With less money to give, recession-struck donors need to sharpen other philanthropic tools, writes Simon Mumme.
The core mission of strategic philanthropy is to overcome entrenched social problems – so during times of economic turbulence, funders should be trying their hardest to maintain their commitments. The downturn shouldn’t stop funders from dedicating time and resources to projects they deeply care for. Rather, they should be seeing the financial crisis as an opportunity to improve their methods – from using scant resources more efficiently, collaborating with other donors and raising the public profile of charities – so that they can continue to support projects when money is hard to come by.
The Institute for Philanthropy in the UK provides donors with strategic tips to help them act creatively and effectively during a financial crisis in order to maintain and strengthen social projects. First, the Institute says, thorough research prevents funders from “reinventing the wheel” – particularly during a time in which resources are being used sparingly – and can help them determine which projects are in most need in tough times. Performing “needs assessments” within a community can identify previously unknown social problems, or provide deeper insights into those already known, and help determine which projects are most in need of funding.
These studies should involve qualitative research, to reveal pockets of need not identified by statistical analyses, and add a human dimension to problems, further compelling donors to act. Ultimately, needs assessments should help communities better understand and counteract their social problems.
The Institute provides a case study of the effectiveness of diligent research. In Surrey, just outside of London, a needs assessment found the apparent affluence of the county concealed pockets of deprivation in which child poverty, poor mental health, low literacy and income were persistent problems. Since local infrastructure and services were built to suit the better-heeled majority, those in trouble were further marginalised.
These findings helped local donors define their priorities and develop effective funding strategies. When funders face a cash shortfall, they should consider collaborating with other donors to pool limited resources and bring more experience to the table – but they must decide on a project of mutual interest, as well as a funding strategy to alleviate it. Once a collaborative effort is underway, it can generate enough momentum to keep donors active in periods of economic stress.
And if funders can’t find a suitable funding collaborative, they should set one up. With limited financial firepower, donors should carefully evaluate which projects are effective and ensure that those commitments are met.
But since money is, after all, just one component of philanthropy, it is also a good time to draw on contacts and share knowledge to give non-financial support to projects. Some funders are prepared to become public ambassadors for causes in order to attract support and develop further contacts.
They can also become closely involved with grantees, even taking board positions to help steer the organisation or helping to raise awareness of its operations. Funders should also consider making mission-related investments – capital allocations to funds and projects that simultaneously provide a financial return and aim to create social change – as an alternative method of supporting causes.
An example of this is New York’s Heron Foundation’s support of Habitat for Humanity International – an organisation aiming to eliminate poverty and homelessness by using volunteer labour, donated money and materials to build houses across the globe. So far, Habitat has built more than 300 houses, which are sold to families for no profit and financed by affordable loans. It has always been reliant on banks for loans, and despite never defaulting on the loans, these capital streams were choked off when the financial crisis hit last year.
Heron saw Habitat’s work as a sound mission-related investment and stepped in to take the banks’ place. When funding runs thin, mission-related investments can protect and grow capital while also helping a project. During the crisis, Heron has increased the portion of its endowment deployed in mission-related investments from 35 per cent to 50 per cent by the end of 2009. With less capital, many charities are forced to prioritise operations over outreach in order to keep themselves afloat.
Funders should find out whether charities are in financial distress, and if so, consider making emergency grants or consider letting them use existing donations to sustain operations rather than projects.
Funders can also suggest appropriate partnerships or mergers among the organisations to ensure their survival. Donors are usually well-placed to bring stakeholders together and provide financial and non-financial support. The Institute’s pointers show that even when philanthropists have less money, they still have much to give.