Trends in giving

Today I once again visited Philanthropy UK, “the leading resource for free and impartial advice to aspiring philanthropists who want to give effectively.”

Here are their 10 trends in (British) philanthropy:

1. Private wealth is increasing

There has been a dramatic increase in the number of wealthy individuals as well as a shift in source of wealth in Britain: 15 years ago, 75% of the Sunday Times Rich List had inherited their wealth and 25% were self-made. Today that ratio is reversed. Meanwhile, the number of billionaires in the Rich List grew by 25% to 68 in 2007, while the country’s richest 1,000 increased their fortunes by 20% to almost £350 billion.

2. A new type of donor is emerging, altering the giving landscape

Changes in amount and source of wealth are giving rise to a new type of donor – one who is younger, typically (but not necessarily) self-made and socially conscious. The new philanthropists want to be engaged in their giving, using their business experience and expertise to support the charity more closely. They also are willing to invest a significant amount of capital – including funding core costs – and take significant risks to test innovative ideas. Importantly, because they are private individuals, they are able to take risks that government and many foundations, who are accountable to other stakeholders, simply cannot.

3. More people are giving during their lifetime

More people are choosing to give during their lifetime, rather than through a one-off legacy bequest. They want to experience the joy of giving and of the relationships they develop – with charity staff, beneficiaries and other donors. More people are talking publicly about their giving, providing role models to new givers.

4. Views on the amount of wealth parents should pass on to their children is changing

Especially among the self-made, more individuals are choosing to give much of their wealth ‘back to society’, through either legacies or lifetime giving. They will provide for their children, but charity is also important. A 2000 Lloyds TSB survey revealed that over half of people with liquid assets of £250,000 or more would prefer to either spend their money or give it to charity rather than to their children.

5. Givers increasingly want to see the impact of their donations

As they become more sophisticated and strategic in their giving, donors increasingly want to see the impact of their support. This goes beyond outputs, such as the number of people helped, to address the longer-term outcomes and impacts on beneficiaries, such as improved health or self-esteem. Donors are also demanding increased accountability and transparency from charities. They want to be confident that their money is being used both effectively and efficiently.

6. More donors are giving together

More donors are joining together to leverage their funding and to share learning. These include ‘giving circles’ such as The Funding Network, as well as funding vehicles such as ARK and the Private Equity Foundation. See The Philanthropy Directory for a full list.

7. Innovation in charity financing is growing

Philanthropists are embracing new ways of giving, such as venture philanthropy. They also are utilising new types of charity financing – including loans and equity – to support charities and social enterprises, filling a gap in the funding market. Meanwhile, charitable banks have been established, enabling social investors to help disadvantaged communities to achieve sustainable economic growth. See The Philanthropy Directory for a full list of new funding and financing vehicles.

8. There is a growing range of charitable services that help donors to give effectively

There is a growing infrastructure of charities and professional service firms to support and promote effective giving, and to help new and existing donors to take a more informed and strategic approach to giving. Meanwhile, private banks are expanding philanthropy services to their high net-worth clients. See The Philanthropy Directory for a full list of donor support services.

9. Information flows are improving

Publicly available information on charities generally has been wanting. However, this is changing with improved quantity and quality of information flows in the sector. These include online resources, such as the Charity Commission’s Register of Charities, GuideStar UK and Intelligent Giving, as well as research into different areas of charitable activity and tailored advisory services for donors from NPC and Geneva Global.

10. Individual giving is becoming increasingly important to third sector organisations

The recent growth in the number of newly wealthy individuals represents a new and potentially significant income source. Importantly, private individuals provide charities with unrestricted, sustainable and predictable income. They also play a critical role in maintaining the independence of the voluntary sector, especially as more charities are delivering public services on behalf of government.

