About Bob Bob serves as President and CEO of GuideStar and serves on the boards of Vision TV, Grameen Foundation USA, and the AAFRC Trust for Philanthropy. More...
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Posted By Bob Ottenhoff on February 8th, 2011, in these categories: Donors | GuideStar Last week I participated in a webinar with Dan Pallotta, author of “Uncharitable” and Ken Berger, CEO of Charity Navigator, sponsored by Network for Good. You can access my presentation on GuideStar’s SlideShare channel, but I wanted to touch on a few key points for those of you who couldn’t attend or who wanted additional clarification.
Dan has written a controversial book and I don’t agree with much of it. He uses exaggeration and hyperbole far too much to make his points. And he mistakes the difference between operating in a business-like fashion with running a charity as a business. But there’s a lot that I did agree with: in particular his concern about fair compensation, the strategic use of promotion and advertising and better access to capital for nonprofits.
Pallotta complains that his organization was held up to unfair public scrutiny in its work. For many years I have talked to people about the fact that the era of assumed virtue in the nonprofit sector is over. There is greater demand for transparency and accountability, a greater demand for data on which to base giving decisions, and a greater personal engagement in philanthropy. In short: people want to know how their contributions are being used. We have to earn people’s trust every day.
Pallotta also attacks evaluating a charity on the basis of its overhead rate. Here I am in total agreement and it’s important that nonprofits resist any ratings efforts to judge them solely on the misleading overhead rates. We know that people come to their giving decisions with a variety of values and expectations, so donors want to be able to choose what evaluation criteria is important to them. Last year’s Money for Good research project showed us that donors evaluate based on a nonprofit’s legitimacy, impact, efficiency and reputation.
For 16 years, GuideStar has made a commitment to transparency and accountability. Previously on this blog I have discussed our view on nonprofit evaluation. I continue to encourage people researching a nonprofit’s effectiveness to focus on three questions:
- What do you do?
- How do you do it?
- How are you doing?
In addition, we have partnered with Independent Sector and the BBB Wise Giving Alliance on an initiative called Charting Impact to do just that – strengthening individual organizations’ ability to document their impact and to share the results of their work with many different stakeholders, thereby expanding our sector’s ability to respond to the most important issues in society. More on that to come.
At GuideStar, we pride ourselves in having 360 degree data sources on 1.5 million tax-exempt organizations and providing the full nonprofit picture to the users of our database. Our GuideStar Exchange program encourages nonprofits to provide information about their mission, programs, activities, board, management, finances, governance and policies, etc., and to personalize their organization for people through photos, videos, user reviews, etc.
In the meantime, I’d like to hear from you. What kind of evaluation barometers do you want to see about the nonprofits you care about? How can GuideStar better serve you as an evaluator?
Posted By Bob Ottenhoff on January 20th, 2011, in these categories: Donors | GuideStar | Nonprofit Practice About a month ago I first blogged about the controversy in the nonprofit sector over Apple’s ban on donation apps on the iPhone. Since then, the voice of the sector has gained strength with Zoetica CEO Beth Kanter continuing to sound off and circulate a petition of more than 13,000 signatures to oppose Apple. The conversation has even entered the political sphere, with PC Pro reporting that the UK’s Minister for Civil Society would write Apple to “encourage the company to be more positive and constructive.”
Sadly, Apple’s silence has signaled to philanthropic donors and practitioners alike that they don’t intend to budge on the issue. I have often spoken publicly about the can-do attitude and spirit of the American people and the nonprofit sector, and this situation has proven to be no exception. The Huffington Post recently reported on Nadanu Technologies’ platform for an “iPhone-optimized giving app with a donate button that can be downloaded outside of the official App Store, exempting it from Apple’s mobile-giving restrictions.” This surely won’t be the last creation of its kind.
I want to stress again the importance that Apple plays in reaching a new generation of financial donors, and urge Steve Jobs and company to reevaluate their stance on the subject. Per the Huffington Post, “Last year’s Haiti earthquake disaster marked a major turning point for mobile giving, as organizations like the Red Cross raked in between $30 million and $40 million over the phone, and app developers across the country seem to be taking notice. Nadanu CEO Getzy Fellig said the company saw a tremendous uptick of Dec. 31 donations through its apps on Facebook and iPhone, including one $10,000 iPhone donation to a New Jersey day school.”
