Revealing Risk in Philanthropy – part 1

Inviting Your Feedback!

Hey there – The National Center for Family Philanthropy and I are asking for your thoughts on risk in philanthropy.

  • For donors and grantmakers: What type of risk most concerns your board and staff? When does philanthropy feel most risky to you?
  • For nonprofits: What types of risk seem to most concern your funders and donors?

By October 11, I encourage you to add your response to the comments below, or via the social hashtag #NCFP15Risk on Twitter, Facebook, or LinkedIn.


Philanthropy is often described as society’s risk capital. However, grantmaking and giving are highly influenced by the risk tolerances of the people involved. Those personal risk tolerances and personal assumptions about risk usually remain obscure during grantmaking conversations.

Our views on risk are partly hidden because all of us are lousy at understanding the mental shortcuts and hidden biases influencing our decisions. Many books and articles have been published in the past few years on this subject. Two recent publications related to philanthropy include Understanding Risk Tolerance in Grantmaking and How Shortcuts Cut Us Short.

Our views on risk are also hidden because grantmakers and philanthropic families rarely take the time to fully discuss risk in a strategy or in individual grants and investments. Those groups lack a common internal understanding of the individual members’ views on risk and how those views add up to a collective picture.

One challenge to creating a common understanding of risk is terminology. Philanthropy doesn’t have a shared framework for discussing and assessing risk. Some terms and ideas are borrowed from corporate culture, others from strategic planning, and others from specific issue areas such as the environment. Many overlap. A few definitions of types of risk I’ve found in grantmaker publications include:

  • Evidence – the ability to measure results, let alone attribute them very directly to an organization
  • Idea – the idea’s track record and the logic connecting the activities to the desired result
  • Implementation – some board members may perceive this as performance risk – “Will the organization do what it said?”
  • Industry – the likely stability and trajectory of a market segment
  • Investment – the likelihood that a funder will lose some or all of the intended social impact of their investment as a result of disruptive events
  • Project – the likelihood of disruptive events occurring which interfere with the successful conduct of a project or program (businesses would call this assessing externalities)
  • Operational – risk of not having the right operational approach to support sustainable impact
  • Strategic – risk of not having an accurate strategic perspective on the social problems
  • Reputation – the perceived potential damage to the reputation of a board or staff member, or to the organization, because of a decision

I’m facilitating a session on risk in family philanthropy at the 2015 National Forum on Family Philanthropy. John Bare, VP of The Arthur M. Blank Family Foundation, wrote a terrific article as a preview of the session. Laurie Michaels, founder of the Open Road Alliance, and June Wilson, Executive Director of the Quixote Foundation are participating in the session. Members of all three foundations have been terrific resources in shaping the session.

We’re hoping to use the session and your feedback to begin shaping a common framework, or at least a good set of revealing questions to ask internally. I’ll keep you posted on our progress after the session!


Trust the People, No Strings Attached

It would be easy to believe that most grantmaking is complex, even to believe it should be complex.

Read the philanthropy news sources. Funders are praised for their wall-sized strategy maps, multi-year evaluation projects, and drive for scientific evidence and stellar nonprofit performance. Attend nonprofit and fundraising conferences. Multi-step application processes, long application reviews, and confounding funder decisions dominate the stories in the halls.

Guess what. Strategy does not have to result in complexity.

This summer, a few stories described funders with a less complex strategy:  trusting individuals and small organizations with small grants, no (or very few) strings attached.

Informal awesomeness

The New York Times and Huffington Post highlighted two of the Awesome Foundation’s chapters. This network of giving circles provides $1,000 grants to “forward the interest of awesome in the universe.” The network and most chapters are unincorporated and unstaffed. Depending on the chapter, the online application is 3-6 simple questions and there’s no formal reporting process for grant winners. Grants go to a mix of individuals, unincorporated groups, social enterprises, nonprofits, and more. Local chapters often connect grantees to other resources and promote their work through social media and events.

