Philanthropy Lesson #010: Business and Charity aren’t Black and White (Microfinance)

It is one of society’s great fallacies that business and charity are viewed by some as polar opposites. This perspective (as ubiquitous as it is incorrect) is based on the premise that one is either out to make a profit or selflessly doing social good. The rise of microfinance institutions represented a significant step in the blurring of this diametric, and served to slowly introduce to the world the idea that you don’t have to employ traditional charity models to do social good. As these ideas become more pervasive and widespread, we find that individuals and institutions start to appear standing between the capitalist and the charity worker (the diametric personified). The image then comes to represent a scale in which an organisation balances input, impact and output according to how they prioritise profit and social good.

If we continue with the image of a sliding scale, the rolling out of microfinance structures was revolutionary in its moderateness – it sits somewhere in the middle of the scale, employing business models for social benefit. Muhammad Yunus, who established the now widely-replicated Grameen Bank in 1983, remains a key proponent of this model, and is often credited with the generation and subsequent success of the structure. Yunus’ microfinance is one that is strictly not-for-profit. Part of the beauty of microfinance was that it broke the diametric, but of course this did not preclude the possibility of some breaking it down further.  As the microfinance model became more successful, some organisations shifted on the scale to start operating a limited for-profit microfinance model, much to the consternation of its originators.

Yunus’ condemnation of the approaches of Mexico’s Compartamos and India’s SKS Microfinance institutions is based on the belief that profit-making is intrinsically incompatible with the alleviation of poverty. In making this argument, Yunus adds another dimension to our scale, which, arguably, is a distinctively normative one. Matthew Bishop, responsible for the most audible rebuttals of Yunus’ article, focuses his attention on this added dimension, claiming:  ‘even in the most optimistic scenario for philanthropy, it seems inconceivable to us [philanthrocapitalists] that there will be enough charitable capital to meet the demand for microfinance from the world’s poor any time soon’. The implication here is that in order for microfinance industry to survive, it needs to attract private investors who will look for profit margins. Bishop suggests that this is a sacrifice worth making for greater social justice. This was also the view taken by SKS’ founder Vikram Akula in a Forbes India interview in 2009, notably before the crisis in microcredit occurred.

This debate comes just as a group of philanthropists gathered at the Institute to prepare for their developing world module of The Philanthropy Workshop, which will take place in India in March. The afternoon comprised of an afternoon’s learning around microcredit in India, but in actual fact the links between TPW and strategic philanthropy and the Yunus and Bishop discussion are more pervasive than the day’s learnings. Ultimately the lessons that must be learnt through these linkages are about the placement of an individual, organization or approach on that sliding scale we started with, where the balance of profit and social impact  are the determinates of that positioning.

Philanthropy Lesson #009: Share success stories (with thanks to Sunil Mittal)

The Indian telecoms magnate and Chairman of Bharti Enterprises, Sunil Mittal, was named ‘Philanthropist of the Year’ at the inaugural session of the Asian Awards last week for his contribution in the area of education for the underprivileged. In many ways, Mittal’s newest accolade is conspicuous on the global philanthropy landscape, not only because Indian philanthropy has suffered a relatively poor reputation in the international giving tables, but because as an Indian philanthropist focussing his efforts towards his home nation he is part of an even smaller minority.

But why are Mittal’s philanthropic endeavours so incongruous with his country’s typical giving profile? Commentators cite a variety of different factors to explain this phenomenon, from India’s Janus-faced reputation in the international political economy as a country home to immense wealth and crippling poverty, to a preoccupation amongst India’s new (very) wealthy with high profile and audacious donations to their (often American, Ivy league) alma maters. That is one view; yet it is possible that these analyses are suffering from a case of short-sightedness. As Arpan Sheth of Bain & Co. highlights in his March 2010 report, India’s giving (quantified as % of GDP) actually leads that of other developing nations, ahead of both China and Brazil, for example. Others suggest that giving in India is not quantified simply by monetary donation, rather that the economy of giving is regulated through complex networks of cultural, religious and familial norms that cannot be articulated on a spreadsheet. Whatever the reasoning behind the trends in Indian philanthropy, however, one thing is clear: that there are too few visible Indian philanthropists, such as Sunil Mittal, with a focus on their native country, and opportunities to promote fantastic philanthropic work such as his ought to be celebrated.

