October 11, 2010

The Growing Social Impact of Philanthropy

When philanthropists bring influence and strategy to giving, the impact can be much greater than the money alone

George Soros George Soros

The face of philanthropy in the U.S. is changing. During the past decade, the emphasis in charitable giving has been on check writing and traditional philanthropy as a path to growth—how to make projects scale, get bigger and replicate. Today, a more powerful trend is taking shape: making philanthropic investments matter and have influence.

“Ultimately there are other levers besides money to pull—whether it’s policy, political will or knowledge,” says Suzanne Muchin, founder of ROI (Return on Inspiration) LLC. “The means to that end is not money.”

Muchin and Rachel Bellow, a partner in the Chicago-based consulting firm, have spent the past 20 years focused on how to maximize social impact by using markets. ROI consults to high-profile philanthropists and foundations, including Pritzker, Soros and Kellogg Foundation. 

Knowledge Transfer

Bellow observes that philanthropy as a solo instrument is relatively weak in solving social problems today, in part because these have become more global and complex. It is also recognition, she says, of the need to enlist markets and give them a reason to put their weight behind a social purpose venture.

ROI is seeing a new trend where organizations, even successful ones that have seen growth and scale, reach a plateau in their ability to address a particular problem in a meaningful way. “When you recognize in that moment that the path to impact isn’t about growth, then you have to conclude it’s about influence,” Muchin says. “This means you’re trying to achieve your mission by influencing the ecosystem surrounding the social impact issue.”

According to Bellow, this requires an organization to codify the knowledge around what it has figured out so that it is transferable to other players, not to be replicated but to be applied. That transfer is a key part of an influence strategy.

“We call it knowledge transfer when the information is packaged in such a way that when it arrives on the doorstep of the recipient, they not only understand it, but are equipped to act on it,” Muchin says.

Strategic Giving—It’s Not Simply Money

In the women’s view, Mark Zuckerberg’s recent, highly publicized $100 million donation to the Newark public school system failed to do these things.

“We see no engagement of markets or what Zuckerberg knows as an entrepreneur—social networking, markets, market growth, market traction, engaging of the next generation," says Muchin. "There’s nothing here that’s other than money and traditional checkbook philanthropy.”

She adds that the media’s focus on the size of the gift skews the story underneath, which has to be about strategy. “What is the strategy here, because you’re trying to fix a broken system? And anytime you go after system change, only one of the levers is money.”

Sector Agnostic

In their work over the past 20 years, Muchin and Bellow became disillusioned by the conventional nonprofit economy and the firewall they saw between market sensibility and market players and those who were concerned about

social purpose. “We started suturing those two territories together before that had a name,” Bellow says.

Money and Meaning

Today, the women see a trend developing that is not about grounding social impact on one side of the money-meaning equation or the other. Call the trend sector agnostic. In order to have social impact in a certain area, philanthropists today are engaging not only specialists in that area, but also talent from other sectors, such as marketing, behavioral economics and social media.

“We view the commercial sector and the nonprofit sector as important structural distinctions that have impact and finance consequences, but it does not mean that they have totally different world views,” Bellow says.

She points out that ROI tells its clients that if they want their businesses to thrive and fuel market traction, they have to look at meaning, not just profit margin. On the other side, they tell clients that if they want their purpose to have traction and gain movement power, they have to think about markets and demand, not just about meaning.

“Whether you’re standing on one side of the meaning-money equation or the other, in order to have your aspirations meet their potential, you have to arrive at the intersection,” Muchin says.

The face of philanthropy is changing. The trends Muchin and Bellow have identified suggest that charitable giving must involve market forces to effect change. It means bringing in influential players by telling a powerful story that compels them to join the effort. Fixing the Newark public school system won’t be easy. Simply throwing money at it may only empower dysfunctional existing players and relationships.

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