By Andy Carroll, Exponent Philanthropy

In our regular “Pulse” blog series, I explore trends influencing philanthropy by spotlighting articles, reports, and essays in the media. I cast a wide net, venturing beyond philanthropy and traditional topics to consider a variety of ideas, innovations, debates, and critiques. Read previous posts in the series  

The model that private foundations and donors have relied on for decades to make positive impact on the world is being questioned. Economic hardship, inequality, racial discrimination, lack of social mobility, and environmental degradation are only increasing in depth and scope. And there is growing recognition that human and environmental needs that go unmet today will incur greater costs in the future. 

The scope and urgency of the challenges is causing frustration, re-assessment, and soul-searching. More foundations and donors are asking themselves not only how they can alleviate problems, but how to solve them once and for all. Can funders reduce the need for philanthropy in the first place?

Many of the nation’s 1.5 million nonprofit organizations struggle constantly, lack internal capacity, and cannot sustain their critical work. Even if foundations and donors provided more funding for general operations and capacity building, can private philanthropy solve nonprofits’ financial struggles when national and state legislators continue to cut government funding—a much larger share of nonprofits’ income? Should funders be more concerned about the decline of public funding over the past decades, since the cuts undermine the effectiveness of their grantees? 

(Among current stress points are budget battles in Pennsylvania, Illinois, and other states, which delay funding to nonprofits that provide critical services. In Pennsylvania recently, more than 17,000 people received no or reduced services due to the budget impasse.)

And even larger questions are being asked. Is it realistic and responsible to place increasing burdens on an already fragile ecosystem of nonprofit organizations to tackle the depth and scope of the nation’s social and environmental problems? If foundations and wealthy donors truly want to end poverty and racism and create opportunity, should philanthropy be initiating a sober conversation about a greater role for government and public investment? Is it time to leave ideological issues aside? Ultimately, do we need to build a stronger and more effective democracy? How can philanthropy be a catalyst for changing the status quo?

Our Money Problems Go Deeper 

Placing our collective hopes on nonprofits to enhance their fundraising won’t solve the sector’s deep financial problems, writes Nell Edgington of Social Velocity, in a commentary about a new report by the Haas Fund called “Beyond Fundraising.” 

“While I don’t disagree with any of the indicators, questions, or roles the (Haas) report describes, I don’t think that any of them — or even their sum total — will solve the lack of financial sustainability at a particular nonprofit, let alone in the nonprofit world over all.

This is because only looking at fundraising — the pursuit of philanthropic dollars, which make up only 13 percent of all money flowing to nonprofits — is a fundamentally flawed approach to understanding money in the sector. My bias has always been to move from a broken fundraising approach to a more strategic and holistic financing approach….

My fear is that if we place the full weight of nonprofit financial dysfunction on the shoulders of the cultures of individual nonprofits, or if we look only at fundraising for solutions, we shirk our duty to dig deeper and remedy larger, structural dysfunctions.

The Haas Fund has started an important conversation, but I would love to see this effort grow to become a bigger conversation about how we solve the endemic financial challenges nonprofits face.” 

Demanding More Public Value From Philanthropy

In an era of reduced public investment in human services and infrastructure, a chorus of thought leaders is putting more pressure on philanthropy to address critical public needs. Tom Watson, President of CauseWired, urges citizens to demand greater accountability and public value from foundations and wealthy donors.

“Despite our ‘ice -bucket challenges,’ our crowdfunding sites, our social networks, and our Giving Tuesdays, democracy itself remains the greatest challenge to American philanthropy — and perhaps even the most important long-term threat to the structures that define the nonprofit sector in the United States…

Nonprofit organizations and foundations (and their benefactors) are granted an extraordinary exemption under our tax system — they do not have to support our communitarian public structure with their dollars — and in return, they are expected to produce extraordinary results.

… for every billionaire’s dollar donated under Warren Buffett’s Giving Pledge, there is a cost to the taxpayer; it means fewer dollars for public budgets that we the people (in theory) control through the ballot box, and more for the budgets of causes that are often controlled by those who fund them. 

… I wonder whether we as citizens extract enough for the tax deductions we bestow on philanthropy.” 

A Responsibility to Address Root Causes

Last year the Ford Foundation took a dramatic step to focus its giving, committing all its money and influence to end inequality. For Darren Walker, Ford’s president, philanthropy’s role is to do more than alleviate human suffering, but to investigate, uncover, and dismantle the structures and conditions that create hardship.

“The world may need a reimagined charter of philanthropy — a “Gospel of Wealth” for the 21st century — that serves not just American philanthropists, but the vast array of new donors emerging around the world.

This new gospel might begin where the previous one fell short: addressing the underlying causes that perpetuate human suffering. In other words, philanthropy can no longer grapple simply with what is happening in the world, but also with how and why.

Feeding the hungry is among our society’s most fundamental obligations, but we should also question why our neighbors are without nutritious food to eat. Housing the homeless is an imperative, but we should also question why our housing markets are so distorted. As a nation, we need more investment in education, but not without questioning educational disparities based on race, class and geography.” 

To Inspire the Next Generation, Ramp Up the Ambition of Philanthropy 

In a provocative letter published in Forbes, writer Jake Hayman advises parents of wealthy children that their kids will be put off by their philanthropy — unless parents invest themselves in giving with deeper passion, intensity, personal commitment, and larger aspirations. 

“This brings us to the third point, the most important one, which is about ambition. Your kids’ stories are different to yours. Your kids were born with everything and therefore trying to prove their worth and exceed expectations is really really tough. Philanthropy could be an incredible way for them to do exactly this. When they look in the mirror each, they question they ask is: “How can I earn this?” Writing checks to nice charities doesn’t cut it. The question you ask when you think about philanthropy is “how can I give back?” The question they ask is “given that I was born knowing the lottery numbers, how can I be worthy of that?” The answers to those two questions are so far from each other that there is almost no overlap in answers. The former question is easy — the gifts to the theater, the malaria nets, mentor some young professionals, sponsor some university access programs: Do good things and you win.

The answer to the latter question is much much more difficult to answer. What would a stranger earning the national average wage need to do in your eyes to be worthy of $1 billion, $100 million, $20 million? That’s the question your kids are asking.

In order to find a satisfactory answer you need the family foundation to have a strategy that could change the world. To do that takes sweat and expertise, it takes a different scale of giving and it takes a values-based rethink of every interaction with money that the family has. If you do all that, then your kids will come to meetings, in fact they may well dedicate their lives to it.”

Senior Program Director Andy Carroll writes resources, designs workshops, and facilitates seminars for funders. Andy also dedicates a significant portion of his time to managing our Leadership Initiative that defines, validates, nurtures, and celebrates the many ways philanthropists lead. Andy has 25 years of experience in nonprofit organizations, and he enjoys talking with funders about their questions, interests, passions, and plans for making a difference. Follow Andy on Twitter @andycarrollexpo.