropy requires persistence and a willingness to examine not only successes, but also failures. Changing circumstances and unanticipated events or participants all require a philanthropist to continually learn and adjust a strategy — even while it is being implemented.
Legendary Chinese military general, strategist and philosopher Sun Tzu said: “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”
Please, be generous in 2014.
In 2015, however, take your giving a step further by engaging in a different, thoughtful and strategic approach to your philanthropy.
This post first appeared in the Denver Post on Sunday, Decmeber 14, 2014. It is reposted here by the author with permission.