Today’s philanthropists have more choices than ever before. There are myriad social and environmental issues that cry for attention, millions of worthy nonprofits doing great work, multiple innovative giving vehicles, and many ways to structure philanthropy. With all these options, it is no wonder that philanthropists come to us overwhelmed when they should be feeling excited and optimistic.
Case in point. About a year ago, an individual philanthropist wanted to hire us to help structure her giving. She was relatively new to philanthropy and wanted to make a difference in education in her hometown. She was struggling with whether she should start a foundation or open a Donor Advised Fund. Her inability to decide was sapping all the joy she wanted to experience by giving back to her community. We encouraged her to take a step back and think first about her vision and her goals for education impact. Our answer was rooted in this old traveler’s analogy: if you need direction, start with a compass and not a map.
This case is not unique. Most of the philanthropic individuals and families we work with tend to focus first on how to structure their giving instead of the why, what, and how behind their giving. In other words, they put function before form.
So, the first step we take with our clients — whether they are new to philanthropy or have been giving for years – is to have them reflect on their values and motivations, set their vision and goals, consider their role in creating change, and create a philanthropic compass that will guide them toward the impact they aspire to achieve.
WHAT IS A PHILANTHROPIC COMPASS AND WHY IS IT IMPORTANT?
At Boldly Go, we define a philanthropic compass as the tool that guides a philanthropist’s strategy, approach to giving, and grantmaking. A finely tuned compass is grounded in values and sets vision and direction. It provides clarity on how to structure effective grants and impact investments, create cohesive grantmaking portfolios, build relationships with grantees, and launch philanthropic initiatives. And it identifies what philanthropic approaches, roles, and structures will lead to successful outcomes. Without this directional tool, funders risk getting distracted and allocating their time, energy, and resources away from what they should focus on to reach their goals and experience joy in their giving.
THE CARDINAL DIRECTIONS OF A PHILANTHROPIC COMPASS
We create a philanthropic compass by focusing on the following four cardinal directions.
- Vision, Mission, and Values
While vision, mission, and values can often feel like philanthropic “filler”, in our experience they serve as the “North Star” to our clients’ philanthropic identity, strategy, execution, and impact. So, we work with our clients to help them develop clear and compelling statements that reflect who they are, what they do, and where they are heading:
|Vision||An inspiring and idealistic state of the world you would like to see.|
|Mission||A clear and compelling description of who or what your philanthropy is intended to benefit and how you pursue your philanthropic work.|
|Values||The core principles and beliefs that guide your behaviors and decisions.|
No matter how well an individual or family thinks they know themselves, the exercise of setting vision, mission, and values is always revealing. It prompts philanthropists to think deeply about their legacy, their beliefs about being charitable (both positive and negative), their personal views about their role in society, and how they want to engage their children and other family members in their giving. For a Bay Area couple we recently worked with, the discussion elevated the importance of faith in their philanthropy and challenged them to balance their preference to remain anonymous with their desire to form stronger relationships with and learn from their grantees.
- Intended Impact
Not to be confused with Mission or Vision, Intended Impact is making explicit the issues (e.g., education, health, climate, racial justice), populations (e.g., women and girls, immigrants, people of color, youth), and/or places (e.g., neighborhoods, cities, regions, countries) that funders want to target through their philanthropy. Taken individually or in combination, these three powerful lenses enable funders to prioritize the specific change they want to create in the world. For an individual philanthropist we work with in Dallas, setting intended impact was relatively straightforward. He cares about extreme poverty in the developing world, so we helped him shape a learning agenda and a grants portfolio focused on economic opportunity in Africa. For another client who has been giving responsively for years, this turned out to be more challenging. While her geography of interest was clear, an analysis of her past grants made her realize that her giving was not aligned with her deep-rooted belief in the importance of education. We conducted a landscape analysis of key education issues and data in her community (including what other funders were and were not doing) and the results helped her set her intended impact with higher specificity and reshape her philanthropic portfolio.
- Changemaking Approach
Among the four points of the compass, this is the one where we get the most questions. For some funders, philanthropy can be as simple as giving gifts to worthy organizations and causes. But once Vision, Mission, and Intended Impact are laid out with authenticity and grounded in data, a whole range of additional approaches to solving a particular problem often emerges. For example, beyond making grants, philanthropists may choose to make impact investments, raise awareness or additional funds from peers, commission research, engage in advocacy, convene partners, or launch signature initiatives. For a client organization in New Jersey, we helped them form and set governance parameters for a funder collaborative to bring together a larger funding pool and take coordinated action to address a key statewide health issue.
Defining a philanthropists’ changemaking approach also includes helping them determine how they want to spend their time and the role they want to play. Too often, our clients are not doing what gives them joy, so we work with them to understand what they want to be doing and how to shift in that direction. Some of our clients want to stay completely behind the scenes. Others want to be much more engaged in their giving – conducting site visits, helping grantees raise funds or make connections, attending conferences, joining boards, or undertaking other activities to advance their causes and the success of their grantees. There is no right or wrong answer here, it comes down to personal preferences, time, and opportunity.
- Structure and Governance
With the first three components of the compass locked in, only then do we turn our attention to identifying the most effective and efficient vehicles for our clients to use to implement their philanthropy. The most common options include private foundations, donor advised funds, and personal checkbooks. However, for clients with highly specific goals and/or complex giving strategies, it may make sense to consider an LLC, pooled donor funds, charitable remainder trusts, public charities, etc. The truth is that many philanthropists will wind up with a combination of these structures tailored to their unique approach to giving, and that those structures will change over time. It is also very important to be aware of not just the advantages but also the limitation of each structure. For example, a private foundation must pay out a minimum of 5% of their assets each year and the gifts are public (as a tax exempt organization, foundations must file 990 forms). As another example, gifts to donor advised funds are irrevocable because the tax benefit is immediately incurred.
As the last, but critically important steps in developing the compass, we work with clients to determine the level of staff support that is needed for execution; whether that staff role will be played by family members, employees, and/or an outsourced provider like Boldly Go; and how multi-generational family members and/or non-family Trustees work together harmoniously to ensure effective governance.
A PHILANTHROPIC COMPASS FOR OUTSIZED IMPACT
Putting the time in to develop a philanthropic compass is one of the best investments philanthropists can make in their quest for outsized impact. Philanthropy is a personal practice and extraordinary philanthropists take the time to understand their motivations, goals, and preferences. With a philanthropic compass in place, decisions about what issues to tackle, which nonprofits to support, how to build high-quality grant portfolios, and yes, even how to structure your giving become much easier to make. Being clear about one’s direction also ensures that the pursuit of philanthropy minimizes wasted time and dollars and maximizes impact and joy.
This is the first in a series of blogs where we share our learnings – big and small, but always actionable – as we work with individuals and families, helping them become extraordinary philanthropists
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