Gena Rotstein's blog

I have been thinking recently on how the charitable sector mirrors the corporate sector.  This thought process was triggered by an article I read in the NY Times and then by a blog posting on Tactical Philanthropy. 

The NY Times Magazine article, Self-Made Philanthropists shares the story of one couple who approached philanthropy from a Venture Capital perspective.  This article highlights how Venture Capital investors are shaping the way people invest in philanthropic projects.   The Tactical Philanthropy blog was on how foundations are struggling with this new approach to philanthropy because “business matrixes” are being applied to measuring social outcomes.  So even though foundations in North America are larger than some of the GDP’s of whole countries, this new form of philanthropy is shaking the “foundations” of major philanthropic funding bodies. 

I find several things interesting about the new approach to philanthropy -the angst that it is causing traditional foundation models, the response of philanthropic investors seeking transparency and accountabilities from their investees, and the creativity that is being generated by philanthropists and within the charitable sector to report back on the social impact generated by the philanthropic investment. 
The Sandlers who are the focus of the NY Times piece, wanted to support effective investigative journalism so this is what they did, something that few others had done: 

They chose a path… Rather than give money to someone who approached them, they did the approaching. Rather than finance an organization that already existed, they started their own outfit. They found a star to run it. They seemed almost to relish the thought that they risked failure with this new, unproven model of journalism, though if truth be told, they don’t think they’ll fail. And they gave a lot of money — $30 million for the first three years, with the expectation of continuing that commitment, if not more, for years to come. It’s hard for philanthropists to make a big difference if they’re not willing to spend some serious money, the Sandlers say. 

On one level Herb and Marion Sandler are part of the new wave of philanthropists that Matthew Bishop of The Economist calls “Philanthrocapitalists”: wealthy entrepreneurs who are applying to philanthropy the same principles that made them successful businesspeople. They make big bets, demand results, take risks, want some control over how their money is spent and so on. The quintessential philanthrocapitalist, of course, is Gates, but many others are now following his lead, trying to forge a new kind of activist philanthropy. Even among the philanthrocapitalists, though, the Sandlers stand out. Herb, in particular, can sound nearly contemptuous about how other philanthropies go about their business. Mainly, it seems, they don’t do it the way he and Marion do. 

But what makes them so sure their way is better? 

A statistic I read a few years ago, stated that 4 out of every 10 start-ups make it to year three, and then only 2 of those make to year five.  Unfortunately I have not found a statistic that states how many start-up charities there are and of those how many make it beyond years three and five (if someone knows this information please share).  What I do know is that in Canada the average age of a charitable organization is 29 years old and that there are over 500 registered charities to every 100,000 Canadians (see the NSNVO study in the resources section of this website).  These stats are based on a 2003 survey.  If we were to do a very (admittedly) unscientific extrapolation, with 1,000,000 people in Calgary there are just over 2,000 registered charities. In 2002 there were approximately 800,000 people in Calgary.  So in just over 5 years the number of charities has grown by just over 25%.   

Is it better for society to have more selection of charitable services, or is it better for society to have fewer charities that are addressing more needs?  How does supply and demand actually play out in the charitable sector - is it donor driven (revenue stream), is it client driven (end user seeking services), is it government driven (cut backs to various sectors requiring charities to fill the gap), or is it collectively driven (social networking)?

• My guess is, in order to even start answering these questions we need to know a few more facts, such as: how many charities are started because someone wants to change something?
• or becuase the government cut services?
• or because someone created a cause on Facebook?
• or because someone got frustrated with what is currently available? 
• and how many of those are already duplicating services that are out there?   

As a philanthropic investor, do you have the time to research where your charitable dollars are going?  According to the Sandlers, they spent as much time researching one of their recipients as they did in preparing for an S&L acquisition!   

If the Sandlers are a new breed of philanthropists, not only are they changing the face of the charitable sector by creating organizations that address their needs, they are also investing resources in identifying organizations and projects that fulfill their philanthropic objectives.  But most especially, they have identified what those objectives are! 

