Philanthropy: How to make even small gifts matter

March 28, 2011

A man gives money to a woman begging on a street in Managua February 8, 2011. REUTERS/Oswaldo RivasGiving money away has such an emotional component to it that it’s hard, sometimes, to think about in strategic terms. But the truth is that if you pay as much attention to your giving strategy as to your investing one, you can have more impact and fund more of the organizations you care about without getting sidetracked by requests.

Tom Tierney, chairman of the Bridgespan Group, which advises both philanthropists and nonprofits, and co-author of the forthcoming book Give Smart: Philanthropy That Gets Result, has been thinking about how to make your philanthropy count for a long time. Before co-founding Bridgespan in 1999, Tierney, who has an MBA from Harvard, had been chief executive of Bain & Co. But as he reached his mid-40s, he made a career shift that few on Wall Street understood at the time. “Midway through the ’90s, I started asking, ‘Are there other ways to live my life?’ ” he recalls. “I had a couple of senior partners come into my office and shut the door, and say, ‘are you okay?’ They were expecting me to say I had gotten bad news from the doctor.”

Since then Bridgespan has accumulated heavy-hitter clients like the Bill & Melinda Gates Foundation, the William and Flora Hewlett Foundation and the Rockefeller Foundation. These foundations account for a lot more money than the rest of us, but whatever the dollar amount you’re giving — and whatever you choose to give to — you can benefit by thinking smarter about that decision. “Whether you’re giving $1 million or $1,000, ask yourself, ‘What do you want to achieve with it?’ ” Tierney says. “For most folks $1,000 is a bigger deal than $1 million is for Bill Gates.

Here’s a few questions to ask yourself to make sure you’re getting the most out of that giving, whatever the number.

What are your values and beliefs? Yeah, it’s basic, and it’s also a hard question. And that’s why it comes first. Most of us start giving willy-nilly to people who ask, or to solicitations that come in the mail. But without unlimited time and resources (and we all face such constraints!), there’s no way to give to everything. “Most of us respond when we’re asked,” Tierney says. “If you give to everyone who asks, you’ll make a lot of $15 or $20 contributions. Maybe it would be better to spend the bulk of your giving on one thing. In business, focus matters. In philanthropy, even more.”

That’s true for the ultra-wealthy, and that’s true for regular givers. “The principles that apply to the wealthy apply also to the less-wealthy because they still have limited resources and limited time,” Tierney says. “The moral of the story is: Don’t wait too long to ask life’s most important questions.”

What’s your strategy? Or to put it another way, how do you define success? “Charitable acts are a means not an end,” says Tierney, whose personal philanthropy includes the Nature Conservancy (where he’s on the board of directors). So once you’ve figured out what you care about — conservation, say — what groups will you choose to give to, how much, and in what time period. While it’s tough to decide how much to give away (and that number depends greatly on your personal financial circumstances), a higher number isn’t always the answer. Today’s story about Madonna’s failed efforts to finance a school in Malawi are only the latest example that large sums of money are not enough. The bigger question is what impact your giving has in changing the world.

Unfortunately, efforts to measure charities in terms of their impact have had a difficult time, since it’s easier to measure spending than it is to measure whether, say, a specific educational program worked. The ratings efforts “by and large are well-intentioned and misguided,” Tierney says. “They’re well-intentioned because they encourage resources to migrate to better nonprofits and away from worse ones. But they’re misguided because they’re focused on cost structure.” The result, he says, is that they can “encourage flawed decision-making and the starvation cycle,” in which under-investment by donors causes an organization to starve to death for lack of funds. The bottom line for givers is to get to know the groups you give to, and to make your own evaluation of how they’re doing.

Are you getting better? If you look at your philanthropy year-over-year, are you getting better each year? “The key to unlocking results is to ask the simple questions, ‘How do I improve the results of my giving?’ ” Tierney says. Should you give money away now or later, as estate planning (Tierney argues for now) and should you also get involved with the organizations you give to (Tierney argues for yes — though that sets a natural cap on the number of groups you can then work with). “There’s no magic number, but you cannot volunteer in nine organizations,” he says.

Since starting Bridgespan, he notes, he’s personally become more focused in his own giving, choosing a few organizations in areas he cares about, like conservation and inner-city youth. A family foundation may sound good and have tax benefits, for example, but depending on the family dynamics giving a pot of money to a bunch of people to fight over may not be the right answer. “In business, it’s focus, focus, focus,” Tierney says. “Here, it’s clarity, clarity, clarity.”

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