There’s no doubt that Apple is missing a key partnership opportunity with the nonprofit sector – and maybe even defining the future of philanthropy for our country. For years Apple has been at the forefront of technology, and it’s shameful that they aren’t taking this opportunity to work with nonprofits, rather than just writing them off.
As the Chronicle of Philanthropy’s Vincent Stehle recently stated, “For its part, Apple has said that it does not permit charitable donations to be made through its iPhone applications because it has no way to verify the legitimacy of nonprofit organizations that might receive donations through its media platform.” If that’s true, then let me make it clear: GuideStar has the capability to meet Apple’s concern. We do it every day for thousands of donors and corporations.
We just need Apple to take the first bite.
Posted By Bob Ottenhoff on December 15th, 2010, in these categories: Disaster Relief | Donors | Fundraising | GuideStar Have you been paying attention to the recent brouhaha over Apple’s long-time decision to ban donations on the iPhone via nonprofit apps? The New York Times recently weighed in and quoted Jake Shapiro, executive director of Public Radio Exchange, an online nonprofit marketplace for licensing and distributing public radio programming, as saying, “One of Apple’s major objections has been that if donations were to go through its payment mechanism, it would have to be in the business of managing and distributing funds and verifying charities as well.”
We think Apple is right to be concerned about the importance of vetting nonprofits. Individual donors as well as professional grantmakers are very concerned that their contributions go to legitimate, legal nonprofit organizations and not bogus or non-deductable charities we often read about.
There’s no doubt that Apple’s ban has upset nonprofits and donors alike. Care2, a huge online community of people passionate about making a difference, has started a petition urging Apple to reconsider, and nonprofit social media guru Beth Kanter has pledged to switch her business from Apple’s iPhone to Google’s Android.
But that doesn’t mean nothing can be done about it. GuideStar has a long history of providing trustworthy, vetted data to a variety of institutions: Facebook Causes, giving portals, corporate programs, large private foundations, financial institutions, donor advised funds, United Way chapters, you name it – if you want to verify a nonprofit, we can do it.
Can Apple afford not to work with the philanthropic sector? When asked for comment, Apple spokeswoman Trudy Miller told us what she told The New York Times, “We are proud to have many applications on our App Store which accept charitable donations via their Web sites.” But how much philanthropic giving are they not supporting when donors are unable to give via their iPhone apps?
Giving USA Foundation and the Center on Philanthropy at Indiana University estimate total charitable contributions from American individuals, corporations, and foundations at $303.75 billion in 2009, even despite a record-setting economic recession. And no longer are we seeing giving coming only from older and wealthier donors. Fundraising Success Magazine notes, “Historic philanthropy patterns of America’s affluent donors are giving way to a more complex and disparate population that represents our country’s patchwork communities. The systematic and predictable giving methods by the rich no longer dominate our donor bases. Diverse communities are emerging with new giving patterns and objectives.” iPhone apps are poised to tap into new donor bases if given that opportunity, particularly among the younger and minority demographics.
We’ve already seen this younger donor base in action: Network for Good’s new study points out that after the Haiti disaster, most giving was online and on mobile. A study conducted by Convio, Edge Research, and Sea Change Strategies, and published in March 2010 found that—a little more than a week to two weeks after Haiti’s deadly January earthquake—17 percent of donors who were ages 19 to 29 reported that they had sent a text message to make a gift and another 37 percent said they thought about making a text-message contribution. Among donors ages 30 to 45, 14 percent said they gave by text message and an additional 27 percent considered it. By contrast, only 3 percent of people ages 46 to 64 and 3 percent of people who are 65 or older reported sending a text contribution to relief efforts. And the results were astounding: just using text messaging capabilities, Americans donated the 30 million dollars in 10 days for Haitian relief efforts.