I’ll admit to being partial to this network. I was a founding donor-trustee of Awesome Pittsburgh and now am a donor-trustee of Awesome Boulder. I admire the network’s ability to find and support, as a donor-trustee in one article put it, people with a “passionate sense of place and a desire to tackle problems, fix inequities, and highlight beauty.” Another donor-trustee said,

“We’re rogues giving to rogues. It’s misfit money for the weird and wonderful.”

Admittedly, not all funded ideas come to fruition and many are small, quirky projects. But, a few projects each year grow to attract other funders and a few grantees draw national and even international attention to a community. One recent example was Pittsburgh’s Smallest Jazz Club, a bus stop augmented with pictures of the local jazz scene, jazz music playing on speakers, and pop-up performances by local jazz musicians. News outlets, bloggers, and social media stories from as far away as Brazil and Germany praised about the project.

Investing in social change leaders

Ariel Nessel, a Dallas-based real estate developer, put his own mark on “trust the people” philanthropy. He founded the Pollination Project to award a $1,000 startup grant each day to “individual change makers and projects that promote compassion around the world.”

Like the Awesome Foundation chapters, the Pollination Project finds ideas and people below the radar of other funders. It has a bit more formal online application and reporting process than the Awesome Foundation. To manage its international reach, it uses a network of former grantees and volunteers to seek out social change-makers and make grant decisions. Nessel recently told the Chronicle of Philanthropy that executive director Alissa Hauser advocated for:

“..democratizing giving and pushing power to the edges, to people who normally don’t have access to capital, and having them help decide who gets money.”

The Pollination Project is a public charity attracts donations ranging from a few dollars to a $50,000 grant from a family foundation. In addition, Nessel has a regular column in the Huffington Post to showcase the grantees.

The International Development Exchange (IDEX) adds longer-term capacity building to “trust the people, no strings attached” grantmaking. One of the younger trustees of the Roy A. Hunt Foundation, my former employer, introduced me to IDEX and its savvy executive director, Rajasvini Bhansali. IDEX supports projects and small organizations founded by grassroots leaders in Africa, South Asia, and Latin America. Bhansali said in a recent article, IDEX, and the Tyranny of the Experts,

“Most of our partners don’t have the machinery to write fancy grant proposals. It’s our role to go and find them.”

IDEX funds grantees for three to ten years, provides them with training programs, and helps them crate alliances to solve local and national problems. It often sticks with them when things go wrong or when they’re out of favor with international aid organizations.

Bhansali and her team are purposely, to coin a term, philanthropically bilingual. They understand and respect the messy, personal work of IDEX’s grantees. And they can talk in-depth about measurable results and theories of change with funders and donors.

Challenging our assumptions

These organizations’ grantmaking styles aren’t for everyone. The Awesome Foundation’s approach often draws quizzical or bemused looks from the staff of large foundations and even community foundations. Those staff members often underestimate the power of supporting passionate, committed citizens. Or, they believe that added layers of complexity will shield them from risk and failure.

Admittedly, not all grantmaking can be this simple or close to the people. There can be legitimate reasons for more complex applications and review processes. However, those complexities can shut out organizations led by volunteers or by a small number of staff. Those organizations make up most of the nonprofit sector. The complexities can also shut out organizations led by people who are racial and ethnic minorities, disabled, LGBTQ, and/or elderly. Those neighbors are growing percentages of the U.S. population.

Nonprofit blogger and humorist Vu Lee wrote about this problem in his compelling post, Funders, your grant application process may be perpetuating inequity. He lists the consequences of grantmaking practices that seem, on the surface, routine. He ends with examples of grantmakers who use challenging processes to “help” nonprofits gain experience with grantwriting, budgeting, and program evaluation. As if the nonprofits needed that help more than cash…

Mr. Lee and the funders I mentioned force us to confront the hidden biases in our philanthropy. We should be inspired to ask ourselves tough questions such as:

  • Do I actually trust people to use the resources I steward wisely? Only certain types of people?
  • Are my professional experience and reputation getting in the way of a heart and mind truly open to others’ ideas?
  • Is a nonprofit always the best means of accomplishing social good?
  • Is bigger really better?

