Philanthropy – Solution or Problem?

Philanthropists need to see themselves as part of the for-impact ecosystem, as they work towards greater outcomes for their communities, writes Caitriona Fay from Perpetual Private in an extract from her presentation at the Nexus Australia Youth Summit.

We are living in an impact focused time. Philanthropists globally are increasingly sophisticated in their decision making processes and are playing deeper roles to support the “for-impact” organisations they are working with.

The term “for-impact” recognises philanthropists are no longer simply focusing their attention on Not for Profit organisations but are exploring how impact investment, social enterprise and mission aligned investment approaches might help them meet their impact goals.

But while the world of philanthropy has increased in size and has more tools at its disposal, the way philanthropy looks in terms of its structures and processes is largely a relic of time. Despite advances in technology, science, thinking and governance, many philanthropic foundations today look and operate much like their predecessors did 100 years ago.

Some will point to technological disruption as evidence of advancements in philanthropy. And while we have a new legion of social investors using crowdfunding, micro financing and social enterprise to help make a community impact, very few donors singularly focused in those areas would tag themselves as “philanthropists”.

Decision making in philanthropy

The typical philanthropist still tends to utilise a governance structure that is regulated and legislated for – a private ancillary fund or an account within a public fund for example. Decision making processes within those structures still tend to be via board or committee if not by individual. And those committees, boards or individuals are often not representative of the communities they are trying to support.

Is representation in philanthropic decision making needed, or useful?  Does it provide better outcomes or decisions on the types of organisations to support?  And what about the application processes we use to assess organisations, or the design of funding guidelines and reporting processes? Do those things influence the outcomes of the projects philanthropy supports and if they do, do we know whether the impact is positive or negative?

In the chase to be as effective as we possibly can, have we as a philanthropic sector thoroughly examined whether the approaches we take to making decisions about who receives the funds actually impacts on the ultimate outcomes we are seeking for our communities of passion?  

The balance of power

There is an inherent power imbalance that exists between the person making “the ask” for funds and the person making the decision on the distribution. Really great philanthropists find ways to minimise the negative effects of this paradigm and understand there are potential unwanted results in not recognising this exists.

Today, many education funders recognise the significant impact and difference quality teaching can make to the outcomes for a child. But in the recent past this wasn’t necessarily the case.

From 2011 to 2013 the Leading Learning in Education and Philanthropy (LLEAP) research project asked philanthropists, Not for Profits and schools which audiences in education should be prioritised for support. Respondent schools consistently listed teachers as one of their top priorities but philanthropists and Not for Profits working with the schools at the time felt teachers or teacher quality was not a high priority for support.  

Many will be aware philanthropists were unable to fund schools directly at that time and as such the voices of many school leaders were missing from funding conversations. The research should give all of us working in philanthropy pause to ask, what happens when we don’t hear or worse yet, listen to, end beneficiaries when we are prioritising our funding distributions? How can we ensure the voices of those who we want to see benefit from our funding are engaged in our decision making processes? One way is to invest in those for-impact organisations who actively engage with the communities that they work in, but there is more we can do to support end-user engagement.

It’s important that as we strive as a philanthropic sector to be more impactful, that we shine the light of critical analysis inward and ask ourselves and our beneficiaries if we are set up to provide advantage to those communities we are seeking to support. And if not, we must be willing to trial and test processes and new ways of working.

Engagement is vital

At Perpetual, we’ve moved to assessment of organisations rather than projects as a means to encourage organisations to apply for what they need in order to have impact, rather than asking for what they think our clients want to see. We work with highly intelligent, successful people who are putting funds into philanthropy to have impact and they are willing to be challenged by projects and funding requests that aren’t necessarily “sexy” but are ultimately about providing the right outcomes for the community.

Internationally, we’re watching very carefully the work coming out of groups like Stanford’s Global Projects Centre and their Unpack Impact project examining how the for-impact sector engages end-users in decision making processes and project design. The for-profit sector is already well advanced in ensuring their consumers are engaged and consulted with, and perhaps there’s something we can learn from them in philanthropy.

Importantly, as we strive for great outcomes for our communities, philanthropists need to see themselves as part of the for-impact ecosystem. They are potential influencers of positive and negative impact just like government, Not for Profit and other agents of the civil society. It’s important then, they continue to be part of the solution, and remove themselves from being part of the problem.

(The Nexus Australia Youth Summit brought together social entrepreneurs, philanthropists, impact investors and business leaders – aged under 40 – to collaborate with social change leaders around solutions to social issues.)

About the author: Caitriona Fay is National Manager of Philanthropy and Non Profit Services at Perpetual Private the wealth advice arm of Perpetual LTd. Fay joined Perpetual from The Ian Potter Foundation where she held the role of Senior Program Manage. She was previously co-chair of Philanthropy Australia’s Education Affinity Group.