Learning Center

Back to Investor Education Center

Philanthropy: Moving from Reaction to Pro-Action
By Jennifer Ladd

Philanthropy? What on earth is a topic like this doing on a web page for socially responsible investing? Isn't philanthropy just about giving, with no returns? Isn't it something only for the very wealthy -- the Soroses and Turners and Gateses?

Actually, the answer to those last two questions is "Not at all." Intentional, strategic philanthropy is a form of investment with tangible returns, and it's open to anyone: you don't need massive amounts of wealth to participate.

In this article I will address some of the kinds of questions I get from people who are now making enough money to feel overwhelmed by the flood of direct-mail solicitations they receive; those who live in communities with a multitude of needs, which they now feel in a better position to address financially; those who want to use their giving wisely and pro-actively rather than reactively.

The word "philanthropy" literally means "love of humankind." In this case, compassion and altruism are expressed through the medium of the dollar, and more and more Americans are doing so. In 1997 Americans gave 143.5 billion dollars to non-profit organizations (many of us also did "pro-bono philanthropy," as a friend of mine calls it, volunteering their time for charitable causes). Individuals were responsible for 85% of total gifts to charities and non-profits. Foundations were responsible for only 9.3% of total giving, and corporations made up 5.7%.

Individual giving is what keeps non-profit organizations going in this country. Particularly as the federal government cuts back on its support of social programs, more and more organizations are dependent on donations from you and me. In 1998, the Standard & Poors index showed a 28.6% return on investments, while contributions to non-profits rose only 6.8%. While wealthy Americans have seen their wealth increase, giving by people with incomes over $250,000 has actually decreased in recent years. Overall, individual giving remains at about 1.6% of personal income. There is a growing need in the non-profit sector and a growing capacity among individuals to meet that need. But too many people see philanthropic funding as a giveaway rather than an investment.

Philanthropy is not simply a good deed, it is enlightened self-interest. In a truly democratic society, all are both contributors and beneficiaries. While investments in worthwhile projects may have no immediate, measurable reward for us personally, they contribute substantially to the quality of life in our communities and our nation. Putting our resources behind our beliefs in philanthropic giving helps create the kind of society we want to live in. By any measure, that's a powerful, worthwhile, and socially responsible investment.

Any one of us can be an effective philanthropist if we are strategic and intentional about where our dollars are going and why they are going there. Just like financial investing, philanthropy takes time, energy, and careful consideration. And successful philanthropy -- no matter what the size of the donations -- requires the same kind of insights, analytical skills, intuition, and wisdom. Based on over 25 years of experience with philanthropy, I would like to share with you six steps you can take to give each donated dollar its maximum impact.

1. Evaluate your current giving

If you are now making some monetary gifts of any kind, take some time to ask yourself these basic questions:

  1. To what or to whom do you now give, and how?
  2. Why? What are your reasons and what do you hope to accomplish?
  3. How is your contribution helping each organization or individual achieve their goals? Are you giving in the most effective way possible?
  4. What donations do you feel satisfied with and don't want to change?
  5. What do you want to change, and why?

Considering these questions means looking closely at all your non-profit memberships, your personal financial gifts to friends or family, your donations to alma maters, to local service groups, national organizations --the whole gamut of giving. We all have a variety of reasons for giving. Are your gifts rational and useful, or are they made primarily to appease people, to let them know you care, or simply get them off your back?

Sometimes these reasons have their place, but the problem is that we are seldom really conscious of the reasons why we give. Examining your past and present patterns of giving offers a chance to get perspective on your motivations -- perhaps to identify where you're using money to solve problems where communication might be more appropriate. By the time you have finished answering these questions you ought to be clearer about what is working in your giving and what needs to be changed.

2. Identify what is most important to you

Think carefully about what you'd like to achieve with the expenditure of your time and money. What are your goals? How can you focus your resources to best help you reach those goals? You may be interested in particular issues, such as women's rights or the environment. Or you may be less issue-oriented and more focused on a particular geographical region, such as your home town.

Deciding what is most significant is one of the most difficult aspects of being intentional about giving. There are so many needs out there, and we would like to acknowledge and do something about each and every one. But of course, we can't. If we try, we just end up spattering our money around aimlessly; we may assuage our consciences, but really, what have we achieved? The more focused we can become, the more effective our dollars become.

Some people decide to focus for a number of years on one area of concern, or on a few organizations within that area, in order to learn more about the field and its needs. After a while, that focus may lead them to another interest area, but that move should be organic, not sporadic. Identifying what is most important to you is an ongoing challenge and opportunity. The trick is to find an answer that's right for you, and stay steady in it long enough to learn and contribute to effecting change.

3. Do some research

Get to know a few areas of need and a few organizations in those areas. Find out who is doing good work. The more familiar you are with a field the better you will be able to assess the effectiveness of an organization within that field. The more you get to know an organization, the more you will come to understand just why your gift is needed and how it's being used (you'll also come to appreciate some of the challenges of running a non-profit in these times). The more you learn, the greater the impact you'll be able to have.

If you do not have a lot of time for research, or want to distribute your gifts efficiently to several organizations, consider making a donation to a foundation that funds work you support. Many people, for instance, give to local groups affiliated with the Funding Exchange Network, like the Haymarket People's Fund in Boston or the Vanguard Foundation in San Francisco. In these funds, community activists do research, site visits, and evaluations on numerous organizations, and then make informed granting decisions with the help of professional staff.

