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Management in Practice

How Can Philanthropy Do More Good?

Market forces drive efficiency and innovation in the private sector. What ensures that philanthropy is helping the people who need it most? Researchers and watchdog groups are pushing for evidence-based practices. Aaron Dorfman of the National Committee for Responsive Philanthropy argues that foundations need to re-think their strategies and tactics.

  • Aaron Dorfman
    President and CEO, National Committee for Responsive Philanthropy

This interview was conducted at the Yale Philanthropy Conference, a student-run conference hosted on February 23, 2018.

In 2017, Americans gave $410 billion to charitable causes, according to Giving USA. At 2.1% of GDP, it was in line with a historical norm hovering around 2%. Seventy-nine percent of the giving came from individuals, including bequests. Corporations accounted for another 5%. Grants from foundations accounted for the final 16%.

What was the result of the generosity? Who was helped? Those questions are harder to answer. “Fundamental questions about effective giving have yet to be studied,” notes Caroline Fiennes in a column for Nature that calls for developing a “science of philanthropy.” Fiennes is director of Giving Evidence, a UK consultancy. In her view, “[p]hilanthropists are flying blind because little is known about how to donate money well.” Good intentions don’t eliminate opportunity costs, Fiennes points out—and in the case of philanthropy, those costs are borne by would-be beneficiaries, not donors.

Is anyone taking on Fiennes’ challenge? In development economics, the evidence-based movement is starting to offer information on what works and what doesn’t. Randomized control trials are the gold standard. For example, Yale SOM’s Mushfiq Mobarak tested whether assisting rural workers in Bangladesh in temporarily migrating to urban areas would mitigate seasonal hunger. The results were promising, and after careful assessment, the program is being ramped up by the nonprofit Evidence Action.

That Evidence Action program was recently named to the list of top charities recommended by GiveWell, a nonprofit that evaluates the impact of philanthropic organizations based on their effectiveness. But even when one does all the work to ensure that a particular philanthropic program is effective, it still leaves some of the big questions unanswered: What are the most important priorities? How can you reach the neediest people? Where is philanthropy most needed?

Yale Insights talked with Aaron Dorfman, the president and CEO of the National Committee for Responsive Philanthropy, about the organization’s research and advocacy work to ensure philanthropy is helping underserved communities.

Q: How much does philanthropy do to help underserved and disenfranchised communities?

The average person thinks, “Of course philanthropy is about helping the poor.” In fact, just one out of every three dollars is intended to benefit underserved or marginalized communities. Even with a very broad definition—low-income communities, communities of color, women and girls, LGBT communities, people with disabilities, the elderly—it’s a small percentage of philanthropic dollars.

In our last analysis, 90% of the 1,000 biggest foundations in the country direct less than half of their dollars to benefit underserved communities. It’s shocking.

There’s a moral case to be made for making sure that philanthropic giving is benefiting those with the least wealth, power, and opportunity. There’s a pragmatic case, as well. People experience different problems in different ways based on demographic information. If you’re not thoughtful and targeted in your grant-making, you may not be reaching underserved communities.

Q: What’s your approach to encouraging foundations and other donors to be more responsive to these communities?

We produce original research that often shows, “You know what? You’re not doing as well as you think you are.” People will sometimes be upset by our work, but we’re trying to move philanthropy forward.

Before I took over 11 years ago, we were known as the critic of philanthropy. Now there’s a slight twist on that; it’s more of a critical friend, pushing and challenging the sector. We seek to provoke good conversations. We’re known as the watchdog of the sector.

Whenever a foundation improves or changes or evolves, someone is driving that change. The CEO, a trustee, a program officer—someone has taken it upon themselves to spark conversation within the organization. With our research, we strengthen the hand of that person to create a dialogue among the key decision-makers at their institution.

“Education is the most popular thing that foundations and high-net-worth donors fund. Even so, government spending on education dwarfs philanthropic spending, 3,000 to 1. It’s like that on every single issue.”

I’ll give an example. About 10 years ago, we were hearing from CEOs and program staff that trustees didn’t understand how funding advocacy, community organizing, and civic engagement activities actually helped people. Trustees would say, “We want our money to help people. Why does funding rabble-rousers do anybody any good?”

We realized we could answer that question. We did a rigorous set of studies over a three-year period in seven different parts of the country, including red states and blue states, urban areas and rural areas. We documented the benefits of foundation funding for advocacy and community organizing work on families and communities. We found a return on investment of 115 to 1. Since then, people have used our research over and over and over again in lots of different foundations to preserve or increase their funding for advocacy.

Q: Are foundations concerned about offending donors by taking too much of a political stance?

There’s a lot of unjustified fear about that on the part of some foundations. Look, if you’re a donor and you’re serious about making a difference, you’ve got to be involved in changing systems and influencing public policy.

Education is the most popular thing that foundations and high-net-worth donors fund. Huge amounts of philanthropic money go into education. Even so, government spending on education dwarfs philanthropic spending, 3,000 to 1. It’s like that on every single issue.

Philanthropies can’t possibly have influence on all these issues if they’re not changing, or influencing, government policy. It’s how philanthropies can leverage their limited dollars to make the most difference possible. A lot of foundation folks learn this as they gain some experience over time.

Dr. Robert Ross, the CEO of the California Endowment, says that 15 years ago he wasn’t a believer in foundation funding for advocacy and community organizing. He had come to lead that very large health foundation from being a medical doctor. He believed in health-oriented interventions. Over time, he has become one of the country’s best philanthropy leaders at funding community organizing, advocacy, and power-building. As he says, he came to realize we don’t have an innovation problem in this country—we have a power problem. Building power for marginalized communities is the way we’re going to overcome these thorny challenges that we face.

Q: What’s the role of philanthropies and donors in the current political climate?

It’s not hyperbole to say that our democracy is under siege right now. The current occupant of the White House is really attacking huge swaths of our population. He’s attacking immigrants, women, African-Americans, and dividing our nation. Philanthropy has an obligation to step forward and fund the resistance. The sector should be part of moving money to groups that can stand up for fairness and equality and really build the people power necessary to ensure that our country doesn’t go down the road to fascism.

I think donors are feeling the urgency of this moment. That’s really, really important. I worry about a sense of complacency as we move further into the Trump administration. I’m trying to make sure that people stay with the same sense of urgency in the face of the real threat that this administration represents for vulnerable and marginalized communities.