Philanthropists Need Investment Model

No one philanthropist, no matter how wealthy, can solve intractable social problems like poverty and climate change, but with a “strong investment model,” serious donors can create real change, says a new article in the Harvard Business Review.

By identifying the type of change that best matches their goals, and then determining what role to play, philanthropists can maximize their investment, says “When You’ve Made Enough to Make a Difference,” written by William Foster and Susan Wolf Ditkoff, both partners with Bridgespan Group.

Donors must achieve what the article terms a “multiplier” effect that “delivers many dollars’ worth of impact for each dollar invested” to achieve the breakthrough results that fuel large-scale change.

“Effective philanthropists merge their program-model perspectives and their understanding of the avenues of change – a focus that informs the grantees they select and the resources they provide,” the authors write.

The first step in developing an investment model is to determine which of four basic approaches to a problem is best suited to the goals one desires to achieve – building strong nonprofits; changing government and the public will; creating intermediary organizations; or funding research and development.

Some issues or societal problems, such as quality foster care, require strong, stable organizations that deliver services.

Others, like curing Parkinson’s disease, require breakthrough discoveries that only can be achieved through research.

Once the approach is matched to the desired goal, philanthropists must take stock of their own particular assets and skills to determine the specific role they will play in bringing about the change they desire.

In addition to money, philanthropists should consider the personal or public networks they possess, as well as their own professional or technical know-how.

They also must assemble the right team of people, whether through direct hires, bolstering the staff of a nonprofit, or buying or borrowing expertise.

Finally, philanthropists must create trusting relationships with their grantees, eliminating as much of the inherent power imbalances as possible and ensuring that roles, responsibilities and expectations are clear.

“To address the world’s most pressing problems, donors must ask themselves if they truly understand what it takes to make change happen, beyond just a great program or idea,” the article says. “And if so, how they can position themselves – through their role resources and relationships – to support that change.”

Reprinted with permission of Philanthropy Journal.