The Multiplier Effect: Invest in Fundraising

Philanthropy411, is currently covering the Council on Foundations conference with the help of a blog team.  This is a guest post by Roger Doughty, Executive Director of the Horizons Foundation

by Roger Doughty

What would happen if foundations invested – and invested heavily – in the fundraising capability of nonprofits? According to Dan Pallotta, one of the presenters at today’s “TED”-style opening plenary, we’d see far greater impact by investing in fundraising than we get from directly supporting programs. Why? Because stronger fundraising would generate more than enough new dollars from individual donors to off-set whatever foundation dollars weren’t spent directly on programs.

Quick fast-forward: later in the afternoon, at a panel session, I heard a very intelligent and thoughtful foundation program officer say – in something of a counter-point to Pallotta’s earlier remarks – that philanthropy’s more important job was to figure out how to have the greatest impact with those resources now available.

Now no one’s likely to argue that foundations shouldn’t try to figure that out. But if we’re limited to the funds now available for philanthropic purposes, we’re in trouble. It’s a bit like a water-starved village focusing solely on better rationing programs – and neglecting to work on bringing more actual water to the village. Don’t get me wrong: foundations’ billions can and do work some good in the world. Sometimes a great deal of good. And it’s inarguably important that those funds be deployed as thoughtfully and strategically as possible.

Yet the problems facing society in this country alone – much less the world – are staggering. Most people likely to read philanthropy blog posts know this, and I won’t belabor the point. But it bears underscoring that the existing resources of philanthropy – great as they may be – fall far short of what those problems demand.  Far. Short. Furthermore, in an age of massive government retreat, the good work foundations can do probably doesn’t even balance out the damage flowing from public-funding calamities coast to coast.

Which takes me back to Pallotta’s argument. Individual giving far exceeds foundation giving as it is. Giving USA shows them clocking in at $251 billion and $38 billion respectively (including $24 billion in bequests). What if individual giving could be pushed up – over time – by 10%? That would be an additional … $25 billion, about two thirds of the total given by foundations. What if, over 10 or 20 years, that number could rise 20%? We’re starting to look at serious money.

There’s another aspect to investing in increasing philanthropic giving: it puts more power in the hands of the nonprofits themselves. If they can raise more unrestricted cash, they’ll have greater ability to fund the strategies they see as most important to advancing their missions. If we take it one step further, from individual nonprofits to communities, then investing in, say, the Latino/a community’s capacity to raise funds within that community can not only generate more dollars but enable it to define and act on its own priorities.

Yes, I know this is oversimplified, perhaps wildly And the idea of foundations investing in communities to raise their own capital has fallen – regrettably – out of vogue at the moment. And it’s true that this kind of grantmaking isn’t very sexy.

But the basic point is hard to contest: the big bucks lie with individual donors more than with foundations.  And if we’re able to increase giving – especially for work on critical social issues – the effect could be dramatic. The potential is especially great in social-justice areas where fundraising hasn’t reached anywhere near the sophistication we see in large institutional nonprofits like universities, large hospitals, and major cultural institutions.

Just throwing money at an organization’s development program isn’t, of course, an answer. Just as with anything else in our field, strategy, execution, and evaluation would still be essential. And rarely is the answer to a nonprofit’s challenges simply a matter of, say, hiring a development director. But if an investment – a thoughtful investment – in fundraising capacity can yield multiples for programs, then it sure looks like a wise one.

None of this means, of course, that foundations aren’t important, or that foundations should stop funding in programmatic priorities they establish. They won’t and they shouldn’t. And the value of a smart, engaged foundation’s capacity to gather information around an issue, bring parties to a table, develop strategy, and make thoughtful grants is considerable.

But it would mean taking seriously the idea that our sector – that society – lacks the capital needed and part of philanthropy’s job can be to help generate more of it. Much more of it. Again, not very sexy. But awfully compelling.

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Posted by Kris Putnam-Walkerly © Kris Putnam-Walkerly and Philanthropy411, 2010.

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6 thoughts on “The Multiplier Effect: Invest in Fundraising”

  1. Roger – very thoughtful post. I do see this happening on the nonprofit side, sort of: when a new development position is created, it is almost always someone focusing on the individuals that give, rather than foundations. There is a desire to focus on the growing numbers of donors on the individual side, it is just nonprofit-driven rather than funder-driven. However, nonprofits have their own stake in the game, and a foundation might be a more removed partner when it comes to increasing individual-giving side. Furthermore, a foundation may have leverage to approach individuals that a nonprofit does not.

  2. Roger,

    I appreciate the way in which you wove together the reality of philanthropic giving (individual vs organizational) and the promise of a more focused and deliberate attempt, with foundations playing a key role, in inspiring a collective commitment to leverage the financial resources of communities to address those issues which most affect them. It would require a shift, it seems, in what many foundations and nonprofits consider as success – to move away from attribution to contribution, to be part of the solution as opposed to being the savior.

  3. Roger –

    What if this idea were taken at a larger scale? In business large corporations support hundreds or thousands of local stores with central office operations. If we can aggregate information on npos doing like-kinded work in the same geography, intermediary and third party organizations could be taking on “central office roles” and leading advertising, pr and fund raising efforts intended to build a distribution of needed resources to all of the programs doing similar work, but in different areas.

    I’ve been trying to make this happen in Chicago in the way I support volunteer-based tutor/mentor programs. The map-directory at http://www.tutormentorprogramlocator.net can be used by anyone in the region to connect donors and volunteers with non profits. It can also be used by the non profits themselves to build local collaborations with peers and with local assets.

    We’ve not had much luck finding donors to invest in this, but the idea can be applied in any city, and in any social benefit sector that needs a geographic distribution of programs to reach clients in all places of the city where the same problem/need exists.

  4. Hi Roger – Great to see you writing here! Just one thing to add to what you’ve said as well as the commenters. It is very important (quoting you) not to “throw money” at an organization’s development program. Instead, I think this Stanford Social Innovation Review article http://www.ssireview.org/opinion/entry/the_limited_returns_on_fundraising_support_for_nonprofits/ provides a compelling argument on why a more comprehensive, holistic approach works best.

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