Philanthropy Lesson #008: You need more than a hammer

If you’re struggling to tackle a complex social problem, and have been for a while, maybe its time to review your ‘tool kit’. Are you adopting the right strategies to get the job done, and are you being as effective as you can possibly be in your giving? Abraham Maslow once said “if all you have is a hammer, everything looks like a nail”. It could be that you are pounding away at every social problem instead of unscrewing it. The solution: Innovation. Steven Johnson recommends you throw yourself headfirst into spaces that stimulate thinking and conversation – spend some more time on the Internet, extend your meeting in the Conference room, or even linger at the water-cooler during work if that means being surrounded by different opinions. From Teach for America to Grameen Bank, from Gmail to GPS, all great ideas are born out of a network of experiences, slowly fading into view over time. The trick to being innovative, creative and effective is placing yourself in an environment where these networks are likely to be formed. After all, when chance favours the connected mind, you’ll have more to use than just a hammer.

Philanthropy Lesson #007: Invest in Talent (with thanks to Oxford and Blavatnik)

One of the more welcome orthodoxies in philanthropy is that donors should invest in the talent within an organisation; or, in sector-speak, “build capacity”. For that reason, it’s heartening to see Leonard Blavatnik’s recent gift of £75million to Oxford University, so that they can establish a School of Government there. The University’s Vice-Chancellor, Professor Andrew Hamilton, commented that “the School represents a huge milestone in Oxford’s history. It will give tomorrow’s leaders the best of Oxford’s traditional strengths alongside new and practical ways of understanding and addressing the challenges of good governance. The University has educated 26 British Prime Ministers and over 30 other world leaders, yet until now the major international schools of government have all been outside Europe, principally in the United States. The establishment of the Blavatnik School of Government at Oxford will correct that imbalance.”

More pertinently, the School, and Blavatnik’s gift, implies a belief that great leaders are not only born but nurtured. The School’s aim is to create a growing network of governance graduates, effectively building a “brains trust” whose collective knowledge and experience will help them to tackle some of the world’s most pressing problems. That is strategic philanthropy in action; and, for that reason, it deserves a thumbs-up.

Philanthropy Lesson #006: There’s No One Way to Lead

If philanthropy in 2010 has a theme, then it is that of leadership.  Earlier this year, Warren Buffett and Bill Gates launched the Giving Pledge, encouraging their peers to give half of their wealth to charity.  Their initiative was met with a swift and positive response from dozens of donors in the US, with forty philanthropists coming out in its support.  In taking this welcome lead, Buffett and Gates opened themselves to scepticism from sections of the media and the wider public, who wondered whether they would succeed in delivering solutions for any of the social problems that they had set out to tackle. But scepticism is a hurdle which, though often confronted by leaders, rarely deters them.

At the Institute, we have been lucky to welcome to dinner a leader who – in a far more perilous context than that of Gates and Buffett – was greeted with not only scepticism but hostility when he made the defining move of his career.  FW de Klerk, the former President of South Africa who was instrumental in the dismantling of apartheid, addressed an audience of philanthropists with whom we work.  Having left office several years ago, he is now a founding member of the Global Leadership Foundation, which “exists to improve the quality of political leadership and governance by enabling today’s national leaders to benefit from the experience of former leaders.” 

The model is an interesting one: the Global Leadership Foundation is “a network of former Presidents, Prime Ministers, senior ministers and other distinguished leaders who make their experience available discreetly” to other heads of state grappling with tough problems.

If the Gates and Buffett campaign is public and de Klerk’s is behind the scenes, we get a rich view of the varied forms and styles of leadership that are needed to advance solutions to social problems.  As with so much in philanthropic work there is no one formula, no one-size-fits-all intervention.

Interestingly, these varied leadership styles are reflected in our own network, with a number of the donors we are privileged to work with seeking large public advocacy roles and others achieving results, like President de Klerk, behind closed doors.   Public leadership vs. quiet leadership?  I say we need both.

Philanthropy Lesson #005: Think Small (with thanks to Aik Saath)

Philanthropy is a world where you often hear uncomfortably lofty language; there are times when the ambitions of donors seem grandiose, if not unattainable altogether.  Tackling climate change?  Eradicating poverty?  These are problems of great complexity, and it often seems futile even to attempt their solution.

In making such an attempt, the goal – somewhat paradoxically – is to think small; to look to the roots, and particularly the grassroots, of a social issue.  This was a lesson illustrated by Aik Saath, one of the recipients of £3,000 from our Youth and Philanthropy Initiative.  Aik Saath was formed in response to ethnic unrest between Asian youths in Slough, a town a few miles from London; its successful approach was based upon engaging carefully with those closest to the problem.  They set up dispute resolution groups composed not of external advisors, but of young people who were directly affected by the rising threats and violence.  Taught by Dr. Dudley Weeks, a world expert in the field of conflict resolution, these teenagers responded so decisively that within only two years the trouble that had so sharply flared was swiftly doused.

When looking at problems of a global scale, it’s often tempting – and reassuring – to look for grand solutions.  But more often than not, as Aik Saath have shown, it’s best to look closest to home for your answers; in other words, to think small.

