Philanthropy is Broken — Let's Re-imagine It

Philanthropy is broken, and the impact of even the most generous donors is no longer enough to cover the overwhelming expenses that plague the social sector. While there have been great strides in re-imagining philanthropy, innovation in this space has been overwhelmingly squandered by three dilemmas that make up something I like to refer to as "the giving gap" — an explanation for the incredibly underwhelming impact businesses, organizations, and individuals are having on the world's problems.

Dilemma #1: The Definition of “Philanthropy” is Outdated and Limiting.

We hear about billionaires like Bill Gates giving away half of their net-worth upon death. Is philanthropic impact something that should be limited to the one percent? Do we really need to die before we can make an impact?

When you are making a billion dollars a year, it is easy to donate a million to a good cause. When you are a small business or an independent contractor, likely bringing in revenue that is barely pushing six figures, the idea of participating in traditional philanthropic endeavors can be daunting. However, contrary to popular belief, being a philanthropist does not solely begin at the stroke of a pen. Instead, philanthropy has the opportunity to go far beyond monetary transaction alone through the donation of time, because talent is a multiplier.

Non-profit organizations are spending billions of dollars each year on overhead. Very often these dollars are being spent ineffectively. Imagine the impact that billions of spare dollars could have. While spending increases each year, funding decreases. In 2013, we saw cuts to funding for the non-profit sector from the federal government totaling $62 Billion, but in 2012 foundation money only totaled $46 Billion. The social sector is becoming drained of resources, and traditional philanthropy clearly doesn’t cut it anymore. We all have the power to create huge impact on a non-profit's well-being by donating our expertise through pro-bono service.

Dilemma #2. Society Only Expects One Percent of Businesses to Engage in Philanthropy.

There is a very loud majority that is critical of big business. We demand transparency. Billionaires are an easy target for public scrutiny, and as a result, we maintain high expectations when it comes to philanthropic engagement amongst big businesses.

The US census documents 27.28 million businesses in the United States. Of these 27.28 million, less than one percent can be categorized as a “big business.” This leaves us with 27.26 million entities in the private sector that can be categorized as “small business.”

While it is crucial to continue holding the highest of expectations in regards to corporate giving amongst the Fortune 500 class, it is a huge missed opportunity to not leverage over 27 million revenue generating businesses for the greater good. By leveraging innovative business models that support small business philanthropy such as the Give Half model popularized by verynice, or the One-for-One model popularized by TOMS Shoes, we can begin to use 99 percent of American businesses as a force for change.

Dilemma #3. Consultants Expect Compensation In Exchange for Social Impact.

In recent years, concepts that serve as the antithesis of the pro-bono movement have become more and more popularized. Thought leaders can be found proclaiming the concept that non-profits should be rewarded by maintaining high overhead in order to scale their message through the power of marketing. While the intentions of such ideas are seemingly authentic, the result of their execution would be catastrophic to the social sector. There is an overwhelming consensus among consultants that we deserve to be paid for the social impact that we create, but what is not understood is the reality that when we charge for the work, our own social impact is void.

The widely accepted idea that “social impact” is something that can be done with a direct profit-margin is one of the biggest unknown problems of our time. It is a new kind of banal evil, and it is plaguing the social sector. As consultants, we do not posses the ability create social impact, but our clients do. We are nothing more than facilitators of social change. It may be hard to accept, but as service providers the only chance we have at creating social impact is by refusing payment in order to allow those who are creating social impact do so with an abundance of resources.

Perhaps it isn’t ethical, efficient, or fair for the nonprofit industry to spend nearly $8 billion each year on design and marketing expenditures in the US. Sure, awesome marketing campaigns and excellent strategic plans are incredibly important for charities, but the enormous allocation of funds and energy in purchasing these services are entirely misplaced. This is especially true because the primary mission of a non-profit organization is not to have the best designed campaign and social media platform comparable to their competitors, but rather to serve an underserved community efficiently and effectively.

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We need new models of philanthropy that will allow non-profit organizations to save valuable resources in order to clear up the social sector’s economic disaster. Here is the good news... a lack of funding is only an issue for a non-profit organization if there are a lot of expenses. When an organization is able to save valuable resources, they are able to immediately re-invest those dollars directly into their cause. Pro-bono work is necessary. As small business owners, freelancers, and entrepreneurs, we have an opportunity to do our part by making giving back an integral component of our business.

Illustrations courtesy of Alisa Olinova