Looking into the philanthropic “scene” in the UK and the US always strikes me as a bit of a travel in time. It’s not nice to say it but us Germans are a little behind. Much of it, and this thought came to me just now, is probably owed to the fact that giving is about money, and talking about money is largely considered a taboo. If you are wealthy and you give money to charity you get the “champagne sipping charity lady” label. If you’re involved in social change or belong to some environmental activist group you get the “poor student wearing a Che Guevara shirt” label. Either you have power or you have street credibility, can’t have them both… The times, they are actually changing. Black or white labels don’t work and won’t get us anywhere. I think us Germans think too much.

Back to betterplace. Of course the whole concept is an experiment. We are non-profit but with an underlying sustainable business model. That way, we can pass on 100 % of all individual donations to the intended project. In Germany, the public opinion is still “either you’re making profit OR you’re doing good”. The question is, though, can you do both? Is the only challenge to, patiently and through a constant dialog, change the public opinion? Or is it an impossible mission? Some days ago, Joana argued the pros and cons of companies being present on betterplace.org – and the dilemma of corporate social responsibility. Like all of us, she asks herself (and others): How can we all join forces to bring about social change in this world?

The Skoll Forum: Looking back – moving forward

The Skoll World Forum 2008 has drawn to a close – I feel energized, stimulated, encouraged, inspired – and utterly exhausted.

How many times in the last few days have I repeated the words:
/betterplace – an internet platform for philanthropy. /
/We link those who want to give to those in need of receiving.
We are German.
We are European.
We are expanding.
We seek partners. We seek projects. We seek users.
It was also a pleasure meeting you.
Here’s my business card.
We will be in touch./

The event was well organised. The delegates were enthusiastic. The speakers profound.
From Jimmy Carter, Jody Williams and Karen Tse, to Paul Farmer, Ashraf Ghani and Al Gore – these were but a few of the great speakers at the forum that guided the discussion on the responsibility of social entrepreneurs to overcome the challenges in today’s world.

And although the words of these powerful individuals have sunk deep into my mind, leaving me to process and digest their message for long after this Forum is passed – it is not these voices that have left the deepest impact – but rather a small “community” of individuals that share a similar vision and understanding of how the internet can be used as a lever to make real change.

In the very beginning of the Skoll Forum, at the Opening Plenary Karen Tse spoke of how individuals can be connected through shared ideas that often transcend traditional cultural borders.
It is this sense of “connectedness” that has left the greatest impact. Connected because, as delegates, we share the unique experience of the Skoll Forum. Connected because we share a common vision for overcoming the many social challenges of our times. And connected because betterplace, like other internet based organisations, provides a solution to linking people, ideas and support across the globe.

The Art of Raising Money

Recently the New York Times brought an article about new research concerning the economics of philanthropy. John List and Dean Karlan, both economics professors at the University of Chicago and Yale respectively, conduct real-world experiments in order to find out what works in philanthropy and what doesn’t.

One of the experiments concerned matching gifts, the idea that a donor agrees to match any gift, dollar for dollar or dollar for 2 dollars etc. The idea seems to work and is common practice in many fundraisers, but nobody really knows if matching gifts really are effective.

In order to find out, Karlan and List drew up different solicitation letters for a fundraising group. The letters were similar except for the part that mentioned (or didn’t mention) a match. In one letter they announced a dollar for dollar match, in another the match was increased to two to one, in a third one it was three to one. A control group received letters in which no match was offered.

What did they find out? The existence of a matching gift did matter very much, Thus 2.2 % of people who recieved the match offer made a donation, compared with only 1.8% of the control group, resulting in a 20% gap between the two responses. But surprisingly, the size of the match didn’t have any effect on giving. “Donors who recieved the offer of a one-to-one match gave just as often, and just as much, as those responding to the three-to-one offer.”

In another experiment, List set out to see whether donors cared about so-called seed money. In a letter to potential donors, they varied the amount of money that supposedly had already been raised for a cause. The results were striking: The more upfront money the charity claimed to have on hand, the more additional money it raised. When paired with the matching-gift research, the study suggests that seed money is a better investments for charities than generous matches.

