Charity vs. Philanthropy

Posted by Laura Otten, Ph.D., Director on October 5th, 2012 in Thoughts & Commentary

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Two recently read quotes got have me thinking about the current relationship between nonprofits that serve and nonprofits that fund—the “charities” versus the philanthropic organizations.

Almost 125 years ago, Andrew Carnegie wrote:  “It were better for mankind that the millions of the rich were thrown in the sea than so spent as to encourage the slothful, the drunken, the unworthy.  Of every thousand dollars spent in so-called charity today, it is probably that nine hundred and fifty dollars is unwisely spent—so spent, indeed, as to produce the very evils which it hopes to mitigate or cure.”    His goal, that many would say was achieved at some point in history, was to make philanthropists think bigger and more creatively, to address the root causes of society’s problems rather than simply to address the ills that befell one small community or individual.

And then there is Michael Porter, Harvard professor and expert on competitiveness, who said of nonprofits’ competitive advantage:  it is “understanding what the organization’s abilities and competencies are that make it best positioned to solve the social problem it is created to address.”

There is important intellectual fodder here for each half of the giving equation; unfortunately, I don’t think anyone is listening.  While there are some funders who actually do look at the impact their funds are making, most are too busy demanding it of those they fund and not of themselves.  They talk the talk, but aren’t so good with the walking.  There are some funders who actually fund research that, in turn, is used to direct their giving; unfortunately, however, there are many others who ignore the research that already exists in favor of pursuing their own egos—oops, I mean pursuing their own areas of interests.  We all know funders who evaluate the impact of their funding, drop what has proven to deliver the desired impact, while continuing to fund whatever their interest du jour is.  Rarely do such funding efforts address the roots of anything.  But it is their prerogative, as it is, after all, their money.

Where too few funders look to determine community need, root causes, proven solutions, etc., and shape their giving strategies, the other half of the funding equation is the charities.  While this always bothers me, I recognize that to a great extent the reason for this may be attributed to the behavior of the nonprofits themselves.  Too few have heeded Porter’s advice and identified their competitive advantage, honestly assessed what it is that they do better than anyone else, preferring, instead, to be a “Jack of all trades,” “guided” by the broadest of missions and a willingness to morph into whatever a funder wants.  Sadly, in so doing, they have stolen from themselves any possible competitive advantage—except in the eyes of an equally foolish funder.

Why is it that the for-profit world is regularly focused on and aware of its competitive advantage while nonprofits too often think it absurd to apply that concept to our sector?  Why is it that a for-profit company would never venture down a road without thoroughly understanding the lay of that road, the demands of the surrounding market, the sources of money, and tailoring its product to what the research reveals, while funders feel free to ignore those markers and go with personal favorites?  Those who run in that sector are no smarter than we in the nonprofit sector, they should have no corner on doing things the “right way,” they are no better than we.  What they do have is complete and total clarity—and agreement—on their mission.

Charities –  too many of us have lost our way, forgetting that we have a (well-defined) mission to serve, a problem to address, a community to build, and a lot of people counting on us to have the answers.  Instead, we have forsaken that role to be subservient to funders, allowing them to tell us what to do by telling us what they want to fund.  We have forgotten that it is our job to educate funders, and others, as to the state of the community and the resources that should be brought to bear to make that community safe, healthy, educated, enriched, and building for the future.  We can no more afford to be about what “I want to do” than funders can; the difference, though, is that we are on the ground and we should know if not what is best, we should, at least, know better.

The partnership of funder and doer has lost its bearings, allowing the power of money to trump the power of knowledge on the ground.  To achieve Carnegie’s dream of solving society’s ills by addressing root causes, this relationship must be righted.

The opinions expressed in Nonprofit University Blog are those of writer and do not necessarily reflect the opinion of La Salle University or any other institution or individual.