People want a way to help the causes they care about, and they want to be able to do it easily via their mobile devices. Apple is a leading platform of mobile apps. GuideStar is the premier source of vetting nonprofit information. I think this could be the beginning of a beautiful friendship.
Posted By Bob Ottenhoff on December 14th, 2010, in these categories: Donors | Fundraising | GuideStar | Nonprofit PracticeLast week another 17 families announced they were taking the Giving Pledge and committing to giving the “majority of the ir wealth to philanthropy.” This follows an earlier announcement in August when a group of 40 families took the pledge, a long-term charitable project launched by Warren Buffett and Bill and Melinda Gates. Thanks to Darin McKeever of the Gates Foundation for pointing out the website for the Giving Pledge – www.givingpledge.org – which has copies of the letters that each of the families has written. Check it out; it makes for some fascinating reading.
Among the more interesting pieces is that of Warren Buffett. Here’s my favorite quote from his letter: “I’ve worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions. In short, fate’s distribution of long straws is wildly capricious.”
And a few more excerpts from his letter:
Millions of people who regularly contribute to churches, schools, and other organizations thereby relinquish the use of funds that would otherwise benefit their own families. The dollars these people drop into a collection plate or give to United Way mean forgone movies, dinners out, or other personal pleasures. In contrast, my family and I will give up nothing we need or want by fulfilling this 99% pledge.
Moreover, this pledge does not leave me contributing the most precious asset, which is time. Many people, including — I’m proud to say — my three children, give extensively of their own time and talents to help others. Gifts of this kind often prove far more valuable than money. A struggling child, befriended and nurtured by a caring mentor, receives a gift whose value far exceeds what can be bestowed by a check. My sister, Doris, extends significant person-to-person help daily. I’ve done little of this.
Some material things make my life more enjoyable; many, however, would not. I like having an expensive private plane, but owning a half-dozen homes would be a burden. Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.
My wealth has come from a combination of living in America, some lucky genes, and compound interest. Both my children and I won what I call the ovarian lottery. (For starters, the odds against my 1930 birth taking place in the U.S. were at least 30 to 1. My being male and white also removed huge obstacles that a majority of Americans then faced.) My luck was accentuated by my living in a market system that sometimes produces distorted results, though overall it serves our country well.
The reaction of my family and me to our extraordinary good fortune is not guilt, but rather gratitude. Were we to use more than 1% of my claim checks on ourselves, neither our happiness nor our well-being would be enhanced. In contrast, that remaining 99% can have a huge effect on the health and welfare of others.
I think Mr. Buffet’s comments are honorable, and as I’ve mentioned before, I think the Giving Pledge is a great thing for the nonprofit sector. It increases public attention of the vital work the nonprofit sector provides and the need for financial support. By increasing visibility, the Pledge helps to encourage people to think more about philanthropy and their own giving commitments. I like the fact that Mr. Buffet’s priorities are applicable to all of us – not just the super rich.
However, I can’t stress enough how important it is for these donors – for all donors – to take a few minutes to think about priorities and goals before they give. Asking a few questions before investing can ensure that the billions being donated are going to the most effective nonprofits – which can in turn make the sector that much more successful.
Posted By Bob Ottenhoff on December 7th, 2010, in these categories: Charting Impact | Donors | GuideStar | Nonprofit Practice It’s that time of the year when we’re being flooded with phone calls from reporters asking about holiday giving and how donors can spend wisely. Part of this activity is driven by skepticism – donors are increasingly wary of nonprofits and how they spend their money. Many of the calls are motivated by a genuine concern for making a difference and a desire to direct hard earned contributions to where it will do the most good.
Still a third reason for these reporter calls is caused by the nonprofit sector itself. Unfortunately too many nonprofit organizations continue to define themselves in terms of their overhead ratios – a short-sighted approach to evaluation. They promote the so-called overhead ratios on their websites or otherwise publicize ratings they have received from watch dog organizations about overhead ratios. How many mailings have you received this season from organizations promising that none of your contribution will go to overhead? As long as we define nonprofit organizations in terms of expense boxes, we are painting ourselves into this corner.
Here at GuideStar we tend to take the long view about these questions.