Depending on your objectives, creating a new charity may help reach your goals, but ultimately will it be better for society?  It is generally understood that resources are finite.  As more and more charities are created to fill niche markets, it seems to me that we will see a wave of mergers and acquisitions simply because a new breed of philanthropic investors are changing the way charities do business.

So you've identified your values, you'ver picked how you will give and you've set your philanthropic goals.  The goals that articulate the kind of social impact you want to make.  How will you find the charities that best fit your values and goals?

First, decide if your community investment goals are locally, nationally or internationally based.  Depending on how you decide to disburse your funds will also play into the type and geographic location of the recipient organizations.  Make sure you have checked with your tax accountant and lawyer about any financial and legal implications your decision will have.

For charities that are Canadian based it is easier to make sure your philanthropic investment will be used appropriately.  Canada Revenue Agency recently released its policy guidelines on fundraising for charitable organizations.  This document defines what "charitable objectives" are and how organizations can spend your philanthropic investment.  A copy of this policy can be found under Materials in the Resources section of this website.

Second, ask questions!

Some basic questions you will want to ask a charity before investing are:

1. Has the agency adopted the Code of Ethical Fundraising (see Resources on this site for a copy) developed by Imagine Canada?
2. Can the agency provide you with two years audited financial statements?  You want two years (preferably three) because you need to compare growth in both revenue and expenses.
3. Who is on the Board of Directors?  What are their terms?  Does the Executive Director have a vote? Are any of the Board Members financially compensated?
4. Where does the core funding come from?  How long is that funding in place?
5. Does the agency have a strategic plan?  How often is it reviewed?  How are is the organization measuring itself against the plan?
6. What percentage of the operating budget goes to the highest paid salary?  How many paid staff are there?
7. How much does it cost to raise a dollar?  You might want to take the following measurements into consideration: 40% of Executive Director's salary, 100% of Fund Development staff salary, 50% of marketing/communications budget and 5-7% of general overhead expenses (rent, phone, etc.).  Under the Donor Bill of Rights written by the Association of Fundraising Professionals, as a philanthropic investor you have the right to know this information.  A copy of the Donor Bill of Rights can be found in the Resources section of this website.
8. Finally, and probably the question you are most interested in knowing the answer to, how will this agency invest your money?  How many people will be helped, animals saved, programs delivered, etc.

If you need more clarification - ASK.  For the most part, charities want to be accountable to their donors.  If you are not satisfied with the answers do not make that charitable investment.  

The past few days there have been some interesting pieces in North American papers and blog sites on philanthropy and specifically on developing philanthropic strategies.  Here a few that I think might of interest to you:

Breaking the Silence - New York Times

This article is about how wealthy Americans are chosing to manage their estates and asking themselves, "How much is enough to leave for my children?"

Civil Servants Want to Donate to Charity - Globe & Mail

This article looks at how a Canadian couple can leave a legacy while still maintaining their quality of life in retirement.  This is a case study of options for Canadian philanthropic investors.  What I feel is missing from this piece is once part about matching charitable investments with the values of the couple.  This article highlights one of many tools available to engage in strategic philanthropy.

One of the blogs that I read on a regular basis comes from the States.  Sean Stannard-Stockton is a regular columnis for the Financial Times on philanthropy.  A recent posting of his discusses the effectiveness of current measurement standards.  I bring this to your attention because of Dexterity Consulting's accountability process of charities that it recommends to clients.  I welcome your comments on this piece - The “Evaluation Revolution” & Problems with Measuring Nonprofits.

What does your past charitable giving say about you?

Does your past giving reflect what you are truly trying to accomplish with your philanthropic dollars?

Before you can create a philanthropic strategy for the future, you need to know where you are starting from; not just how much you want to invest in the charitable sector.

Since it is tax season, let's do an activity.  Did you know that only 25% of Canadians who make charitable investments claim their charitable receipts on their taxes?  Pull out your charitable receipts (even if you are not claiming them) and put them into the following piles:

- Annual investment out of obligation

- Annual investment because I believe in the cause

- One time donation (therefore not investing in the cause)

Once you have divided up the recieipts how many of the donations are inline with your own personal or family values?  Do your "One Time Donations" out number those that you are personally connected to?  What about the charitable investments that you made out of obligation - was that for business purposes (a client asked you), you "owed" a friend a favour, you made a commitment to your child's school?

