Giving Circles - Opportunities & Challenges

Giving Circles are relatively new in Australia but a new study of a variety of giving circles in the US finds that they provide both opportunities and challenges for fundraisers.

The study found that while giving circles have much to offer charities, in some cases the funding relationships can be uneven and have yet to reach their full potential.

The report, Giving Circles and Fundraising in the New Philanthropy Environment, is based on interviews with 17 leaders of charitable organisations that received funding from giving circles and looks at the challenges and opportunities that this new type of funding mechanism presents.

The report was developed by Dr Angela Eikenberry, an assistant professor at the Centre for Public Administration and Policy, School of Public and International Affairs, Virginia Polytechnic Institute and State University in Blacksburg, Va.

Giving circles are groups of like-minded individuals who each contribute a certain amount of money to join the circle. Members then discuss how the pool of money should be used and which charities should be supported, often asking for applications from prospective charities and going on site visits.

The average gift from a giving circle was $US28,781 with gifts ranging from $US90 to $US715,000.

The study identified three different types of giving circles:

• Small groups, which consist of a small number of people who pool their funds (typically ranging from $50 to $5,000 per member) and then decide together where to give it away. Because the group is small, leadership is often shared and all are able to participate in the decision-making process. The major focus of the small giving circles seems to be social and educational activities, with the social aspects often taking precedence.

• Loose networks, which typically consist of a core group of people who do the ongoing organising, planning and grant decision making for the group, and then individuals, who may or may not be considered members, branch off from that group, often participating intermittently. “Members” tend to gather around a specific event such as a potluck dinner or other fundraiser. Individual participants can make funding recommendations but typically do not make funding decisions. There is typically no minimum fee to participate and decision making often occurs in an ad hoc fashion in response to the needs of individuals.

• Formal organisations, which look like a traditional membership organisation structure with a board or lead group at the top, committees, members and frequently professional staff support. They are also larger in size than other giving circles and the cost to participate tends to be high compared to small groups and loose networks—the model amount being $5,000 to $5,500. The grant decision-making process typically involves committees or investment teams making grant decisions directly or making recommendations for a full membership vote. There is also a strong emphasis on direct engagement with Not for Profit organisations.

Dr. Eikenberry’s earlier research revealed that giving circles generally attract younger and female participants (as well as other groups not historically active in organised philanthropy) to the philanthropic table.

Also, participation serves to increase levels of giving while bringing “new money” to the Not for Profit sector, especially to small and medium-sized organisations. In addition, members are more thoughtful, focused and strategic in their personal giving because of their educational experiences through the giving circle.

The overall response from the organisations involved in the study was mixed but generally positive.

Many felt that giving-circle members were open, had a partnership mentality and were interested in learning about the recipient organization and its needs. Nearly all felt that the added value that the giving circle could bring to a relationship—visibility, a voice, appreciation, connections, volunteers, business and mentors, to name a few—could be instrumental for most organisations.

Others, however, felt that giving circles were not always consistent about their expectations and what was expected in return for funding, and that giving circles were simply not reliable for sustained and long-term funding.

From the study comes a series of lessons learned about how to approach and develop a relationship with a giving circle.

• In almost every case involved in the study, the giving circle sought out the charity. In most instances, someone in the giving circle already knew about the organisation (and sometimes knew someone at the charity) and proposed that the circle fund the charity. Therefore, if nonprofits want to attract giving circle funding, they most focus on networking, building awareness and public relations. Being able to give presentations and facility tours were cited by several participants, and two individuals interviewed were themselves members of giving circles.

• Because the giving-circle relationship is often new, fundraisers should expect to spend a significant amount of time on developing it. A fundraiser must be able to adjust quickly to a variety of different personalities within the giving circle. In addition, some participants described some giving-circle funding as “too directive,” with members constantly wanting to get involved in different aspects of the charity.

• Several participants noted that for more formal giving circles sponsored or associated with a host foundation or other organisation, there was often a mismatch between the host’s priorities and application process and those of the giving circle. The philosophy of giving circles can sometimes clash with the already established board governance structure of their host organisation, making it difficult for recipient organisations to navigate the funding process smoothly.

• It can be difficult to count on giving-circle funding from year to year, since a circle’s priorities can change quickly depending upon membership and personalities.

The study also provides a number of suggestions for giving circles provided by the interviewees in the study.

A study is available to download at: http://afpnet.org/content_documents/eikenberry_research_giving_circles.pdf