Over ten years ago GuideStar led the movement to promote transparency and accountability among the philanthropic sector. Today stakeholders can view the available IRS Form 990s on GuideStar. Nearly 7,500 organizations will earn the prestigious GuideStar Exchange Seal this year signifying their commitment to transparency. Donors expect an organization to freely provide information about their programs and finances and are suspicious when they aren’t readily available.
We urge reporters researching what donors should do before giving to start by looking at the mission of the organization and asking three simple questions:
- What do they do?
- How do they do it? What are their programs and activities?
- And how are they doing? Is the organization having success in achieving its goals?
Currently we have a major test underway with our partners Independent Sector and the BBB/Wise Giving Alliance called Charting Impact. The project is designed to help nonprofits better communicate with the public about how to evaluate nonprofit performance by answering five easy questions:
1. What is your organization aiming to accomplish?
2. What are your strategies for making this happen?
3. What are your organization’s capabilities for doing this?
4. How will your organization know if you are making progress?
5. What have and haven’t you accomplished so far?
The Money For Good study performed last year by Hope Consulting found that donors are very interested in learning about nonprofit organization performance but infrequently actually use data to make decisions. At GuideStar we see that as a challenge to learn more about donor needs and to lead the next wave in making better decisions.
Posted By Bob Ottenhoff on October 22nd, 2010, in these categories: Donors | Economy | Fundraising | GuideStar | Nonprofit Practice Here at GuideStar we try hard to listen and learn from people working in the nonprofit community. Every day GuideStar is in contact with hundreds of people like you at nonprofit organizations through emails and phone calls, answering questions, giving tips, and helping you meet the challenges of your important jobs. Another way we try to stay on top of issues is through our economic surveys which we share with the sector. Now, we are expanding our approach through a unique partnership. This week we launched a new economic survey in partnership with the Association of Fundraising Professionals, Blackbaud, Inc., the Center on Philanthropy at Indiana University, the Foundation Center, and the National Center for Charitable Statistics. By partnering with these institutions, we’re reaching out to new participants, expanding the audiences that will see the results, increasing the survey’s overall impact—and cutting down on the number of surveys you’ll be asked to take this fall.
We invite you to be part of this inaugural survey by answering the questions at the 2010 Nonprofit Fundraising Survey website: http://www.nonprofitfundraisingsurvey.org/. The survey will take about five minutes of your time. The questions in this month’s survey are about changes in giving. A summary of responses to date will be visible as soon as you hit “submit,” and you can go back later to check again. Data collected will be reported in the aggregate, with no reference to individual participating organizations. Results will be published jointly by the participating organizations throughout the year, with further analysis to help guide you and your colleagues in this new era for fundraising.
On another note, last week, the Chronicle of Philanthropy reported that charitable giving to the nation’s 400 biggest donor-funded nonprofits fell 11 percent in 2009, the steepest drop since the Chronicle began tracking those numbers 20 years ago.
The United Way and the Salvation Army, which saw decreases of 4.5 percent and 8.4 percent respectively, actually got off relatively easily. Other top 10 organizations like the Y (17.2 percent) and Food for the Poor (27 percent) reported much bigger drops. Experts don’t expect charities, which are as battered by the recession as any other industry, to do much better in 2010 than they did in 2009; most fundraising directors say they’re expecting growth of just 1.4 percent over last year.
These results track with GuideStar’s own most recent economic survey, released in August, which showed that 40 percent of respondents saw a further decline in contributions in the first five months of 2010 compared to the first five months of 2009. At the same time, a majority (63 percent) saw an increase in demand for their services. As I said before, there’s no doubt that the nonprofit sector continues to face an incredibly difficult philanthropic environment
One academic researcher responded in the Chronicle that our interpretation of the survey results was too bleak. Here is our response which was published Sunday in the Chronicle:
In a letter to the editor (“The Nonprofit World’s Finances Are Not as Bleak as a New Study Suggests,” September 23), Lester Salamon commented on GuideStar’s 2010 Economic Survey, taking us to task for what he felt was an overly grim picture of the effects of the economic downturn on the charitable sector.