Interesting stuff, no?

The new Philanthropists

It is often only after new role models have been established (who a critical number of people want to emulate) that new socio-economic trends gain momentum and are sustainable. With this insight in mind, Irish economic philosopher Charles Handy has assembled 23 portraits of good-doers in The New Philanthropists. 

What is new about these benefactors? Unlike many of their predecessors most of them are entrepreneurs who have made money while still relatively young. Now they set out to apply the same principles which have made them successful in the world of business to the social realm. They don’t (only) donate their money, but initiate and actively manage social projects.

Among them are celebrities such as Bono and Bill & Melinda Gates, but also many others who operate under the radar of media attention. It is the latter The New Philanthropists concentrates on, people such as Irish real estate developer Niall Mellon, who gets volunteers together to build new housing estates in South African Slums and Jeff Gambin, a well-known Australian chef, who started Just Enough Faith to hand out quality meals to the homeless in Sydney. Or Michael de Giorgio, who’s Greenhouse Organisation offers underprivileged kids in London valuable sports opportunities.  

The interviewees stand out due to their mix of social engagement, management abilities and economic expertise. Initially investing their own money, some nevertheless expect the initiatives to stand on their own feet after a certain time. Thus Greenhouse is planning to sell their expertise to companies, who could book them to organize staff sport days or team building workshops.

As mentioned, Handy wants readers of his book to identify with the protagonists, saying: “I want to do what these guys are doing”. But somehow this effect was lost on me.

Why? Maybe some of the portraits were too sleek for my liking. And there were only 2 women among the 23 (mostly British) philanthropists. This imbalance may reflect power relations in the real world. But then 51% of all assets in the US are held by women, and the trend towards female philanthropists is increasing. Thus for a book aiming at establishing new role models, this omission is incomprehensible.  Everybody knows the late Anita Roddick, founder of the Body Shop, who started among others Children on the Edge . Also a woman such as Mahnaz Malik, the young British-Pakistani lawyer, acting on behalf of underpriviledged children in Pakistan and offering (through the Advocate Foundation) free legal aid to under-aged prisoners, would have enriched this volume. 

I would welcome readers suggestions for their “favourite female philanthropist”!

A basis for informed choices

On my desk today was a video of a (very respectable, “senior”) round table discussion at the National Press Club in Washington about Charity Fraud and Reform, posted on the online site of Contribute . At the same time, a reader of Aishahs latest blogpost on online fundraising platforms, pointed us to an article critical of GiveMeaning, a Canadian-based donation platform (Thanks, Tom Newman). 

The charity reformers in the video are highly critical of excessive compensation of many top-end executives in the non-profit sector, some of which make 1 million US$ p.a. and more. They also point out that charities in the US are mainly accountable for very formal legal and financial aspects of their work, but not for the actual use of their money. One participant, Trent Stamp of Charity Navigator, highlights the fact that tax-deductable charity 501(c) status is handed out in the US like “candy to babies”, i.e. is far too easy to get. As an indication of their dubiousness a number of non-profits are operating in all US states, except the one they are residing in, thus evading official scrutiny. 

Every start-up has to spent money to get going. Self-exploitation is fine for a start, but you need a sound business model taking over pretty soon in order to sustain your efforts. betterplace has opted for a model, whereby the operating costs as well as the transaction costs are covered by fees companies pay in order to be able to present their CSR engagement on betterplace. Until we are able to fully rely on those fees to cover our operating costs, we pay minimum wages to some team members (others work on a completely pro-bono basis) and are fortunate to have enlisted the financial backing of individual supporters, who believe in the idea of betterplace and are also actively engaged in its day to day operation. 

We also believe that transparency is of utmost importance to create trust, the backbone of betterplace. Thus we fully disclose our business model and partnerships, 100% of donations are forwarded to the projects they are intended for. And we make sure to work as efficiently as possible. Here the internet helps us a lot: we rely on viral marketing, we cut communication and other operating costs.  

