Mega-Changes in Philanthropy

Change is certain, often unexpected, startling, threatening and for a few, opportunity affording. The events of the past year surrounding the COVID-19 pandemic were predicted by not even one New Year’s Day prognosticator, throwing nearly every annual plan into confusion or oblivion. One or two months later, the nimble in the industry supporting philanthropy adapted quickly and prospered, and those frozen by convention generally fell behind.

Within the industry supporting philanthropy, change has occurred on a massive basis since its organized practice began during the last century. Having witnessed this, it can be reported that there are risk tolerant innovators, early adopters, late adopters, and never adopters. Inherently cautious, and sometimes locked in the known world of convention, leaders and organizations in the philanthropy industry often choose what they know, even as the high performing organizations in their sectors benefit by taking new paths. Massive change has occurred in the philanthropy industry, creating winners, water treaders, and losers, depending on the amount of change embraced. It is also true that there are intended and unintended consequences when it comes to change, as new strategies are adopted or not adopted.

The areas of massive change in the industry of philanthropy over a generation include: 1) The professionalization and nearly exponential investment in staff, overturning the existing broad-based volunteer model; 2) A focus on much larger gifts, in many cases causing a decline in the broader-based giving of smaller gifts; 3) The utilization of analytics, more and deeper, in decision-making about potential donors, and the management of staff with performance metrics as a primary tool; and, 4) The increasing utilization of technology to receive gifts and to secure gifts. These developments, led by innovators and early adopters, were controversial at the outset, even today with detractors. However, these have become landscape markers, and players in all sectors have raised the levels of their games accordingly. So prolific are these changes that these may no longer be news, but there are winners, those treading water, and less enthusiastic adopters falling behind, based on the adoption of these and other change strategies. Importantly, what is observed and proposed herein generally apply to institutions and organizations of all sizes and sectors within the philanthropy industry.

Professionalization and Investment

Sitting alone in an alumni relations office 50 years ago, a single individual, if at all ambitious, set out to recruit scores of volunteers to expand a network, acting as very part-time fundraising agents, capable and not so capable. This was the norm. Remnants of this model still exist, a recognition that volunteering is noble and an important part of philanthropy. However, early adopters sought more efficiency, which led to more full-time professionalization and additional staff members whose job it was at first to back up the volunteers and then to do the donor contacts previously done or not done by volunteers.

While it is arguable that Stanford University, in response to a large Ford Foundation grant in the 1960s, was the first to make investments in staff, which produced transformational philanthropic results and help jettison Stanford to the top rungs of higher education. This new strategy was emulated by others, generally those with the resources to do so. Volunteer assistance at this point was not abandoned. As a hybrid for many years after staff expansion, Harvard maintained the volunteer spirit for quite some time, requiring that a volunteer be present during a philanthropy conversation. Columbia University went so far as to banish volunteers for several years until they realized their importance as “door openers,” a role that they needed volunteers to perform.

To this day, no organization has ever put too many professional feet on the street. Twenty years ago, Boston College changed the language of budgets, substituting “investment.” The enlightened CFO at that time realized that $0.25 in investment returned $1.00 of philanthropy, a very good ROI. The Boston College board enthusiastically adopted this investment as a better return than endowment performance. When organizational leaders begin speaking of investment rather than expense, they have crossed the threshold to greater productivity and to an increase in the belief of the philanthropic spirit.

The profession is now majority-female (70%) and increasingly diverse, the latter with still a ways to go. Graduate philanthropy professional schools are putting more career-oriented and diverse committed young people into life-long careers of service to the nonprofit sector. Innovators across the spectrum are successfully recruiting more experienced diverse candidates from like professions to bridge the age and experience gaps. Philanthropy is practiced by most communities, and it is incumbent to have representation to maximize support in all sectors. Several of the historically black colleges and universities are successful examples as pioneers, producing diverse professionals who promote the power of philanthropy with extraordinary success.

More and Bigger Big Gifts

A product and specialization of professionalization called “Principal Gifts,” the giving of gifts from one million to several billion dollars are now common. Numerous million-dollar gifts made the pages of The New York Times in the last century. As of this writing, 225 individuals have signed the Giving Pledge issued by Bill and Melinda Gates and Warren Buffet, which brings together billionaires planning to distribute one-half of their net worth to charities. It is likely that hundreds if not thousands more billionaires and millionaires are quietly following their leads. The importance and value of this movement is under-reported.

The full-time practice of Principal Gifts is a team sport, involving nearly all aspects of a philanthropy organization in the quest for large gifts. Whether they think so or not, all organizations have principal gift candidates, relative to the wealth profile of their constituencies. It takes imagination, determination, and focus to believe so, as well as time for engagement and conversations, though not always in years. Big gifts received from these efforts are often many times larger than imagined at the outset.

