Don’t give to programming, give to the development team. That’s what Dan Pallotta wrote in a Harvard Business Review’s blog post last week entitled Multiplication Philanthropy. In the post he outlined the idea that if a donor wants to truly have an impact he should direct his resources to be used for fundraising, multiplying the outcome of his donation. He says if you are going to give $100k to an organization you could either give a $100k towards programming or $1m by channeling that money through development.
He and I are of the same heart and mind in that we both agree that overhead is a poor judge of a good nonprofit. He uses that idea as part of the evidence for this new approach to philanthropy. And I have to say that part of me really likes this idea. I think its an interesting one, maybe the next iteration of the matching grant. Obviously, if taken to its absurd conclusion we wouldn’t do anything because we were only raising money, but I think its an interesting point that is made.
I might take it even a step farther though. Instead of directing your money towards fundraising, just write the check. Gifts that have to be used by one department are another are horribly cumbersome to the organization. Unrestricted gifts is the most efficient thing you can do, if you trust the organization to use it wisely. Then they will be putting the resources towards the most efficient trade-off between overhead and programming.
What are your thoughts? What do you think about Dan Pallotta’s idea about giving to help organizations fundraise?
Dan F. February 21, 2012
It seems like another efficient means would be to give that $100k as an endowment providing an income to the charity far into the future. Obviously it wouldn’t have as big an immediate impact but it has the added benefit of stability.
Andrew February 21, 2012
Dan-
That is definitely an interesting idea and one that is growing in popularity. But I actually think it is inefficient because a guarantee stream of money provides no incentive. Imagine if I was bound to buying all my meals from the same restaurant, there would be no incentive for them to provide good food or service. Just because an organization is doing good work today and deserves my money today does not mean that it will continue indefinitely, so they shouldn’t receive my money indefinitely.
Dan F. February 22, 2012
Good point. I suspect that certain kinds of non-profits (churches and church ministries immediately come to mind) might be better recipients of income type gifts.