Looking at the annual investments that you made because you believe in the cause and the organization is inline with your values - are there more or fewer receipts in this pile?  If there are fewer, why is that? 

Now that you know your giving pattern, do you know how your money was invested within the organization?  When you make an investment in the stock market, or purchase a house, or buy a car do you ask what you are getting for your money?  The same approach should be made with your charitable investments.  As a donor you have a right to ask how your money is being invested within the organization.  Make sure you exercise that right.

Imagine Canada, Charity Village and the Association of Fundraising Professionals all have versions of the Donor Bill of Rights and Ethical Fundraising.  As a philanthropic investor you should know if the agencies you are investing have adopted one of these documents.  The way to find out... ASK.

Under the resources section of this website you will find both the Donor Bill of Rights and the Code of Ethical Fundraising.

Welcome to Dexterity Consulting's first blog!  I am very excited about the prospect of exchanging ideas and information about Canada's philanthropic sector.  Whenever possible, resources and links will be provided so that you can continue to ask questions and seek answers.  Of course, I welcome your comments and queries.

The first topic I would like to post is on the methodology of giving.  Much of what has been written on this topic is from the perspective of the non-profit organization or as a psychological analysis of why people give.  What I am interested in sharing is the HOW behind effective philanthropy.

What are your reasons for making a charitable donation?

Is it your affinity towards the organization?

Perhaps it is the person who is asking you for the donation?

Did you volunteer your time with them at some point?

Did you seek their services and this is a way of "paying back"?

In thinking about why you give to the agencies that you give to, have you considered the ripple effect of that donation?  How many people were helped?  How many mouths were fed?  But beyond that, as a result of feeding those people how many were then able to pay attention in school and get a scholarship to university thereby breaking the cycle of poverty? 

Did you even know that you could measure this type of impact?

The first step in philanthropic giving is to think about the impact you would like to have.  The impact can be in your household (engaging your family in philanthropy), in your community or even globally.  That may seem daunting at first, so let's break it down.

Your Household:

Who lives in your home?

What are your family connections?  How have you defined family?

Think about everyone in your home (including your pet!) - Does your current giving reflect them?

Is your family in the same city as you?  Is where you reside, the same place as where you call home?  Does your current giving reflect this geographical distinction?

There are probably many other questions around family and how you give.  By using the above questions as a stepping stone, you will begin to see how your family impacts the way you conduct your philanthropy.

Your Community:

What does your community look like?

Is it religiously or ethnically based?

How do political parties play into your charitable giving?  Yes, even a donation to your local MLA is part of your philanthropic investment.  If you think about it, the ripple effect of that donation could have a major impact on others in your community. 

Have you considered how some of your donations might be in conflict with each other? 

In ranking your priorities, does community play a larger role in your philanthropic activities than your family philanthropy?  Is this intentional?

Has direct interaction with a community agency influenced your philanthropic priorities?  For example, your child received care from the children's hospital so you make an annual donation to the foundation.

These questions are designed to get you thinking about how you are connected to community.

Now let's look at how your philanthropic investments are situated globally.

Global Connections:

In what way do you actively participate with the global community?

What are your consumer choices?  Do you buy items manufactured overseas?  Do you make conscious choices to buy locally sourced items?

Do you travel?  How do you travel?

Do you engage in cultural exchanges (from eating out to attending special events)?

Are you conscious about the impact that your decisions are having on communities beyond your immediate circle?

How you engage the world in another value-set that should be considered as part of your philanthropic plan.

Philanthropic Plan???

Yes, philanthropic plan.  Just as you create a plan for your finances, you should plan for your charitable giving.  By doing so you will ensure that you are achieving the impact that you want to have.  More importantly, a philanthropic plan provides you with the tools so that you are able to hold your recipient agencies accountable for the investment.

So what are the pieces of the plan?  The next few entries will be about mapping your values as they pertain to your family, community and the globe.  This map will be the framework for the types of organizations you should be investing your philanthropic dollars in.