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Hard Evidence Of Philanthropy Results Will Drive More Donations But Not Only Factor - Study
Eliane Chavagnon
7 November 2013
Many individuals in the philanthropic sector
believe that if non-profits provided “hard evidence” of their results, private
foundation donors would give more to the best-performing organizations. However, for family
foundations, grant-making is a relationship-based enterprise, says Page Snow, chief philanthropy officer
at Foundation Source. While a quarter of
the participants involved in a recent survey by the firm cited “clear evidence of
demonstratable impact” as the most important factor in determining whether to
grant to a non-profit, 37.4 per cent said “personal knowledge
of/previous experience with the organization.” The findings are an important reminder that the majority of
these foundations aren’t run by professional staff, Page told Family Wealth Report. “They are comprised of dads
and moms (and their offspring) involved in their communities. Understandably,
these donors want to give to organizations that they’re involved with, organizations
with which they have a personal relationship. Non-profits need to understand
that the way they solicit funding from large foundations simply does not work
with family foundations. Shipping off a well-crafted proposal is not going to
get their attention,” Page said. She added: “For family
foundations, grant-making is a relationship-based enterprise. To attract these
donors, non-profits need to deploy their own board members to get to know
theses donors. They also need provide opportunities for family funders to get
to know their organizations in low-pressure environments.” Foundation Source is a
provider of support services for private foundations. Results from the survey
were derived from 198 of its private foundation clients, the majority of whom
have private foundations with around $50 million in assets. The firm noted that
foundations of this size account for 98 per cent of the some 86,000 private
foundations in the US. In other of the survey’s
findings, three-quarters (77.5 per cent) agreed with the idea that foundations
should support non-profits without “telling them what to do” as it “negates the
value of non-profits’ ‘on-the-ground’ knowledge.” A much smaller proportion -
22.5 per cent - opted for a more entrepreneurial approach, saying that
foundations should direct non-profits in carrying the foundation’s vision and
ideas.
highlighted that there is ongoing debate about how foundations should work with
non-profits; William Schambra of the Hudson Institute in Washington, DC,
for example, believes that foundations “should just write checks.” On the other
hand, Paul Brest, former president of the Hewlett Foundation is of the view
that foundations should drive the agenda. “I actually was surprised that the percentage
of those who opted for a more entrepreneurial approach was so high—nearly a
quarter of those participating the survey,” Page said. “Ten years ago, I suspect that that ratio
would have been 5 per cent proactive versus 95 per cent responsive. I suspect
that the reason behind the shift is that a significant number of our clients
are first-generation wealth creators. In my experience, these individuals often
want to use the business smarts that created their wealth to drive the agenda
in pioneering ground-breaking philanthropic solutions.” Foundation Source also found that over half of
those surveyed (54.3 per cent) have not collaborated with other foundations and
have no intention of doing so in the future. “Interestingly, no
respondents said that they had worked with other foundations in the past year,
but would never collaborate again, suggesting that those who partner with other
foundations find the experience worthwhile,” the firm said. Impact
investing Impact investing, which
Foundation Source describes as “the practice of investing a foundation’s assets
to generate a positive social or environmental impact as well as for financial
returns,” is a large and growing market. What the firm learnt from its recent survey is
how highly the “social dividends” aspect is valued, it said. For example, while
over half of those surveyed said that ROI was of prime importance, 46.1 per
cent put a greater emphasis on “choosing investments that further our
foundation’s mission.” “Frankly,
I thought that the popularity of ‘impact investing’ had been exaggerated by its
proponents,” Page told this publication. “The
traditional model in philanthropy has been to invest the foundation’s endowment
to generate the greatest return (often without regard for the social or
environmental repercussions of these investments) in order to generate sufficient
capital to ‘do good’. Our survey indicates that, for
many foundations, the social impact of their investments isn’t just an
important consideration - it’s the most important consideration.” She added that donors want to hear more from
their advisors about impact investing, saying: “I’ve noticed that every time I
receive a call from a client asking for more information about impact investing
– they end up asking me for the name of an advisor who can help them find such
opportunities (she noted that she doesn't provide such advice). Wealth managers who are
reluctant to engage their clients around their philanthropy are missing an
opportunity.” It was also found that
foundations prefer to find grantees themselves rather than solicit requests,
with only 7.9 per cent of respondents saying that they fund organizations that
submit proposals. However, once funders find non-profits that they trust, they
tend to repeat their grants, Foundation Source said.