Think Before You Give: Impact Philanthropy vs Impulse Philanthropy

During the last 3 years I have had the opportunity to oversee an analysis that covered over 2,500 non-profits and 500+ donors around the World.[1]

The analysis confirmed an important trend: giving is on the rise, pretty much everywhere.[2] Overall, individuals are giving more, corporations are giving more, both in advanced and in developing countries. This is really good news.

But I would like to focus my reflection on how people are giving. I would argue that two, very distinct ways of giving are emerging: I’ll call them “Impact Philanthropy” and “Impulse Philanthropy”. These two ways of giving differ substantially. Let me say it upfront: I believe Impact philanthropy is superior and it is my hope that understanding what makes it different from Impulse Philanthropy will help donors to think more strategically about how they are giving.

Impact philanthropy is focused on results. Impulse Philanthropy is driven by the recognition that the individual or corporate donor expects from it.

The table below summarizes the six key dimensions across which the two ‘giving paradigms’ differ.

Impulse Philanthropy is at present the most common way of giving both by individuals and corporates. (1) In terms of objectives, this form of giving is not particularly concerned about ‘impact’ nor it is particularly strategic. It is impulsive and primarily driven by a ‘feel good’ effect and by the recognition that the donor himself expects from it: a personal recognition for an individual or a brand reinforcement for a company vis a vis its customers and/or employees. Tax incentives are also often in the mix. This approach is of course legitimate — and often truly generous — but places the attention first and foremost on the donor’s interest, not on what impact the donors is actually supposed to contribute to. When such is the prevailing objective, (2) resource allocation is not driven by a careful analysis and comparison of different options available to generate impact. It is determined by communications’ imperatives which often leads to supporting the most ‘appealing’ NGOs, typically the largest ones (with recognized brands) or those that excel in communications/marketing. As a result, funding doesn’t necessarily target the most impactful or innovative organizations. (3) An approach to philanthropy that is mostly interested in short-term, easy-to-communicate success prefers a funding modality that is designed to support quick wins: one-off, earmarked (or ‘project-based’) donations. These are donations with which the donor obtains (or at least has the illusion to obtain) immediate ‘impact’: one-shot donations, typically tagged to a specific outcome that a donor wants to see attributed to himself (ex. building a new school, or xx packs of rice provided). When this approach to giving is adopted, (4) impact monitoring is conceived as a way to confirm impact, a ‘good news machine’ that inevitably speaks of success, never of failure. (5) In this context, communication tends to be focused on the donor itself, often celebrating its generosity and overstating his/her impact. (6) Donor engagement under Impulse Philanthropy is usually modest, condescending or — more and more so — takes the form of voluntourism[3] (by individuals) or staff engagement initiatives (by corporations). These are designed with the primary objective to satisfy the donor(s), regardless of local circumstances and of the needs of NGOs and their beneficiaries.

A different approach to giving is possible.

Impact Philanthropy, as opposed to Impulse Philanthropy — is characterized by (1) a deliberate focus on impact. Donors (both individual and corporate) approach the act of giving strategically — just like they would do with other important aspects of their life or business — and expect to be more and better informed about the impact that their philanthropic investments drive.[4] As the focus of giving is placed on impact, (2) the search for the right cause and organizations to support is taken seriously: professional tools or intermediaries[5] are employed for the due diligence of organizations to support and the selection of the best possible philanthropic investment. (3) The preferred funding modality of an individual or corporation that wants to have impact is not a one-off donation: Impact Philanthropy opts for multi-year, unrestricted support that provides non-profit organizations with predictable funding and with much needed flexibility in using it[6]. Under this approach (4), monitoring and evaluation are viewed as critical. Donors demand monitoring and evaluation, pay for it and leverage technology to drive a ‘culture of evaluation’ — and of collaboration — where all parts (donors and implementing organizations) become smarter by learning from success and failure. (5) In this context, communication is evidence based and focused on the work of the organizations supported. It uses reliable information on impact and it is ethical in terms of use of images (for instance of children). Under Impact Philanthropy, (6) donors engage actively, seek to understand what they support and are eager to ‘experience’ their philanthropy in a smart, thoughtful way.

Impact Philanthropy vs. Impulse Philanthropy

Both approaches to giving I outlined are possible and both can produce positive outcomes, even the more superficial, ‘Impulse Philanthropy’.[7] But it is fairly obvious that ‘impulse’ giving has a major drawback: in the short term, it results in an inefficient and ineffective allocation of philanthropic resources. This means quite simply that money doesn’t go to the most impactful organizations. In the medium-long term, I am persuaded that Impulse Philanthropy can even threaten the growth of philanthropy as a whole: the absence of thoughtful donor engagement combined with poor results (which sooner or later emerge) makes the act of giving less appealing and leads to its decline. As for a fashion.

On the other hand, if impact-driven giving becomes the norm, Impact Philanthropy will emerge as a key, stable force for civic engagement, social innovation and development. What is at stake here is the future of philanthropy and whether billions of dollars will be put to good use or not.

Every single player in the philanthropic industry, every individual donor, corporation or foundation can consider the differences between the two approaches outlined in this note and make a choice: to adopt impulse philanthropy or to become part of impact philanthropy.

Where do you stand?

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You can follow me on Twitter: @Nico_Crost

[1] Analysis was carried out in the framework of the Selection process carried out by Epic Foundation every year. Epic publishes Lessons learnt from this and other processes in an annual Epic Outlook.

[2] It isn’t easy to find reliable sources on ‘giving’ also because the very definition of philanthropy varies from country to country. But most National studies seem to confirm the upward trend in philanthropy across developed and developing countries. An useful source to follow trends in philanthropy across advanced and developing country is the OECD NetFW.

[3] An interesting documentary has looked into the voluntourism market: ‘The Voluntourist’: is voluntourism doing more harm than good?”.

[4] Refer to increasing emphasis on social ‘return’ on investments, impact investing and support to social enterprises and ‘bankable’ social innovations.

[5] It is important to note here that there are now intermediaries — like Epic Foundation and may more working at National or local levels — that can vet and monitor organizations for free and are thus accessible to virtually any individual or institutional donor.

[6] Nearly 80% of non-profits surveyed by Epic indicate the lack of unrestricted and multi-year funding as a key barrier to their capacity to achieve impact (see Epic Outlook 2017).

[7] I would agree — as many argue — that impulsre philanthropy can be a ‘way to start’. And that many people and corporations can, and indeed do, start giving in a relatively superficial way and then get more conscious about their impact (or lack of) over time.

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