Strategic Philanthropy: The Shift in Donor Behavior That's Shaking Up the Nonprofit Sector

A recent study of high net-worth philanthropy conducted by Bank of America found that 71 percent of these philanthropists have a specific giving strategy in place—and that behavior is spreading. As a frontline fundraiser for nearly 20 years, I am seeing donors previously content to hear a good story ask for measurable impact on a comparative timeline.

Trickle-Down Philanthropic Behavior

Strategic philanthropists are mimicking the behavior of the mega-donors. Bill Gates talks about attacking specific problems with his philanthropy, measuring the impact of his investments and making strategic adjustments accordingly. Strategic philanthropists think, “I have a lot less capital to invest, but why would I not follow the example of one of the world’s richest and, arguably, smartest men?”

Philanthropy as a whole has always mirrored the behaviors of those at the top of the pyramid. The Carnegies and Rockefellers invested in civic institutions, like libraries and museums, and the philanthropic masses followed suit. The recognition of their generosity was their names on buildings. This eventually led to “brick” and “paver” campaigns, so investors giving fewer dollars could also see their names etched in stone.

The Bill and Melinda Gates Foundation begets the Chan-Zuckerberg Initiative begets strategic philanthropists thinking harder and more deliberately about how they invest their own small parts of the philanthropic pie.

How does your nonprofit attract strategic philanthropists?

I had a boss that used to keep a framed quote on his desk: “If you do what you’ve always done, you’ll get what you’ve always got.” We used to joke that he should scribble an addendum: “But less.” As the landscape changes, that has never been truer. If we continue to approach fundraising as we always have—events that facilitate check-swapping, mass mailings that rely on anecdotal evidence and cookie-cutter approaches to donors—we’ll get less than we’ve always gotten. Meet the market where it is.

Ideas

Strategic philanthropists are interested in understanding your theory of change, the metrics you used to arrive at this theory and the metrics by which you will measure the efficacy of its implementation. Yes, they still want to hear the stories that pull the heart-strings. But they also want to be persuaded by a sound business case. Your case for support is more important than ever, and needs to be more data-driven and forward-looking than ever before.

Leadership

In some ways this contradicts the prior point on ideas, but strategic philanthropists are simultaneously focused on who is implementing and leading the theory of change described in the above. As is often the case in the capital markets, the philanthropic market is investing in CEOs who inspire confidence, and can prove they can create lasting impact and lead an organization at or to scale.

The old adage “people give to people” has been used in our field to stress that the right person with the greatest amount of leverage should make “the ask.” It now just as often can be used to describe philanthropists investing because they believe in the CEO of a particular nonprofit. CEOs have to be on the road meeting with prospects, because prospects are investing in them—not just the nonprofit or the mission.

Engagement

Strategic philanthropists view themselves as partners—and they don’t expect to be silent partners. They want to understand and have input on strategy and decisions. For your largest investors, that means personal visits and dialogue, and, in many cases, seats on the board. But as donors at all levels adopt these attributes, this will mean more forums where wider groups can ask questions and have input. The information you share with constituents should go deeper and be more transparent. We must design our solicitation strategies, proposals and communications with this engagement in mind.

I view this evolution of philanthropy as our greatest opportunity to grow giving beyond its historic levels of 2 percent of gross domestic product. Better informed donors acting as strategic philanthropists, who understand and can measure the social return on their investments beyond the anecdotal, will invest greater dollars.

As leaders of nonprofits, we just have to facilitate the process.