With Trent Stamp of charity navigator I cherish the vision that open and transparent platforms such as betterplace will lead to a real basis of comparison between different charities and grassroots-initiatives and that the fraud, apparently as pervasive in the non-profit scene as in the corporate world, will be more visible to the individual donor, who will be able to make much more informed choices of how to make a difference. I am convinced that we are not part of the problem, but of the solution.

betterplace.org and the others – online fundraising platforms

When observing yourself you can learn a lot about others, too (and vice versa). As far as we – and the author of the German Das Kulturmanagement Blog know – betterplace.org is the one and only. In Germany, that is. On a global level, however, there are many online fundraising platforms, and that’s a good thing. Especially North America is ahead of Europe when it comes to understanding and using the power of the social web. Thank you, dear Kulturmanagement Blog, for linking to Peter Deitz’ blog About Micro Philanthropy and its list of online fundraising platforms, some of which are, like betterplace.org, also web communities.

Are we comparable? I’d definitely encourage comparisons. Take Montreal based GiveMeaning, for instance. We are quite similar to each other – but then again so different. I like the idea behind their voting system: a project proposal has to receive 100 votes within 30 days in order to become a project and qualify for fundraising. Nonetheless (I won’t even pretend to be objective about this…) to me betterplace is more appealing. What do you think?

New report on accountability of charitable organisations

In a period where many people tend to be quite cynical towards the State and its organs – and regard governmental institutions as weak, over-bureaucratic or corrupt – non-governmental organisations seem to be an adequate alternative for they are a manifestation of the power of the civil society and the difference it can make.

The Global Accountability Report 2007 which has just been published by One World Trust makes this view look rather naive. One World Trust sets out to assess the many global intergovernmental orgaisations (e. g. UNDP, African Union, Concil of Europe), non-governmental organisations (e. g. Christian Aid, Save the Children, Greenpeace) and transnational companies (e. g. Coca Cola, Google, General Electric) based on wether they adhere to democratic principles. 30 of the major organisations are being assessed according to four principles: transparence, participation, evaluation, and complaint and response mechanisms.

The different types of organisations are characterised by contrasting strengths and weaknesses: international organisations like the African Union or UNDP show a relatively transparent structure and a systematic evaluation of their work, transnational organisations (like GE or Google) are proactive towards criticism, whereas international NGOs’ main feature is their constant attempt to involve their stakeholders in their work. On a more negative note, according to the report many charitable organisations (Doctors without Borders, among others) tend to shield from public criticism.

The Graffiti of the Philanthropy Class

The new home of the Shakespeare Theater Company in  Washington D.C. tells the tale of a new class of pilanthropists. As  The New York Times in an amusing article writes:

You enter through the Arlene and Robert Kogod Lobby. From there you may choose to ascend to the orchestra level by taking either the Morris and Gwendolyn Cafritz Foundation Grand Staircase West or the Philip L. Graham Fund Grand Staircase East. (One wonders: Do the friends of the Cafritz family feel disloyal if they enter on the east side, running late, and choose to head up Phil’s stairs?)

Should you arrive with time for a drink before the curtain, you can linger near the James and Esthy Adler Orchestra Terrace West, or the less personal-sounding American Airlines Orchestra Terrace East. And don’t forget to check your bulky outerwear at the Cassidy & Associates Coat Room, before entering the Landon and Carol Butler Theater Stage to watch the performance.

Two long lists of names of benefactors also cascade down the front of the terra-cotta-colored facade. More are etched into the glass balustrades on the upper level.

Indeed, from top to bottom the new theater is all but covered in this graffiti of the philanthropic class. Attending a performance can be like leafing through somebody else’s high school yearbook. Who are all these people? Should I know? Should I care? How much would I have to give to get my name on, say, a drinking fountain? And would a urinal be cheaper?