Thursday, August 21, 2014

Update on Philanthropy

One of the topics we examined in TrendsWatch 2013 was the “Changing Face of Giving.” Though the economy, and giving overall, continues to rebound, there’s wide agreement that we aren’t going to return to the world that existed pre-2008. We are seeing a fundamental shift in who has money to give, the criteria used to select who to give to, and what causes actually get support. Here are a few recent reads exploring the shape of the new philanthropic economy as it takes form.
 

Callahan takes a look at out one trend transforming philanthropy: “the way that relatively young people are making great knowledge economy wealth in a very short time and then cashing out, leaving them with both the resources and time to be large-scale philanthropists -- living mega donors -- for many years to come.”

Starting in the 1990s the tech boom spawned huge fortunes, but the people catapulted into the 1% by technological-generated wealth have backgrounds and mindsets strikingly different from the Carnegies, Fords and MacArthurs. For one thing, people like Pierre Omidyar and Jeff Skoll (eBay) and Bill Gates (Microsoft) made their fortunes at a younger age, so they will exert hands-on control of their foundations for a far longer period than their 20th century predecessors. Citing Jan Koum and Brian Acton, who sold their startup, WhatsApp, to Facebook for $19 billion this year, the article suggests “let's just ponder the weird reality that either of these guys, who nobody had ever heard of before last week, could now create foundations bigger than Rockefeller, Carnegie, or MacArthur if that's what they chose to do -- and instantly be major philanthropy power players.”

Callahan suggests that some of the practical effects of the entry of relatively young tech billionaires into philanthropy are:

Increased expectations for outcomes-based measurement of the effects of their giving
More focus on spending down a foundations wealth in return for quick, tangible results
A desire to influence policy through political giving

Also on my short list of good reads  on this topic, an article in The New Yorker by Russ Juskalian askingWas Carnegie Right About Philanthropy?” Juskalian presents a brief, cogent overview of the effects of soaring wealthy inequality on giving. As he points out, rich donors are less like to support causes that directly address poverty, and more likely to give to established foundations as well as colleges, universities and hospitals. While this charity may trickle down, indirectly, to the poor, Peter Buffett, a young philanthropist bucking the prevailing tide, is quoted as saying “as long as most folks are patting themselves on the back for charitable acts, we’ve got a perpetual poverty machine.” Many of the top 50 US philanthropists, Juskalian observes, use their wealth in ways that “keep current power structures in place—for instance, by supporting political candidates who prefer lower taxes for the rich and smaller government spending on social programs—which ultimately hurt the poor.”

I also recommend the Giving USA report that came out this spring, reporting the figures for 2013. The good news is that giving to Cultural, Arts and Humanities (which included museums), increased over 7% last year. That is twice the average increase for giving overall. So not only are museums rebounding, rebounding, we are rebounding faster than others in the nonprofit sector. Indeed, The Alliance’s annual “Conditions of Museums and the Economy” report confirms the continued improvement in the field's vital signs (attendance, financial stress) since 2008, and most museums reported an increase in philanthropic funding. However, more than one director noted “fundraising continues to be very difficult." As the 2013 report says “even those [museums] that experienced notable increases in donations last year argued that philanthropic support has become less predictable.” Museums need to understand and adapt to the new shape of giving, and/or place less reliance on philanthropy and more on other income streams. 

Museums can also take an active role in shaping the expectations of donors. Last year GuideStar, Charity Navigator and BBB Wise Giving Alliance published an open letter to the "donors of America" combating what they dubbed "the Overhead Myth"--the undue importance granted to the ratio of administration and fundraising expenses to program delivery. As the Myth campaign pointed out, too much focus on this one ratio devalues other critical measures of performance. And in fact many nonprofits spend too little on overhead--underpaying staff and failing to invest in critical infrastructure. Obsessing on their overhead ratio is as counterproductive as asking someone with anorexia about their weight. Now the Overhead Myth coalition is preparing to launch a second letter, this time directed at nonprofit organizations, calling on them to be "more proactive about communicating the story of their programmatic work, their governance structures, and the real costs of achieving results...[and] to recruit nonprofits to help us retrain donors to pay attention to what matters: results." When this letter is released, I hope the director of your museum will share it with your board of trustees, and lending your support to the campaign.

2 comments:

James G. Leventhal said...

Glad to see postings on fundraising! There are fundamentals to keep in-mind: relevance and relationships that can help museums navigate these waters. philanthropy will remain such an essential element of the livelihood of museums! if it dwindles as the article suggests at the end, a focus on alternate income streams will not serve the industry well :(

Paula Robinson said...

I'm so glad to see you are raising the issue of raising money! There are too many people content to sit by idly and not do there bit. I for one would like to see a world where we all come together to help one another. Not where we sit idly by as people struggle to make ends meet.

Paula Robinson @ Canada Gives