This piece was originally posted in January 2020.
The past two decades have seen a shift in the conversation about philanthropy. We entered the 2000s being told that what philanthropy needed was a “business” or “investor” mindset, with less clarity of course about what exactly that even meant. The first decade of the 2000s was the “Business-Knows-Best Decade.”
But, as it turns out, business didn’t know best, of course.
And while there is at least a bit more recognition of this now than then, the business-knows-best mindset remains widespread, so it’s useful to trace it back a bit. I’m no historian, but I have been working in Philanthrolandia since 2001. When I think about the last 19 years, I have at least one take on how the conversation about effective philanthropy has evolved over the past two decades — as well as some hopes for the decade to come.
To understand the first decade of the 21st century in philanthropy, it’s useful to go back to the late 1990s — and especially to a pair of influential but wildly misguided articles in Harvard Business Review. One, by Christine Letts of Harvard University’s John F. Kennedy School of Government, Allen Grossman of Harvard Business School (HBS), and another co-author, posited that what was needed in philanthropy was a venture capitalist mindset. Another, by a different HBS professor, Michael Porter, and co-author Mark Kramer, promoted a conception of strategy taken straight out of a competitive business environment in which “unique positioning” was paramount.
“The underlying logic of strategy is … the same” in business and philanthropy, they argued.
For the first decade of the century, this was the prevailing view — especially among some of the largest foundations, which turned to consultants (including Kramer and Porter’s firm, FSG) promoting this approach to help clients devise their strategies. The results were typically not pretty because — as at least some of us had pointed out, usually in vain, at the time — strategy in philanthropy is not at all the same as strategy in business!
Strategy in philanthropy is about collaborative dynamics, not competitive ones, and therefore must be shared across organizational boundaries, rather than guarded closely as “unique” to a particular funder. As we at CEP observed in a 2009 report on foundation strategy, “Philanthropic funders are seeking to maximize their positive social impact — not to beat the competition in a defined market. In fact, for philanthropists and private foundations, it may sometimes be that replicating the activities of others, or collaborating with them, is the very best way to maximize impact on particular organizations, communities, or fields.”
Moreover, the power dynamics between the funder and the funded (which are very different than the dynamics between either a business and a customer or an investor and a company they invest in) heightened the risk of funders devising strategies that were out of touch with the realities of those closest to the problems being addressed. Those whose knowledge and expertise were often insufficiently considered included nonprofits and, of course, the people themselves who the funding was intended to help. In education philanthropy, especially, the story played out repeatedly, with different donors and foundations making the same, predictable mistakes.
Read the full article about business and philanthropy by Phil Buchanan at The Center for Effective Philanthropy.