We at GuideStar stand by our interpretation of the data resulting from our economic survey. While we are pleased for each nonprofit that has moments of good news, the data is clear in its conclusion that many continue to face great challenges, and most have a long way to go to achieve the success they experienced before the recession.
One important aspect of our findings with which Mr. Salamon disagrees is the impact of the decline in charitable giving. Although it may be statistically correct that “such giving accounts overall for only about 12 percent of nonprofit revenues,” when you start to actually look at individual organizations, you see a different picture.
Charitable revenues, when viewed in the aggregate, are dominated by a relatively small number of very large health-care providers, universities, employee-benefit trusts, and the like that derive most of their revenue from program services. For the 4,102 respondents to the GuideStar survey that gave us sufficient information to track back to their Form 990 filings, the median dependence on charitable contributions was 44 percent; for those with annual revenues under $5-million, about a third of respondents depended on charitable giving for 75 percent or more of their revenues.
There is another aspect of the GuideStar survey, however, that is difficult to convey in numbers. There were 7,014 usable responses, and nearly 3,000 of the respondents made comments about how their organizations were doing.
Although 69 percent of survey respondents reported that their 2010 budgets had increased or stayed about the same, this is not necessarily an unalloyed sign of good health. Consider these typical comments from organizations that didn’t cut their budgets in 2010:
“It was better than 2009, but not as good as 2008. We do feel that we’re no longer in free-fall.”
“Cash flow continues to be the problem. We will survive but we may have to cut programs and positions.”
“We have increased revenues by about 50 percent but most is one-time stimulus funding and will not likely continue.”
“Due to decrease in donations, we had to rely on credit to continue operating and now we are in debt.”
“We are struggling financially due to the decrease in contributions.”
“We are operating out of our reserves. We have about six months left and we will fold if no money comes in.”
To be sure, not all the comments are negative, and many of them show resilience as old organizations learn new strategies for raising funds. But the overall tenor of the comments from organizations we are in direct contact with suggests a sector that is nervous and uncertain about what the future holds.
If we report that things are better than they are, the individuals and institutions that are in a position to help may not step up to the plate.
We hope you find these surveys helpful as you make your plans for the remainder of 2010 and 2011. One of the characteristics I like best about my nonprofit colleagues is their optimistic, can-do attitudes. We are resilient and determined. This continuing economic downturn is difficult, but not impossible. What makes us stronger – and more creative and innovative – makes us better. Good cheer to all.
Although we wouldn’t presume to have the answer to Sigmund Freud’s famous question, we do applaud the approach that Cynthia Gibson and Bill Dietel take in their provocative article “What Do Donors Want?,” in a recent issue of Nonprofit Quarterly. At GuideStar, we have long known that the majority of donors give according to their hearts. They look for nonprofits that align with their own sets of values, and they look for the nonprofits themselves to prove that they are worthy of the donations. That’s what makes the nonprofit sector so interesting – there’s something for everyone.
We think it’s important that nonprofits make that emotional connection for donors. But in a crowded marketplace, with multiple nonprofits working towards the same mission and providing similar programs, we also believe it’s the high-performing nonprofits that, in fact, deserve these generation donations. And that’s a distinction that we have to make.
In fact, many donors who are solely motivated by strong personal interests─religion, education, health and friend─will probably continue to be the vast bulk of donors. But even here data can play a role: one person told me he gives to the same organizations every year, but uses GuideStar to make sure everything is still okay.
And it must be said: sometimes it is the most passionate donors who seek data. In our experience, an increasing numbers of donors who are determined to solve a problem or make a difference are the ones most likely to want to know about the results of the organizations they support. If a person’s goal is to, say, provide low income housing or end malaria, these passionate donors want to make sure the organizations to which they send their hard earned money actually know how to make a difference. During the Haiti earthquake crisis we were flooded with phone calls from people not about whether to make a contribution, but which organizations had the capabilities and experience to actually deliver. Passion often demands data.
Above all else, we know that we need to understand better what drives charitable giving in order to understand better how to drive that giving to high performing nonprofits. We recently partnered with Hope Consulting to conduct and market test research on this topic to better understand and inform the philanthropic sector on the behaviors, motivations, and needs of individual donors, foundations, and those who advise them. We hope to use the findings of this research to help shape our core offerings of nonprofit data and information to the world.