Philanthropy Lesson #004: “Tell Tales”

Philanthropy is a field dominated by facts and figures.  Donors and advisors alike, understandably keen to show that they are making significant strides in the areas of their choice, are increasingly focused upon the clear and careful evaluation of their work. 

This is a welcome development; yet it is important that it does not come at the expense of an intangible but no less important part of the philanthropy world, that of storytelling.

Storytelling is one of the most valuable aspects of philanthropy.  Before the first cheque of grant money is given, there must be a strategy; before the strategy is drawn up, there must be a vision of a successful story that will be enabled by that cheque. 

An example: in an item that tops our week’s Press Highlights, George Soros has just awarded $100million to Human Rights Watch, the largest-ever sum that this organisation has received.  And whilst Mr. Soros was undoubtedly drawn to the charity’s efficiency, the chances are that he was also taken with its compelling narrative of the world that it was working to bring about.

Some months ago, The BBC World Service ran a piece on their website on this very subject, noting that their listeners were as interested in their “soft” stories – i.e., those with an element of human interest – as their “hard” stories, which had a tougher, somewhat worthier edge.  Indeed, it’s notable that some of the most successful organisations we have encountered – like, say, Atlantic Philanthropies – are those who can not only crunch the numbers but also provide vivid illustrations of their work.  That’s why efforts such as those by The Daily Tell should be applauded; a website which takes time every few days to highlight the success stories in charitable giving.  Long may they, and many others in the philanthropic sector, continue telling tales.

Philanthropy Lesson #003: “Take The Lead”

When Bill Gates and Warren Buffett went public with their Giving Pledge a few months ago, they challenged America’s wealthiest people in the plain sight of the world to give away half of their fortunes to good causes.  But that was not all that they did: they also reminded us of the power of inspiration, and of emulation.  Within weeks, dozens of donors had signed up to the Giving Pledge, either establishing or reaffirming their commitment to philanthropy.  Many of them spoke in support of the initiative, and in several cases it was the first time that they had been so open about their giving.

Commentators in the media have questioned why Gates and Buffett made the decision to be so forthright with their plans; some accused them of immodesty, of ostentation.  The two men, accustomed to life in the glare of the media, will have taken that as a necessary part of making a principled stand.  They will also have remained true to a wider and compelling objective: of showing successful executives that they have a crucial role to play in addressing some of the world’s greatest problems. 

Four years ago, Buffett changed the face of large-scale giving overnight, when – then the world’s wealthiest man – he pledged the bulk of his wealth to the foundation of Gates and his wife Melinda.  Now, he and Gates are looking to do so again, with a yet more profound agenda.  They are looking to build a community of givers, a peer group whose members understand and act upon their sense of responsibility to the world around them.

At the Institute, this ethos of network-building is something that we keenly share.  We have found that the donors who give most generously and effectively are those who have a group of people with whom they can regularly meet to share their knowledge and experiences of the field.  Giving can be a daunting process, as donors begin to grapple with social issues of often overwhelming scale; we tip our hats, then to Gates and Buffett for stepping forward as they have, and showing us all that there truly can be strength in numbers.

Philanthropy Lesson #002: “Pass It On”

Many philanthropists, when speaking of the motivations behind their giving, talk of a desire to give something back to the community that has given them so much.  We applaud that aim; at the same time, it’s never too early to start thinking about changing the world around you for the better.  With that in mind, we’ve prepared Tomorrow’s Donors; a paper examining how family philanthropy can be a powerful tool for good, as the older generations pass down their learning to the younger ones – and learn from the younger ones in the process.  The paper features six case studies with families of donors with whom we have worked, as well as ten tips for philanthropic families as they go about their giving.

Philanthropy Lesson#001: “Failure is Good”

Welcome to “Philanthropy Lessons”, the Institute for Philanthropy‘s blog on donor education.  In this blog, we’ll draw attention to the most pressing issues in the field of strategic philanthropy: and we’ll  share with you both our own views, and those of innovative people whose work contains valuable lessons for thoughtful donors everywhere.

The first topic is that of failure: a topic not often touched upon in philanthropy or, for that matter, in many other disciplines, where the emphasis is on putting your best foot forward at all costs.  Yet much can be learned from falling short.  As the saying goes, “if you hit the bullseye every time, you’re standing too close to the dartboard”; often, a failure to achieve your objectives in your philanthropy can pave the way for a more nuanced, and most likely more successful, approach. 

It’s with that in mind that we link to an article on this very topic; “Positive Failure”, by David Simms in the Harvard Business Review.  Setting the standard for many Philanthropy Lessons to follow, it is an invigorating and thought-provoking read.