Million Dollar Donors Not Comfortable with Philanthropist Tag

Surprise findings in a US study shows nearly a third of the participants
do not think of themselves as “philanthropists,” despite giving an average of nearly $US1 million annually.

The Center for High Impact Philanthropy conducted a series of structured interviews to determine how high net worth individual philanthropists (HNWP) make decisions about giving.

The Centre found a set of diverse and evolving practices, a predominant reliance on peers for information, a narrow and negative view of evaluation (despite a strong desire to make a difference), and difficulty with exiting established relationships with Not for Profits, perhaps because the transaction costs of “breaking up” seem too high.

Many expressed a reluctance to investigate the effectiveness of potential recipients for fear of inviting unwanted solicitations or appearing distrustful or overly demanding of the charities with which they already had relationships.

Most did not know about or refer to the myriad of academic and Not for Profit resources in their areas of interest.

While a few HNWP participants reported that they had always thought of themselves as “philanthropists,” the majority considered it a role they would achieve at some point in their evolution as givers.

In fact, nine HNWP participants revealed that they did not yet consider themselves philanthropists, despite giving an average of almost $1 million annually.

Some HNWPs revealed that their involvement in an organisation was a precondition to donating what they considered larger gifts. Others were comfortable giving a larger amount if someone they knew well was personally involved in an organisation.

Few HNWP participants made a practice of giving large gifts in situations where they had simply heard of and/or read about an organisation.

Interestingly, despite the fact that many Not for Profits are now rated or scrutinized based on their “administrative cost ratios” many HNWP participants thought overhead was not a useful decision criterion.

The majority of HNWP participants, however, seemed reluctant to inquire about specific costs before making an initial or repeat gift (“I think you can drive yourself nuts trying to quantify this stuff”).

This seemed implicitly, if not explicitly, related to the fact that HNWP participants did not want their giving activities to feel like work.

The survey found that current time commitments – primarily family and work – were the major constraints that precluded greater involvement beyond that of a cheque-writer.

Many said they did not want to burden Not for Profits with additional feedback requirements, nor did they want to appear to be high-maintenance donors or imply a lack of trust or commitment by asking about outcomes.

HNWP participants were similarly ambivalent about the role of evaluation in their philanthropy. Many held rather narrow views of what “evaluation” means and had a negative opinion of its value. Some did not see the importance of any kind of formal evaluation process.

Few HNWP participants indicated that they thought upfront about how and when they would exit a philanthropic relationship. As a result, many appeared to give to the same organisations each year, even when they had other priorities or indicated there was a reason to sever ties with an organisation.

The report concludes that if HNWPs are unwilling to “break up” with organisations, which most say is too hard, those who care about impact need to invest upfront in due diligence and learn how to support organisations to track their progress.

The study can be downloaded at: http://www.impact.upenn.edu/UPenn_CHIP_HNWP_Study.pdf