As President Obama recently remarked at the Millennium Development Goals Summit in New York, New York, “Guided by the evidence, we will invest in programs that work; we’ll end those that don’t. We need to be big-hearted but also hard-headed in our approach to development.” In other words, the job of providing data to donors is tough, but somebody’s got to do it.
Earlier this month the Seattle Foundation announced a new website that gathers information about local nonprofits in Seattle and King County. You can read more about it here on Seattle Times and Chronicle of Philanthropy. 
I see the Seattle Foundation’s decision to invest $1.45 million dollars to build their solution as further market confirmation of several key trends:
- Community foundations are creating community knowledge as central to their unique value proposition;
- There is a rising importance of donor education and donor engagement through online tools to stay relevant in a changing market place and to reach a new generation of donors; and
- Community foundations are driving philanthropy and leadership to improve their community
We’re thrilled at this announcement. It is another confirmation of many of the activities our community foundation partners already have underway with GuideStar’s DonorEdge. Consider these:
- After being pioneered by the Greater Kansas City Community Foundation in 2002, with financial support from the William and Flora Hewlett Foundation, DonorEdge has spread to nine other community foundations. In 2008, GuideStar USA became the technology partner. Together, we have added seven community foundations over the past two years.
- GuideStar’s DonorEdge empowers community foundations to engage donors to become informed, effective donors by sharing credible, vetted, and sourced nonprofit information online and off line.
- The DonorEdge Learning Community (DELC) is a robust learning community of fellow practitioners who share lessons learned and support innovation in community philanthropy. New partners in the DELC receive ongoing marketing, operational, technology, and best practices support from their partnership with GuideStar and the DELC.
- Finally, DonorEdge means community foundations don’t need to do it alone:
- Because of GuideStar’s technology infrastructure, DonorEdge is scalable and cost effective for varying sizes of community foundations.
- Our cooperative funding model provides for annual software updates and new features informed by the DELC to stay ahead of the curve.
The news from Seattle is another important step for the re-shaping of community foundations. I’d be interested in your thoughts. Please share this with your networks via the ShareThis button below and leave a message in the comment section below.
Posted By Bob Ottenhoff on August 27th, 2010, in these categories: Disaster Relief | DonorsAs CNN and other news outlets are reporting, monsoon rains have flooded large areas of Pakistan, forcing millions to flee their homes and seek humanitarian aid for such basic necessities as shelter, food, potable water, and medical care. And, as BusinessWeek pointed out, Americans are joining in force to provide assistance to the victims of this cruel tragedy.
 Pakistan Flood Survivors I’m always so proud when Americans come together in the face of tragedy. All across the nation, communities are asking themselves how they can help, individuals are digging into their pockets to find something extra, and hundreds of nonprofits are getting calls from people wanting to know how they can help. And, luckily for those who need the help so desperately, people are acting quickly.
But, as you’ve heard me say it before (it bears repeating): Do a little research before you donate. Be sure that your money is being put to the best use possible. Click here for some quick and easy tips for doing your due diligence.
As I’ve also said before, unrestricted contributions are really the most effective gifts you can give to nonprofits that provide emergency assistance. There are already many organizations in Pakistan working diligently to help, and they’ve had to reach into their operating budgets or disaster-relief funds to provide this aid. They didn’t anticipate the flooding, and they probably didn’t have a fund already earmarked for Pakistan. And once their work in Pakistan is over, they’ll need resources to respond to the next unanticipated emergencies, particularly in the early hours, when quick action can literally mean the difference between life and death.
Over and over in the past we’ve seen disaster-relief organizations hampered because gifts have been restricted to a specific disaster or location. Although we encourage unrestricted giving to all charities, emergency-relief organizations particularly need donations that come without limitations for spending them, or that are made to the organizations’ general disaster-relief funds.
If it’s important to you that your gift be used in Pakistan, consider giving to nonprofits that have long-range programs there. Disaster recovery is a long-term process that has many facets. Your donation to an organization that will provide assistance after the flood waters have receded will have an impact.