Many foundations fund socially responsible causes; the National Network of Grantmakers' "Grant Makers Directory" and "The Grant Seeker's Guide" have lists of them (see Resources, below). A number of foundations offer donor-advised or donor-directed giving; they will help you find organizations that are in alignment with your values Your own local community foundation, women's fund, or other special-interest community fund is also a good bet.

4. Be strategic and systematic

Once you've identified the area or areas of your interest, you need to make some strategic decisions. What criteria will you apply to your donations? How much are you going to give, how are you going to give it, and when?

Be systematic and intentional in your giving. Identifying specific criteria will create boundaries that enable you to more easily say "yes" or "no" to funding requests. I often suggest that people set aside certain times of the year for giving -- April and October, for instance -- so that you are not constantly wondering whether you do or don't want to give. Just save up the requests and assess them together in a group. (Being systematic helps the people who are fundraising, too. There is nothing more refreshing to a fundraiser than a donor who will not waste their time but will either give them a clear "no" or engage them in a substantive discussion of the project with the strong possibility of a gift in view.)

How to structure your gift, how much to give, and when to give it -- all these are also important elements of effective philanthropy. Perhaps an organization -- your local public radio station, for instance -- could use a matching grant to increase their fundraising potential. Could they use a larger grant to help upgrade their computer and networking capacities, or would a small grant at this particular time help them balance their budget?

Consider making general support donations, no matter how small. All too often, groups feel they need to come up with something new and flashy to attract donors. Specific projects can be attractive focuses for funding, but non-profits have basic, year-round needs: rent, salaries, office equipment and supplies, staff development. What better investment can one make than to help groups sustain a strong infrastructure so that they can carry on their work over the long haul?

Multi-year donations are similarly helpful, in that they enable organizations to do their work and reach out to new donors rather than spending time and energy reconfirming your support. Making a three-to-five year pledge of a certain amount is a useful and affirming way to support an organization; it also relieves you of having to decide again every year. Just as we ask organizations for multi-year activity plans, so a corresponding gift is a way to support that vision and planning.

5. Evaluate your giving

At the beginning of the year, take a look at what you did in the last year. Ask yourself the same questions you did in step 1 and assess what you think and feel. Are there gifts you want to continue making? Are there ones you are not sure of, and others you want to stop making? This is your learning opportunity.

In terms of evaluating the impact of your gift, take the time to ask around about an organization, talk to a staff person, visit the office or attend an event. Significant social change takes a long time, so don't be too impatient for results, but listen for changes in the organization's approach and their goals. We are all learning -- individuals and organizations both.

6. Leave room for serendipity and spontaneity

Planning and strategizing are crucial, but inspired and powerful gifts can also be made on the spur of the moment when necessary. Sometimes time is of the essence: you must act or an important opportunity will be missed. If you have done the foundational work of thinking -- both rationally and with the heart -- about how your resources can be best used, inspiration can often be your best counselor. The challenge is to learn how to listen deeply enough to act from clear intuition rather than from muddier, more superficial emotions.


Philanthropy is one vehicle for supporting and creating social change. Money is an essential tool in creating a sustainable, just, and caring society, but it is only as powerful as the wisdom of the humans who use it. It is important that philanthropists and donors realize they are a part of the picture, but not all of the picture. The people we fund have experience, knowledge, vision, and skills; that's why we fund them. It is the job of philanthropists, no matter what the size of our resources, to work in partnership with organizations to the best of our abilities, realizing that we have lots to learn from the groups doing the work. As in any investment relationship, all parties bring something to the table for accomplishing the larger task.

I firmly believe that the more we are able to receive with gratitude what comes to us, the more effectively we are able to give. Giving and receiving are actually one concept, one action -- though we have yet to coin the word that expresses this. One always receives something from giving, and philanthropic giving is no different. It gives us a sense of pride and self-worth, a sense of contributing to the community, whether it's our own locality or a community of interest. We also receive the very real benefits of the work of the organizations we support. The more we recognize this, the more constructively we can give, with a humility grounded in the understanding of mutuality.

Jennifer Ladd, Ed.D. is Director of Class Action, a philanthropic advising business, and Coordinator of the Donor Organizers' Network (DON), a program of the National Network of Grantmakers. DON serves people and organizations helping individuals with inherited and earned wealth to become partners in progressive social change through increased giving, volunteerism, socially responsible investing and activism.


National Network of Grantmakers, 1717 Kettner Blvd., San Diego, CA 92101. (619) 231-1348.

Funding Exchange Network, 666 Broadway, #500, New York, NY. 10012 (212) 529-5300. (Haymarket and Vanguard's address's can be found here)

Women's Funding Network, 332 Minnesota St., Suite E-1320, St. Paul, MN 55101. (612) 227-1911.

Back to Investor Education Center

Mutual Funds | Community Investing | News | Sustainability Reports | Corporate Research | Shareowner Actions | Financial Services | Conferences
Home | Login | Contact | Support This Site | Terms of Use | Privacy Statement | Reprints

© 1998-2018 SRI World Group, Inc. All Rights Reserved.

Created and maintained by
SRI World Group web development services
Do your own research Work with an advisor SRI News SRI Learning Center Home