Cheque book philanthropy is increasingly making way for donors seeking social impact and tangible outcomes. Lawrence Jackson explains the rise of ‘new philanthropy’ and how it may impact on traditional fundraising practices.

A shift in donor behaviour by early adopter ‘philanthrocapitalists’ is resulting in a move away from passive ‘cheque book charity’ to more active ‘social investor’ donor models. Fundraisers will need to acquire a brand new toolbox of skills, in the form of metrics, methodologies, marketing strategies and messaging, if they are to leverage these potential threats into future opportunities.

Performance philanthropy on the rise

Wall Street Journal reporter Robert Frank introduces us to Phillip Berber, an enigmatic, Dallas-based, Irish/Jewish internet entrepreneur in his fascinating book, Richistan: a journey through the American wealth boom and the lives of the new rich. Berber has turned his hand to ‘social investing’ through his personal charity, Glimmer of Hope, since selling his online trading company for US$450 million in 2000.

Perhaps the most telling insight for fundraisers is Berber’s views on traditional charity. He is described as someone who “hates black tie balls and social climbing that poses as charity, shuns awards and would never think of writing a cheque to … big institutions which waste donor money on staff, marketing and useless reports.” If ever a wakeup call for big brand charity is needed, here it is.

Berber, rather, is described as a social entrepreneur, who is not in the business of donating money but rather in “investing in social change, demanding concrete results and searching for dot-com-style efficiencies.”

“I’m not giving anything to anybody. There is no charity with me. I am a social investor, investing capital for social profits,” he says.

Searching for concrete results

The difference, it appears, is Berber’s evangelical devotion to concrete results. And his track record is pretty impressive. Berber says Glimmer of Hope has invested US$16 million in Ethiopia and as a result has built 1,657 water wells, brought clean water to more than 886,000 people, built 190 schools educating more than 886,000 people, created 99 health clinics serving 776,000 people and launched 24 vet clinics for farm animals benefiting 162,000 people.

Berber has performance metrics on the efficiency of his Ethiopian projects. He claims his costs are about half of similar projects conducted by big aid agencies, and he has figures to prove it, with clean water coming at a cost of US$5.74 and healthcare for US$4.01 per person.

“This isn’t rocket science,” Berber tells Frank. “It is applying fundamental lessons I leant as a business entrepreneur, and reapplying it as a social entrepreneur. It is wholly applicable to whatever philanthropic cause touches anybody’s heart. I only wish more people would try it.”

Are these trends biting in Australia?

Daniel Almagor literally is a rocket scientist who has “long had a passion for using business and engineering to create social change”. Almagor holds a double degree from RMIT University -in aerospace engineering and business administration – and could easily serve as the Australian ambassador for Philanthrocapitalism, the ground-breaking book by Mathew Bishop and Michael Green.

Almagor is the founder and former chief executive officer of Engineers Without Borders Australia, the managing director of national vaccination company Medivax, RMIT Universities’ inaugural ‘social entrepreneur in residence’, and chairperson of Jewish Aid Australia. Together with his wife, Berry Liberman, Almagor operates Small Giants, a firm focused on developing businesses with a social and environmental purpose which blurs the lines between profit and nonprofit.

He is not alone. Jill Reichstein is well known in Australia’s philanthropic circles, yet one feels she much prefers being described as a ‘donor activist’ rather than a philanthropist. She is clearly one of the key players in growing what she calls “progressive philanthropy” in Australia, which she does by mentoring and supporting novice donors as they embark on their personal philanthropic journeys.

Less well known is Steve Killelea, described by the Sydney Morning Herald as Australia’s “largest individual donor to overseas aid”. Together with wife Debbie, the Killelea’s set up a charitable foundation in 1999 with the aim of investing half their wealth in “bang-for-buck projects with visible results”.

Graeme Wood is someone Bishop and Green would describe as a ‘plutocrat’ – an individual who engages in political philanthropy, like George Soros. Wood amassed a $330 million fortune as the co-founder of the online travel site Wotif.com and has already given millions away.

What is most interesting about Wood is his willingness to use his money to influence government and social policy to his own “deep green” philosophical agenda. So much so that Greens leader Bob Brown credits Wood with delivering his party the “balance of power in the Senate thanks to a $1.6 million” political donation, which was used on campaign advertising.

These are only a few examples of many Australian philanthropists who are starting to break the traditional charitable giving mould. These early adopters are providing ample anecdotal evidence that the shift to performance philanthropy is well underway Down Under.

Demise of traditional fundraising?

The implications of these trends on fundraising are likely to be far reaching, and are almost certainly still unraveling. Fundraisers may be forgiven for thinking that this is simply about measurement, and if nonprofits can simply learn how to quantify their social impact, they will be immune and funding will simply continue to flow their way.

Jason Saul, chief executive officer of American social impact constancy Mission Management, advocates for a new paradigm of impact marketing to replace traditional fundraising in his book, The End of Fundraising: raise more money by selling your impact. It requires nonprofit organisations to master the following four steps:

Embrace the social capital market. Shift current fundraising practices away from psychic- or emotionally-driven donors to a larger source of capital from donors who value your impact. Capture your impact: define and measure your outcomes, which allows you to design compelling value propositions to the market. Market your value: identify and target a new segment of impact buyers who are willing to pay for social outcomes. Communicate and sell your societal outcomes: how to engage and cultivate these so called impact buyers so that you are able to position, pitch and transact with them on behalf of your nonprofit organisation. Who understands impact measurement and selling?

Here are two examples of Australian nonprofits which are clearly demonstrating that they are starting to get it. Not only have they developed or employed a reliable measurement tool, but they’ve also demonstrated an ability to articulate and communicate this via their marketing communications process.

Vision Australia’s SROI tool
In 2009, Vision Australia used a Social Return on Investment (SROI) approach to understand and measure the social, environmental and economic benefits of four key projects. The SROI methodology appears to be a rigorous and independent tool which has been valuable in providing a “robust framework for measuring and evaluating” Vision Australia’s services.

SROI has allowed Vision Australia to better understand and communicate the social impact of its children and family services by showing that for every $1 invested in the program, $12.40 is created in social value. Overall, Vision Australia’s annual investment of $5,863,157 has created a very respectable social return of $72,700,311 to the community.

Opportunity International’s Social Performance Management project
Opportunity International Australia (OIA) is a socially-focused microfinance supporter which has developed a simple tool to allow it to measure its impact. The Social Performance Management (SPM) project uses a simple survey scorecard, known as the Progress out of Poverty index, to focus on and assess its impact.

Data was sourced through SPM to help it demonstrate to supporters that their donations are having an impact – helping more families to lift themselves out of poverty.

Perhaps the key take away message for the sector is the potential to benefit from the economic value in the concrete results organisations deliver and the tangible social value they create. This necessitates a change of mindset to recognise, as Saul points outs, that nonprofits have economic power and financial influence for the first time.

Yesterday’s feel-good causes now have direct economic consequences and, as a result, the nonprofit sector and fundraisers in particular have a new tool to leverage. It can, however, only be realised if fundraisers learn to sell their organisation’s impact by transacting with a new segment of social impact donors.

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