When it comes to philanthropy, how you give is as important as what you give.
The approach you take will depend on a variety of factors, including how hands-on you would like to be, how much time you have and how focused you wish to be in finding causes to support.
Here, we turn to some of the most important operational aspects of giving well: finding and assessing organisations to support, funding in a way that empowers, and collaborating with others.
Finding organisations to support
Most donors choose to donate (or grant) to existing organisations that are operating in their field of interest. Their most significant challenge is often how to select high-quality recipients.
It is likely that you will find organisations through an open-application process, independent research (either conducted by yourself or with the help of staff or specialist consultants) or recommendations from other donors. Alternatively, it may be a combination of these.
See our chapter Six choices and potential trade-offs in philanthropy for some of the pros and cons of different approaches.
Appropriate due diligence
Conducting due diligence when selecting organisations to fund is extremely important. It can make sure that precious resources are used effectively and for their intended purpose. It’s worth noting that there has been a move in recent years towards a more trusting approach to giving in which accountability goes both ways.
Consider the following:
- Ensure that the level of due diligence is appropriate to the size and scope of the potential gift. It may be unnecessary to create onerous hurdles if the gift*/donation will be relatively small.
- Try to use publicly available information to gather what you need before asking the organisation. Such requests can be a drain on time and divert resources from vital frontline work.
- Beware the pitfall of focusing on operational expenditure (commonly called ‘admin costs’ or ‘overheads’), which is often not a helpful measure of effectiveness. Having a nuanced understanding of the stage of the organisation, the type and complexity of its work and its goals can be a more useful guide to assessing ratios.
- Consider consulting others who have conducted their own assessments, getting references from experienced funders, reviewing paperwork submitted to the charity’s regulatory body or working through an intermediary with existing knowledge and relationships.
- Some donors outsource due diligence to consultants with relevant expertise, which could potentially save considerable time and widen a donor’s network.
*The definition of a small or large gift is relative – it will depend on the size of the organisation and scope or complexity of the work in question.
Due diligence: What to watch out for
As you consider due diligence, it may be helpful to break your thinking down into the following key areas (but again, use common sense about the level of due diligence that is proportionate to the intended size of your gift):
- Strategy: How well thought-through is the organisation’s strategy? Are its goals clear and ambitious but also realistic? Do they align with your goals? Is the organisation using robust evidence to support the case for need (or attempting to build evidence)? Is it seeking to solve an issue or solely to address symptoms?
- Impact: What change is the organisation achieving through its work and how does it track this? For a newer entity, what change does it want to achieve and how does it plan to measure this?
- Leadership and governance: What is the capability and track record of the organisation’s leadership? Do staff and board members have the necessary skills? Is there adequate diversity and representation from those impacted by the issues?
- Learning: How does the organisation ensure progress is made, and that lessons learned are successfully applied? Are staff and board members regularly updating their skills and open to feedback?
- Financial management: Is the organisation compliant with regulations? Are robust measures in place to ensure proper financial management and reporting? Does it have a balanced approach to income generation and a plan to work towards financial sustainability?
- Community engagement: Are those closest to the issues involved in decision-making, and informing the organisation’s strategy?
- Collaboration: Does the organisation collaborate with others? Is it willing to share learnings?
When due diligence is carried out effectively, you can typically trust the organisation to take the lead on what it needs from you.
Power dynamics in philanthropy
Getting things done in philanthropy relies on relationships. Unequal power can very quickly affect relationship dynamics, potentially derailing even the best strategies and intentions.
“Money is power, but what right do donors have to exercise that power? Working closely with recipients helps donors to understand the cause and how they are making a contribution,” says Professor Beth Breeze, Director of the Centre for Philanthropy at the University of Kent.
“However, this is very different from philanthropists expecting – or, worse, demanding – control of a project because they have handed over a cheque.
“It is important to bear in mind that potential recipients have few options to express that an idea is unwelcome, if well-intentioned. An example is when donors take it upon themselves to build a hospital or library that a community may not need.”
Awareness is key. Without it:
- Donors may not recognise the limits of their knowledge and may not make informed choices.
- Donors may make unfair or costly demands of others.
- Recipients may not speak openly, reducing the likelihood of donors learning the fact.
Addressing imbalances
That said, power is not inherently bad. It can be a valuable tool if philanthropists use it to redress imbalances. This can be done in a few simple ways:
- Recognise the limits of your knowledge from the outset.
- Involve those with lived experience in making decisions. You could do this through paid advisers, staff members and trustees with lived experience, or through funding and learning from community organisations.
- Consider offering unrestricted funding to give recipients choice over how donations are spent.
- Allow recipients to provide anonymous feedback – and respond to it.
- Avoid costly demands such as rigid application and reporting requirements where possible, and ensure these are proportionate to the size of the gift.
- Use your voice and network to raise awareness and positively influence others’ behaviour.