The efficiency of seeking large gifts reveals the higher degree of difficulty of securing many smaller gifts, previously the norm in organizational philanthropy. The experienced decline in giving rates over the past 30 years may be an unintended consequence, both due to professional focus on bigger gifts, and smaller donors saying, “Why do they need my $100? The soup kitchen needs it more.” Surveys reveal this to be true. Both strategies are important, though it is only the better-financed organizations that can provide both at full tilt. A conundrum occurs as leaders demand both without adequate investment. Put it in the category of unrealistic expectations.

Analytics and Metrics

With the appearance of primitive electronic donor identification in the last century, disbelievers cited inaccuracy and violation of the philanthropic spirit in the form of invasion of privacy. The professional response was, “These same techniques are used to sell soft drinks and automobiles. Why not utilize them for philanthropy?” Over time, analytics have improved in depth and accuracy, to a stated level of over 90%. Many of these tools have gone from innovation to commodity, and are now relatively inexpensive, which, if used judiciously, provide confidence about potential and a high return on investment. An innovator in the use of analytics refers to the use of these tools as “decision-assisted analytics.”

Management metrics occur in all walks of life, some more stringently applied than others. A room full of philanthropy professionals several years ago bristled at the chaffing of measurement. Several leaders there said that these demeaned the ethics and professionalism of their staff members, who chose to serve the nonprofit sector.

There is good management and there is bad management; there is helpful encouragement and there is negative discouragement. Linked to professionalization, this measurement practice is indeed meant to allow the professionals to take messages of mission and philanthropy to more and more potential donors.

During the pandemic, when personal visits were no longer possible, this was done by early adopters using technology effectively, which may prove to be a lasting practice. Enlightened managers and practitioners saw little difference between personal meetings and ZOOM meetings, and comparable giving results from previous times and conventional methods followed. We have come a long way from volunteers as primary agents, producing philanthropy at higher heretofore unimaginable levels.

The Giving and Getting of Gifts Via Technology

We live in the age of technology. The fastest growing medium by which gifts have been received in recent years, large and small, is online. From all indications, this will not only continue, but likely increase dramatically, changing frequently due to ever-changing technological applications (apps), and the evolving practices of the philanthropy industry. Mail, telephone, and even personal visits, once mainstays of potential donor contact and gift response, are being relegated to tertiary techniques, hastened by the pandemic.

Looking toward the future, much of this is correctly thought to be generational, and to some degree it is, but not as an excuse to delay the inevitable. Millennials were raised on new communication devices and mostly do not respond to old media. They react to messages and issue responses differently. They are the responders of the future, a generation as large as the Baby Boomers, who are not technologically savvy, preferring the old media. This is no longer a viable strategy for the vast majority of potential donors. Boomers talk to their children and grandchildren via FaceTime and enjoy the convenience of home delivery over driving to the now shuttered mall.

The early appearance of online giving focused on capturing information rather than on giving. Ten or more clicks were often required. Many potential donors lost patience, especially in this age of impulse buying. Organizations are now advised to design their sites to resemble Amazon, two or three clicks to make a gift. This had been viewed as expensive until very large gifts began to be made online.

Several recent developments include the use of ZOOM during COVID, teams of staff communicating with potential donors only online, resulting in big gifts, online events attracting potential donors who most often don’t appear in person, and communications platforms where personalized “insider” information is routinely shared. In the last application, potential donors, when surveyed, preferred to receive their information from organizations they care most about in this fashion.

The obsolescence of mail and phone, the expense and inconvenience of travel, and the ever-changing and growth of online applications propel this as yet another mega-change in the philanthropy industry. Indeed, there will be individuals with whom in-person conversations and interactions will be important and crucial into the future. But in the prophetic words of Marshall McLuhan written in 1964, “The medium is the message.” Organizations that avoid this understanding and investment do so at their own peril.

In Conclusion, For Now

There are obviously other mega-changes that have occurred since Stanford set up one of the first professional philanthropy organizations in the 1960s. The techniques of highly sophisticated planned and estate giving come to mind. People of all net worth levels can give a meaningful estate gift to those organizations most important to them during their lifetimes.

What else has changed? Wealth creation is larger and broader than ever imagined. In President Ronald Reagan’s first term, when these mega-changes began, the DOW sat at 600. Now at 32,000, the increases have fed the economy and philanthropy thousands-fold.

Perhaps it is human nature that often disallows us to recognize the differences of the present over the past, and it is rarer still when risk tolerant thinkers and planners attempt to look ahead to imagine a higher order of accomplishment. The landscape is littered with incorrect guesses, but many break-through, creative visions have taken place in philanthropy, causing innovation, change, and increased support.

What is in the offing? The power of the wealth transfer of Baby Boomers, just now beginning, could dwarf today’s philanthropy results over the next 20 years. Much of this will transfer to their Millennial descendants, with positive visions of how society can be improved. There should be a pivot in their direction. It is now time to look ahead and to prepare.

Expect and embrace change. Be an innovator. Be an early adopter.