Click here for list of nonprofits working in Pakistan. Other nonprofits assisting relief efforts in Pakistan can contact GuideStar to be added to the list. You can also find lists of nonprofits working in Haiti and Chile.
Posted By Bob Ottenhoff on August 9th, 2010, in these categories: Donors | Giving WiselyWhat do you think of the efforts of Bill and Melinda Gates and Warren Buffett to urge their fellow billionaires to donate more to charity? So far, about 40 billionaires have responded positively, and I’ve seen one estimate that the amount pledged so far is approximately $600 billion.
I had several reporters call me last week, and I told them that I think this campaign is a big plus for the nonprofit sector. First, it increases public attention of the vital work the nonprofit sector provides and the need for financial support. More media attention about the importance of giving to charity should help heighten people’s awareness about their own giving habits. Warren Buffett was quoted as saying, "At its core, the Giving Pledge is about asking wealthy families to have important conversations about their wealth and how it will be used." Mayor Bloomberg said, "By giving, we inspire others to give of themselves, whether their money or their time."
Second, although many of these signatories are already major philanthropists, this effort should result in more money going to charitable causes. That’s a good thing, too.
I wish more attention had been paid to giving wisely. The Bill & Melinda Gates Foundation has earned a well-deserved reputation for strategic thinking, deep due diligence, and careful monitoring of results and impact. When Warren Buffett announced several years ago that he was asking the Gates Foundation to manage his charitable giving, he said it was harder to give away money wisely with impact than to earn it. We haven’t heard much yet about making sure this increase in donations ends up sending more money to high-performing organizations that are carefully measuring what they do and how they do it. Maybe that will come later.
What type of activity the billionaires support isn’t as important to me as making sure the money is carefully spent and leveraged as much as possible. I hope we’ll see some instances of pooling of money to increase the impact even more. Some of the billionaires on the list are already major philanthropists and regularly make huge gifts to important institutions. Not every one likes that: Pablo Eisenberg commented in the Chronicle of Philanthropy, "Very wealthy individuals have [an] unbalanced record when it comes to philanthropy. They give their biggest donations almost exclusively to universities and colleges, hospitals and medical centers, and arts institutions. They rarely make large gifts to social-service groups, grass-roots organizations, or nonprofit groups that focus on the poor or minorities."
Finally, Steven Pearlstein had a very thought-provoking column in last Friday’s Washington Post. He says the pledges remind him of the "hollowing out" of the middle class in America. He points out, "The latest data from the Congressional Budget Office show that in 2007, the top ‘quintile’—the 20 percent of the households at the top of the income ladder—took home 52 percent of the nation’s after-tax income, with the top 1 percent of households earning 17 percent. The Center on Budget and Policy Priorities calculates that from 1979 to 2007, the average after-tax, inflation-adjusted income of households in the middle of the ladder increased 25 percent; for the top 1 percent, it rose 281 percent."
Pearlstein urges us to reconsider our public policies that help all Americans improve their economic status. "With its ‘giving pledge,’ the Gang of 40 has taken an important step in revitalizing America’s philanthropic institutions, but it will take much more to revive the virtuous cycle by which wealth begets opportunity which in turn begets more wealth. Whether at an individual company or in the country at large, it is the feeling that we are all in it together that creates the basis for a truly vibrant economy and just society. Trickle-down alone won’t cut it."
Although I’m thrilled that the Giving Pledge has billionaires making strides towards significant philanthropy, I encourage these individuals—and all donors—to give wisely. Research and evaluate the organizations that support your beloved causes. Ask nonprofits about their performance and their results. Ultimately, make sure your dollars are making a real and sustained difference. It is this kind of due diligence that can ensure the billions being donated are maximizing impact.
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Last week I participated in a webinar with Dan Pallotta, author of “Uncharitable” and Ken Berger, CEO of Charity Navigator, sponsored by Network for Good. You can access my presentation on GuideStar’s SlideShare channel, but I wanted to touch on a few key points for those of you who couldn’t attend or who wanted additional clarification.
