Donors Learn How to Be Effective by Seeing a Charity’s Real Challenges

What makes an effective donor? Recently, my consulting firm was asked to “reverse engineer” effective philanthropy by interviewing two dozen wealthy donors who were perceived to be highly effective by their peers. Our goal was to learn how they became that way.

We discovered that effective donors are made, not born. We also found a surprisingly common theme running through their stories.

First, all of the donors had gone through a major event in their businesses or their personal lives that gave them the resources to make big philanthropic gifts. Many had sold their businesses or inherited wealth and had time, as well as money, to devote to their philanthropy. All had some predisposition to giving, whether from family history, religious motivation, a desire to engage children in philanthropy, or merely a high degree of civic engagement.

Despite this predisposition, the effective donors began their philanthropic journeys like other benefactors: responding to those who asked them for money, unsure of how much they could afford to give, concerned about preserving their privacy, and without any direct apprehension of the difference their giving made. In fact, they were highly skeptical that philanthropy could have any significant impact.

Their giving was as much motivated by social ties, business relationships, and communal obligations as it was by any sense that their few dollars would change the world. If they became involved in a nonprofit organization as board members or volunteers, they saw their primary task as helping raise money, and did not see that their business skills had much relevance in the nonprofit world. They became prominent philanthropists in their communities, but had not yet distinguished themselves as highly effective.

Then something happened.

A cause or an issue came along of great personal significance and urgency. A magnificent historical landmark was about to be torn down. A child was diagnosed with a rare disease. A wilderness preserve from childhood was about to be sold to a developer. A charismatic acquaintance brought an environmental issue to life. A trip to a developing country exposed them to a level of poverty and disease they had never imagined.

Each of these donors stepped up in a new way, often giving a far larger sum than they had ever imagined. One donor, who had never given more than $30,000, made a million-dollar gift. Another invested more than half her net worth in a project.

The urgency of the cause and the magnitude of their commitment forced them to roll up their sleeves and take an active hand in solving the problems they had discovered.

Sometimes there was no nonprofit group dedicated to the issue and they had to create their own. Other times, they took a leadership role in redirecting or expanding an existing organization — not just raising money but shaping the organization’s strategy and work. They became deeply knowledgeable about the issue and actively recruited collaborators. Above all, they saw firsthand that their personal intervention of money and time was making a visible difference on the issue.

Seeing an urgent problem directly, making the commitment to do something about it — beyond writing a generous but painless check — and learning that their work and money could produce a genuine impact became a “firsthand stretch experience” that changed these donors’ entire attitudes toward philanthropy.

They stopped thinking about giving away money and started to think about how to solve social problems. These donors became passionately engaged, focusing on one or a few issues about which they could truly become well-informed, and staying with the same issue for years.

They used every skill, connection, and resource they possessed and made careful efforts to measure their impact — not just through other dollars raised but on the issue itself. They became highly effective donors and leaders in the nonprofit world. And in return, they found their work profoundly rewarding.

Among the many major donors today, very few have been fortunate enough to experience this transformation. Nonprofit groups have become so sophisticated that anyone with visible wealth is sure to be inundated with requests for money.

Affluent Americans can easily find themselves fully occupied just giving money away, year after year.

They may be told daily by appreciative development officers that they are “making a difference.” But for all the money they give and time they spend, they will not have understood the problem nor seen any change result from their efforts. And they will often feel a certain hollowness in the whole exercise that saps their commitment and diminishes their generosity.

A recent study by Foundationworks documented that the news media has produced 38,000 articles about philanthropy in the past 15 years yet only 1 percent of them discuss the results of a gift.

We have created a black hole in philanthropy, capable of absorbing endless amounts of money without demonstrating impact. Until they see results, however, donors don’t shift from giving away modest sums to reaching deep and engaging personally in solving social problems.

Educating donors, therefore, is not about books or conferences. It is about how nonprofit groups themselves perform, and the opportunities they provide for their major donors to experience the problems and see the solutions they have financed firsthand.

Mark Kramer is a co-founder and managing director of FSG Social Impact Advisors, a nonprofit consulting firm, a senior fellow at Harvard’s John F. Kennedy School of Government, and a co-founder of the Center for Effective Philanthropy. He can be reached at Mark.Kramer@FSG-impact.org.