Each donor and grantmaker will have his or her own answers to such questions. The discernment process isn’t always easy. It is uncomfortable to uncover and voice our hidden biases, to change our routines. But, I’ve found the process is definitely worth the time and discomfort and is worth repeating over time. Here’s hoping other donors and grantmakers feel the same way.

picture of new books on shelf

Philanthropy Bookshelf Additions

When I returned to consulting, I thought I’d have more time to blog. As the first few months have unfolded, that didn’t happen. Instead, two big projects consumed my reading, research, and creative energies. You might find some of the books useful additions to your own reading list and digital or physical bookshelf.

I was asked to write a chapter for a book on the history of philanthropy in Pittsburgh, to be published by the University of Pittsburgh Press in 2016. The Philanthropy Forum at GSPIA is leading the project. To prepare for the chapter, I grounded myself in some of the seminal history books on philanthropy. None of the books were easy summer beach reading, but any of them would be useful to people new to, or wanting to join, the world of foundations and grantmakers.

  • A Versatile American Institution (David C. Hammack and Helmut K. Anheier, 2013) focused on the changing practices and norms of foundations, starting in the 1800s and diving more deeply into foundations’ growth in the 20th
  • Inventing the Nonprofit Sector (Peter Dobkin Hall, 1992) looked at the growth of the nonprofit and philanthropic sectors and their roles in shaping American society.
  • Philanthropy in America – Olivier Zunz (2012) focused on the ever-changing relationships between the philanthropic and government sectors and how those relationships shaped, and were shaped by, different historic periods.

I’m also working toward the Chartered Advisor in Philanthropy® certification through three online graduate courses at the American College. The courses mix online lectures with books and downloaded reading materials (sooooo many downloads….). The materials are useful to fundraising and planned giving staff and to professional advisors working with philanthropic individuals and families. Four highlights include:

  • Give Smart (Thomas Tierney and Joel Fleishman), one of the key books in the movement to encourage donors and foundations to be strategic, focused, and proactive in their giving. Even if a donor doesn’t want to burdened with the work or label of “strategic philanthropy,” the book is full of good questions for self-reflection.
  • Planned Giving in a Nutshell (Craig Wruck, 4th, 2013) is a useful resource to nonprofit staff who aren’t in gift planning roles but need to know the basics and have quick access to sample forms and policies.
  • The Right Side of the Table (Scott Fithian and Todd Fithian, 2007) is helps financial planners and other advisors move from a sales process to long-term discernment and trusted advisor roles. It is also a useful window into the minds of those advisors for nonprofit fundraising and gift planning staff.
  • Wealth in Families (Charles Collier, 3rd, 2012) is a must-have for exploring the meaning of wealth, how families can use it, and how they can pass on healthy values around money to children and other heirs. I had read it a few years ago, and it was definitely worth reading again.

I did read one book unrelated to those assignments, and I highly recommend it to leaders at businesses, foundations, and nonprofits:

  • Matterness (Allison Fine, 2014) provides a valuable framework for how organizations can have more authentic, two-way conversations with the public and their customers/constituents. It looks at issues of organizational culture, building healthy online and in-person communities, social media, effectively connecting with crowds, and more. It’s a great follow-up to the book Fine wrote with Beth Kanter, The Networked Nonprofit, in 2010.

Next on my reading list are:

  • The Social Profit Handbook (David Grant, 2015), a new resource on impact assessment for nonprofits, social enterprises, and foundations. David also has his own recommendations for a foot-long bookshelf.
  • Understanding the Social Economy of the United States (Mook, Whitman, Quarter and Armstrong, 2015), a dive into the landscape of the business of social good beyond charitable nonprofits, including social economy businesses, local development enterprises, government-driven nonprofits, and mutual associations.
  • New Frontiers of Philanthropy (Lester Salamon, editor, 2014), a thick guide to the new tools and actors reshaping philanthropy and social investing. Its 24 chapters cover the gamut from giving circles to equity investments, and from crowdfunding and prize philanthropy to quasi-public investment funds. In full, transparency, I probably won’t read every chapter word-for-word…

What great books about philanthropy are you reading this year?